A N N U A L R E P O R T 2 0 2 1
Y E A R I N R E V I E W
Sales growth and strong execution helped Quad drive strong full-year 2021 results.
These results were supported by higher print volumes, including print segment
share gains from new clients, continued growth in Agency Solutions, and increased
pricing. We were able to achieve these results despite a challenging operating and
economic environment that included significant supply chain disruptions, inflationary
cost pressures and labor shortages. We worked thoughtfully and diligently to
mitigate these impacts on our business while prioritizing the health and well-being
of our employees, proactively managing our clients’ service expectations, providing
innovative solutions, and enhancing the financial health of the company.
Strong Results
Increased Net
Sales Excluding
Divestitures
Increased
Adjusted Diluted
Earnings Per
Share from
Continuing
Operations
Generated
Strong
Cash Flows
Reduced
Net Debt
Improved
Debt
Leverage
2021 Y E A R I N R E V I E W
To Our Shareholders
In 2021, Quad continued to accelerate our competitive position as a worldwide
marketing solutions partner, leveraging our more than 50-year heritage of platform
excellence, innovation, strong culture and social purpose to create a better way for
our clients, employees and communities.
Despite a challenging operating and economic environment, our sales growth and
strong execution helped drive strong full-year results, including a 3% increase in
Net Sales when excluding divestitures. At the same time, we continued to pay down
debt and, over the past two years, we have reduced Net Debt by $410 million or
40%, and returned to our long-term targeted leverage range of 2.0x to 2.5x.
Throughout 2021, we continued to strategically invest in the talent, technology,
products and services to strengthen our integrated marketing platform, which
features a complete through-the-line offering–from innovation to execution. Our
platform is unique because it removes friction wherever a client experiences it in
the marketing process by:
• Reducing the complexity of working with multiple agency partners and vendors;
•
•
Increasing efficiencies through workflow re-engineering, content production
and process optimization; and
Enhancing marketing spend effectiveness through integrated solutions that
help clients target, more deeply engage and grow audiences; plan and measure
marketing; strategize, create and activate big ideas; produce content at scale;
and connect with consumers in the most appropriate channels and with the
right amplitude for eliciting maximum response.
Due to the strength of our integrated marketing platform, we are winning higher
value, higher margin work from leading brands across multiple verticals. For
example, we recently created an integrated advertising campaign for a regional
insurance carrier that featured a series of 30-second media spots—one of which
aired in the Pacific Northwest during Super Bowl LVI. This placement helped our
client achieve its campaign objectives, including strengthening consumer brand
awareness. In another example, we are currently helping two national retail clients
advance sustainable packaging for their “own” or private brands, drawing on our
expertise in sustainability, which has been a core focus for our company since
our founding in 1971. This work includes materials reduction and replacement
evaluations, packaging redesign, sustainable sourcing practices, and a process for
long-term packaging innovation to achieve a regenerative future.
We take seriously our role in creating a better way through our approach to
Environmental, Social and Governance (ESG) matters and, at year-end 2021, released
a comprehensive ESG report that details how we are driving positive, sustainable
change in our business along with ESG commitments for the future. For example, when
it comes to the environment, we have a long history of reducing our environmental
impact by conserving resources, minimizing waste, and recycling and re-using
materials—including a 98% recycling rate for wastepaper, the primary byproduct of
our manufacturing processes. We are even exploring how to upcycle waste streams—
like paper dust from the printing process—into viable commercial products.
In the Social space, we continue to build out a more comprehensive and sustainable
Diversity, Equity and Inclusion strategy. This strategy includes specific goals for
creating a more inclusive, open culture to benefit all stakeholders. Additionally,
we have deepened our commitment to employee health and wellness with a newly
expanded program that provides full-circle support for our employees’ physical,
emotional, financial and social well-being.
As far as how we run our business, we remain committed to effective Governance
and have programs and policies in place that reflect our culture of high ethical
standards, legal compliance, and reduced risk to the company and all stakeholders.
As we continue to grow, I am thankful for our employees who are committed
to proactively managing our clients’ service expectations while innovatively
addressing our clients’ ever-changing needs.
2021 Performance
We delivered strong 2021 financial results, including revenue growth, despite a
myriad of economic challenges that included significant paper and supply chain
disruptions; a tight labor and freight market; and inflationary cost pressures.
Despite these headwinds, we achieved or exceeded our 2021 financial guidance.
We continued to optimize our product portfolio, completing the divestiture of
QuadExpress, a third-party logistics business that was a small part of our overall
Logistics business. The divestiture supports Quad’s established strategy to optimize
our product and service portfolio and invest in those parts of our business that
accelerate our competitive position and create more value for our clients and other
stakeholders. We generated $40 million in cash proceeds from the divestiture,
which we used to reduce debt.
Net Sales in 2021 were $3 billion, up 1% from 2020 and up 3% when excluding
divestitures. The Net Sales increase was due to a 1% increase in year-over-year
Print Net Sales, a 12% increase in year-over-year Logistics Net Sales, and a 7%
increase in year-over-year Agency Solutions Net Sales. We expect sales growth of
3% – 7% in 2022, marking a second consecutive year of sales growth.
O U R R E V E N U E D I V E R S I F I C A T I O N S T R A T E G Y
We continue to make progress on
our revenue diversification strategy
into higher value, higher margin
services. In 2021, our Integrated
Solutions and Targeted Print
offerings increased as a portion
of total Net Sales to represent
64% of Net Sales—a significant
increase from just two years ago,
when they accounted for 58% of
Net Sales. Our Integrated Solutions
include powerful Agency Solutions
and Logistics, while Targeted Print
comprises the high-growth areas of
Catalog, Direct Mail, Packaging
and In-Store Marketing. Notably,
offline channels continue to be
popular for brand awareness and
driving response.
Net Earnings from Continuing Operations were $38 million in 2021 as compared to
a Net Loss of $107 million in 2020. Non-GAAP Adjusted EBITDA was $246 million
in 2021 as compared to $260 million in 2020, and Non-GAAP Adjusted EBITDA
margin was 8.3% as compared to 8.9% in 2020. The decline in Adjusted EBITDA
and margin was primarily due to the nonrecurrence of $39 million of COVID-19
pandemic-related temporary cost savings in 2020 and from the negative impact of
cost inflation and supply chain disruptions.
Non-GAAP Adjusted Diluted Earnings Per Share From Continuing Operations more
than doubled from $0.29 per share for full-year 2020 to $0.60 per share for full-year
2021. This increase was primarily due to lower depreciation and amortization, lower
interest expense and lower selling, general and administrative expenses.
Net Cash Provided by Operating Activities decreased by $54 million in 2021 to
$137 million, as compared to 2020, and Non-GAAP Free Cash Flow decreased by
$43 million in 2021 to $87 million, as compared to 2020. The decline was primarily
due to $40 million of income tax refunds received during the third quarter of 2020
due to the CARES Tax Act, as well as higher working capital to support Net Sales
growth and the strategic decision to carry higher paper and material inventory
to serve our clients during this period of worldwide supply chain disruption and
resulting longer lead times. These were partially offset by an $11 million decrease
in capital expenditures.
At year-end 2021, we improved our Debt Leverage Ratio 81 basis points to 2.5x
from 3.3x at year-end 2020, and returned to our long-term targeted leverage range
of 2.0x to 2.5x. Notably, we have reduced Net Debt by $410 million or 40% over
the past two years.
We believe our ample liquidity, strong lender relationships, agile approach to
cost management and ability to help clients as a marketing solutions partner will
provide substantial financial flexibility on into the future.
2022 Financial Objectives
In 2022, we will build on the positive growth momentum from clients embracing
our integrated marketing platform. Our financial objectives to ensure Quad remains
a compelling long-term investment include:
•
•
•
Net Sales growth and diversification into higher margin marketing services, as
well as improved profitability through effective cost management, productivity
improvements and automation investments.
Generate strong Free Cash Flow and use it to continue to invest organically in
our business and reduce debt with the expectation that we will end 2022 at a
lower debt leverage ratio than we ended 2021.
Further strengthen our balance sheet and liquidity through debt reduction to
enhance our financial flexibility to further accelerate and scale our strategy as
a marketing solutions partner, and drive shareholder value.
The Future
As we look ahead to 2022, we will continue to accelerate our competitive position,
scaling our unique platform to innovatively address our clients’ ever-changing
needs. We will expand our relationships with existing clients, providing them with
more products and services, while also adding new clients who are looking for a
partner with a complete through-the-line marketing offering. We also expect to
expand in established and emerging verticals, driven by our integrated marketing
platform that removes friction throughout the marketing process. Our focus remains
clear: helping brands and marketers reduce complexity, increase efficiency and
enhance marketing spend effectiveness while creating a better, more purposeful and
sustainable way forward for all our stakeholders.
Sincerely,
J. Joel Quadracci
Chairman, President & Chief Executive Officer
2 0 2 2 S T R A T E G I C P R I O R I T I E S
Walk in
the Shoes
of Clients
Grow the
Business
Profitably
Bolster
Platform
Strength
Empower
Employees
Enhance
Financial
Strength
and Create
Shareholder
Value
The Future
Financials at a Glance
Financial Highlights (1)
(in millions, except per share and ratio data)
2021
2020
Net Sales
$
2,960.4 $
2,929.6
Net Earnings (Loss) From Continuing Operations
Adjusted EBITDA (2)
Adjusted EBITDA Margin (2)
Adjusted Diluted Earnings Per Share
From Continuing Operations (2)
Cash Flow From Operations
Free Cash Flow (2)
Debt Leverage Ratio (2)
$
$
$
$
$
37.8 $
(106.6)
246.0 $
260.4
8.3%
8.9%
0.60 $
0.29
136.5 $
190.2
86.5 $
129.2
2.54x
3.35x
1. During 2019, the Company made the decision to sell its United States Book business as part of an ongoing process to review its business portfolio and
divest assets non core to the Company’s transformation strategy. The sale of the Book business was completed during 2020. These financial highlights
are being reported to reflect the Company’s Book business as discontinued operations for the year ended December 31, 2020 in accordance with United
States generally accepted accounting principles (GAAP), with the exception of cash flow related financial metrics which have not been adjusted to sepa-
rately disclose cash flows related to discontinued operations.
2. Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Diluted Earnings Per Share From Continuing Operations, Free Cash Flow and Debt Lever-
age Ratio are financial measures not prepared in accordance with GAAP in the United States of America. The Company believes that these Non-GAAP
measures, when presented in conjunction with comparable GAAP measures, provide additional information for evaluating Quad’s performance and
are important measures by which Quad’s management assesses the profitability and liquidity of its business. These Non-GAAP measures should be
considered in addition to, not as a substitute for or superior to, net earnings (loss) as a measure of operating performance or to cash flows provided by
operating activities as a measure of liquidity. These Non-GAAP measures may be different than Non-GAAP financial measures used by other companies.
Adjusted EBITDA is defined as net earnings (loss) attributable to Quad common shareholders excluding interest expense, income tax expense (benefit),
depreciation and amortization (“EBITDA”), restructuring, impairment and transaction-related charges, gains from sale and leaseback, loss from discon-
tinued operations, net of tax, net pension income, loss on debt extinguishment, equity in (earnings) loss of unconsolidated entity, the Adjusted EBITDA
for unconsolidated equity method investments (calculated in a consistent manner with the calculation for Quad) and net earnings (loss) attributable
to noncontrolling interests. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net sales. Adjusted Diluted Earnings Per Share From
Continuing Operations is defined as earnings (loss) from continuing operations before income taxes and equity in (earnings) loss of unconsolidated
entity excluding restructuring, impairment and transaction-related charges, gains from sale and leaseback, loss on debt extinguishment, and adjusted for
income tax expense at a normalized tax rate, divided by diluted weighted average number of common shares outstanding. Free Cash Flow is defined as
net cash provided by operating activities less purchases of property, plant and equipment. Debt Leverage Ratio is defined as total debt and finance lease
obligations less cash and cash equivalents divided by the last twelve months of Adjusted EBITDA. A reconciliation of these non-GAAP financial measures
to GAAP financial measures can be found in our press release dated February 22, 2022, disclosing our financial results for 2021, and which is also an
exhibit to our form 8-K furnished to the Securities and Exchange Commission on February 22, 2022.
F O R M 1 0 - K [ 2 0 2 1 ]
K UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
or
For the transition period from to
Commission File Number 001-34806
QUAD/GRAPHICS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin
(State or other jurisdiction of incorporation or organization)
39-1152983
(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)
Title of Class
Class A Common Stock, par value $0.025 per share
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol
QUAD
Name of Each Exchange on Which Registered
The New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
Non-accelerated filer
☐
☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the class A common stock (based on the closing price of $4.15 per share on the New York Stock Exchange) on June 30,
2021, the last business day of the registrant’s most recently completed second fiscal quarter, held by non-affiliates was $146,450,960. The registrant’s
class B common stock is not listed on a national securities exchange or traded in an organized over-the-counter market, but each share of the registrant’s
class B common stock is convertible into one share of the registrant’s class A common stock.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
Class
Class A Common Stock
Class B Common Stock
Class C Common Stock
Outstanding as of January 31, 2022
42,416,771
13,556,858
—
Portions of the Proxy Statement for the registrant’s 2022 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
[This page has been left blank intentionally.]
QUAD/GRAPHICS, INC.
FORM 10-K INDEX
For the Year Ended December 31, 2021
Page No.
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . .
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . .
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15. . . . . Exhibit Index and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16 . . . . Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
3
21
34
34
35
35
37
39
67
71
129
129
130
130
131
131
131
132
132
133
139
141
i
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Forward-Looking Statements
To the extent any statements in this Annual Report on Form 10-K 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 Quad/Graphics, Inc. (the “Company” or
“Quad”), 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 this Annual Report on Form 10-K, 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, and the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
The impact of fluctuations in costs (including labor and labor-related costs, energy costs, freight rates and
raw materials, including paper and the materials to manufacture ink) and the impact of fluctuations in the
availability of raw materials, including paper and the materials to manufacture ink;
The impact of inflationary cost pressures and supply chain shortages;
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 negative impacts the COVID-19 pandemic has had and will continue to have on the Company’s
business, financial condition, cash flows, results of operations and supply chain, including rising
inflationary cost pressures on raw materials, distribution and labor, and future uncertain impacts;
The failure to attract and retain qualified talent across the enterprise;
The impact of increased business complexity as a result of the Company’s transformation to a marketing
solutions partner;
The impact of digital media and similar technological changes, including digital substitution by consumers;
The inability of the Company to reduce costs and improve operating efficiency rapidly enough to meet
market conditions;
The impact of changes in postal rates, service levels or regulations, including delivery delays due to
ongoing COVID-19 impacts on daily operational staffing at the United States Postal Service;
The impact of a data-breach of sensitive information, ransomware attack or other cyber incident on the
Company;
The impact negative publicity could have on our business;
The impact of changing future economic conditions;
The failure of clients to perform under contracts or to renew contracts with clients on favorable terms or at
all;
1
•
•
•
•
•
•
•
•
The fragility and decline in overall distribution channels;
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 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;
The impact of risks associated with the operations outside of the United States (“U.S.”), including costs
incurred or reputational damage suffered due to improper conduct of its employees, contractors or agents;
Significant investments may be needed to maintain the Company’s platforms, processes, systems, client
and product technology and marketing and to remain technologically and economically competitive;
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 regulatory matters and legislative developments or changes in laws, including changes in
cyber-security, privacy and environmental laws; 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 United States Securities and
Exchange Commission (“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 Annual Report on Form 10-K. 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.
2
Item 1.
Business
Overview
PART I
As a worldwide marketing solutions partner, Quad leverages its more than 50-year heritage of platform
excellence, innovation, strong culture and social purpose to create a better way for its clients, employees and
communities. The Company’s integrated marketing platform removes friction throughout the marketing process thereby
helping brands and marketers reduce complexity, increase efficiency and enhance marketing spend effectiveness. Quad
provides its clients with a complete through-the-line marketing offering, providing unmatched scale for on-site services
and expanded subject expertise in marketing strategy, creative solutions, media deployment and marketing management
services. With a client-centric approach that drives the Company to continuously hone and evolve its offering, combined
with leading-edge technology, advanced data and analytics and single-source simplicity, the Company has the resources
and knowledge to help a wide variety of clients target, more deeply engage and grow audiences in multiple verticals,
including those in established and emerging industries, such as retail, publishing, consumer technology, consumer
packaged goods, financial services, insurance, healthcare and direct-to-consumer.
Quad was founded in Pewaukee, Wisconsin, as a Wisconsin corporation, in 1971 by the late Harry V.
Quadracci. As of January 31, 2022, the Quadracci family, through the Quad/Graphics, Inc. Amended and Restated
Voting Trust Agreement (“Quad Voting Trust”), has voting control of approximately 71%, which the Company believes
provides it with continued stability and flexibility as Quad works to achieve its long-term strategic vision. As of
December 31, 2021, the Company had approximately 15,100 full-time equivalent employees in North America
(including Mexico and the Dominican Republic), South America, Europe and Asia, and served a diverse base of
approximately 4,600 clients. Quad locations span 14 countries, including 45 manufacturing and distribution facilities
and more than 90 client-based on-site locations, with additional investments in printing operations in India.
During Quad’s first 40 years, the Company grew rapidly through greenfield growth, built a premier
manufacturing and distribution platform equipped with the latest technology, established its reputation as one of the
printing industry’s foremost innovators and created a strong Company culture based on enduring values and commitment
to social purpose that remains in place today.
Beginning in 2010, Quad strategically expanded its offerings to create enhanced value for its clients. Quad saw
an opportunity to participate in industry consolidation in response to economic and industry pressures following the great
recession of 2008 and 2009 that severely impacted print volumes and accelerated the impact of media disruption.
Through a series of disciplined consolidating acquisitions that included World Color Press, Inc., Vertis Holdings Inc. and
Brown Printing Company, the Company added experienced talent and enhanced and expanded its print-based product
and service offerings while removing inefficient and underutilized capacity by transitioning work to more efficient
facilities, and reducing costs. This period of consolidation created a disciplined cost reduction philosophy and advanced
investment in the highly automated and efficient manufacturing and distribution capabilities the Company operates
today.
Beginning in 2014, Quad focused on strategic investments in marketing services, talent and technology to
accelerate its transformation as a marketing solutions partner. During this transformation period, known as Quad 3.0,
Quad made several growth acquisitions including a premier marketing services provider specializing in customized
marketing and business process outsourcing with unmatched scale for on-site marketing services; a top five independent
creative agency offering world-class capabilities in strategy, including media buying and analytics, creative and account
management, and packaging design and premedia services; and a leading performance marketing agency specializing in
media, analytics and customer experience in digital channels. In addition, the Company hired business professionals
with client-side marketing experience and consulting expertise to strategically expand its integrated marketing offering,
enter new market verticals, and change product-centric conversations with clients to a solutions-based approach. To
reflect its transformation to a marketing solutions partner with a strong foundation in print, the Company evolved its
brand from Quad/Graphics to Quad in 2019.
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Today, Quad provides brands and marketers with a more efficient and effective way to go to market and reach
consumers. Through its integrated marketing platform, the Company creates greater value for clients by removing
friction in the marketing process and speeding the overall marketing journey by delivering all the elements of a
successful campaign under one roof. For Quad clients, this:
•
•
•
Reduces the complexities of working with multiple agency partners and vendors.
Increases process efficiencies through workflow re-engineering, content production and process
optimization.
Enhances marketing spend effectiveness through integrated solutions that help clients target, more deeply
engage and grow audiences; plan and measure marketing; strategize, create and activate big ideas; produce
content at scale; and connect with consumers in the most appropriate channels and with the right amplitude
for eliciting maximum response.
As a good corporate citizen, Quad also creates societal value through a strong commitment to proactively
addressing environmental, social and governance matters. This dedication to driving positive, sustainable change in its
business and in the world aligns with Quad’s long-standing commitment to create a better way – a hallmark of the
Company’s culture.
In 2021, the Company delivered strong financial results while navigating the COVID-19 pandemic, paper and
supply chain disruptions, inflationary cost pressures and labor shortages. Despite these challenges, Quad worked
thoughtfully and diligently to mitigate these impacts on the business and proactively manage client expectations. Quad
continued to grow print segment share because of its dependable performance, operational and financial stability, and
ongoing investments in its platform. It also continued to expand its marketing solutions with new and existing accounts,
providing clients with the simplicity, efficiency and effectiveness of an integrated approach. Further, Quad shared how it
is creating a better way to drive positive change in its business and the world through a comprehensive environmental,
social and governance report featuring commitments in key areas integral to its business strategy as a marketing solutions
partner. Quad believes it will be able to maintain its leading competitive position through its consistent business
strategy, dedicated and passionate employees, and integrated marketing platform, providing stability and innovative
solutions for clients into the future.
More information regarding Quad is available on the Company’s website at QUAD.com. Quad is not including
the information contained on or available through its website as part of, or incorporating such information by reference
into, this Annual Report on Form 10-K. The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-
Q, Current Reports on Form 8-K and any amendments to those reports are made available to the public at no charge
through a link appearing on the Investor Relations section of the Company’s website. Quad provides access to such
materials through its website as soon as reasonably practicable after electronically filing such material with, or furnishing
it to, the SEC.
Industry and Competition
According to an October 2021 Dun & Bradstreet First Research report, the U.S. advertising and marketing
services industry is forecast to grow at an annual compounded rate of 4% between 2021 and 2026, as compared to
portions of the printing industry which are in secular decline. The secular decline of the printing industry has accelerated
due to the COVID-19 pandemic and the further migration of advertising dollars from print to digital channels. These
industry dynamics support Quad’s transformation as a marketing solutions partner.
The advertising and marketing services industry is highly fragmented. According to the October 2021 Dun &
Bradstreet First Research report, the top 50 companies in the U.S. advertising and marketing services industry generate
approximately 40% of industry revenue. Services in this industry include advertising for print, broadcast and online
media (about 43% of industry sales); public relations (12%); and direct marketing (10%). Other services include display
advertising, media buying (reselling advertising time or space), and media representation (selling advertising time or
space on behalf of media outlet owners). The U.S. advertising and marketing services industry includes about
38,000 establishments (single-location companies and units of multi-location companies), with combined annual revenue
of about $110 billion.
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The commercial print industry is also highly fragmented. According to the October 2021 Printing in the U.S.
IBISWorld industry report, the United States commercial printing industry, in the aggregate, generates an estimated
$78 billion in annual revenue, employs approximately 350,000 people and is comprised of over 45,000 companies. The
report also states that no printing company accounts for more than 5% of total commercial print industry annual revenue
in the United States.
In addition to being highly fragmented, competition in the printing industry remains intense, and the Company
believes that there are indicators of heightened competitive pressures. The Company faces competition due to the
increased accessibility and quality of digital alternatives to traditional delivery of printed documents through the online
distribution and hosting of media content, and the digital distribution of documents and data. The Company faces
competition from print management and marketing consulting firms that look to streamline processes and reduce the
overall print spend of the Company’s clients.
The commercial print industry has moved toward a demand for shorter print runs, faster product turnaround and
increased production efficiency of products with lower page counts and increased complexity. This, combined with
increases in postage expenses and the increased use of digital marketing and communication channels, has led to excess
manufacturing capacity in the print industry. This excess capacity has allowed certain larger competitors, like Quad,
with economies of scale, strong balance sheets and access to capital markets, the ability to invest in automation and more
efficient equipment, take advantage of consolidating acquisition opportunities to remove excess, inefficient and/or
underutilized capacity, and reduce overall costs.
Competition in both the advertising and marketing services and print industries is affected by real gross
domestic product growth, as economic activity and advertising spending are key drivers of consumer demand. In times
of economic prosperity, advertisers may increase spending to build brand awareness and to drive sales. Conversely, in
times of global economic uncertainty and budget pressures, advertisers may reduce spending or shift their spending to
other forms of media, as demonstrated during the COVID-19 pandemic. For print specifically, magazine publishers that
face diminished advertising pages reduce total page counts and frequency; catalog marketers reduce page counts,
circulation or frequency of print campaigns; retailers curb investments in store inventory and cut back on retail insert
newspaper circulation and advertising; and other advertisers reduce their direct mail volume. It is possible that these
customers instead decide to move advertising spend to digital alternatives.
Marketing services providers face pressure to satisfy major clients’ needs, as the win or loss of a major client
account can impact revenue significantly. Another challenge facing marketing service providers relates to public
concern and general annoyance with advertising methods. For example, data collection of personal information for
marketing purposes is an issue under scrutiny from federal and state legislation, and marketing service providers are
facing future restrictions on certain types of data they collect. In Europe, the European Union enforces data protection
through the General Data Protection Regulations.
The Company faces competition in the advertising and marketing services industry based on access to a skilled
workforce, pricing, adapting quickly to new technology, creating unique and effective campaigns and offering superior
customer service. Across Quad’s range of printed products, competition is based on total price of printing, materials and
distribution; availability of materials; quality; distribution capabilities; customer service; access to a highly skilled
workforce; availability of labor; availability to schedule work on appropriate equipment; on-time production and
delivery; and state-of-the-art technology to meet a client’s business objectives, including the ability to adopt new
technology quickly.
As consumer media consumption habits change, marketing services providers face increased demand to offer
end-to-end marketing services, from strategy and creative through execution, across all channels, traditional and digital.
As new marketing and advertising channels emerge, marketing services providers must expand their services beyond
traditional channels, such as for television, newspapers, print publications and radio, to digital channels, such as mobile,
internet search, internet display and video, to create effective multichannel campaigns for their clients.
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Quad believes that business users of print and print-related services are focused on generating and tracking the
highest returns on their marketing spend. Quad believes it is well positioned to help clients achieve greater process
efficiencies and marketing spend effectiveness through data-driven integrated marketing solutions. The Company
believes that its clients receive the greatest return on their marketing spend when they start with a strong marketing
strategy that uses print in combination with other media channels, informed by customer data, to create targeted and
relevant multichannel marketing campaigns.
Seasonality
Quad 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 and Free Cash Flow due to the reduction of working
capital requirements that reach peak levels during the third quarter. Seasonality is driven by increased 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. Due to the continued uncertainty surrounding the continuing COVID-19
pandemic and supply chain shortages, the Company anticipates this seasonality may be further impacted in future
periods, as the Company is heavily dependent on consumer demand.
Strategic Priorities
Quad’s overarching business strategy and singular vision as a marketing solutions partner is achieved through
the execution of the following five consistent strategic priorities:
Walk in the Shoes of Clients
The Company encourages all employees, regardless of job title, to walk in the shoes of clients by putting a
priority on listening to clients’ needs and challenges, doing what they can to make it easy to work with Quad, and
making the client experience enjoyable and inclusive at every touchpoint. With a focus on solving problems and
removing friction wherever a client experiences it in the marketing process, Quad seeks to become an invaluable
strategic marketing partner for its clients, helping them successfully navigate today’s constantly evolving media
landscape through innovative data-driven solutions, produced and deployed efficiently across multiple media channels.
A key component of Quad’s client-facing strategy is to strengthen relationships at higher levels within a client’s
organization so the Company can better understand, anticipate and satisfy the organization’s requirements, including
their diversity, equity and inclusion goals, and broader environmental, social and governance objectives. The Company
also believes its proactive thought leadership in the key issues facing its clients, including data-driven marketing, mar-
tech and postal reform, will foster loyalty to the Quad brand.
Grow the Business Profitably
This strategic priority centers on Quad’s ability to defend against significant media disruption, deploy balanced
use of capital, including disciplined and compelling investments, and grow the business as a marketing solutions partner.
Key components of this priority are:
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•
Acquire new and expand existing account relationships by introducing clients to the Company’s complete
through-the-line marketing offering – from strategy and creative through production, execution and
analytics – that helps them market more efficiently and effectively. To this end, Quad is focused on
ensuring it has the right talent in the right positions to facilitate strategic marketing conversations and
tailored solutions based on a better understanding of their needs.
Expand in key vertical industries with growth opportunities, such as consumer technology, consumer-
packaged goods, financial services, insurance, healthcare and direct-to-consumer, while continuing to
capitalize on the Company’s established expertise in retail and publishing. Through existing and new
offerings, Quad delivers solutions dedicated to solving client marketing and process challenges.
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• Make disciplined and compelling investments that take many different forms. The Company intends to
continue to pursue growth investments that help expand and strengthen its integrated marketing platform.
In addition, the Company intends to continue making long-term investments in its talent, such as hiring
business professionals with client-side marketing experience and consulting expertise to enhance its
position as a marketing solutions partner, as well as investments to attract new employees and increase
existing employee engagement, retention and productivity.
Bolster Platform Strength
The Company operates what it believes to be a superior and unparalleled integrated marketing platform, which
it has consciously built to remove friction in the marketing process and speed the overall marketing journey through
reduced complexity, increased efficiencies and enhanced marketing spend effectiveness across channels. Through this
unique platform, the Company offers a complete through-the-line marketing offering featuring agency, consulting and
implementation solutions encompassing marketing strategy, including consumer insights and data analytics; creative
solutions for producing quality content at scale; and media deployment and optimization for all channels, including print,
broadcast, digital, in-store, out-of-home and packaging supported by 24/7 global production, including industry-leading
print manufacturing and mail-distribution capabilities. Quad uses a disciplined return on capital framework to make
regular, strategic investments in this platform, resulting in what it believes is the most integrated, automated, efficient,
innovative and modern marketing platform of its kind. The Company’s long-standing, disciplined culture of holistic
Continuous Improvement and commitment to Lean Enterprise methodologies, along with ongoing, strategic investments
in talent, technology, products and services to accelerate its position as a marketing solutions partner.
To strengthen its offering, the Company continually seeks to enhance its product portfolio, especially in the
direct marketing, in-store and packaging spaces, with innovations that support clients’ ability to stand out in a
consumer’s mailbox or front doorstep, or on the store shelf. These innovations include proprietary solutions unavailable
anywhere else in the marketing, communications or printing industries.
Additionally, Quad has chosen to strategically divest of those businesses that cannot be easily leveraged as part
of its greater integrated marketing platform, such as the QuadExpress third-party logistics business Quad sold in 2021.
Through these types of optimization efforts, Quad maintains a superior, unparalleled platform that delivers value to
clients and, ultimately, their customers.
Empower Employees
Quad’s strategic priority to empower employees throughout their career journey builds on the key aspects of the
Company’s distinct corporate culture, which the Company views as a competitive advantage. These aspects include the
Company’s enduring values, which are centered on trust, innovation, growth, believing in people and doing the right
thing. The Company understands that its employees perform better at work when they can simply be themselves –
confident in their abilities, comfortable sharing their ideas, opinions and beliefs, and able to bring their truest and best
selves to the workplace – all of which leads to a more inclusive environment and better engagement, decision-making
and business outcomes. The Company embraces forward-thinking workplace practices, such as flexible work models for
the long-term future of work; implements innovative talent acquisition strategies to meet its labor and business needs;
and provides training and reward programs to engage, develop and retain its employees. Employees are encouraged to
take advantage of the Company’s continuous growth environment, which not only teaches critical on-the-job and
leadership skills, but also helps them respond to rapid change, cultivate effective networks, and create high-quality
relationships necessary for personal, professional and company growth. The Company believes its approach to
continuous growth for each employee is advantageously distinct from other employers. With the Company’s
encouragement to do things differently, to be something greater and to create a better way, employees are more fully
engaged in their day-to-day activities, producing better results for clients and advancing the Company’s strategic
priorities. Additionally, the Company engages employees and fosters corporate pride by supporting community
activities, initiatives and organizations that improve the quality of life near Quad’s operations.
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Enhance Financial Strength and Create Shareholder Value
Quad follows a disciplined approach to maintaining and enhancing financial strength to create shareholder
value, which is essential given ongoing media disruption, including printing industry challenges. This strategy is
centered on the Company’s ability to drive profitable growth, and maximize net earnings, Free Cash Flow and operating
margins; maintain consistent financial policies to ensure a strong balance sheet, liquidity level and access to capital; and
retain the financial flexibility needed to strategically allocate and deploy capital as circumstances change. The priorities
for capital allocation and deployment are balanced according to prevailing circumstances and what the Company thinks
is best for shareholder value creation at any particular point in time. Those priorities currently include: deleveraging the
Company’s balance sheet through debt and pension liability reductions; making compelling investments that drive
profitable organic growth and productivity in the Company’s print manufacturing and distribution operations, as well as
expansion into higher-growth marketing services; and paying dividends and stock buybacks over the long term.
To provide ongoing improvement in manufacturing productivity and, ultimately, maximize operating margins,
the Company applies holistic Continuous Improvement and Lean Enterprise methodologies to simplify and streamline
processes. These same methodologies are applied to its selling, general and administrative functions to create a truly
Lean Enterprise. The Company continually works to lower its cost structure by consolidating its manufacturing
operations into its most efficient facilities, as well as realizing purchasing, mailing and logistics efficiencies by
centralizing and consolidating print manufacturing volumes, and eliminating redundancies in its administrative and
corporate operations. Quad believes that its focused efforts to be the high-quality, low-cost producer generates increased
Free Cash Flow and allows the Company to maintain a strong balance sheet through debt and pension liability reduction.
The Company’s disciplined financial approach also allows it to maintain sufficient liquidity and to reduce refinancing
risk, with the nearest significant debt maturity of $211.5 million occurring in May 2022 and of which the Company is
well-positioned to address at or before maturity due to its liquidity. The Company had total liquidity of $576.6 million
as of December 31, 2021, which consisted of up to $396.7 million of unused capacity under its revolving credit
arrangement, which was net of $35.8 million of issued letters of credit, and cash and cash equivalents of $179.9 million.
In addition, the Company completed the amendment of its $1 billion bank debt agreement, extending the maturity to
November 2026. Quad is proud of its strong and trusted banking relationships, which provide the Company with
increased financial flexibility to continue to pay down debt and to make strategic investments to accelerate its position as
a marketing solutions partner.
Competitive Advantages
Quad’s strategic priorities are powered by three key competitive advantages that the Company believes
distinguish it from its competitors: a commitment to integrated marketing platform excellence, a commitment to ongoing
innovation, and a commitment to its culture and social purpose.
Commitment to Integrated Marketing Platform Excellence
Through a 24/7 “always on” global platform featuring strategic consulting, creative talent, and production and
implementation resources across North America, South America, Europe and Asia, Quad provides a better way to solve
clients’ marketing and process challenges. The Company’s data-driven integrated marketing platform enables clients to
strategically plan, produce, deploy, manage and measure their content across multiple media channels – rapidly, at scale
and without handoffs that compromise quality, consistency and timeliness. Through this platform, Quad gives brands
and marketers a more efficient, effective and frictionless way to go to market and reach consumers using its unmatched
scale in client on-site services and expanded subject matter expertise in:
• Marketing Strategy, including customer insights and analytics, campaign planning and media services, to
understand and connect with a target audience;
•
Creative Solutions, including campaign development, photo and video production, adaptive design and
cross-media production to produce quality content quickly and at scale;
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• Media Deployment, including print, broadcast, all forms of digital, in-store, out-of-home and packaging,
to reach multi-channel consumers while maximizing budgets; and
• Marketing Management Services, including dedicated marketing services teams, sourcing and
procurement, and print and paper management, to remove friction in the process so clients can focus on
other critical aspects of their business.
A key aspect of Quad’s integrated marketing platform is dedicated client on-site and near-site teams, including a
network of photography and video production studios. These teams serve as a natural extension of a client’s internal
marketing department, fulfilling traditional agency executional roles while also providing production efficiencies at scale
for content creation, creative production and marketing execution. These teams also offer seamless access to the
Company’s other integrated services and subject matter experts, removing friction in the marketing process. The
Company believes this model increases process efficiencies and enables clients to focus on what they do best: sell more
products, services and content. Quad has more than 500 professionals embedded at more than 90 on-site locations
covering grocery, sporting goods, mass merchandisers and publishers.
Over its more than 50 year heritage, the Company also has led the industry in its printing and print distribution
capabilities – the most capital intensive part of Quad’s integrated marketing platform, but also a key point of
differentiation with traditional creative agencies and agency holding companies. Unlike traditional agencies or agency
holding companies that develop creative and then outsource production, or traditional consulting firms that provide
strategy and then outsource implementation, Quad provides all campaign elements for seamless, expedited execution.
As far as printing, Quad continually invests in its equipment, automation and leading-edge technology to enhance print
product features, including personalization, while maximizing labor productivity, increasing throughput and reducing
labor costs. For example, through ongoing investments in digital press technology, the Company provides marketers and
publishers a full range of options to produce and deliver more relevant content faster, in smaller print-run quantities, and
more cost-effectively versus conventional web offset press technology. Recent investments in digital press technology
also have enabled Quad to enter markets in which it previously was not as competitive. These ongoing investments,
along with innovative front-end toolsets and data workflows, and industry-best, back-end logistics and postal
optimization, have enabled Quad to better serve the needs of today’s leading marketers who prize direct access to
consumers’ home mailboxes. Quad carries over this commitment to print media to other forms of media, including all
forms of digital, broadcast, in-store and out-of-home.
Another key aspect of the Company’s manufacturing capabilities is the operation of very large facilities (greater
than one million square feet) that produce multiple different product lines under one roof to maximize utilization of
equipment and labor resources, while also driving savings in certain product lines (such as publications and catalogs) due
to economies of scale. The Company has continued to strengthen its manufacturing operations by:
•
•
Removing excess and/or under-utilized capacity, and by consolidating work into facilities where it can
achieve the greatest manufacturing and distribution efficiencies.
Reconfiguring and re-equipping manufacturing facilities for growth segments, such as direct mail, in-store
and packaging. This includes recent investments in advanced digital sheetfed press technology that is new
to the North America continent.
Postal rates are a significant component of many clients’ cost structures, and Quad believes that postal costs
influence the number of pieces that its clients print and mail. Therefore, the Company has invested significantly in its
mailing and distribution platform to mitigate increasing postage costs, and to help clients successfully navigate the ever-
changing postal environment. One of Quad’s postal optimization programs is co-mailing, which involves the sorting and
bundling of multiple printed products to be mailed to consumers in order to facilitate better integration with the United
States Postal Service (“USPS”). In return, the USPS offers significant work-sharing discounts for this sorting, bundling
and drop-shipping. Quad’s co-mail program is the largest in the print industry (based on information published or
otherwise made available from competitors). Due to the continuously increasing costs of utilizing the USPS and to help
control costs for its clients, Quad continues to expand its alternate delivery service for clients that altogether bypasses the
USPS to deliver products to consumers’ doorsteps.
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Commitment to Ongoing Innovation
At the forefront of innovation for more than 50 years, Quad believes its commitment to ongoing innovation
drives its purpose to create a better way, which benefits all stakeholders.
Marketing Solutions
When it comes to marketing solutions, Quad takes a disciplined approach to (1) expand its existing product
offerings; (2) develop and commercialize new products offerings; and (3) deliver integrated solutions that solve clients’
marketing and process challenges in the areas of Marketing Strategy, Creative Solutions, Media Deployment and
Marketing Management.
The Company has hired talent with client-side marketing experience and consulting expertise to help advance
conversations with clients to be more solutions-based. Quad’s Sales team is focused on understanding client pain points,
and aims to expand relationships with higher-level executives responsible for corporate strategy, including Chief
Executive Officers and Chief Marketing Officers, to create and implement solutions that incorporate a broad range of
Quad’s products and services. Through these relationships, the Company is able to gain insights into additional client
marketing needs, and then uses a disciplined process to develop and commercialize those solutions to expand and deepen
Quad’s relationships. These solutions include media products, and innovative solutions for cost-effective mailing and
distribution, as well as online and cloud-based solutions for effectively integrating multichannel campaigns.
Marketing Strategy: The Company has made recent investments in its data and analytics capabilities,
including campaign planning and media services, to improve marketing execution and drive stronger results for clients
and advertisers. The Company’s data-driven customer insights and analytics services not only help clients identify their
optimal target audience based on behaviors and demographics, but also the best content and mix of channels to reach and
engage that audience at the moment they are most receptive across all paid, owned and earned touchpoints. Proprietary
and highly valuable household-level data and insights are derived from Quad’s unique data set, Profile Collective – a
database of in-home resident media and mobile engagements, including QR code scans, that only Quad can compile.
This unique information is augmented with existing third-party data and clients’ first-party information to create an
unparalleled audience and household targeting tool.
Accordingly, the Company is able to outline the ideas, places, spaces and experiences that can deliver a
communications strategy for maximizing end-customer value and behavior change (i.e., response). As far as
measurement, the Company can provide a unified view of campaign, channel and individual tactic performance.
Complementing these services are advanced testing capabilities, including a proprietary online testing platform that
allows clients to rapidly test print alternatives to identify precisely what combination of format, offer, messaging and
imagery will be most successful. The Company has innovated media buying by providing in-house media services for
all channels, creating a single point of accountability for streamlined planning, execution, measurement and testing of all
marketing efforts while reducing cycle time, leading to more opportunities to iterate, adjust and optimize spend across all
channels and segments.
Creative Solutions: With its premier marketing, advertising and creative talent, Quad creates world-class
campaigns that attract attention and activate audiences, and then implements those campaigns using processes that save
money and time to get in market faster. Technology plays a key role in Quad’s Creative Solutions which include content
workflow solutions that simplify and optimize the creative process, from concept through production; content production
services that enable clients to generate high-volume, high-quality content with a noncompetitive, complementary partner;
creative services that seamlessly connect strategy, concept and design; and mar-tech solutions centered on solving client
challenges in the areas of marketing operations, content accessibility, content production (including but not limited to
copywriting, videography and photography), content workflows, asset management, content deployment and data
optimization. Clients credit the Company’s creative solutions for providing a more integrated, channel agnostic, content-
first approach.
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Media Deployment: Unlike traditional creative agencies or agency holding companies, Quad has the ability to
seamlessly activate through-the-line media – both online and offline – and create value by understanding how every
touchpoint in a client’s marketing and media mix is performing at a particular moment in time and then guiding how to
optimize that investment to provide the greatest return. The Company manages hundreds of millions of dollars of gross
media billings annually on behalf of its clients. As the number of marketing channels expands, each with its own return-
on-investment measurement, the Company continues to innovate mar-tech solutions that help marketers know where to
allocate their marketing budget to achieve their business goals. For example, through Connex, its proprietary cross-
channel media optimization platform, Quad helps digital marketers eliminate the noise of disparate data sets and helps
marketers identify the specific value-driving actions they need to take in real time to drive revenue and grow their
business.
Quad’s maintains its leadership in print by leveraging its expertise in every facet of print production and
deployment. Quad’s own Smartools® proprietary enterprise resource planning system provides seamless, real-time
information flow across print sales and estimating, production planning, scheduling, manufacturing, warehousing,
logistics, invoicing, reporting and customer service. Quad also has applied robotic process automation to streamline data
processing and report generation. Where appropriate, Quad also leverages artificial intelligence in areas such as labor
management, scheduling and predictive machine maintenance.
Quad continues to make investments in the most advanced and efficient print manufacturing and distribution
capabilities in the industry, averaging 2% of its annual net sales for capital expenditures over the past five years. These
investments, which include automated guided vehicles, robotic palletizers and efficient digital and wide-web offset
presses, have resulted in what the Company believes is the most advanced and efficient print manufacturing and
distribution capabilities in the industry and have allowed the Company to reduce the amount invested in recent years
without impacting its leading technological excellence. These investments also have enabled it to remain the print
industry’s high-quality, low-cost producer.
Marketing Management: Quad leverages its deep expertise and expansive network to help clients manage
their operations the way it runs its own – with diligence toward efficiency and cost-savings. Through this innovative
approach, Quad removes friction in the process, offering clients its network of in-house experts and capabilities for
marketing and production outsourcing; sourcing and procurement of goods and services; and print and paper
management. As a result, clients can focus on other critical aspects of business while leveraging Quad’s expertise and
purchasing power.
Vertically Integrated Capabilities
A commitment to innovation and creating a better way to do business has also helped to expand Quad’s
vertically-integrated print and non-print capabilities. Through ongoing innovation in prepress/premedia services, paper
procurement and ink manufacturing (through Quad’s Chemical Research\Technology subsidiary), the Company
maintains a competitive advantage in delivering lower costs and enhanced customer service for its clients while
providing the Company with substantial control over critical links in the overall print supply chain to help control the
quality, cost and availability of key inputs in the printing process.
The Company created a health and wellness subsidiary, QuadMed, LLC (“QuadMed”) in 1990 to address its
own employees’ needs for quality, cost-effective health care. Today, QuadMed provides worksite health care solutions
nationally for approximately 60 employers of all sizes and across all industries, including private and public sector
employers. These solutions include onsite, near-site and virtual health delivery of comprehensive primary and
preventive care, condition management, wellness programs and coaching, physical therapy, behavioral health, pharmacy
services, occupational health and more. During the COVID-19 pandemic, Quad, its employees and their dependents
have benefited from guidance and best practices provided by QuadMed, which maintains relationships with leading
health care organizations and research organizations across the country.
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Commitment to Culture and Social Purpose
Quad believes its ability to create value is not limited to generating economic value, but also social and
environmental value, and that the Company can do good in the world while doing well as a business. Quad’s long-
standing focus on “creating a better way” – a hallmark of the Company’s culture for more than 50 years – has inspired
creativity in how it addresses environmental, social and business challenges and contributed to good corporate
citizenship. Further, the Company believes that its distinct corporate culture, which evolved from a core set of values
conceived by the Company’s late founder Harry V. Quadracci, drives thoughtful decision-making, especially with regard
to its disciplined approach to managing operations, innovating solutions for clients, and better positioning the Company
to prevail in a dynamic marketplace.
In this Annual Report on Form 10-K, the Company reports on its commitment to culture and social purpose
through achievements in environmental, social (Human Capital Management) and governance matters as outlined below.
Environmental
Quad believes that doing what is good for the environment is good for business, and seeks to operate in an
environmentally responsible manner by challenging itself to find new and better ways to conduct business that better
serves the environment and reflect the values of its clients and their customers. This approach focuses on conserving raw
materials, minimizing waste, recycling and reusing products and materials, and reducing environmental impacts
wherever possible across Quad’s integrated marketing platform. Examples of Quad’s commitment to environmental
responsibility and sustainability include:
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•
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Aligning the Company’s efforts and initiatives with environmentally focused United Nations Sustainable
Development Goals (SDG) such as SDG 12: Responsible Consumption and Production and SDG 15: Life
on Land.
Partnering with federal, state and local regulatory agencies; educational institutions; industry trade groups;
and non-profit organizations to share information, best-management practices, development of new tools
and metrics, and innovative technology that lead to the reduction or elimination of environmental impacts.
Benchmarking environmental performance to evaluate the effectiveness of current environmental
management programs and to identify program areas that need improvement or need to be developed.
Reclaiming materials and diverting them from the landfill through industrial and office recycling programs.
Becoming a founding member of Forests in Focus, a sustainability verification tool that offers the first
landscape-level assessment of U.S. timberlands, giving brands reliable data on sustainability risks that may
be present in the forest where they source wood fiber, the raw material used to make paper and packaging.
• Maintaining chain-of-custody certifications for sourcing materials from responsibly managed forests
(Forest Stewardship Council®, Sustainable Forest Initiative, and Program for the Endorsement of Forest
Certification).
•
•
•
•
Formulating its own brand of Envirotech™ inks that contain a high percentage of renewable resource (i.e.,
vegetable) content.
Developing a co-mailing program - now believed to be the largest in the printing industry - that helps
consolidate loads of mail and, thereby, reduce greenhouse gas emissions impact by putting fewer trucks on
the road.
Equipping the Company’s web offset presses with dryers that can collect volatile organic compounds and
use them as a supplementary fuel source to natural gas.
Becoming a founding partner of the U.S. Department of Energy’s Better Plants Program, a voluntary
program to save energy and money, and reduce the Company’s environmental footprint.
12
•
•
•
•
•
•
Being an active participant in the State of Wisconsin’s Focus on Energy program, an energy efficiency and
renewable resource program through which the Company has implemented multiple energy-saving
upgrades to its facilities and operations.
Becoming ISO 50001 Ready through the U.S. Department of Energy in the Company’s Hartford and West
Allis, Wis., facilities, recognizing that these plants have created sound energy policies, established
objectives and built structured improvements to generate deep, sustained energy savings.
Helping clients meet their sustainability goals through sourcing sustainable materials and reporting how the
Company’s performance affects their carbon footprint.
Putting the Company’s 300-acre plus “Camp Quad” recreational center into conservancy through non-profit
Tall Pines Conservancy, ensuring the land will remain undeveloped and will always be managed as a
private preserve for plant life and wildlife.
Proactively managing water consumption through a combination of best practices, capital investments,
efficient platform and efforts.
Continually educating clients, employees and communities on environmental sustainability matters. These
include providing access to internal experts for consultations; hosting symposiums and other educational
events at which the clients, suppliers and employees learn about the latest challenges and trends in
sustainability; and advancing community education initiatives through non-profits such as Pine View
Wildlife Rehabilitation and Education Center in southeastern Wisconsin which creates awareness of
sustainability’s importance in daily life.
As the owner, lessee or operator of various real properties and facilities, Quad is subject to various federal, state
and local environmental laws and regulations, including those relating to air emissions; waste generation, handling,
management and disposal; sanitary and storm water discharge; and remediation of contaminated sites. Historically,
compliance with these laws and regulations has not had a material adverse effect on the Company’s results of operations,
financial position or cash flows. Compliance with existing or new environmental laws and regulations may require the
Company to make future expenditures.
Human Capital Management
The Company continually invests in and supports its employees. Its people-focused, values-driven culture is a
key competitive advantage that the Company believes distinguishes itself from its competitors.
Attracting, Developing and Retaining Highly Qualified Talent
Quad relies on highly qualified, skilled and knowledgeable talent to advance its strategic priorities and maintain
its competitive advantage. Accordingly, the Company heavily invests in efforts to attract, develop and retain employees,
and in tools, technologies, processes, training and education to increase engagement, productivity and efficiency.
As of December 31, 2021, the Company had approximately 15,100 full-time equivalent (“FTE”) employees in
the following geographies:
Geographic Region
North America (Includes Mexico, Central America and the Caribbean) . . . . . . . . . . . . . . . . . . .
Europe, Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of FTE
Employees
12,700
1,500
800
100
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The ways in which Quad attracts, develops and retains highly qualified talent include, among others, the
following:
•
•
•
•
•
•
Providing and maintaining a world-class culture and environment for health and safety. The Company
strives for zero workplace injuries and illnesses through its Safety Accountability for All Employees
(SAFE) policy which states that no department is considered properly managed – regardless of proficiency
in other managerial areas – unless it maintains an acceptable level of safety performance. All employees,
from entry-level through senior management, are held accountable for adhering to the Company’s safety
policies. In 2020, the Company also implemented a Safe at Work program in response to the COVID-19
pandemic, which prioritizes the health and safety of employees through a variety of initiatives. (For
additional information on this program, see “COVID-19” below).
Creating jobs with competitive pay and innovative benefits that support families, strengthen communities
and provide long-term career growth opportunities. The Company regularly evaluates its pay practices and
structures, including implementing a new wage structure over the past few years for hourly manufacturing
employees in its most competitive labor markets.
Offering career development through a variety of programs, including Accelerated Career Training, which
provides a fast-track for career advancement in manufacturing positions; People Leading People that
focuses on best-in-class manager behaviors; Corporate Trainee Program, which develops skills and
leadership abilities through a series of agency and corporate rotations; and hands-on, mentor-led
manufacturing apprenticeship programs, including registered apprenticeships and youth apprenticeships.
Listening to employees through annual engagement surveys and open forums at department and company-
wide meetings to help better understand what employees like about working for the Company, what it can
improve, and what could drive greater job satisfaction, and acting on that employee feedback.
Fostering pride through employee recognition programs, including a new engagement and retention award
for manufacturing locations that work to create an engaging workplace; employee and family events; and
community outreach activities.
Offering a new flexible work model (aka The Future of Work @ Quad) for office-based employees who
have been working remotely during the pandemic that provides benefits to both employees and the business
by emphasizing flexibility based on roles, technology requirements and responsibilities.
Compensation and Benefits
The Company invests in its workforce by offering market competitive compensation, regularly conducting total
compensation benchmarking as part of its basic operations, as well as offering a comprehensive benefits package as part
of its Total Rewards program. Features of this program include:
•
•
•
•
•
•
Comprehensive medical, prescription, dental and vision coverage to employees, including access to 24/7
telemedicine and virtual care being piloted in certain regions.
On-site and near-site primary and specialty healthcare, pharmacy, dental, vision and physical therapy
services and fitness centers at several large-scale employee locations, owned and operated by the
Company’s health and wellness subsidiary, QuadMed.
Robust holistic wellness programming for physical, emotional, financial and social well-being through the
company’s QLife Wellness Program.
401(k) retirement savings program with annual discretionary Company match as well as retirement
planning and financial wellness resources and webinars.
Paid vacation time and holidays.
Short- and long-term disability insurance, and employer-paid life insurance.
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•
On-site affordable childcare and summer camps for school-aged children at some of the Company’s largest
manufacturing locations.
Diversity, Equity and Inclusion
Diversity, Equity and Inclusion (DEI) is part of Quad’s overall business strategy and a key driver behind
specific business outcomes, including attracting and retaining talent, strengthening and protecting its brand reputation,
increasing employee productivity, and competing in growth verticals. Quad’s DEI strategy is focused on (1) achieving a
workforce that reflects the communities where employees live and work, as well as the clients who trust Quad with their
business; (2) ensuring that procedures, processes and distribution of resources create equal opportunities and fair and just
outcomes; and (3) creating a safe and open environment where all Quad employees can bring their truest and best selves
to work every day, consistent with the Company’s long-standing values.
The Company is focused on the following areas to ensure it achieves its stated DEI goals:
•
•
•
•
•
•
•
Launching a DEI task force to build and execute a more comprehensive and sustainable strategy that
supports learning and development, intercultural awareness and growth, removes inhibitors to true
inclusion in areas such as workforce policies and procedures, procurement and how the Company serves its
clients, creates a consistent and common language throughout the organization to increase understanding,
and establishes metric reporting.
Strengthening Quad’s commitment to DEI through partnerships with nationally recognized DEI experts,
consultants and researchers that include tailored learning and development programs for employees.
Supporting employee-led Business Resource Groups (BRGs), which are designed to cultivate an open
company culture for employees who share common interests and can easily and regularly connect to
encourage the growth and development of each other. The Company currently has six BRGs supporting
women, military veterans and their families, the LGBTQIA+ community, Black employees, Hispanic /
Latinx employees and working parents.
Investing in programs to support underserved communities, such as Milwaukee-based Running Rebels’
Pipeline2Promise workforce development program where Quad connects people to jobs, and provides the
tools, training and transportation to set them up for success.
Engaging employees in DEI-related topics through I am. We Are., an internal education and communication
platform.
Supporting the education and advancement of talent from underrepresented communities in the creative
industry through scholarships at institutions committed to diversifying the talent pipeline and talent
development programs, such as The Brandlab, a non-profit that introduces young people who are racially or
ethnically diverse or from lower-income households to viable creative careers.
Growing a more inclusive supplier base by developing mutually beneficial relationships with suppliers
representing women-, minority-, LGBTQIA+, veteran- and disability-owned businesses.
Building Strong Communities
The Company continuously seeks to build strong relationships with the communities where employees live and
work through volunteerism, outreach, philanthropy, pro bono and in-kind services, and charitable giving. Through its
efforts, the Company has made a meaningful difference through support of:
•
•
Important community pillars, such as firefighters, schools, libraries and military veterans groups;
Organizations that help underserved communities, such as non-profits dedicated to improving educational
or employment opportunities for individuals who are racially or ethnically diverse or from lower-income
households; and
15
•
Employees who are involved in local volunteer efforts and charitable events, from stocking food pantries to
assembling care packages for military service members to participating in fundraisers and holiday toy and
clothing drives.
Communication
The Company believes that timely, transparent communication with all employees is an important engagement
tool, and uses a variety of channels to inform and educate employees about business operations and matters of personal
importance (e.g., benefits). These channels include InsideQuad, the employee intranet; executive blogs and video logs
(vlogs); executive town halls; department meetings; email; text messaging; in-plant electronic and print signage; and in-
home mailings. Quad’s CEO hosts regular town halls for all employees, accessible online and also posts video and
written messages.
Corporate Governance
Effective corporate governance has been a part of Quad since its founding and is informed by the Company’s
values, especially Do the Right Thing, which strengthens partnerships, reduces risk and creates sustainable value for the
long term. Key aspects of Quad’s approach to strong governance practices include:
• Maintaining consistent, stable leadership that is focused on making decisions in the best long-term interest
of the Company. It is able to do this because of the Quadracci family voting control, which enables the
Company to manage its strategy and disciplined financial policy by being able to avoid the pitfalls of short-
term decision making that could potentially jeopardize the stability and longevity of the Company.
•
•
•
Retaining an experienced management team with a proven track record that is committed to preserving the
Company’s values-based culture. The senior management team includes entrepreneurially minded leaders
with a long tenure at Quad combined with strategic new hires or leaders from recent acquisitions, further
supplemented by managers and employees committed to advancing the Company as a marketing solutions
partner. The Company believes the experience and stability of senior management, paired with next-
generation talent, will contribute to its long-term success.
Sustaining a disciplined approach to managing operations and commitment to innovating solutions to drive
growth for clients and the Company.
Reducing risk to the business and to clients through a formal enterprise risk management program that is
guided by a team that takes a strategic role in risk identification and response planning, and is managed by
an executive risk steering committee with overall program responsibility.
• Maintaining a high standard for corporate compliance and ethical business practices to keep the business
healthy and protect the Company and its stakeholders from risk. The Company’s values, especially Do the
Right Thing, serve as the foundation for Quad’s ethical approach to decision-making and business
practices. The Company’s Code of Conduct appears on the employee intranet and corporate website, and
explicitly states that Quad is committed to a workplace where every employee, regardless of job title or
position, is responsible for doing the right thing.
•
Training all employees annually on a suite of ethics and compliance topics, including Code of Conduct,
anti-harassment, conflict of interest, C-TPAT, data privacy, HIPAA, information security and physical
security, acceptable use policy for technology assets, and, where relevant, fraud, waste and abuse training,
and anti-bribery and anti-corruption training.
• Making it safe and easy for employees to report violations of the Code of Conduct through multiple
channels, including a 24/7 Ethics and Compliance Hotline or web-based reporting tool with guidance in
multiple languages.
•
Continually updating and strengthening the Company’s information and data security program to address
the fast-changing threat landscape and ensure oversight. The program includes ongoing employee
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education to ensure physical and digital workspaces remain secure, valuable data remains private, spot
potential phishing and malware threats, and avoid risky behaviors.
•
Creating a Supplier Code of Conduct to ensure suppliers, vendors, contractors, consultants, agents and
other providers of goods and services follow the Company’s policies related to business integrity, ethical
labor and human rights practices, associate health and safety, and environmental management. This Code
also includes anti-corruption and anti-bribery policies.
COVID-19
Throughout the ongoing COVID-19 pandemic, Quad has prioritized protecting employees’ health and well-
being while also protecting the financial health and long-term viability of the Company. The Company’s COVID-19
response is led by an internal Crisis Management Team consisting of leaders from Risk Management, Human Resources,
Legal, Manufacturing, Agency Solutions and Communications, as well as medical professionals from QuadMed, the
Company’s health and wellness subsidiary. The Company’s response is informed by guidance from the public health
professionals, including the Centers for Disease Control and Prevention, local health authorities, and direction from
federal and state governments, along with best practices and recommendations from QuadMed, which maintains
relationships with leading health care organizations and research universities across the country.
Quad’s Safe at Work program, updated throughout the pandemic, provides for the health and safety of
employees while we continue to meet the needs of clients. This program:
•
•
•
•
•
Strongly encourages all employees and family members to get the COVID-19 vaccine and booster, making it as
easy as possible to do so through the Company’s own QuadMed health clinics and on-site vaccination events.
Quad also offered incentives and a competition between manufacturing facilities to achieve higher vaccination
rates.
Details policies and procedures for mask wearing, social distancing, good hygiene, daily disinfecting and more
to protect against COVID-19.
Features an internal Rapid Response Team of HR and other professionals to assess each potential COVID-19
case, perform contact tracing, and support and track employees through their return to work at the appropriate
time.
Includes a branded communication strategy built on transparent, frequent and consistent communication across
multiple channels and regularly featuring QuadMed healthcare professionals.
Equips any employee able to perform their duties remotely to work from home to prevent the spread of the
virus, especially during times of high transmission rates.
Clients
Quad enjoys long-standing relationships with a diverse base of clients, which includes both national and
regional corporations in North America, South America, Europe and Asia. The Company’s clients include industry-
leading blue chip companies that operate in a wide range of industries and serve both businesses and consumers,
including retailers, publishers and direct marketers. The Company’s relationships with its largest clients average over
17 years in duration.
In 2021, Quad served approximately 4,600 clients, and its ten largest clients accounted for approximately 16%
of consolidated sales, with none representing more than 5% individually. The Company believes that its large and
diverse client base, broad geographic coverage and extensive range of marketing capabilities are competitive strengths.
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Patents, Trademarks and Trade Names
Quad operates research and development facilities that support the development of new equipment, process
improvements, raw materials and content management, and distribution technologies to better meet client needs and
improve operating efficiencies. The Company continues to innovate within the printing and print-related industry and, as
a result, has developed what it believes to be one of the most powerful patent portfolios in the print industry.
Quad currently holds or has rights to commercialize a wide variety of worldwide patents and applications
relating to its business. The Company intends to continue to file patent applications that it believes will help ensure the
continued strength of the Company and its portfolio. Additionally, the Company markets products, services and
capabilities under a number of trademarks and trade names. Quad aggressively defends its intellectual property rights
and intends to continue to do so in the future.
Raw Materials
The primary raw materials that Quad uses in its print business are paper, ink and energy. At this time, the
Company’s supply of raw materials are available from numerous vendors; however, based on market conditions, the
current supply is under pressure due to supply chain shortages and higher than expected inflation. The Company
generally buys these raw materials based upon market prices that are established with the vendor as part of the
procurement process.
Approximately half of the paper used in the printing process is supplied directly by the Company’s clients. For
those clients that do not directly supply their own paper, the Company makes use of its purchasing efficiencies to supply
paper by negotiating with leading paper vendors, uses a wide variety of paper grades, weights and sizes, and does not
rely on any one vendor. In addition, the Company generally includes price adjustment clauses in sales contracts for
paper and other critical raw materials in the printing process. Although these clauses generally mitigate paper price risk,
higher paper prices and tight paper supplies, as well as changes in the United States import or trade regulations, may
have an impact on client demand for printed products. The Company’s working capital requirements, including the
impact of seasonality, are partially mitigated through the direct purchasing of paper by its clients.
The Company produces the majority of ink used in its print production, allowing it to control the quality, cost
and supply of key inputs. Raw materials for the ink manufacturing process are purchased externally from a variety of
vendors.
The Company generally cannot pass on to clients the impact of higher electric and natural gas energy prices on
its manufacturing costs, and increases in energy prices result in higher manufacturing costs for certain of its operations.
The Company mitigates its risk through natural gas hedges when appropriate. In its logistic operations, however, the
Company is able to pass a substantial portion of any increase in fuel prices directly to its clients.
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Strategic Investments
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 resulted in the Company’s ownership interest changing from 57% to
99%. On April 30, 2021, Rise purchased and retired units of equity from previous holders of Rise for $1.9 million in
cash. This transaction resulted in the Company’s ownership interest changing from 99% to 100%. The Company began
consolidating the results of Rise in the Company’s consolidated financial statements when its equity ownership increased
to 57% on March 14, 2018. The portion of Rise’s operating results not owned by the Company of 43% through June 15,
2020 and of 1% from June 15, 2020 through April 30, 2021, was recorded as net earnings (loss) attributable to
noncontrolling interests on the consolidated statement of operations. The portion of net assets not owned by the
Company was recorded as noncontrolling interests as of the December 31, 2020 consolidated balance sheet.
For additional information related to the Company’s strategic investment activity, see Note 3, “Strategic
Investments,” to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,”
of this Annual Report on Form 10-K.
Information About Our Executive Officers
The following table sets forth the names, ages (as of January 31, 2022) and positions of Quad’s executive
officers.
Name
Age
Position
J. Joel Quadracci . . . . .
Eric N. Ashworth . . . . .
Julie A. Currie . . . . . . .
Joshua J. Golden . . . . . .
David J. Honan . . . . . . .
Jennifer J. Kent . . . . . . .
Donald M. McKenna . .
Anthony C. Staniak . . .
Kelly A. Vanderboom .
Anne M. Bauer . . . . . . .
Steven D. Jaeger . . . . . .
53
56
59
50
53
50
49
49
47
57
57
Chairman, President and Chief Executive Officer
Executive Vice President of Product and Market Strategy, and President of Quad Agency
Solutions
Executive Vice President and Chief Revenue Officer
Chief Marketing Officer
Executive Vice President and Chief Operating Officer
Executive Vice President and Chief People & Legal Officer
Executive Vice President and Chief Administrative Officer
Chief Financial Officer
Executive Vice President, President of Logistics and Treasurer
Vice President and Chief Accounting Officer
Vice President and Chief Information Officer
Mr. Quadracci has been a director of Quad since 2003, its President since January 2005, its President and Chief
Executive Officer since July 2006 and its Chairman, President and Chief Executive Officer since January 2010.
Mr. Quadracci joined Quad in 1991 and, prior to becoming President and Chief Executive Officer, served in various
capacities, including Sales Manager, Regional Sales Strategy Director, Vice President of Print Sales, Senior Vice
President of Sales and Administration, and President and Chief Operating Officer. He serves on the board of directors
for Plexus Corp., Pixability, Inc., Road America, Inc., Children’s Hospital of Wisconsin, the National Association of
Manufacturers, and the Metropolitan Milwaukee Association of Commerce. He also serves on the board of trustees for
the Milwaukee Art Museum and on the advisory council of the Smithsonian National Postal Museum and is a member of
the Greater Milwaukee Committee. Mr. Quadracci received a Bachelor of Arts in Philosophy from Skidmore College in
1991. Mr. Quadracci is the brother of Kathryn Quadracci Flores, M.D., a director of Quad, and the brother-in-law of
Christopher B. Harned, a director of Quad. Quad believes that Mr. Quadracci’s experience in the printing industry and in
leadership positions within Quad qualify him for service as a director of Quad.
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Mr. Ashworth has served as Executive Vice President of Product and Market Strategy since joining Quad in
2015, and President of Quad Agency Solutions since April 2016. Mr. Ashworth also serves on the board of directors of
Ash+Ames, and is a board member of the Chicago Children’s Choir. Prior to joining Quad, Mr. Ashworth was President
of SGK, Inc. (formerly Schawk, Inc.) from July 2012 to July 2015, Chief Growth and Strategy Officer of SGK from
September 2009 to July 2012, and Global Chief Growth Officer of Anthem Worldwide (a division of SGK) from
November 2003 to 2010. Prior thereto, Mr. Ashworth was Co-founder and President of BlueMint Associates from June
2002 through November 2003, after serving in various marketing roles at Fitch San Francisco, Addis Interaction, Levi
Strauss & Co., Clorox, Colgate-Palmolive and National Semiconductor.
Ms. Currie has served as Executive Vice President and Chief Revenue Officer since November 2020. She
previously served as Executive Consultant of FCM, LLC from 2019 to 2020. Prior thereto, Ms. Currie served as Senior
VP of Global Retail Product Leadership from 2016 to 2019, as Senior VP, Global Loyalty Commercial Director from
2012 to 2016, as Senior VP, Global Business Services North America from 2008 to 2012, as VP, National Accounts
Group Client Director from 2003 to 2007, and as VP, Group Client Director from 2001 to 2003 of The Nielsen
Company. Ms. Currie also serves on the board of Boys & Girls Club of Lake County.
Mr. Golden has served as Chief Marketing Officer since joining Quad in July 2021. Prior to joining Quad, Mr.
Golden was the President & Publisher of Ad Age from 2016 to 2021. Prior thereto, Mr. Golden served as VP, Global
Digital Marketing & Communications of Xerox from March 2015 to June 2016; as Chief Marketing Officer of Story
Worldwide from September 2011 to March 2015; as Chief Digital Officer of Grey Worldwide from September 2010 to
September 2011; as Managing Director, Digital of Euro RSCG Worldwide from December 2007 to September 2010; as
Group Director of Digital Marketing of NBC Universal from January 2006 to December 2007; and as Integrated Account
Director, AT&T and Xerox at Young & Rubicam from November 2000 to January 2006.
Mr. Honan has served as Executive Vice President and Chief Operating Officer since January 2022. He
previously served as Executive Vice President and Chief Financial Officer from January 2015 to December 2021; Vice
President and Chief Financial Officer from March 2014 to January 2015; Vice President and Chief Accounting Officer
from July 2010 to March 2014; Vice President and Corporate Controller from December 2009 to July 2010; and
Corporate Controller from when he joined Quad in May 2009 until December 2009. Currently, he serves on the
Advisory board of FM Global. Prior to joining Quad, Mr. Honan served as Vice President, General Manager and Chief
Financial Officer of Journal Community Publishing Group, a subsidiary of media conglomerate Journal Communications
Inc., for five years. Before joining Journal Community Publishing Group, Mr. Honan worked in executive-level roles in
investor relations and corporate development at Newell Rubbermaid, a global marketer of consumer and commercial
products. Prior thereto, Mr. Honan worked at the accounting firm Arthur Andersen LLP for 11 years.
Ms. Kent has served as Executive Vice President and Chief People & Legal Officer since January 2022 and has
served in this role since June 2015 under its previous title of Executive Vice President of Administration and General
Counsel. She previously served as Vice President and General Counsel from December 2013 to June 2015, and as
Quad’s Assistant General Counsel from when she joined Quad in August 2010 until December 2013. Ms. Kent serves
on the board of directors of Mayville Engineering Company, Inc. (NYSE: MEC), a manufacturer of tooling, production
fabrication, coating, assembly and aftermarket components, and Building Brave, a non-profit virtual community for
professional women. Prior to joining Quad, Ms. Kent held various positions in the legal department at Harley-Davidson
Motor Company from March 2003 to July 2010. Prior thereto, Ms. Kent served as an Assistant United States Attorney
for the Eastern District of Wisconsin and practiced law at Foley & Lardner LLP, a Milwaukee-based law firm.
Mr. McKenna has served as Executive Vice President and Chief Administrative Officer of Quad since January
2022, and Senior Vice President of Sales Administration of Quad since August 2018. He previously served as Vice
President of Sales Administration from June 2013 to August 2018, and Product Planning Manager from March 2010 to
June 2013. Prior to joining Quad, Mr. McKenna worked at J.S. Eliezer Associates, a print consulting firm in Stamford,
Conn., beginning in 1998 and was named President of the firm in 2004.
Mr. Staniak has served as Chief Financial Officer of Quad since January 2022. Previously, he served as Vice
President of Finance from March 2017 until January 2022. Joining the company in 2009 as Director of External
Reporting, Mr. Staniak was subsequently named Director of Internal Audit in 2011; Executive Director – Financial
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Controller in 2013; Chief Accounting Officer in 2014; and Vice President and Chief Accounting Officer in 2015. Prior
to joining Quad, Mr. Staniak was CFO of data consulting firm Sagence, Inc. He began his career at the accounting firm
Arthur Andersen in 1995. Mr. Staniak is a member of the Wisconsin Institute of Certified Public Accountants and the
Board of Directors for the Zoological Society of Milwaukee.
Mr. Vanderboom has served as Executive Vice President since 2018, and Treasurer and President of Logistics
since March 2014. Mr. Vanderboom was put in charge of leading Quad’s EBITDA initiatives in October of 2019. Since
joining Quad in 1993, he has served in various leadership capacities, including Controller of Quad’s Distribution and
Facilities departments from 2004 until 2006; Director of Treasury, Risk & Planning, beginning in 2007, and Vice
President, beginning in 2008.
Ms. Bauer has served as Vice President since January 2022 and Chief Accounting Officer since March 2017.
She previously served as Director - Corporate Controller of Quad from May 2016 until March 2017 and then as
Executive Director and Chief Accounting Officer until January 2022. She joined Quad in September 2011, serving as
Director of Corporate Accounting until May 2016. Prior to joining Quad, Ms. Bauer held various accounting positions at
Journal Communications, Inc. during her 18 years there, including Vice President and Controller from June 2000 until
September 2011.
Mr. Jaeger has served as Vice President and Chief Information Officer since November 2015. He previously
served as Executive Vice President, President of Direct Marketing and Chief Information Officer from November 2014
to November 2015; as Executive Vice President, President of Direct Marketing and Media Solutions and Chief
Information Officer from March 2014 to November 2014; as Corporate Vice President of Information and Technology
since 2013; as Vice President of Information Systems and Infrastructure from 2007 to 2012; and as President of Quad/
Direct from August 2007 until 2013. Prior thereto, Mr. Jaeger served as Quad’s Vice President of Information Systems
from 1998 to 2006 and worked in various other capacities since he joined Quad in 1994. Prior to joining Quad,
Mr. Jaeger worked for Andersen Consulting for eight years.
Executive officers of Quad are elected by and serve at the discretion of Quad’s Board of Directors. Other than
described above, there are no family relationships between any directors or executive officers of Quad.
Item 1A. Risk Factors
You should carefully consider each of the risks described below, together with all of the other information
contained in this Annual Report on Form 10-K, before making an investment decision with respect to Quad’s securities.
If any of the following risks develop into actual events, the Company’s business, financial condition or results of
operations could be materially and adversely affected, and you may lose all or part of your investment.
Risks Relating to Quad’s Business, Operations and Industry
The Company may be adversely affected by increases in its operating costs, including the cost and availability of
paper, ink components and other raw materials, labor-related costs, fuel and other energy costs and freight rates.
The primary raw materials that the Company uses in its print business are paper, ink and energy. The price of
such raw materials has fluctuated over time and has caused fluctuations in the Company’s net sales and cost of sales.
This volatility may continue and the Company may experience increases in the costs of its raw materials in the future as
prices in the overall paper, ink and energy markets are expected to remain beyond its control. The price and availability
of paper may also be adversely affected by paper mills’ permanent or temporary closures, and mills’ access to raw
materials, conversion to produce other types of paper, and ability to transport paper produced. The price and availability
of ink and ink components may be adversely affected by the availability of component raw materials, labor and
transportation, all of which have been negatively impacted by the continuing COVID-19 pandemic.
Approximately half of the paper used by the Company is supplied directly by its clients. For those clients that
do not directly supply their own paper, the Company generally includes price adjustment clauses in sales contracts for
21
paper and other critical raw materials in the printing process. Although these clauses generally mitigate paper price risk,
higher paper prices and tight paper supplies may have an impact on client demand for printed products. If the Company
passes along increases in the cost of paper and the price of the Company’s products and services increases as a result,
client demand could be adversely affected, and thereby, negatively impact the Company’s financial performance. If the
Company is unable to continue to pass along increases in the cost of paper to its clients, future increases in paper costs
would adversely affect its margins and profits.
Due to the significance of paper in the Company’s print business, it is dependent on the availability of paper. In
periods of high demand, certain paper grades have been in short supply, including grades used in the Company’s
business. In addition, during periods of tight supply, many paper producers allocate shipments of paper based upon
historical purchase levels of clients. Additionally, the declining number of paper suppliers has resulted in a contraction
in the overall paper manufacturing industry. This contraction of suppliers may cause overall supply issues, may cause
certain paper grades to be in short supply or unavailable, and may cause paper prices to substantially increase.
Although historically the Company generally has not experienced significant difficulty in obtaining adequate
quantities of paper, continued decline in suppliers, changes in United States import or trade regulations, or other
developments in the overall paper markets (such as the continuing COVID-19 pandemic) could result in a decrease in the
supply of paper and could adversely affect the Company’s revenues or profits. In addition, the Company may not be
able to resell waste paper and other by-products or the prices received for their sale may decline substantially.
The Company is dependent upon the vendors within the Company’s supply chain to maintain a steady supply of
inventory, parts and materials. Many of the Company’s products are dependent upon a limited number of vendors, and
significant disruptions could adversely affect operations (including as a result of the continuing COVID-19 pandemic).
Under current market conditions, and in light of the COVID-19 pandemic, it is possible that one or more of the
Company’s vendors will be unable to fulfill their operating obligations due to financial hardships, liquidity issues or
other reasons.
The Company generally cannot pass on to clients the impact of higher electric and natural gas energy prices on
its manufacturing costs, and increases in energy prices result in higher manufacturing costs for certain of its operations.
Labor represents a significant component of the cost structure of the Company. Increases in wages, salaries and
the cost of medical, dental, pension and other post-retirement benefits, including increases from the continuing
COVID-19 pandemic, may impact the Company’s financial performance. Changes in interest rates, investment returns
or the regulatory environment may impact the amounts the Company will be required to contribute to the pension plans
that it sponsors and may affect the solvency of these pension plans. The Company may be unable to achieve labor
productivity targets, to retain employees or labor may not be adequately available in locations in which the Company
operates, which could negatively impact the Company’s financial performance.
Freight rates and fuel costs also represent a significant component of the Company’s cost structure and the
COVID-19 pandemic has resulted in upward price pressure on freight, as the number of available drivers have been
reduced. In general, the Company has been able to pass along increases in the cost of freight and fuel to many of its
clients. If the Company is not able to pass along a substantial portion of increases in freight rates or in the price of fuel,
future increases in these items would adversely impact the Company’s margin and profits. If the Company passes along
increases in the cost of freight and fuel and the price of the Company’s products and services increases as a result, client
demand could be adversely affected, and thereby, negatively impact the Company’s financial performance.
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Decreasing demand for printing services caused by factors outside of the Company’s control, including the
substitution of printed products with digital content, the continuing COVID-19 pandemic and prior recessions, as well
as significant downward pricing pressure, may continue to adversely affect the Company.
The Company and the overall printing industry continues to experience a reduction in demand for printed
materials and overcapacity due to various factors including the sustained and increasing shift of digital substitution by
marketers and advertisers (to both replace and augment campaigns that were historically focused on print), as well as the
continuing COVID-19 pandemic and prior recessions (which have severely impacted print volumes and further
accelerated the impact of media disruption). The impacts of overcapacity, as well as intense competition, have led to the
Company experiencing significant downward pricing pressures for printing services in recent years and such pricing may
continue to decline from current levels. Any future increases in the supply of printing services or decreases in demand
could cause prices to continue to decline, and prolonged periods of low prices, weak demand and/or excess supply could
have a material adverse effect on the Company’s business growth, results of operations and liquidity.
The media landscape is experiencing rapid change due to the impact of digital media and content on printed
products. Improvements in the accessibility and quality of digital media through the online distribution and hosting of
media content, mobile technologies, e-reader technologies, digital retailing and the digital distribution of documents and
data has resulted and may continue to result in increased consumer substitution. Continued consumer acceptance of such
digital media, as an alternative to print materials, is uncertain and difficult to predict and may decrease the demand for
the Company’s printed products, result in reduced pricing for its printing services and additional excess capacity in the
printing industry, and adversely affect the results of the Company’s operations.
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.
The COVID-19 pandemic resulted in national, state and local government authorities implementing numerous
measures to try to contain the virus, such as travel bans and restrictions, border closings, restrictions on public
gatherings, quarantining of people who may have been exposed to the virus, shelter-in-place restrictions, and limitations
or shutdowns of business operations. These measures, some of which are continuing or being re-implemented in light of
new variants of the virus, have impacted and may further impact the Company’s workforce and operations, the
operations of its clients, and those of its suppliers. Quad has significant operations in the United States and printing
operations or investments in printing operations in England, France, Germany, Poland, Argentina, Colombia, Mexico,
Peru, Brazil and India, and each of these countries has been affected by the pandemic and taken measures to try to
contain it, resulting in disruptions at some of the Company’s printing facilities and support operations. There is still
uncertainty regarding the full impact and duration of such measures and potential future measures, and restrictions on the
Company’s access to its facilities or on its support operations or workforce, or similar limitations for Quad’s suppliers.
The COVID-19 pandemic has weakened demand for the Company’s products and services, which has resulted
in a decline in sales, and it remains uncertain what impact this weakened demand will have on future sales once
conditions continue to further improve. The pandemic has also disrupted the Company’s supply chain and resulted in
rising inflationary cost pressures within the Company’s raw materials, distribution and labor.
The COVID-19 pandemic has had, and will continue to have, a negative impact on the Company’s business,
financial condition, cash flows, results of operations, supply chain and raw materials availability, although the full extent
is still uncertain. As the pandemic continues to evolve and new variants continue to emerge, 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, including, but not limited to, the continued duration of the pandemic, government actions to contain the
virus and/or treat its impact, restrictions on travel, the duration, timing and severity of the impact on client spending and
consumer demand, and how quickly and to what extent normal economic and operating conditions can resume, all of
which are still uncertain and cannot be predicted.
In addition to the COVID-19 pandemic, future natural disasters, epidemics, other public health crises, conflicts,
wars, terrorist attacks, fires or other catastrophic events affecting the Company’s plants, distribution centers or other
facilities, could also materially disrupt the Company’s operations and result in an adverse impact on its financial
23
condition, results of operations and cash flows, which could force the Company to reassess its strategic alternatives
involving certain of its operations.
The Company operates in a highly competitive environment.
The advertising and marketing services industries are highly competitive and are expected to remain so. Any
failure on the part of the Company to compete effectively in the markets it serves could have a material adverse effect on
its results of operations, financial condition or cash flows and could require changes to the way it conducts its business or
require it to reassess strategic alternatives involving its operations.
The Company operates primarily in the commercial print portion of the printing industry, which is highly
fragmented and competitive in both the United States and internationally. The Company competes for business not only
with large and mid-sized printers, but also with smaller regional printers and the growing forms of digital alternatives to
print. In certain circumstances, due primarily to factors such as freight rates and client preference for local services,
printers with better access to certain regions of a given country may be preferred by clients in such regions.
Some of the industries that the Company services have been subject to consolidation efforts, leading to a
smaller number of potential clients. Furthermore, if the smaller clients of the Company are consolidated with larger
companies using other printing companies, the Company could lose its clients to competing printing companies.
Failure to attract and retain qualified talent across the enterprise could materially adversely affect the Company’s
business, competitive position, financial condition and results of operations.
The Company continues to be substantially dependent on its production personnel to print the Company’s
products in a cost-effective and efficient manner that allows the Company to obtain new clients and to drive sales from
the Company’s existing clients. The Company believes that there is significant competition for production personnel
with the skills and technical knowledge that the Company requires, especially in light of the labor shortages resulting
from the COVID-19 pandemic. The Company’s ability to continue efficient operations, reduce production costs, and
consolidate operations will depend, in large part, on the Company’s success in recruiting, training, integrating and
retaining sufficient numbers of production personnel to support the Company’s production, cost savings and
consolidation targets. New hires require extensive training and it may take significant time before they achieve full
productivity. In addition, an increase in the wages paid by competing employers, including as a result of the COVID-19
pandemic, could result in an increase in the wage rates that the Company must pay. As a result, the Company may incur
additional costs to attract, train and retain employees, including expenditures related to salaries and benefits, and the
Company may lose new, as well as existing, employees to competitors or other companies before the Company realizes
the benefit of its investment in recruiting and training them. If the Company is unable to hire and train sufficient
numbers of personnel, the Company’s business would be adversely affected.
The Company’s future success also depends on its continuing ability to identify, hire, develop, and retain its
executive management team, including its Chief Executive Officer, and other personnel for all areas of the organization.
Approximately 1,300 of the Company’s United States and international employees are covered by an industry
wide agreement, a collective bargaining agreement or through a works council or similar arrangement. While the
Company believes its employee relations are good and that the Company maintains an employee-centric culture, and
there has not been any material disruption in operations resulting from labor disputes, a strike or other forms of labor
protest affecting the Company’s United States or international plants, distribution centers or other facilities in the future
could materially disrupt the Company’s operations and result in an adverse impact on its financial condition, results of
operations and cash flows, which could force the Company to reassess its strategic alternatives involving certain of its
operations.
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The Company’s transformation to a marketing solutions partner increases the complexity of the Company’s business,
and if the Company is unable to successfully adapt its business processes as required by these new markets, the
Company will be at a competitive disadvantage and its ability to grow will be adversely affected.
As the Company expands its integrated marketing platform, the overall complexity of the Company’s business
increases at an accelerated rate and the Company becomes subject to different market dynamics. The new markets into
which the Company is expanding, or may expand, may have different characteristics from the markets in which the
Company historically competed. These different characteristics may include, among other things, demand volume
requirements, demand seasonality, product generation development rates, client concentrations and performance and
compatibility requirements. The Company’s failure to make the necessary adaptations to its business model to address
these different characteristics, complexities and new market dynamics could adversely affect the Company’s operating
results.
The Company may not be able to reduce costs and improve its operating efficiency rapidly enough to meet market
conditions.
Because the markets in which the Company competes are highly competitive, the Company will need to
continue to improve its operating efficiency in order to maintain or improve its profitability. There can be no assurance
that the Company’s continuing cost reduction efforts will continue to be beneficial to the extent anticipated, or that the
estimated productivity, cost savings or cash flow improvements will be realized as anticipated or at all. If the
Company’s efforts are not successful, it could have an adverse effect on the Company’s operations and competitive
position. In addition, the need to reduce ongoing operating costs have and, in the future, may continue to result in
significant up-front costs to reduce workforce, close or consolidate facilities, or upgrade equipment and technology.
Changes in postal rates, postal regulations and postal services may adversely impact clients’ demand for print
products and services.
Postal costs are a significant component of the cost structures of many of the Company’s clients and potential
clients. Postal rate changes and USPS regulations that result in higher overall costs can influence the volume that these
clients will be willing to print and ultimately send through the USPS.
Integrated distribution with the USPS is an important component of the Company’s business. Any material
change in the current service levels provided by the postal service could impact the demand that clients have for print
services. The USPS continues to experience financial problems. Without decreased operational costs structures,
increased efficiencies, increased revenues or action by Congress to reform the USPS’ cost structure, these losses will
continue into the future. As a result of these financial difficulties, the USPS has come under increased pressure to adjust
its postal rates and service levels. Additional price increases may result in clients reducing mail volumes and exploring
the use of alternative methods for delivering a larger portion of their products, such as continued diversion to the internet
and other alternative media channels in order to ensure that they stay within their expected postage budgets. There are
also continued risks of delivery delays due to ongoing COVID-19 impacts on daily operational staffing at the USPS.
The USPS offers “work-share” discounts that provide incentives to co-mail and place product as far down the
mail-stream as possible. Discounts are earned as a result of less handling of the mail, and therefore, lower costs for the
USPS. As a result, the Company has made substantial investments in co-mailing technology and equipment to ensure
clients benefit from these discounts. As the USPS reacts to its financial difficulties, it often revises design standards for
mail entering its system. These design standards often increase costs for clients and, in turn, decrease the value of the
cost reductions that the Company’s co-mailing services provide. If the incentives to co-mail are decreased by USPS
regulations, the overall cost to mail printed products will increase and may result in print volumes declining.
Federal statute requires the Postal Regulatory Commission (“PRC”) to conduct reviews of the overall rate-
making structure for the USPS to ensure funding stability. As a result of those reviews, the PRC authorized a five year
rate-making structure that provides the USPS with additional pricing flexibility over the Consumer Price Index cap,
which may result in a substantially altered rate structure for mailers. The revised rate authority that is effective as a
result of the rules issued by the PRC includes a higher overall rate cap on the USPS’ ability to increase rates from year to
25
year. This may lead to price spikes for mailers and may also reduce the incentive for the USPS to continue to take out
costs and instead continue to rely on postage to cover the costs of an outdated postal service that does not reflect the
industry’s ability or willingness to pay. The uncertainty as to how much of the authority the USPS will use also creates
potential volume declines as rate predictability with respect to cost is no longer known for mailers. The result may be
reduced demand for printed products as clients may move more aggressively into other delivery methods, such as the
many digital and mobile options now available to consumers.
The Company may suffer a data-breach of sensitive information, ransomware attack or other cyber incident. If the
Company’s efforts to protect the security of information or systems are unsuccessful, any such failure may result in
costly government enforcement actions and/or private litigation, and the Company’s business and reputation could
suffer.
The Company and its clients are subject to various United States and foreign cyber-security laws, which require
the Company to maintain adequate protections for electronically held information. The Company may not be able to
anticipate techniques used to gain access to the Company’s systems or facilities, the systems of the Company’s clients or
vendors, or implement adequate prevention measures. Moreover, unauthorized parties may attempt to access the
Company’s systems or facilities, or the systems of the Company’s clients or vendors, through fraud or deception. In the
event and to the extent that a data breach, ransomware attack or other cyber incident occurs, such breach could have an
adverse effect on the Company’s business and results of operations. Complying with these various laws could cause the
Company to incur substantial costs or require changes to the Company’s business practices in a manner adverse to the
Company’s business.
Negative publicity could have an adverse impact on the Company’s business.
Unfavorable publicity, whether accurate or not, related to the Company or the Company’s executive
management team, employees, board of directors, operations, business or prospects, or to the Quadracci family
shareholders of the Company, could negatively affect the Company’s reputation, stock price, ability to attract new clients
from growth vertical industries, ability to attract and retain high-quality talent, or the performance of the Company’s
business.
In addition, there has been a substantial increase in the use of social media platforms, including blogs, social
media websites, and other forms of internet-based and mobile communications, which allow individuals access to a
broad audience of consumers and other interested persons. Many social media platforms immediately publish the
content their subscribers’ and participants’ post, often without filters or checks on accuracy of the content posted.
Information or commentary posted on such platforms at any time may be adverse to the Company’s interests or may be
inaccurate, each of which may harm the Company’s reputation, business or prospects. The harm may be immediate
without affording the Company an opportunity for redress or correction.
Future declines in economic conditions may adversely affect the Company’s results of operations.
In general, demand for the Company’s products and services is highly related to general economic conditions in
the markets the Company’s clients serve. Declines in economic conditions in the United States or in other countries in
which the Company operates, including as a result of the continuing COVID-19 pandemic, may adversely impact the
Company’s financial results, and these impacts may be material. Because such declines in demand are difficult to
predict, the Company or the industry may have increased excess capacity as a result. An increase in excess capacity has
resulted, and may continue to result, in declines in prices for the Company’s products and services. In addition, a
prolonged decline in the global economy and an uncertain economic outlook, including as a result of the COVID-19
pandemic, has and could further reduce the demand in the printing industry. Economic weakness and constrained
advertising spending have resulted, and may in the future result, in decreased revenue, operating margin, earnings and
growth rates and difficulty in managing inventory levels and collecting accounts receivable. The Company has
experienced, and expects to experience in the future, excess capacity and lower demand due to economic factors
affecting consumers’ and businesses’ spending behavior, including as a result of the continuing COVID-19 pandemic.
Uncertainty about future economic conditions makes it difficult for the Company to predict results of operations,
financial position and cash flows and to make strategic decisions regarding the allocation and deployment of capital.
26
The Company’s business depends substantially on client contract renewals and/or client retention. Any contract non-
renewals, renewals on different terms and conditions or decline in the Company’s client retention or expansion could
materially adversely affect the Company’s results of operations, financial condition and cash flows.
The Company has historically derived a significant portion of its revenue from long-term contracts with
significant clients. If the Company loses significant clients (including as a result of reduced demand for a client’s
products or services), is unable to renew such contracts on similar terms and conditions, or at all, or is not awarded new
long-term contracts with important clients in the future, its results of operations, financial condition and cash flows may
be adversely affected.
The Company is exposed to risks of loss in the event of nonperformance by its clients. Some of the Company’s
clients are highly leveraged or otherwise subject to their own operating and regulatory risks. Even if the Company’s
credit review and analysis mechanisms work properly, the Company may experience financial losses and loss of future
business if its clients become bankrupt, insolvent or otherwise are unable to pay the Company for its work performed,
including as a result of the continuing COVID-19 pandemic. Any increase in the nonpayment or nonperformance by
clients could adversely affect the Company’s results of operations and financial condition.
Certain industries in which the Company’s clients operate are experiencing consolidation. When client
consolidation occurs, it is possible that the volume of work performed by the Company for a client after the
consolidation will be less than it was before the consolidation or that the client’s work will be completely moved to
competitors. In addition, new and enhanced technologies, including search, web and infrastructure computing services,
digital content, and electronic devices, may affect clients. The internet facilitates competitive entry and comparison
shopping, and the reliance on digital retailing may reduce clients’ volume. Any such reduction or loss of work could
adversely affect the Company’s results of operations and financial condition.
The fragility of and decline in overall distribution channels may adversely impact clients’ access to cost effective
distribution of their advertising materials, and therefore may adversely impact the Company’s business.
The distribution channels of print products and services, including the newspaper industry, face significant
competition from other sources of news, information and entertainment content delivery. If overall distribution channels,
including newspaper distribution channels, continue to decline, the Company’s clients may be adversely impacted by the
lack of access to cost effective distribution of their advertising materials. In turn, this decline in cost effective
distribution channels may force clients to use other avenues of distribution that may be at significantly higher cost, which
may decrease demand for the Company’s products and services, and thus adversely affect the Company’s financial
condition, results of operations and cash flows.
If the Company fails to identify, manage, complete and integrate acquisitions, investment opportunities or other
significant transactions, as well as identify and execute strategic divestitures, it may adversely affect the Company’s
future results and ability to implement its business strategy.
The Company may pursue acquisitions of, investment opportunities in, or other significant transactions with,
companies that are complementary to the Company’s business, as well as divestitures of businesses, product lines or
other assets. In order to pursue this strategy successfully, the Company must identify attractive acquisition or investment
opportunities, successfully complete the transaction, some of which may be large and complex, and manage post-closing
issues such as integration of the acquired company or employees. The Company may not be able to identify or complete
appealing acquisition or investment opportunities given the intense competition for these transactions. Even if the
Company identifies and completes suitable corporate transactions, the Company may not be able to successfully address
inherent risks in a timely manner, or at all. These inherent risks include, among other things: failure to achieve all or any
projected synergies, performance targets or other anticipated benefits of the acquisition, investment or divestiture; failure
to successfully integrate the purchased operations, technologies, products or services and maintain uniform standard
controls, policies and procedures; substantial unanticipated integration costs; loss of key employees, including those of
an acquired business; diversion of management’s attention from other business concerns; failure to retain the clients of
the acquired business; additional debt and/or assumption of known or unknown liabilities; potential dilutive issuances of
equity securities; and a write-off of goodwill, client lists, other intangibles and amortization of expenses. If the Company
27
fails to successfully integrate an acquisition, the Company may not realize all or any of the anticipated benefits of the
acquisition, and the Company’s future results of operations could be adversely affected.
In addition, the acceleration of the Company’s transformation to a marketing solutions partner is partially
dependent upon the Company’s continued ability to identify and execute strategic divestiture opportunities to generate
cash and related benefits. There can be no assurance whether the strategic benefits and expected financial impact of any
divestitures will be achieved.
There are additional risks associated with the Company’s operations outside of the United States.
Net sales from the Company’s wholly-owned subsidiaries outside of the United States accounted for
approximately 11% and 10% of its consolidated net sales for the years ended December 31, 2021 and 2020, respectively.
As a result, the Company is subject to the risks inherent in conducting business outside of the United States,
including, but not limited to: the impact of economic and political instability; fluctuations in currency values, foreign-
currency exchange rates, devaluation and conversion restrictions; exchange control regulations and other limits on the
Company’s ability to import raw materials or finished product; tariffs and other trade barriers; trade restrictions and
economic embargoes by the United States or other countries; health concerns regarding infectious diseases (such as
COVID-19), adverse weather or natural disasters; social unrest, acts of terrorism, force majeure, war or other armed
conflicts; inflation and fluctuations in interest rates; language barriers; difficulties in staffing, training, employee
retention and managing international operations; logistical and communications challenges; differing local business
practices and cultural consideration; restrictions on the ability to repatriate funds; foreign ownership restrictions and the
potential for nationalization or expropriation of property or other resources; longer accounts receivable payment cycles;
potential adverse tax consequences and being subject to different legal and regulatory regimes that may preclude or make
more costly certain initiatives or the implementation of certain elements of its business strategy.
Financial Risks
The Company may be required to make investments, including capital expenditures and in the development and
implementation of new systems, client technology, product technology and marketing to sustain and grow its
platforms and processes, in part to keep pace with industry developments and client expectations, and to remain
technologically and economically competitive, which may increase its costs, reduce its profits, disrupt its operations or
adversely affect its ability to implement its business strategy.
The printing and marketing services industries are experiencing rapid change as new digital technologies are
developed that offer clients an array of choices for their marketing and publication needs. In order to remain
competitive, the Company will need to adapt to future changes, especially with regard to technology, to enhance the
Company’s existing offerings and introduce new offerings to address the changing demands of clients. In order to
remain technologically and economically competitive, the Company may need to make significant capital expenditures
and other investments as it develops and continues to maintain its platforms and processes, and to develop and integrate
new technologies. In order to accomplish this effectively, the Company will need to deploy its resources efficiently,
maintain effective cost controls and bear potentially significant market and raw material risks. If the Company’s
revenues decline, it may impact the Company’s ability to expend the capital necessary to develop and implement new
technology and be economically competitive. Debt or equity financing, or cash generated from operations, may not be
available or sufficient for these requirements or for other corporate purposes or, if debt or equity financing is available, it
may not be on terms favorable to the Company. In addition, even if capital is available to the Company, there is risk that
the Company’s vendors will have discontinued the production of parts needed for repairs, replacements or improvements
to the Company’s existing platforms, leading the Company to expend more capital than expected to perform such repairs,
replacements or improvements. The Company’s business and operating results may be adversely affected if the
Company is unable to keep pace with relevant technological and industry changes or if the technologies or business
strategies that the Company adopts or services it promotes do not receive widespread market acceptance.
If the Company is unable to make the capital expenditures and other investments necessary to adapt to industry
and technological developments, the Company may experience a decline in demand for its services, be unable to
28
implement its business strategy and its business operating results may be adversely affected. Additionally, if the
Company is unable to meet future challenges from competing technologies on a timely basis or at an acceptable cost, the
Company could lose clients to competitors. In general, the development of new communication channels inside and
outside the printing and media solutions industry requires the Company to anticipate and respond to the varied and
continually changing demands of clients. The Company may not be able to accurately predict technological trends or the
success of new services in the market.
The Company’s debt facilities include various covenants imposing restrictions that may affect the Company’s ability
to operate its business.
On September 1, 1995, and as last amended on November 24, 2014, the Company entered into a senior secured
note agreement (the “Master Note and Security Agreement”) pursuant to which the Company has issued over time senior
notes in an aggregate principal amount of $1.1 billion in various tranches. As of December 31, 2021, the borrowings
outstanding under the Master Note and Security Agreement were $7.2 million. On April 28, 2014, and as last amended
on November 2, 2021, the Company entered into a senior secured credit facility (the “Senior Secured Credit Facility,”)
which includes two different loan facilities: a $825.0 million Term Loan A and a $432.5 million revolving credit facility.
As a result of the November 2, 2021 amendment to the Senior Secured Credit Facility, the Term Loan A and revolving
credit facility were both broken into two separate maturity dates. Borrowing from lenders who elected to not extend the
maturity date will mature on January 31, 2024, whereas borrowing from lenders who elected to extend the maturity date
will now mature on November 2, 2026. As of December 31, 2021, the borrowings outstanding under the Senior Secured
Credit Facility were $575.4 million. On April 28, 2014, the Company issued $300.0 million aggregate principal amount
of its unsecured 7.0% senior notes due May 1, 2022 (“Senior Unsecured Notes,”), of which $211.5 million remained
outstanding as of December 31, 2021.
The Company’s various lending arrangements include certain financial covenants. In addition to the financial
covenants, the debt facilities also include certain limitations on acquisitions, indebtedness, liens, dividends and
repurchases of capital stock. As of December 31, 2021, the Company was in compliance with all financial covenants in
its debt agreements. While the Company currently expects to be in compliance in future periods with all of the financial
covenants, there can be no assurance that these covenants will continue to be met. The Company’s failure to maintain
compliance with the covenants could prevent the Company from borrowing additional amounts and could result in a
default under any of the debt agreements. Such default could cause the outstanding indebtedness to become immediately
due and payable, by virtue of cross-acceleration or cross-default provisions.
The Company may be adversely affected by interest rates, particularly floating interest rates, and foreign exchange
rates.
As of December 31, 2021, 24% of the Company’s borrowings were subject to variable interest rates. As a
result, the Company is exposed to market risks associated with fluctuations in interest rates, and increases in interest
rates could adversely affect the Company.
The Company currently holds two interest rate swap contracts. The purpose of entering into these contracts is
to reduce the variability of cash flows from interest payments related to a portion of the Company’s variable-rate debt.
The swaps convert 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.
Because a portion of the Company’s operations are outside of the United States, significant revenues and
expenses are denominated in local currencies. Although operating in local currencies may limit the impact of currency
rate fluctuations on the results of operations of the Company’s non-United States subsidiaries and business units,
fluctuations in such rates may affect the translation of these results into the Company’s consolidated financial statements.
To the extent revenues and expenses are not in the applicable local currency, the Company may enter into foreign
exchange forward contracts to hedge the currency risk. There can be no assurance, however, that the Company’s efforts
at hedging will be successful. There is always a possibility that attempts to hedge currency risks will lead to greater
losses than predicted.
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The Company’s revenue, operating income from continuing operations and cash flows are subject to cyclical and
seasonal variations.
The Company’s business is seasonal, with the Company recognizing the majority of its operating income from
continuing operations in the third and fourth quarters of the financial year, primarily as a result of the increased magazine
advertising page counts and retail inserts and catalogs from back-to-school and holiday-related advertising and
promotions. The fourth quarter is typically the highest seasonal quarter for cash flows from operating activities and Free
Cash Flow due to the reduction of working capital requirements that reach peak levels during the third quarter. If the
Company does not successfully manage the increased workflow, necessary increases in paper and ink inventory,
production capacity flows and other business elements during these high seasons of activity, this seasonality could
adversely affect the Company’s cash flows and results of operations.
An other than temporary decline in operating results and enterprise value could lead to non-cash impairment charges
due to the impairment of property, plant and equipment, goodwill and other intangible assets.
The Company has a material amount of property, plant, equipment, goodwill and other intangible assets on its
balance sheet, due in part to acquisitions. As of December 31, 2021, the Company had the following long-lived assets on
its consolidated balance sheet included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual
Report on Form 10-K: (a) property, plant and equipment of $727.0 million; (b) goodwill of $86.4 million; and (c) other
intangible assets, primarily representing the value of customer relationships acquired, of $75.3 million.
As of December 31, 2021, these assets represented approximately 47% of the Company’s total assets. The
Company assesses impairment of property, plant and equipment, goodwill and other intangible assets based upon the
expected future cash flows of the respective assets. These valuations include management’s estimates of sales,
profitability, cash flow generation, capital structure, cost of debt, interest rates, capital expenditures and other
assumptions. A decline in expected profitability, significant negative industry or economic trends (including the
negative impacts of the continuing COVID-19 pandemic), inability to effectively integrate acquired businesses,
unexpected significant changes or planned changes in use of the assets or in entity structure, divestitures and
discontinued operations may adversely impact the assumptions used in the valuations. As a result, the recoverability of
these assets could be called into question, and the Company could be required to write down or write off these assets.
Such an occurrence could have a material adverse effect on the Company’s results of operations and financial position.
The Company has significant liabilities with respect to defined benefit pension plans that could cause the Company to
incur additional costs.
As a result of the 2010 acquisition of World Color Press, the Company assumed frozen single employer defined
benefit pension plans for certain of its employees in the United States. The majority of the plans’ assets are held in North
American and global equity securities and debt securities. The asset allocation as of December 31, 2021, was
approximately 26% equity securities and 74% debt securities.
As of December 31, 2021, the Company had underfunded pension liabilities of $19.2 million for single
employer defined benefit plans in the United States. Under current United States pension law, pension funding deficits
are generally required to be funded over a seven-year period. These pension deficits may increase or decrease depending
on changes in the levels of interest rates, pension plan investment performance, pension legislation and other factors.
Declines in global debt and equity markets would increase the Company’s potential pension funding obligations. Any
significant increase in the Company’s required contributions could have a material adverse impact on its business,
financial condition, results of operations and cash flows.
In addition to the single employer defined benefit plans described above, the Company has previously
participated in multiemployer pension plans (“MEPPs”) in the United States, including the Graphic Communications
International Union - Employer Retirement Fund (“GCIU”) and the Graphic Communications Conference of the
International Brotherhood of Teamsters National Pension Fund (“GCC”). Prior to the acquisition of World Color Press
by the Company, World Color Press received notice that certain plans in which it participated were in critical status, as
defined in Section 432 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). As a result,
30
the Company could have been subject to increased contribution rates associated with these plans or other MEPPs
suffering from declines in their funding levels. Due to the significantly underfunded status of the United States
multiemployer plans and the potential increased contribution rates, the Company withdrew from participation in these
multiemployer plans and has replaced these pension benefits with a Company-sponsored “pay as you go” defined
contribution plan, which is historically the form of retirement benefit provided to the Company’s employees. As of
December 31, 2021, the Company estimates and has recorded in its financial statements a pre-tax withdrawal liability for
all United States MEPPs of $32.2 million in the aggregate. The Company is scheduled to make payments to the GCIU
and GCC until April 2032 and February 2024, respectively.
The Company may not be able to utilize deferred tax assets to offset future taxable income.
As of December 31, 2021, the Company had deferred tax assets, net of valuation allowances, of $105.0 million.
The Company expects to utilize the deferred tax assets to reduce consolidated income tax liabilities in future taxable
years. However, the Company may not be able to fully utilize the deferred tax assets if its future taxable income and
related income tax liability is insufficient to permit their use. In addition, in the future, the Company may be required to
record a valuation allowance against the deferred tax assets if the Company believes it is unable to utilize them, which
would have an adverse effect on the Company’s results of operations and financial position.
Legal and Regulatory Risks
The Company and its facilities are subject to various consumer protection and privacy laws and regulations, and will
become subject to additional laws and regulations in the future. If the Company’s efforts to comply with such laws or
protect the security of information are unsuccessful, any failure may subject the Company to material liability,
require it to incur material costs or otherwise adversely affect its results of operations as a result of compliance with
such laws, costly enforcement actions and private litigation.
The nature of the Company’s business includes the receipt and storage of information about the Company’s
clients, vendors and the end-users of the Company’s products and services. The Company and its clients are subject to
various United States and foreign consumer protection, information security, data privacy and “do not mail”
requirements at the federal, states, provincial and local levels. The Company is subject to many legislative and
regulatory laws and regulations around the world concerning data protection and privacy. In addition, the interpretation
and application of consumer and data protection laws in the United States and elsewhere are often fluid and uncertain.
To the extent that the Company or its clients become subject to additional or more stringent requirements or that the
Company is not successful in its efforts to comply with existing requirements or protect the security of information,
demand for the Company’s services may decrease and the Company’s reputation may suffer, which could adversely
affect the Company’s results of operations. In addition, such laws may be interpreted and applied in a manner
inconsistent with the Company’s internal policies. If so, the Company could suffer costly enforcement actions (including
an order requiring changes to the Company’s data practices) and private litigation, which could have an adverse effect on
the Company’s business and results of operations. Complying with these various laws could cause the Company to incur
substantial costs or require changes to the Company’s business practices in a manner adverse to the Company’s business.
Unfavorable outcomes in legal proceedings could result in substantial costs and may harm the Company’s financial
condition.
The Company’s financial condition may be affected by the outcome of pending and future litigation, claims,
investigations, legal and administrative cases and proceedings, whether civil or criminal, or lawsuits by governmental
agencies or private parties. Defending against any such claims, or any legal proceedings to which the Company is
subject, can result in substantial costs and divert management time and resources. An adverse judgment could result in
monetary damages, which could have a negative impact on the Company’s liquidity and financial condition and/or cause
significant reputational harm to the Company’s business.
31
The Company may incur costs or suffer reputational damage due to improper conduct of its employees, contractors or
agents under laws governing business practices, including the United States Foreign Corrupt Practices Act.
The Company could be adversely affected by engaging in business practices that are in violation of United
States or foreign anti-corruption laws, including the United States Foreign Corrupt Practices Act. The Company operates
in parts of the world with developing economies that have experienced governmental corruption to some degree, and in
certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices. In
certain countries, the Company does substantial business with government entities or instrumentalities, which creates
increased risk of a violation of the Foreign Corrupt Practices Act and international laws. There can be no assurance that
all of the Company’s employees, contractors or agents, including those representing the Company in countries where
practices which violate anti-corruption laws may be customary, will not take actions that violate the Company’s policies
and procedures. The failure to comply with the laws governing international business practices may result in substantial
penalties and fines.
Changes in the legal and regulatory environment could limit the Company’s business activities, increase its operating
costs, reduce demand for its products or result in litigation.
The conduct of the Company’s businesses is subject to various laws and regulations administered by federal,
state and local government agencies in the United States, as well as to foreign laws and regulations administered by
government entities and agencies in markets in which the Company operates. These laws and regulations and
interpretations thereof may change, sometimes dramatically, as a result of political, economic or social events, such as
the election of the new administration. Such regulatory environment changes may include changes in taxation
requirements, accounting and disclosure standards, immigration laws and policy, environmental laws, and requirements
of United States and foreign occupational health and safety laws. Changes in laws, regulations or governmental policy
and the related interpretations may alter the environment in which the Company does business, and therefore, may
impact its results or increase its costs or liabilities.
In addition, the Company and its subsidiaries are party to a variety of legal and environmental remediation
obligations arising in the normal course of business, as well as environmental remediation and related indemnification
proceedings in connection with certain historical activities, former facilities and contractual obligations of acquired
businesses. Permits are required for the operation of certain parts of the Company’s business, and these permits are
subject to renewal, modification and, in some circumstances, revocation. Due to regulatory complexities, uncertainties
inherent in litigation and the risk of unidentified contaminants on current and former properties, the potential exists for
remediation, liability and indemnification costs to differ materially from the costs the Company has estimated. The
Company cannot assure you that the Company’s costs in relation to these matters will not exceed its established
liabilities or otherwise have an adverse effect on its results of operations.
Various laws and regulations addressing climate change are being considered at the federal and state levels.
Proposals under consideration include limitations on the amount of greenhouse gas that can be emitted (so-called “caps”)
together with systems of trading allowed emissions capacities. The impacts of such proposals could have a material
adverse impact on the Company’s financial condition and results of operations.
32
If QuadMed, a wholly-owned subsidiary of the Company, fails to comply with applicable healthcare laws and
regulations, the Company could face substantial penalties, and its business, reputation, operations, prospects and
financial condition of the Company’s subsidiary could be adversely affected.
QuadMed provides employer-sponsored healthcare solutions in the United States to employers of all sizes,
including the Company and other private and public-sector companies. These solutions include, but are not limited to,
on-site and near-site healthcare clinics, occupational health services, telemedicine, and health and wellness programs.
The healthcare industry is heavily regulated, constantly evolving and subject to significant change and fluctuation. The
United States federal and state healthcare laws and regulations that impact the QuadMed subsidiary business include,
among others, those: (a) regarding privacy, security and transmission of individually identifiable health information; (b)
prohibiting, among other things, soliciting, receiving or providing remuneration to induce the referral of an individual for
an item or service or the purchasing or ordering of an item or service for which payment may be made under healthcare
programs; (c) prohibiting, among other things, knowingly presenting or causing to be presented claims for payment from
third-party payors that are false or fraudulent; and (d) prohibiting the corporate practice of medicine.
Risks Relating to Quad’s Common Stock
Holders of class A common stock are not able to independently elect directors of the Company or control any of the
Company’s management policies or business decisions because the holders of class A common stock have
substantially less voting power than the holders of the Company’s class B common stock, all of which is owned by
certain members of the Quadracci family, trusts for their benefit or other affiliates of the Company, whose interests
may be different from the holders of class A common stock.
The Company’s outstanding stock is divided into two classes of common stock: class A common stock
(“class A stock”) and class B common stock (“class B stock”). The class B stock has ten votes per share on all matters
and the class A stock is entitled to one vote per share. As of January 31, 2022, the class B stock constitutes
approximately 76% of the Company’s total voting power. As a result, holders of class B stock are able to exercise a
controlling influence over the Company’s business, have the power to elect its directors and indirectly control decisions
such as whether to issue additional shares, declare and pay dividends or enter into corporate transactions. All of the
class B stock is owned by certain members of the Quadracci family or trusts for their benefit, whose interests may differ
from the interests of the holders of class A stock.
As of January 31, 2022, approximately 93% of the outstanding class B stock was held of record by the Quad
Voting Trust, and that constitutes approximately 71% of the Company’s total voting power. The trustees of the Quad
Voting Trust have the authority to vote the stock held by the Quad Voting Trust. Accordingly, the trustees of the Quad
Voting Trust are able to exercise a controlling influence over the Company’s business, have the power to elect its
directors and indirectly control decisions such as whether to issue additional shares, declare and pay dividends or enter
into corporate transactions.
Furthermore, in response to recent public focus on dual class capital structures, certain stock index providers are
implementing limitations on the inclusion of dual class share structures in their indices and certain institutional
shareholder advisory firms are updating their voting guidelines to generally withhold support for directors of companies
with dual class voting rights. If these restrictions increase or these guidelines are followed, they may impact who buys
and holds the Company’s stock.
The Company is a controlled company within the meaning of the rules of the New York Stock Exchange (“NYSE”)
and, as a result, it relies on exemptions from certain corporate governance requirements that provide protection to
shareholders of other companies.
Since the Quad Voting Trust owns more than 50% of the total voting power of the Company’s stock, the
Company is considered a controlled company under the corporate governance listing standards of the NYSE. As a
controlled company, an exception under the NYSE listing standards exempts the Company from the obligation to comply
with certain of the NYSE’s corporate governance requirements, including the requirements that (a) the Company have a
corporate governance and nominating committee that is composed entirely of independent directors with a written
33
charter addressing the committee’s purpose and responsibilities; and (b) the Company have a compensation committee
that is composed entirely of independent directors with a written charter addressing the committee’s purpose and
responsibilities.
Accordingly, for so long as the Company is a controlled company, holders of class A stock may not have the
same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements
of the NYSE.
Currently, there is a limited active market for Quad’s class A common stock and, as a result, shareholders may be
unable to sell their class A common stock without losing a significant portion of their investment.
The Company’s class A stock has been traded on the NYSE under the symbol “QUAD” since July 6, 2010.
However, there is currently a limited active market for the class A common shares. The Company cannot predict the
extent to which investor interest in the Company will lead to the development of a more active trading market for its
class A common stock on the NYSE or how liquid that market will become. If a more active trading market does not
develop, shareholders may have difficulty selling any class A stock without negatively affecting the stock price, and
thereby, losing a significant portion of their investment.
Item 1B.
Unresolved Staff Comments
The Company has no unresolved staff comments to report pursuant to this item.
Item 2.
Properties
Quad’s corporate office is located in Sussex, Wisconsin. The Company owned or leased 110 facilities located
in 14 countries including manufacturing operations, warehouses and office space totaling approximately
19,320,000 square feet, of which approximately 13,419,000 is owned space and approximately 5,901,000 is leased space
as of December 31, 2021. In addition to these owned and leased facilities, the Company has more than 90 client-based
marketing on-site locations, as well as investments in printing operations located in India and Brazil.
Within the United States Print and Related Services segment, the Company operated 37 owned or leased
manufacturing facilities, encompassing approximately 15,241,000 square feet as of December 31, 2021. Within the
International segment, the Company operated 8 owned or leased manufacturing facilities, encompassing approximately
1,829,000 square feet as of December 31, 2021. The following table lists the Company’s operating locations with
manufacturing facilities totaling over 500,000 square feet as of December 31, 2021:
Locations
Square Feet Property Type
Lomira, Wisconsin, United States . . . . . . . . . . . . .
Sussex, Wisconsin, United States . . . . . . . . . . . . .
Martinsburg, West Virginia, United States . . . . . .
Hartford, Wisconsin, United States . . . . . . . . . . . .
Saratoga Springs, New York, United States . . . . .
West Allis, Wisconsin, United States . . . . . . . . . .
The Rock, Georgia, United States . . . . . . . . . . . . .
Wyszkow, Poland . . . . . . . . . . . . . . . . . . . . . . . . .
Effingham, Illinois, United States . . . . . . . . . . . . .
Merced, California, United States . . . . . . . . . . . . .
2,174,000
1,971,000
1,740,000
1,682,000
1,034,000
913,000
797,000
709,000
564,000
539,000
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Segment
United States Print and Related Services
United States Print and Related Services
United States Print and Related Services
United States Print and Related Services
United States Print and Related Services
United States Print and Related Services
United States Print and Related Services
International
United States Print and Related Services
United States Print and Related Services
34
Item 3.
Legal Proceedings
The Company is subject to various legal actions, administrative proceedings and claims arising out of the
ordinary course of business. The Company believes that such unresolved legal actions, proceedings and claims will not
materially adversely affect its results of operations, financial condition or cash flows. For additional information, see
Note 11, “Commitments and Contingencies — Litigation,” to the consolidated financial statements in Part II, Item 8,
“Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
Item 4.
Mine Safety Disclosures
Not applicable.
35
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36
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
PART II
Equity Securities
Capital Stock and Dividends
Quad’s authorized capital stock consists of 105.0 million shares of class A stock, 80.0 million shares of class B
stock, 20.0 million shares of class C common stock and 0.5 million shares of preferred stock. The Company’s
outstanding capital stock as of December 31, 2021, consisted of 40.8 million shares of class A stock, 13.5 million shares
of class B stock and no shares of class C common stock or preferred stock. As of January 31, 2022, there were
2,226 record holders of the class A stock and 21 record holders of the class B stock.
The Company’s class A stock is listed on the NYSE under the symbol “QUAD”. The class A stock is entitled
to one vote per share. The Company’s class B stock is held by certain members of the Quadracci family or trusts for
their benefit (and can only be voluntarily transferred to the Company or to a member of the Quadracci “family group” as
defined in the Company’s Articles of Incorporation; and any transfer in violation of the Company’s Articles of
Incorporation results in the automatic conversion of such class B stock into class A stock). The class B stock is entitled
to ten votes per share. Each share of class B stock may, at the option of the holder, be converted at any time into one
share of class A stock. There is no public trading market for the class B stock.
The Company paid a dividend for each class of common stock then outstanding during the first quarter of 2020.
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. However, the
Company remains committed to paying a dividend over the long term and will seek to resume a dividend following the
stabilization of its operating environment.
Pursuant to the Company’s Articles of Incorporation, each outstanding class of common stock has equal rights
with respect to cash dividends. Pursuant to the Company’s debt facilities, the Company is subject to limitations on
dividends and repurchases of capital stock. If the Company’s Total Leverage Ratio is greater than 2.75 to 1.00, as
defined in the Company’s Senior Secured Credit Facility, last amended on November 2, 2021, (see Note 12. “Debt,” for
more details on the amendment), the Company is prohibited from making greater than $60.0 million of dividend
payments, capital stock repurchases and certain other payments, over the course of the agreement. If the Company’s
Total Leverage Ratio is above 2.50 to 1.00, but below 2.75 to 1.00, the Company is prohibited from making greater than
$100.0 million of dividend payments, capital stock repurchases, and certain other payments, over the course of the
agreement. If the Total Leverage Ratio is less than 2.50 to 1.00, there are no such restrictions.
Securities Authorized For Issuance Under Equity Compensation Plans
See Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters,” of this Annual Report on Form 10-K for certain information regarding the Company’s equity
compensation plans.
37
Information about the Company’s repurchases of its class A common stock during the three months ended
December 31, 2021, was as follows:
Issuer Purchases of Equity Securities
Period
October 1, 2021 to October 31, 2021
November 1, 2021 to November 30, 2021
December 1, 2021 to December 31, 2021
Total
Total Number of
Shares
Purchased(1)
Average Price
Paid Per Share
—
—
—
—
—
—
—
______________________________
(1) Represents shares of the Company’s class A common stock.
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs(1)
—
—
—
—
Dollar Value of
Shares that May
Yet Be
Purchased
Under the Plans
or Programs(2)
$
100,000,000
100,000,000
100,000,000
(2) 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. Under the authorization, share repurchases may be made at the Company’s
discretion, from time to time, in the open market and/or in privately negotiated transactions as permitted by federal securities
laws and other legal requirements. The timing, manner, price and amount of any repurchase will depend on economic and market
conditions, share price, trading volume, applicable legal requirements and other factors. The program may be suspended or
discontinued at any time. There were no shares of the Company’s class A stock repurchased during the years December 31, 2021
and 2020. As of December 31, 2021, there were $100.0 million of authorized repurchases remaining under the program.
38
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Following discussion of the financial condition and results of operations of Quad should be read together with
Quad’s audited consolidated financial statements for each of the three years in the period ended December 31, 2021,
including the notes thereto, included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual
Report on Form 10-K. This discussion contains forward-looking statements that reflect the Company’s plans, estimates
and beliefs. The Company’s actual results could differ materially from those discussed in these forward-looking
statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in
“Forward-Looking Statements” and Part I, Item 1A, “Risk Factors,” included earlier within this Annual Report on
Form 10-K.
Management’s discussion and analysis of financial condition and results of operations is provided as a
supplement to the Company’s 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:
•
•
•
•
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 the year ended December 31, 2021, to the year ended December 31, 2020. The
comparability of the Company’s results of operations between periods was impacted by acquisitions,
strategic investments and divestitures, including the divestiture of the Omaha, Nebraska packaging plant,
which was sold on January 31, 2020, the additional investment in Rise in June 2020, and the divestiture of
Company’s third-party logistics business on June 30, 2021. The results of operations of the packaging
plant and the third-party logistics divestitures are included in the Company’s 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 (“Book business”) have been reported as discontinued operations for the year ended
December 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 accounting principles generally accepted in the United States of America
(“GAAP”).
Liquidity and Capital Resources. This section provides an analysis of the Company’s capitalization, cash
flows and a discussion and table 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.
Critical Accounting Policies and Estimates. This section contains a discussion of the accounting policies
that the Company’s management believes are important to the Company’s financial condition and results of
operations, as well as allowances and reserves that require significant judgment and estimates on the part of
the Company’s management. In addition, all of the Company’s significant accounting policies, including
critical accounting policies, are summarized in Note 1, “Basis of Presentation and Summary of Significant
Accounting Policies,” to the consolidated financial statements in Part II, Item 8, “Financial Statements and
Supplementary Data,” of this Annual Report on Form 10-K.
39
Overview
Business Overview
As a worldwide marketing solutions partner, Quad leverages its more than 50-year heritage of platform
excellence, innovation, strong culture and social purpose to create a better way for its clients, employees and
communities. The Company’s integrated marketing platform removes friction throughout the marketing process thereby
helping brands and marketers reduce complexity, increase efficiency and enhance marketing spend effectiveness. Quad
provides its clients
with a complete through-the-line marketing offering, providing unmatched scale for on-site services and expanded
subject expertise in marketing strategy, creative solutions, media deployment and marketing management services. With
a client-centric approach that drives the Company to continuously hone and evolve its offering, combined with leading-
edge technology, advanced data and analytics and single-source simplicity, the Company has the resources and
knowledge to help a wide variety of clients target, more deeply engage and grow audiences in multiple verticals,
including those in established and emerging industries, such as retail, publishing, consumer technology, consumer
packaged goods, financial services, insurance, healthcare and direct-to-consumer.
For a full description of the Company’s business overview, refer to Part I, Item 1, “Business,” of this Annual
Report on Form 10-K.
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 summarized below.
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. The
United States Print and Related Services segment accounted for approximately 89% and 90% of the Company’s
consolidated net sales during the years ended December 31, 2021 and 2020, respectively.
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. The International
segment accounted for approximately 11% and 10% of the Company’s consolidated net sales during the years ended
December 31, 2021 and 2020, respectively.
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.
40
Key Performance Metrics Overview
The Company’s management believes the ability to generate net sales growth, profit increases and positive cash
flow, while maintaining the appropriate level of debt, are key indicators of the successful execution of the Company’s
business strategy and will increase shareholder value. The Company uses period-over-period net sales growth, EBITDA,
EBITDA margin, net cash provided by operating activities, Free Cash Flow and Debt Leverage Ratio as metrics to
measure operating performance, financial condition and liquidity. EBITDA, EBITDA margin, Free Cash Flow and Debt
Leverage Ratio are non-GAAP financial measures (see the definitions of EBITDA, EBITDA margin and the
reconciliation of net earnings (loss) attributable to Quad common shareholders to EBITDA in the “Results of
Operations” section below, and see the definitions of Free Cash Flow and Debt Leverage Ratio, the reconciliation of net
cash provided by operating activities to Free Cash Flow, and the calculation of Debt Leverage Ratio in the “Liquidity
and Capital Resources” section below).
Net sales growth. The Company uses period-over-period net sales growth as a key performance metric. The
Company’s management assesses net sales growth based on the ability to generate increased net sales through increased
sales to existing clients, sales to new clients, sales of new or expanded solutions to existing and new clients, and
opportunities to expand sales through strategic investments, including acquisitions.
EBITDA and EBITDA margin. The Company uses EBITDA and EBITDA margin as metrics to assess
operating performance. The Company’s management assesses EBITDA and EBITDA margin based on the ability to
increase revenues while controlling variable expense growth.
Net cash provided by operating activities. The Company uses net cash provided by operating activities as a
metric to assess liquidity. The Company’s management assesses net cash provided by operating activities based on the
ability to meet recurring cash obligations while increasing available cash to fund debt service requirements, capital
expenditures, cash restructuring requirements related to cost reduction activities, World Color Press single employer
pension plan contributions, World Color Press MEPPs withdrawal liabilities, acquisitions and other investments in future
growth, shareholder dividends and share repurchases. Net cash provided by operating activities can be significantly
impacted by the timing of non-recurring or infrequent receipts or expenditures.
Free Cash Flow. The Company uses Free Cash Flow as a metric to assess liquidity and capital deployment.
The Company’s management assesses Free Cash Flow as a measure to quantify cash available for strengthening the
balance sheet (debt and pension liability reduction), for strategic capital allocation and deployment through investments
in the business (acquisitions and strategic investments) and for returning capital to the shareholders (dividends and share
repurchases). The Company’s priorities for capital allocation and deployment will change as circumstances dictate for
the business, and Free Cash Flow can be significantly impacted by the Company’s restructuring activities and other
unusual items.
Debt Leverage Ratio. The Company uses the Debt Leverage Ratio as a metric to assess liquidity and the
flexibility of its balance sheet. Consistent with other liquidity metrics, the Company monitors the Debt Leverage Ratio
as a measure to determine the appropriate level of debt the Company believes is optimal to operate its business, and
accordingly, to quantify debt capacity available for strengthening the balance sheet (debt and pension liability reduction),
for strategic capital allocation and deployment through investments in the business (capital expenditures, acquisitions
and strategic investments), and for returning capital to the shareholders (dividends and share repurchases). The
Company’s priorities for capital allocation and deployment will change as circumstances dictate for the business, and the
Debt Leverage Ratio can be significantly impacted by the amount and timing of large expenditures requiring debt
financing, as well as changes in profitability.
41
The Company remains disciplined with its debt leverage. The Company’s consolidated debt and finance lease
obligations decreased by $125 million during the year ended December 31, 2021, primarily due to the use of cash
provided by operating activities, cash proceeds from the sale of property, plant and equipment, and the sale of the
Company’s third-party logistics business. Since the Company completed the World Color Press acquisition in July 2010,
the Company has reduced debt and finance lease obligations by $936 million and has reduced the obligations for
pension, postretirement and MEPPs by $511 million, for a total obligation reduction since July 2010 of approximately
$1.4 billion.
Overview of Trends Affecting Quad
As consumer media consumption habits change, marketing services providers face increased demand to offer
end-to-end marketing services, from strategy and creative through execution, across all channels, traditional and
digital. As new marketing and advertising channels emerge, marketing services providers must expand their services
beyond traditional channels, such as for television, newspapers, print publications and radio, to digital channels, such
as mobile, internet search, internet display and video, to create effective multichannel campaigns for their clients. This
trend greatly influences Quad’s ongoing efforts to redefine the future of integrated marketing and create greater value
for its clients who are looking for less complexity, greater transparency and accountability from their business
partners.
The Company leverages its data-driven print expertise as part of an integrated marketing platform that helps its
clients not only plan and produce marketing programs, but also deploy, manage and measure them across all media
channels. Competition in the printing industry remains highly fragmented and intense, and the Company believes that
there are indicators of heightened competitive pressures. The industry has excess manufacturing capacity created by
continued declines in industry volumes, compounded by the COVID-19 pandemic, which, in turn, have created
accelerated downward pricing pressures. The Company faces competition due to the increased accessibility and quality
of digital alternatives to traditional delivery of printed documents through the online distribution and hosting of media
content, and the digital distribution of documents and data. The Company faces competition from print management and
marketing consulting firms that look to streamline processes and reduce the overall print spend of the Company’s clients.
For a full description of the Company’s industry and competition overview, refer to Part I, Item 1, “Business,”
of this Annual Report on Form 10-K.
The Company believes that a disciplined approach for capital management and a strong balance sheet are
critical to be able to invest in profitable growth opportunities and technological advances, thereby providing the highest
return for shareholders. Management balances the use of cash between deleveraging the Company’s balance sheet
(through reduction in debt and pension obligations), compelling investment opportunities (through capital expenditures,
acquisitions and strategic investments) and returns to shareholders (through dividends and share repurchases).
The Company continues to make progress on integrating and streamlining all aspects of its business, thereby
lowering its cost structure by consolidating its manufacturing platform into its most efficient facilities, as well as
realizing purchasing, mailing and logistics efficiencies by centralizing and consolidating print manufacturing volumes
and eliminating redundancies in its administrative and corporate operations. The Company has continued to evolve its
manufacturing platform, equipping facilities to be product line agnostic, which enables the Company to maximize
equipment utilization. Quad believes that the large plant size of certain of its key printing facilities allows the Company
to drive savings in certain product lines (such as publications and catalogs) due to economies of scale and from
investments in automation and technology. The Company continues to focus on proactively aligning its cost structure to
the realities of the top-line pressures it faces in the printing industry through Lean Manufacturing and sustainable
continuous improvement programs.
The Company believes it will continue to drive productivity improvements and sustainable cost reduction
initiatives into the future through an engaged workforce and ongoing adoption of the latest manufacturing automation
and technology. Through this strategy, the Company believes it can maintain the strongest, most efficient print
manufacturing platform to remain a high-quality, low-cost producer.
42
Integrated distribution with the USPS is an important component of the Company’s business. Any material
change in the current service levels provided by the postal service could impact the demand that clients have for print
services. The USPS continues to experience financial problems. Without decreased operational cost structures,
increased efficiencies, increased revenues or action by Congress to reform the USPS’ cost structure, these losses will
continue into the future. As a result of these financial difficulties, the USPS has come under increased pressure to adjust
its postal rates and service levels. Additional price increases may result in clients reducing mail volumes and exploring
the use of alternative methods for delivering a larger portion of their products, such as continued diversion to the internet
and other alternative media channels in order to ensure that they stay within their expected postage budgets. There are
also delivery delays due to ongoing COVID-19 impacts on daily operational staffing at the USPS.
Federal statute requires the PRC to conduct reviews of the overall rate-making structure for the USPS to ensure
funding stability. As a result of those reviews, the PRC authorized a five year rate-making structure that provides the
USPS with additional pricing flexibility over the Consumer Price Index cap, which may result in a substantially altered
rate structure for mailers. The revised rate authority that is effective as a result of the rules issued by the PRC includes a
higher overall rate cap on the USPS’ ability to increase rates from year to year. This may lead to price spikes for mailers
and may also reduce the incentive for the USPS to continue to take out costs and instead continue to rely on postage to
cover the costs of an outdated postal service that does not reflect the industry’s ability or willingness to pay. The
uncertainty as to how much of the authority the USPS will use also creates potential volume declines as rate
predictability with respect to cost is no longer known for mailers. The result may be reduced demand for printed
products as clients may move more aggressively into other delivery methods, such as the many digital and mobile
options now available to consumers.
The Company has invested significantly in its mail preparation and distribution capabilities to mitigate the
impact of increases in postage costs, and to help clients successfully navigate the ever-changing postal environment.
Through its data analytics, unique software to merge mail streams on a large scale, advanced finishing capabilities and
technology, and in-house transportation and logistics operations, the Company manages the mail preparation and
distribution of most of its clients’ products to maximize efficiency, to enable on-time and consistent delivery and to
partially reduce these costs; however, the net impact of increasing postal costs may create a decrease in client demand for
print and mail products.
The Company’s results of operations have been adversely impacted as a result of the COVID-19 pandemic and
the emergence of new variants. Through the Company’s Crisis Management Team, including executive and operations
leadership, the Company has been executing business continuity plans focused on protecting the health and well-being of
our employees, while also continuing to service clients, and protect the long-term financial health of the Company as the
COVID-19 pandemic continues. With ongoing advancements against the COVID-19 pandemic, the effects on the
Company have lessened from previous periods, particularly from the heavily impacted second and third quarters of 2020.
The Company is continuing to evaluate the impact and may implement additional cost reduction measures as necessary.
The ultimate impact of COVID-19 on the Company’s business, financial condition, cash flows, results of operations and
supply chain will depend on future developments, including the duration of the pandemic and the related length of its
impact on the global economy, all of which are still uncertain.
Additionally, the increasing cost and availability of raw materials, such as paper, ink, supplies, distribution and
labor, have been and are expected to continue to adversely impact the Company’s results of operation. The Company is
dependent on its production personnel to print the Company’s products in a cost-effective and efficient manner that
allows the Company to obtain new clients and to drive sales from existing clients. The nationwide shortage of available
production personnel may put a strain on the Company’s ability to accept new work from client requests, including the
Company’s seasonally higher third and fourth quarters. The ongoing labor shortage is also placing upward price
pressure on freight, as the number of available drivers have been reduced, and may have an adverse effect on our
operations. Due to the reduced number of freight drivers available, the Company may not be able to meet rising
customer demand and could fail to meet our clients’ expectations.
The Company has also experienced and anticipates it will continue to experience certain distribution challenges,
including, but not limited to, the above-noted delivery delays at the USPS and recent volume restrictions at the United
Parcel Service, Federal Express and certain local couriers. As the labor shortages, supply chain and distribution
challenges continue to evolve, the Company is unable to predict the duration of the shortages and challenges and the
43
extent of the impact on the Company’s business, financial condition, cash flows and results of operations. As a result of
the rising inflationary cost pressures within our raw materials, distribution and labor, the Company has and will continue
to pass along price increases to our clients. The Company expects inflationary cost pressures and supply chain shortages
to potentially continue through fiscal year 2022. The Company is unable to predict the future impact of the labor and
supply chain shortages as well as cost inflation, and the resulting impact on the Company’s business, financial condition,
cash flows and results of operations.
44
Results of Operations for the Year Ended December 31, 2021, Compared to the Year Ended December 31, 2020
Summary Results
The Company’s operating income (loss) from continuing operations, operating margin, net earnings (loss)
attributable to Quad common shareholders (computed using a 25% normalized tax rate for all items subject to tax) and
diluted earnings (loss) per share attributable to Quad common shareholders for the year ended December 31, 2021,
changed from the year ended December 31, 2020, as follows (dollars in millions, except per share data):
Operating Income
(Loss) from
Continuing
Operations
Operating Margin
Net Earnings
(Loss)
Attributable to
Quad Common
Shareholders
Diluted Earnings
(Loss) Per Share
Attributable to
Quad Common
Shareholders
. . . . . . . . . .
For the year ended December 31, 2020 . . . . . $
Gains from sale and leaseback (1)
Restructuring, impairment and transaction-
related charges (2) . . . . . . . . . . . . . . . . . . . . . .
Interest expense (3) . . . . . . . . . . . . . . . . . . . . .
Net pension income (4) . . . . . . . . . . . . . . . . . .
Loss on debt extinguishment (5) . . . . . . . . . . .
Income taxes (6)
. . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations, net of
tax (7)
Investments in unconsolidated entity and
noncontrolling interests, net of tax (8)
Operating income (loss) from continuing
operations (9)
For the year ended December 31, 2021 . . . . . $
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . .
(46.0)
24.5
105.2
N/A
N/A
N/A
N/A
N/A
N/A
9.1
92.8
(1.6) % $
0.8 %
3.6 %
N/A
N/A
N/A
N/A
N/A
N/A
0.3 %
3.1 % $
(128.3) $
18.4
78.9
6.9
3.0
0.8
29.1
21.9
0.3
6.8
37.8 $
(2.53)
0.35
1.58
0.18
0.05
0.02
0.55
0.43
0.01
0.07
0.71
______________________________
(1)
The Company executed sale and leaseback transactions of its Chalfont, Pennsylvania and West Allis, Wisconsin facilities
resulting in $24.5 million ($18.4 million, net of tax) in gains during the year ended December 31, 2021.
(2) Restructuring, impairment and transaction-related charges decreased $105.2 million ($78.9 million, net of tax), to $18.9 million
during the year ended December 31, 2021, and included the following:
a. A $24.8 million decrease in employee termination charges from $34.7 million during the year ended December 31,
2020, to $9.9 million during the year ended December 31, 2021;
b. A $29.2 million decrease in impairment charges from $64.1 million during the year ended December 31, 2020, to
$34.9 million during the year ended December 31, 2021;
c. A $0.8 million decrease in transaction-related charges from $1.4 million during the year ended December 31, 2020, to
$0.6 million during the year ended December 31, 2021;
d. A $1.9 million decrease in integration-related charges from $1.9 million during the year ended December 31, 2020, to
zero during the year ended December 31, 2021; and
e. A $48.5 million decrease in various other restructuring charges from $22.0 million of expense during the year ended
December 31, 2020, to $26.5 million of income during the year ended December 31, 2021.
The Company expects to incur additional restructuring and integration costs in future reporting periods in connection with
eliminating excess manufacturing capacity and properly aligning its cost structure in conjunction with the Company’s
acquisitions and strategic investments, and other cost reduction programs.
45
(3)
Interest expense decreased $9.2 million ($6.9 million, net of tax) during the year ended December 31, 2021, to $59.6 million.
This change was due to lower average debt levels and a $0.7 million decrease in interest expense related to the interest rate swaps
during the year ended December 31, 2021, as compared to the year ended December 31, 2020.
(4) Net pension income increased $4.0 million ($3.0 million, net of tax) during the year ended December 31, 2021, to $14.5 million.
This was due to a $4.8 million decrease from interest cost on pension plan liabilities, partially offset by an increase in non-cash
settlement charges of $0.8 million.
(5)
(6)
(7)
(8)
Loss on debt extinguishment decreased $1.1 million ($0.8 million, net of tax) from $1.8 million during the year ended
December 31, 2020, to $0.7 million during the year ended December 31, 2021. The $0.7 million loss on debt extinguishment
recorded during the year ended December 31, 2021, relates to a $0.5 million loss on debt extinguishment recorded during the
fourth quarter of 2021, primarily related to the repurchase of the Company’s unsecured 7.0% senior notes due May 1, 2022 and a
$0.2 million loss on debt extinguishment from the fifth amendment to the Company’s April 28, 2014 Senior Secured Credit
Facility, completed on November 2, 2021. The $1.8 million loss on debt extinguishment recognized during the year ended
December 31, 2020, relates to a $2.4 million loss on debt extinguishment from the fourth amendment to the Company’s April 28,
2014 Senior Secured Credit Facility, completed on June 29, 2020, partially offset by a $0.6 million gain on debt extinguishment
recorded during the first quarter of 2020, primarily related to the repurchase of the Company’s unsecured 7.0% senior notes due
May 1, 2022.
The $29.1 million increase in income tax benefit as calculated in the following table is primarily due to a $54.1 million increase
from decreased valuation allowance reserves, partially offset by the following: (1) a $14.3 million income tax benefit related to
the Coronavirus Aid, Relief, and Economic Security Act net operating loss carry back provisions in 2020 that did not repeat in
2021; (2) a $6.2 million decrease from impairment charges related to foreign investments in 2021; and (3) a $2.4 million decrease
from income in foreign branches.
Year Ended December 31,
2021
2020
$ Change
Income (loss) from continuing operations before income taxes and equity in loss
of unconsolidated entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
47.0
$
(106.1)
$
153.1
Normalized tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) at normalized tax rate . . . . . . . . . . . . . . . . . . . . . . .
25.0 %
11.7
25.0 %
(26.6)
Less: Income tax expense (benefit) from the consolidated statements of
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.5
0.3
38.3
9.2
Impact of income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.2
$
(26.9)
$
29.1
The loss from discontinued operations, net of tax, of $21.9 million was recognized during the year ended December 31, 2020.
The Company completed the sale of the Book business in 2020.
The increase from investments in unconsolidated entity and noncontrolling interests, net of tax, of $0.3 million during the year
ended December 31, 2021, was primarily due to a $0.5 million increase in earnings at the Company’s investment in Plural
Industria Gráfica Ltda. (“Plural”), the Company’s Brazilian joint venture, partially offset by a $0.2 million decrease in loss
attributed to noncontrolling interests in the Company’s consolidated statements of operations related to the Company’s majority
ownership of Rise.
(9) Operating income from continuing operations, excluding the gains from sale and leaseback and restructuring, impairment and
transaction-related charges, increased $9.1 million ($6.8 million, net of tax) primarily due to the following: (1) a $24.3 million
decrease in depreciation and amortization expense; (2) a $22.2 million increase in paper byproduct recoveries; (3) an $8.7 million
net benefit in 2021 of gains from property insurance claims; (4) higher print volume and pricing; and (5) savings from other cost
reduction initiatives. These cost decreases were partially offset by the following: (1) $38.5 million in COVID-related temporary
cost reductions primarily from temporary salary reduction and furloughs in 2020; (2) net cost increases from labor, freight and
materials inflationary cost impacts; and (3) a $12.0 million benefit in 2020 from a change in the hourly production employee
vacation policy.
46
Operating Results From Continuing Operations
The following table sets forth certain information from the Company’s consolidated statements of operations on
an absolute dollar basis and as a relative percentage of total net sales for each noted period, together with the relative
percentage change in such information between the periods set forth below:
Year Ended December 31,
2021
2020
(dollars in millions)
Amount
% of Net
Sales
Amount
% of Net
Sales
$ Change
%
Change
Net sales:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,247.1
75.9 % $ 2,228.7
76.1 % $
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
713.3
24.1 %
700.9
23.9 %
Total net sales . . . . . . . . . . . . . . . . . . . . .
2,960.4
100.0 %
2,929.6
100.0 %
Cost of sales:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,861.0
62.9 %
1,831.5
Services . . . . . . . . . . . . . . . . . . . . . . . . . . .
528.9
17.9 %
503.3
Total cost of sales . . . . . . . . . . . . . . . . .
2,389.9
80.8 %
2,334.8
Selling, general & administrative expenses .
Gains from sale and leaseback . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . .
Restructuring, impairment and transaction-
related charges . . . . . . . . . . . . . . . . . . . . . . .
326.0
(24.5)
157.3
11.0 %
335.1
(0.8) %
—
5.3 %
181.6
62.5 %
17.2 %
79.7 %
11.4 %
— %
6.2 %
18.4
12.4
30.8
29.5
25.6
55.1
(9.1)
(24.5)
(24.3)
0.8 %
1.8 %
1.1 %
1.6 %
5.1 %
2.4 %
(2.7) %
(100.0) %
(13.4) %
18.9
0.6 %
124.1
4.2 %
(105.2)
(84.8) %
Total operating expenses . . . . . . . . . . .
2,867.6
96.9 %
2,975.6
101.5 %
(108.0)
(3.6) %
Operating income (loss) from continuing
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
92.8
3.1 % $
(46.0)
(1.6) % $
138.8
nm
Net Sales
Product sales increased $18.4 million, or 0.8%, for the year ended December 31, 2021, compared to the year
ended December 31, 2020, primarily due to the following: (1) a $19.4 million increase in sales in the Company’s print
product lines, primarily due to increased print volume and pricing; (2) a $6.8 million increase from pass-through paper
sales, partially offset by a $7.5 million decrease in sales due to the divestiture of the Company’s Omaha packaging plant
and $0.3 million in unfavorable foreign exchange impacts
Service sales, which primarily consist of logistics, distribution, marketing services, imaging and medical
services, increased $12.4 million, or 1.8%, for the year ended December 31, 2021, compared to the year ended
December 31, 2020, primarily due to a $44.3 million increase in logistics sales and a $21.5 million increase in print
imaging services and sales of marketing services, partially offset by a $53.4 million decrease in sales due to the
divestiture of the Company’s third-party logistics business.
Cost of Sales
Cost of product sales increased $29.5 million, or 1.6%, for the year ended December 31, 2021, compared to the
year ended December 31, 2020, primarily due to the following: (1) higher print volume compared to the COVID-19
pandemic impacted 2020; (2) a $12.0 million benefit in 2020 from a change in the hourly production employee vacation
policy; (3) an increase in pass-through paper costs; (4) the impacts from rising costs of labor, materials and other costs of
production. These increases were partially offset by a $22.2 million increase in paper byproduct recoveries and the
impact from the divestiture of the Omaha packaging plant.
47
Cost of service sales increased $25.6 million, or 5.1%, for the year ended December 31, 2021, compared to the
year ended December 31, 2020, primarily due to increased freight costs, partially offset by the impact from the
divestiture of the Company’s third-party logistics business.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $9.1 million, or 2.7%, for the year ended December 31,
2021, compared to the year ended December 31, 2020, primarily due to an $8.7 million net benefit in 2021 of gains from
property insurance claims, a $7.8 million decrease in credit loss expense mainly due to specific client credit reviews and
savings from other cost reduction initiatives, partially offset by a $14.3 million increase in employee-related costs.
Selling, general and administrative expenses as a percentage of net sales decreased from 11.4% for the year ended
December 31, 2020, to 11.0% for the year ended December 31, 2021.
Gains from sale and leaseback
The Company executed sale and leaseback transactions of its Chalfont, Pennsylvania and West Allis, Wisconsin
facilities resulting in $24.5 million ($18.4 million, net of tax) in gains during the year ended December 31, 2021.
Depreciation and Amortization
Depreciation and amortization decreased $24.3 million, or 13.4%, for the year ended December 31, 2021,
compared to the year ended December 31, 2020, due to a $16.7 million decrease in depreciation expense, primarily from
property, plant and equipment becoming fully depreciated over the past year and a decrease in purchases of property,
plant and equipment and a $7.6 million decrease in amortization expense.
48
Restructuring, Impairment and Transaction-Related Charges
Restructuring, impairment and transaction-related charges decreased $105.2 million, or 84.8%, for the year
ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to the following:
Year Ended December 31,
2021
2020
$ Change
Employee termination charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Impairment charges (a)
Transaction-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Integration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other restructuring charges (income)
Vacant facility carrying costs and lease exit charges . . . . . . . . . . . . .
Equipment and infrastructure removal costs . . . . . . . . . . . . . . . . . . .
Gains on the sale of facilities (b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other restructuring activities (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other restructuring charges (income) . . . . . . . . . . . . . . . . . . . . .
9.9 $
34.7 $
34.9
0.6
—
19.8
1.6
(24.8)
(23.1)
(26.5)
64.1
1.4
1.9
11.5
1.1
(1.6)
11.0
22.0
Total restructuring, impairment and transaction-related charges . . . . . . $
18.9 $
124.1 $
(24.8)
(29.2)
(0.8)
(1.9)
8.3
0.5
(23.2)
(34.1)
(48.5)
(105.2)
______________________________
(a)
Includes $2.8 million and $22.1 million of impairment charges for machinery and equipment no longer being utilized in
production as a result of facility consolidations, as well as other capacity reduction and strategic divestiture activities during the
years ended December 31, 2021 and 2020, respectively; and $42.0 million of land and building impairment charges during the
year ended December 31, 2020. $56.6 million of the impairment charges recorded during the year ended December 31, 2020
were related to property, plant and equipment for the Oklahoma City, Oklahoma facility. $32.1 million of the impairment
charges recorded during the year ended December 31, 2021 were related to the Company’s decision to sell the investment in
Plural.
(b)
(c)
Includes a $13.8 million gain on the sale of the Oklahoma City, Oklahoma facility, a $7.6 million gain on the sale of the
Riverside, California facility, a $1.0 million gain on the sale of the Fernley, Nevada facility and a $2.4 million gain on the sale of
other facilities during the year ended December 31, 2021; and a $0.8 million gain on the sale of the Shakopee, Minnesota facility
and a $0.8 million gain on the sale of the Midland, Michigan facility during the year ended December 31, 2020.
Includes a $20.9 million gain on the sale of a business and a $2.7 million gain from the reclassification of foreign currency
translation adjustments during the year ended December 31, 2021; and a $2.9 million loss on the sale of a business during the
year ended December 31, 2020.
49
EBITDA and EBITDA Margin—Consolidated
EBITDA is defined as net earnings (loss) attributable to Quad common shareholders, excluding (1) interest
expense, (2) income tax expense (benefit) and (3) depreciation and amortization. EBITDA margin represents EBITDA
as a percentage of net sales. EBITDA and EBITDA margin are presented to provide additional information regarding
Quad’s performance. Both are important measures by which Quad gauges the profitability and assesses the performance
of its business. EBITDA and EBITDA margin are non-GAAP financial measures and should not be considered
alternatives to net earnings (loss) as a measure of operating performance, or to cash flows provided by operating
activities as a measure of liquidity. Quad’s calculation of EBITDA and EBITDA margin may be different from the
calculations used by other companies, and therefore, comparability may be limited.
EBITDA and EBITDA margin for the year ended December 31, 2021, compared to the year ended
December 31, 2020, were as follows:
Year Ended December 31,
2021
2020
Amount
% of Net Sales
Amount
% of Net Sales
(dollars in millions)
EBITDA and EBITDA margin (non-GAAP) . . . . . . . . . . $
264.2
8.9 % $
122.4
4.2 %
EBITDA increased $141.8 million for the year ended December 31, 2021, compared to the year ended
December 31, 2020, primarily due to the following: (1) $105.2 million of decreased restructuring, impairment and
transaction-related charges; (2) $24.5 million in gains from sale and leaseback transactions; (3) a $22.2 million increase
in paper byproduct recoveries; (4) a $21.9 million decrease in loss from discontinued operations, net of tax; and (5) an
$8.7 million net benefit in 2021 of gains from property insurance claims. These increases were partially offset by the
following: (1) $38.5 million in COVID-related temporary cost reductions primarily from temporary salary reduction and
furloughs in 2020; (2) net cost increases from labor, freight and materials inflationary cost impacts; and (3) a $12.0
million benefit in 2020 from a change in the hourly production employee vacation policy.
50
A reconciliation of EBITDA to net earnings (loss) attributable to Quad common shareholders for the years
ended December 31, 2021 and 2020, was as follows:
Year Ended December 31,
2021
2020
(dollars in millions)
Net earnings (loss) attributable to Quad common shareholders(1) . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EBITDA (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
37.8 $
59.6
9.5
157.3
264.2 $
(128.3)
68.8
0.3
181.6
122.4
______________________________
(1) Net earnings (loss) attributable to Quad common shareholders included the following:
a. Restructuring, impairment and transaction-related charges of $18.9 million and $124.1 million for the years ended
December 31, 2021 and 2020, respectively;
b. Gains from sale and leaseback of $24.5 million for the year ended December 31, 2021;
c. Net pension income of $14.5 million and $10.5 million for the years ended December 31, 2021 and 2020, respectively;
d.
e.
Loss on debt extinguishment of $0.7 million and $1.8 million for the years ended December 31, 2021 and 2020,
respectively;
Equity in earnings of unconsolidated entity of $0.3 million for the year ended December 31, 2021 and equity in loss of
unconsolidated entity of $0.2 million for the yeas ended December 31, 2020;
f.
Loss from discontinued operations, net of tax, of $21.9 million for the year ended December 31, 2020; and
g. Net loss attributable to noncontrolling interests of $0.2 million for the year ended December 31, 2020.
United States Print and Related Services
The following table summarizes net sales, operating income from continuing operations, operating margin and
certain items impacting comparability within the United States Print and Related Services segment:
Year Ended December 31,
2021
2020
(dollars in millions)
Amount
Amount
$ Change
% Change
Net sales:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,935.8
$
1,944.0
$
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
692.8
683.6
Operating income from continuing operations (including
restructuring, impairment and transaction-related charges) . . . .
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
163.1
6.2 %
1.7
0.1 %
(8.2)
9.2
161.4
N/A
(0.4) %
1.3 %
nm
N/A
Restructuring, impairment and transaction-related charges . . . . $
(14.5)
$
110.1
$
(124.6)
(113.2) %
Net Sales
Product sales for the United States Print and Related Services segment decreased $8.2 million, or 0.4%, for the
year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to a $8.8 million decrease
from pass-through paper sales and a $7.5 million decrease in sales due to the divestiture of the Company’s Omaha
packaging plant, partially offset by a $8.1 million increase in sales in the Company’s print product lines, primarily due to
increased print volume and pricing.
51
Service sales for the United States Print and Related Services segment increased $9.2 million, or 1.3%, for the
year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to to a $42.0 million
increase in logistics sales and a $20.6 million increase in print imaging services and sales of marketing services, partially
offset by a $53.4 million decrease in sales due to the divestiture of the Company’s third-party logistics business.
Operating Income from Continuing Operations
Operating income from continuing operations for the United States Print and Related Services segment
increased $161.4 million for the year ended December 31, 2021, compared to the year ended December 31, 2020,
primarily due to the following: (1) a $124.6 million decrease in restructuring, impairment and transaction-related
charges; (2) $24.5 million in gains from sale and leaseback transactions; (3) a $22.2 million increase in paper byproduct
recoveries; (4) a $22.0 million decrease in depreciation and amortization expense; (5) a $8.7 million net benefit in 2021
in gains from property insurance claims; and (6) savings from other cost reduction initiatives. These increases were
partially offset by the following: (1) $38.5 million in COVID-related temporary cost reductions primarily from
temporary salary reduction and furloughs in 2020; (2) net inflationary cost increases from labor, freight and materials;
and (3) a $12.0 million benefit in 2020 from a change in the hourly production employee vacation policy.
The operating margin for the United States Print and Related Services segment increased to 6.2% for the year
ended December 31, 2021, from 0.1% for the year ended December 31, 2020, primarily due to the reasons provided
above.
52
Restructuring, Impairment and Transaction-Related Charges
Restructuring, impairment and transaction-related charges for the United States Print and Related Services
segment decreased $124.6 million for the year ended December 31, 2021, compared to the year ended December 31,
2020, primarily due to the following:
Year Ended December 31,
2021
2020
$ Change
Employee termination charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Impairment charges (a)
Transaction-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Integration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other restructuring charges (income)
Vacant facility carrying costs and lease exit charges . . . . . . . . . . . . .
Equipment and infrastructure removal costs . . . . . . . . . . . . . . . . . . .
Gains on the sale of facilities (b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other restructuring activities (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other restructuring charges (income) . . . . . . . . . . . . . . . . . . . . .
8.2 $
30.0 $
2.8
—
—
19.8
1.6
(24.8)
(22.1)
(25.5)
64.0
0.1
1.9
11.5
1.1
(1.6)
3.1
14.1
Total restructuring, impairment and transaction-related charges . . . . . . $
(14.5) $
110.1 $
(21.8)
(61.2)
(0.1)
(1.9)
8.3
0.5
(23.2)
(25.2)
(39.6)
(124.6)
______________________________
(a)
Includes $2.8 million and $22.0 million of impairment charges for machinery and equipment no longer being utilized in
production as a result of facility consolidations, as well as other capacity reduction and strategic divestiture activities during the
years ended December 31, 2021 and 2020, respectively; and $42.0 million of land and building impairment charges during the
year ended December 31, 2020. $56.6 million of the impairment charges recorded during the year ended December 31, 2020
were related to property, plant and equipment for the Oklahoma City, Oklahoma facility.
(b)
(c)
Includes a $13.8 million gain on the sale of the Oklahoma City, Oklahoma facility, a $7.6 million gain on the sale of the
Riverside, California facility, a $1.0 million gain on the sale of the Fernley, Nevada facility and a $2.4 million gain on the sale of
other facilities during the year ended December 31, 2021; and a $0.8 million gain on the sale of the Shakopee, Minnesota facility
and a $0.8 million gain on the sale of the Midland, Michigan facility during the year ended December 31, 2020.
Includes a $20.9 million gain on the sale of a business and a $2.9 million loss on the sale of a business during the years ended
December 31, 2021 and 2020, respectively.
International
The following table summarizes net sales, operating income from continuing operations, operating margin,
certain items impacting comparability and equity in loss of unconsolidated entities within the International segment:
Year Ended December 31,
2021
2020
(dollars in millions)
Amount
Amount
$ Change
% Change
Net sales:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
311.3
$
284.7
$
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20.5
17.3
Operating loss from continuing operations (including
restructuring, impairment and transaction-related charges) . . . .
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(16.1)
(4.9) %
Restructuring, impairment and transaction-related charges . . . . $
31.3
$
Equity in (earnings) loss of unconsolidated entity . . . . . . . . . . .
(0.3)
(0.8)
(0.3) %
12.2
0.2
$
26.6
3.2
(15.3)
N/A
19.1
(0.5)
9.3 %
18.5 %
nm
N/A
156.6 %
250.0 %
53
Net Sales
Product sales for the International segment increased $26.6 million, or 9.3%, for the year ended December 31,
2021, compared to the year ended December 31, 2020, primarily due to a $15.6 million increase in pass-through paper
sales and a $11.3 million increase in volume, primarily in Mexico and Europe, partially offset by $0.3 million in
unfavorable foreign exchange impacts, primarily in Argentina.
Service sales for the International segment increased $3.2 million, or 18.5%, for the year ended December 31,
2021, compared to the year ended December 31, 2020, primarily due to a increase in logistics sales and imaging services
in Europe.
Operating Loss from Continuing Operations
Operating loss from continuing operations for the International segment increased $15.3 million for the year
ended December 31, 2021, compared to the year ended December 31, 2020, primarily due a $19.1 million increase in
restructuring, impairment and transaction-related charges and the receipt of a $2.2 million COVID-19 related
government subsidy in Poland in 2020 that did not repeat in 2021, partially offset by a $6.0 million increase in operating
income from cost saving initiatives and increased print volume.
Restructuring, Impairment and Transaction-Related Charges
Restructuring, impairment and transaction-related charges for the International segment increased $19.1 million,
or 156.6%, for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to the
following:
Employee termination charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Impairment charges (a)
Other restructuring charges (income) (b)
Total restructuring, impairment and transaction-related charges . . . . . . $
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2021
2020
$ Change
1.2 $
4.5 $
32.1
(2.0)
0.1
7.6
31.3 $
12.2 $
(3.3)
32.0
(9.6)
19.1
______________________________
(a)
Includes $32.1 million of impairment charges related to the Company’s decision to sell the investment in Plural during the year
ended December 31, 2021; and $0.1 million of impairment charges for machinery and equipment no longer being utilized in
production as a result of facility consolidations, as well as other capacity reduction and strategic divestiture activities during the
year ended December 31, 2020.
(b)
Includes a $2.7 million gain from the reclassification of foreign currency translation adjustments during the year ended
December 31, 2021; and $0.6 million and $5.9 million in charges from foreign currency losses as result of the economy in
Argentina being classified as highly inflationary during the years ended December 31, 2021 and 2020, respectively.
Equity in (Earnings) Loss of Unconsolidated Entities
Investments in entities where Quad has the ability to exert significant influence, but not control, are accounted
for using the equity method of accounting. At December 31, 2021, the Company held a 49% ownership interest in
Plural, a commercial printer based in São Paulo, Brazil. The equity in earnings of unconsolidated entity in the
International segment was $0.3 million for the year ended December 31, 2021, compared to equity in loss of
unconsolidated entity of $0.2 million for the year ended December 31, 2020, due to an increase in earnings at the
Company’s investment in Plural. In January 2022, the Company sold its investment in Plural. As a result of the planned
sale, the Company recorded a $32.1 million impairment charge during the year ended December 31, 2021.
54
Unrestricted Subsidiaries
As of December 31, 2021, the Company has no unrestricted subsidiaries as defined in the Senior Unsecured
Notes indenture.
Corporate
The following table summarizes unallocated operating expenses presented as Corporate:
Year Ended December 31,
2021
2020
(dollars in millions)
Operating expenses (including restructuring, impairment and
transaction-related charges) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
54.2 $
46.9 $
Restructuring, impairment and transaction-related charges . . . .
2.1
1.8
7.3
0.3
15.6 %
16.7 %
Amount
Amount
$ Change
% Change
Operating Expenses
Corporate operating expenses increased $7.3 million, or 15.6%, for the year ended December 31, 2021,
compared to the year ended December 31, 2020, primarily due to a $6.6 million increase in employee-related costs and a
$0.3 million increase in restructuring, impairment and transaction-related charges.
Restructuring, Impairment and Transaction-Related Charges
Corporate restructuring, impairment and transaction-related charges increased $0.3 million, or 16.7%, for the
year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to the following:
Employee termination charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.5 $
0.2 $
Transaction-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.6
1.0
1.3
0.3
Total restructuring, impairment and transaction-related charges . . . . . . . . . $
2.1 $
1.8 $
0.3
(0.7)
0.7
0.3
Year Ended December 31,
2021
2020
$ Change
Liquidity and Capital Resources
The Company utilizes cash flows from operating activities and borrowings under its credit facilities to satisfy its
liquidity and capital requirements. The Company had total liquidity of $576.6 million as of December 31, 2021, which
consisted of up to $396.7 million of unused capacity under its revolving credit arrangement, which was net of
$35.8 million of issued letters of credit, and cash and cash equivalents of $179.9 million. Total liquidity is reduced to
$314.6 million under the Company’s most restrictive debt covenants, and consists of $179.9 million in cash and cash
equivalents and $134.7 million available under its revolving credit arrangement. There were no borrowings under the
$432.5 million revolving credit facility as of December 31, 2021, and peak borrowings were $59.7 million during the
year ended December 31, 2021.
The Company believes its expected future cash flows from operating activities and its current liquidity and
capital resources, are sufficient to fund ongoing operating requirements and service debt and pension requirements for
both the next 12 months and beyond.
55
Net Cash Provided by Operating Activities
Year Ended December 31, 2021, Compared to Year Ended December 31, 2020
Net cash provided by operating activities was $136.5 million for the year ended December 31, 2021, compared
to $190.2 million for the year ended December 31, 2020, resulting in a $53.7 million decrease in cash provided by
operating activities. The decrease was primarily due to a $29.6 million decrease in cash from earnings and a
$24.1 million decrease in cash flows provided by changes in operating assets and liabilities, primarily due to the strategic
decision to carry higher inventory levels to serve clients.
Net Cash Provided by Investing Activities
Year Ended December 31, 2021, Compared to Year Ended December 31, 2020
Net cash provided by investing activities was $129.4 million for the year ended December 31, 2021, compared
to $9.7 million for the year ended December 31, 2020, resulting in a $119.7 million increase in cash provided by
investing activities. The increase was primarily due to the following: (1) a $118.9 million increase in proceeds from the
sale of property, plant and equipment; (2) a $11.0 million decrease in purchases of property, plant and equipment; (3) a
$10.2 million increase in the proceeds from property insurance claims; and (4) a $2.2 million decrease in cash used in the
acquisition of business. These increases were partially offset by a $21.6 million decrease in the proceeds from the sale of
businesses and a $0.9 million increase in cost investment in unconsolidated entities.
Net Cash Used in Financing Activities
Year Ended December 31, 2021, Compared to Year Ended December 31, 2020
Net cash used in financing activities was $140.9 million for the year ended December 31, 2021, compared to
$223.6 million for the year ended December 31, 2020, resulting in a $82.7 million decrease in cash used in financing
activities. The decrease was primarily due to a (1) a $63.4 million decrease in net payments of debt and lease obligations
in 2021 compared to 2020; (2) a $20.5 million decrease in cash used in changes in ownership of noncontrolling interests;
and (3) a $8.1 million decrease in cash used in the payment of dividends. These decreases were partially offset by a $6.0
million increase in other financing activities and a $3.2 million increase in payments of debt issuance costs and financing
fees.
Free Cash Flow
Free Cash Flow is defined as net cash provided by operating activities less purchases of property, plant and
equipment.
The Company’s management assesses Free Cash Flow as a measure to quantify cash available for
(1) strengthening the balance sheet (debt reduction), (2) strategic capital allocation and deployment through investments
in the business (acquisitions and strategic investments) and (3) returning capital to the shareholders (dividends and share
repurchases). The priorities for capital allocation and deployment will change as circumstances dictate for the business,
and Free Cash Flow can be significantly impacted by the Company’s restructuring activities and other unusual items.
Free Cash Flow is a non-GAAP financial measure and should not be considered an alternative to cash flows
provided by operating activities as a measure of liquidity. Quad’s calculation of Free Cash Flow may be different from
similar calculations used by other companies, and therefore, comparability may be limited.
56
Free Cash Flow for the years ended December 31, 2021 and 2020, was as follows:
Year Ended December 31,
2021
2020
(dollars in millions)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
136.5 $
190.2
Less: purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(50.0)
(61.0)
Free Cash Flow (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
86.5 $
129.2
Free Cash Flow decreased $42.7 million for the year ended December 31, 2021, compared to the year ended
December 31, 2020, primarily due to a $53.7 million decrease in net cash provided by operating activities, partially
offset by an $11.0 million decrease in capital expenditures. See the “Net Cash Provided by Operating Activities” section
above for further explanations of the change in operating cash flows and the “Net Cash Provided by Investing Activities”
section above for further explanations of the changes in purchases of property, plant and equipment. The above
calculation of Free Cash Flow includes the cash flows related to the Book business for the year ended December 31,
2020.
Debt Leverage Ratio
The Debt Leverage Ratio is defined as total debt and finance lease obligations less cash and cash equivalents
(Net Debt) divided by the trailing twelve months Adjusted EBITDA, comprised of the sum of the following: (1) the last
twelve months of EBITDA (see the definition of EBITDA and the reconciliation of net earnings (loss) attributable to
Quad common shareholders to EBITDA in the “Results of Operations” section above); (2) restructuring, impairment and
transaction-related charges; (3) earnings (loss) from discontinued operations, net of tax; (4) net pension income; (5) gain
from sale and leaseback; (6) (gain) loss on debt extinguishment; (7) equity in (earnings) loss of unconsolidated entity;
(8) Adjusted EBITDA for unconsolidated equity method investments (calculated in a consistent manner with the
calculation for Quad); and (9) net earnings (loss) attributable to noncontrolling interests.
The Company uses the Debt Leverage Ratio as a metric to assess liquidity and the flexibility of its balance
sheet. Consistent with other liquidity metrics, the Company monitors the Debt Leverage Ratio as a measure to determine
the appropriate level of debt the Company believes is optimal to operate its business, and accordingly, to quantify debt
capacity available for strengthening the balance sheet through debt and pension liability reduction, for strategic capital
allocation and deployment through investments in the business, and for returning capital to the shareholders. The
priorities for capital allocation and deployment will change as circumstances dictate for the business, and the Debt
Leverage Ratio can be significantly impacted by the amount and timing of large expenditures requiring debt financing, as
well as changes in profitability.
The Debt Leverage Ratio is a non-GAAP measure, and should not be considered an alternative to cash flows
provided by operating activities as a measure of liquidity. Quad’s calculation of the Debt Leverage Ratio may be
different from similar calculations used by other companies and, therefore, comparability may be limited.
The Debt Leverage Ratio calculated below differs from the Total Leverage Ratio, the Total Net Leverage Ratio
and Senior Secured Leverage Ratio included in the Company’s debt covenant calculations (see Note 12, “Debt,” to the
consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual
Report on Form 10-K for further information on debt covenants). The Total Leverage Ratio included in the Company’s
debt covenants includes interest rate swap liabilities, letters of credit and surety bonds as debt, excludes non-cash stock-
based compensation expense from EBITDA and includes net income (loss) attributable to noncontrolling interests in
EBITDA. The Total Net Leverage Ratio includes and excludes the same adjustments as the Total Leverage Ratio, in
addition to netting domestic unrestricted cash with debt. Similarly, the Senior Secured Leverage Ratio includes and
excludes the same adjustments as the Total Leverage Ratio, in addition to the exclusion of the outstanding balance of the
Senior Unsecured Notes and surety bonds from debt and netting domestic unrestricted cash with debt.
57
The Debt Leverage Ratio as of December 31, 2021 and 2020, was as follows:
December 31,
2021
December 31,
2020
(dollars in millions)
Total debt and finance lease obligations on the consolidated balance sheets . . . . . . . . . . . . . . . . . $
803.7
$
Less: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
179.9
Net Debt (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
623.8
$
928.2
55.2
873.0
Divided by: Adjusted EBITDA for the year ended (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . $
246.0
$
260.4
Debt Leverage Ratio (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.54 x
3.35 x
The calculation of Adjusted EBITDA for the years ended December 31, 2021 and 2020, was as follows:
Year Ended December 31,
2021
2020
(dollars in millions)
Net earnings (loss) attributable to Quad common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . $
37.8 $
(128.3)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59.6
9.5
157.3
EBITDA (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
264.2 $
Restructuring, impairment and transaction-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net pension income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains from sale and leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18.9
—
(14.5)
(24.5)
0.7
1.2
68.8
0.3
181.6
122.4
124.1
21.9
(10.5)
—
1.8
0.7
Adjusted EBITDA (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
246.0 $
260.4
______________________________
(1) Other is comprised of equity in loss of unconsolidated entity, Adjusted EBITDA for unconsolidated equity method investments
and net earnings (loss) attributable to noncontrolling interests.
The Debt Leverage Ratio, at December 31, 2021, decreased 0.81x to 2.54x compared to December 31, 2020,
primarily due to a $249.2 million decrease in debt and finance lease obligations, partially offset by a $14.4 million
decrease in Adjusted EBITDA. The Debt Leverage Ratio, at December 31, 2021, is above management’s desired target
Debt Leverage Ratio range of 2.0x to 2.5x; however, the Company expects to operate above the Debt Leverage Ratio
target range due to the ongoing supply chain shortages. The Company will also operate at times above the Debt
Leverage Ratio target range depending on the timing of compelling strategic investment opportunities, as well as
seasonal working capital needs.
Description of Significant Outstanding Debt Obligations as of December 31, 2021
As of December 31, 2021, the Company utilized a combination of debt instruments to fund cash requirements,
including the following:
•
Senior Secured Credit Facility:
◦
$432.5 million revolving credit facility (no outstanding balance as of December 31, 2021); and
58
◦
$825.0 million Term Loan A ($575.4 million outstanding as of December 31, 2021);
•
Senior Unsecured Notes ($211.5 million outstanding as of December 31, 2021); and
• Master Note and Security Agreement ($7.2 million outstanding as of December 31, 2021).
Senior Secured Credit Facility
On April 28, 2014, the Company entered into its Senior Secured Credit Facility, which included a revolving
credit facility, Term Loan A and Term Loan B. The Company completed the fourth amendment to the Senior Secured
Credit Facility on June 29, 2020. The Senior Secured Credit Facility was amended to (a) provide for certain financial
covenant relief through the fiscal quarter ended September 30, 2021 (the Covenant Relief Period); (b) reduce the
aggregate amount of the existing revolving credit facility from $800.0 million to $500.0 million; (c) make certain
adjustments to pricing such as the addition of a 0.75% LIBOR floor; and (d) prohibit repurchases of capital stock and
payments of cash dividends during the Covenant Relief Period. Certain amendments were also made to the quarterly
financial covenants to which the Company is subject.
The Company completed the fifth amendment to the Senior Secured Credit Facility on November 2, 2021. The
Senior Secured Credit Facility was amended to (a) reduce the aggregate amount of the existing revolving credit facility
from $500.0 million to $432.5 million, and extend the maturity of a portion of the revolving credit facility such that
$90.0 million under the revolving credit facility is due on the existing maturity date of January 31, 2024 (the “Existing
Maturity Date”) and $342.5 million under the revolving credit facility is due on November 2, 2026 (the “Extended
Maturity Date”); (b) extend the maturity of a portion of the existing term loan facility such that $91.5 million of such
term loan facility is due on the Existing Maturity Date and $483.9 million is due on the Extended Maturity Date; (c)
make certain adjustments to pricing, including an increase of 0.50% to the interest rate margin applicable to the loans
maturing on the Extended Maturity Date; (d) modify certain financial and operational covenants; and (e) modify the
interest rate provisions relating to the phase-out of LIBOR as a reference rate.
Borrowings under the revolving credit facility and Term Loan A made under the Senior Secured Credit Facility
bear interest at 2.75% in excess of reserve adjusted LIBOR, or 1.75% in excess of an alternate base rate with a LIBOR
floor of 0.75% for the extended tranche and bear interest at 2.50% in excess of reserve adjusted LIBOR, or 1.50% in
excess of an alternate base rate with a LIBOR floor of 0.75% for the non-extending tranche.
At December 31, 2021, the Company had no outstanding borrowings on the revolving credit facility, and had
$35.8 million of issued letters of credit, leaving up to $396.7 million available for future borrowings. The Senior
Secured Credit Facility is secured by substantially all of the unencumbered assets of the Company. The Senior Secured
Credit Facility also requires the Company to provide additional collateral to the lenders in certain limited circumstances.
Senior Unsecured Notes
The Company issued $300.0 million aggregate principal amount of its Senior Unsecured Notes due May 1,
2022, on April 28, 2014, of which $211.5 million is outstanding as of December 31, 2021. The Senior Unsecured Notes
bear interest at 7.0%, and interest is payable semi-annually. The Company received $294.8 million in net proceeds from
the sale of the Senior Unsecured Notes, after deducting the initial purchasers’ discounts and commissions.
During the year ended December 31, 2021, the Company repurchased $27.2 million of its outstanding Senior
Unsecured Notes in the open market, resulting in a net loss on debt extinguishment of $0.5 million. During the year
ended December 31, 2020, the Company repurchased $4.7 million of its outstanding Senior Unsecured Notes in the open
market, resulting in a net gain on debt extinguishment of $0.8 million. All repurchased Senior Unsecured Notes were
canceled. The Company used cash flows from operating activities and borrowings under its revolving credit facility to
fund the repurchases. These repurchases were completed primarily to reduce interest expense.
59
Each of the Company’s existing and future domestic subsidiaries that is a borrower or guarantees indebtedness
under the Company’s Senior Secured Credit Facility or that guarantees certain of the Company’s other indebtedness or
indebtedness of the Company’s restricted subsidiaries (other than intercompany indebtedness) fully and unconditionally
guarantee or, in the case of future subsidiaries, will guarantee, on a joint and several basis, the Senior Unsecured Notes
(the “Guarantor Subsidiaries”). All of the Guarantor Subsidiaries are 100% owned by the Company. Guarantor
Subsidiaries will be automatically released from these guarantees upon the occurrence of certain events.
Master Note and Security Agreement
On September 1, 1995, and as last amended on November 24, 2014, the Company entered into its Master Note
and Security Agreement pursuant to which the Company issued over time senior notes in an aggregate principal amount
of $1.1 billion in various tranches, of which $7.2 million was outstanding as of December 31, 2021. The senior notes
under the Master Note and Security Agreement had a weighted average interest rate of 7.81% at December 31, 2021,
which is fixed to maturity, with interest payable semiannually. Principal payments commenced September 1997 and
extend through April 2026 in various tranches. The notes are collateralized by certain United States press equipment
under the terms of the Master Note and Security Agreement.
The Company redeemed $37.6 million of its senior notes under the Master Note and Security Agreement, at par
(the outstanding principal balance as of the date of payment), during the year ended December 31, 2020. There was no
direct gain or loss recognized as a result of the tender as all notes were redeemed at par; however, $0.2 million of
unamortized debt issuance costs related to the tendered notes were recognized as a loss on debt extinguishment during
the year ended December 31, 2020. All tendered senior notes under the Master Note and Security Agreement were
canceled. The Company used cash flows from operating activities and borrowings under its revolving credit facility to
fund the tender. The tender was primarily completed to reallocate debt to the lower interest rate revolving credit facility
and thereby reduce interest expense based on the then current LIBOR rates.
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). Among these covenants, the Company was required to
maintain the following as of December 31, 2021:
•
•
•
Total Leverage Ratio. On a rolling twelve-month basis, the Total Leverage Ratio, defined as consolidated
total indebtedness to consolidated EBITDA, shall not exceed 3.75 to 1.00 (for the twelve months ended
December 31, 2021, the Company’s Total Leverage Ratio was 3.22 to 1.00).
Liquidity, defined as unrestricted cash and permitted investments of the Company and its subsidiaries
(subject to certain conditions) plus the aggregate amount of the unused revolving credit facility
commitments, shall not be less than $181.6 million at any time during the period commencing December
15, 2023 and ending when all obligations owed under the Senior Secured Credit Facility to lenders that are
not extending lenders are paid in full.
If there is any amount outstanding on the Revolving Credit Facility or Term Loan A, or if any lender has
any revolving credit exposure or Term Loan A credit exposure, the Company is required to maintain the
following:
◦
Senior Secured Leverage Ratio. On a rolling four-quarter basis, the Senior Secured Leverage
Ratio, defined as the ratio of consolidated senior secured net indebtedness to consolidated
EBITDA, shall not exceed (a) 3.50 to 1.00 for any fiscal quarter ending prior to December 31,
2023, and (b) 3.25 to 1.00 for any fiscal quarter ending on or after December 31, 2023 (other than,
in the case of this clause (b), any fiscal quarter ending September 30 of any year, each of which
shall be subject to a maximum Senior Secured Leverage Ratio not to exceed 3.50 to 1.00) (for the
twelve months ended December 31, 2021, the Company’s Senior Secured Leverage Ratio was
1.68 to 1.00).
60
•
Interest Coverage Ratio. On a rolling twelve-month basis, the Interest Coverage Ratio, defined as
consolidated EBITDA to cash consolidated interest expense, shall not be less than 3.00 to 1.00 (for
the twelve months ended December 31, 2021, the Company’s Interest Coverage Ratio was
5.35 to 1.00).
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.
The Company was in compliance with all financial covenants in its debt agreements as of December 31, 2021.
While the Company currently expects to be in compliance in future periods with all of the financial covenants, there can
be no assurance that these covenants will continue to be met. The Company’s failure to maintain compliance with the
covenants could prevent the Company from borrowing additional amounts and could result in a default under any of the
debt agreements. Such default could cause the outstanding indebtedness to become immediately due and payable, by
virtue of cross-acceleration or cross-default provisions.
In addition to those covenants, the Senior Secured Credit Facility also includes certain limitations on
acquisitions, indebtedness, liens, dividends and repurchases of capital stock.
•
•
If the Company’s Total Leverage Ratio is greater than 2.75 to 1.00, the Company is prohibited from
making greater than $60.0 million of dividend payments, capital stock repurchases and certain other
payments, over the course of the agreement. If the Company’s Total Leverage Ratio is above 2.50 to 1.00
but below 2.75 to 1.00, the Company is prohibited from making greater than $100.0 million of dividend
payments, capital stock repurchases and certain other payments, over the course of the agreement. If the
Total Leverage Ratio is less than 2.50 to 1.00, there are no such restrictions. As the Company’s Total
Leverage Ratio as of December 31, 2021, was 3.22 to 1.00, the limitations described above are currently
applicable.
If the Company’s Senior Secured Leverage Ratio is greater than 3.00 to 1.00 or the Company’s Total Net
Leverage Ratio which, on a rolling twelve-month basis, is defined as consolidated net indebtedness to
consolidated EBITDA, is greater than 3.50 to 1.00, the Company is prohibited from voluntarily prepaying
any of the Senior Unsecured Notes and from voluntarily prepaying any other unsecured or subordinated
indebtedness, with certain exceptions (including any mandatory prepayments on the Senior Unsecured
Notes or any other unsecured or subordinated debt). If the Senior Secured Leverage Ratio is less than
3.00 to 1.00 and the Total Net Leverage Ratio is less than 3.50 to 1.00, there are no such restrictions. The
limitations described above are currently not applicable, as the Company’s Senior Secured Leverage Ratio
was 1.68 to 1.00 and Total Net Leverage Ratio was 2.53 to 1.00, as of December 31, 2021.
Net Pension Obligations
The net underfunded pension and MEPPs obligations decreased by $40.9 million during the year ended
December 31, 2021, from $92.3 million at December 31, 2020, to $51.4 million at December 31, 2021. This decrease in
overall pension obligations was primarily due to a 40 basis point increase in the pension discount rate from 2.37% at
December 31, 2020 to 2.77% at December 31, 2021, payments totaling $6.2 million made to the MEPPs and $1.6 million
in employer pension contributions during the year ended December 31, 2021. The decrease was partially offset by an
actual return on pension plan assets of 5.11% during the year ended December 31, 2021, which was below the expected
return on plan assets assumption of 5.50%.
61
The Company continues to focus on reducing pension obligations through cash contributions to the plans, lump-
sum settlements and plan design changes.
Share Repurchase Program
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. Under the authorization, share repurchases may be
made at the Company’s discretion, from time to time, in the open market and/or in privately negotiated transactions as
permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any
repurchase will depend on economic and market conditions, share price, trading volume, applicable legal requirements
and other factors. The program may be suspended or discontinued at any time.
There were no shares of the Company’s class A stock repurchased during the years December 31, 2021 and
2020. As of December 31, 2021, there were $100.0 million of authorized repurchases remaining under the program.
Risk Management
For a discussion of the Company’s exposure to market risks and management of those market risks, see
Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of this Annual Report on Form 10-K.
62
Contractual Obligations and Other Commitments
The Company’s contractual cash obligations at December 31, 2021, were as follows (in millions):
Payments Due by Period
. . . . . . . . . . . . . . . . $
Debt obligations(1)
Operating lease obligations(2) . . . . . . .
MEPPs withdrawal obligations(3) . . . .
Pension benefit obligations(4)
Finance lease obligations(5) . . . . . . . . .
Purchase obligations(6)
. . . . . . . . . . . . .
Total(7)(8)
______________________________
Total
2022
2023
2024
2025
2026
Thereafter
907.0 $
277.4 $
73.4 $
164.2 $
85.3 $
306.7 $
148.2
45.0
4.2
3.4
21.4
34.4
6.1
1.7
1.9
14.9
29.5
21.9
17.8
14.5
6.1
0.7
0.8
2.9
4.1
0.6
0.4
2.1
3.9
0.6
0.3
1.3
3.9
0.6
—
0.2
—
30.1
20.9
—
—
—
$ 1,129.2 $ 336.4 $ 113.4 $ 193.3 $ 109.2 $ 325.9 $
51.0
(1) Debt obligations include $97.4 million for anticipated future interest payments, including $5.2 million of estimated interest
payments from the interest rate swaps, and excludes $9.1 million for future amortization of debt issuance costs. During 2021, the
Company paid in advance $35.7 million on its Term Loan A for the year ended December 31, 2022. The Company also paid in
advance $62.4 million of required amortization payments on its Term Loan A for the year ended December 31, 2023.
(2) Operating lease obligations include $20.3 million for anticipated future interest payments.
(3) MEPPs withdrawal obligations include $12.8 million for anticipated future interest payments. See Note 16, “Employee
Retirement Plans,” to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of
this Annual Report on Form 10-K for further discussion of the MEPPs withdrawal liability.
(4)
(5)
(6)
(7)
(8)
For the pension benefit obligations, contributions and benefit payments to be funded from Company assets included in the table
have been actuarially estimated over a five year period. While benefit payments under these benefit plans are expected to
continue beyond 2026, the Company believes that an estimate beyond this period is unreasonable.
Finance lease obligations include $0.2 million for anticipated future interest payments.
Purchase obligations consist primarily of $10.0 million in firm commitments to purchase press and finishing equipment and
$11.4 million of other purchase obligations.
The contractual obligations table above does not include reserves for uncertain tax positions recorded in accordance with the
accounting guidance on uncertainties in income taxes. The Company has taken tax positions for which the ultimate amount and
the year(s) any necessary payments will be made that pertain to those tax positions is uncertain. The reserve for uncertain tax
positions prior to interest and penalties was $11.7 million as of December 31, 2021, of which $6.5 million was included in
deferred income taxes and $5.2 million was included in other long-term liabilities.
The contractual obligations table above does not include the share repurchase program as no repurchases are required under the
program. See the “Share Repurchase Program” section above for further discussion, including the maximum potential cash
payments under the program.
63
Critical Accounting Policies and Estimates
The Company’s consolidated financial statements are prepared in accordance with GAAP. The Company’s
most critical accounting policies are those that are most important to the portrayal of its financial condition and results of
operations, and which require the Company to make its most difficult and subjective estimates. Management is required
to make judgments and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the statements, and the reported amounts of revenues and expenses during the
reporting period. The Company bases its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. The Company’s management believes that such judgments and
estimates are made with consistent and appropriate methods based on information available at the time, and that any
reasonable deviation from those judgments and estimates would not have a material impact on the Company’s
consolidated financial position or results of operations. Actual results may differ from these estimates under different
assumptions or conditions. To the extent that the estimates used differ from actual results, adjustments to the
consolidated statements of operations and corresponding consolidated balance sheets would be necessary. These
adjustments would be made in future statements.
The Company has identified the following as its critical accounting policies and estimates.
Revenue Recognition
Performance Obligations
At contract inception, the Company assesses the products and services promised in its contracts with customers
and identifies performance obligations for each promise to transfer to the customer a product or service that is distinct.
To identify the performance obligations, the Company considers the goods or services promised in the contract
regardless of whether they are explicitly stated or are implied by customary business practices. The Company
determined that the following distinct products and services represent separate performance obligations:
•
•
•
Pre-Press Services
Print
Other Services
For Pre-Press and Other Services, the Company recognizes revenue at point-in-time upon completion of the
performed service and acceptance by the customer. The Company considers transfer of control to occur once the service
is performed as the Company has right to payment and the customer has legal title and risk and reward of ownership.
The Company recognizes its Print revenues upon transfer of title and the passage of risk of loss, which is point-
in-time upon shipment to the customer, and when there is a reasonable assurance as to collectability. Revenues related to
the Company’s logistics operations, which includes the delivery of printed material, are included in the Print
performance obligation and are also recognized at point-in-time as services are completed. Revenues related to the
Company’s imaging operations, which include digital content management, photography, color services and page
production, are recognized in accordance with the terms of the contract, typically upon completion of the performed
service and acceptance by the customer. Under agreements with certain customers, products may be stored by the
Company for future delivery. In these situations, the Company may receive warehouse management fees for the services
it provides.
Certain revenues earned by the Company require judgment to determine if revenue should be recorded gross as
principal or net of related costs as an agent. Billings for third-party shipping and handling costs, primarily in the
Company’s logistics operations, and out-of-pocket expenses are recorded gross in net sales and cost of sales in the
consolidated statements of operations in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report
on Form 10-K. Many of the Company’s operations process materials, primarily paper, that may be supplied directly by
customers or may be purchased by the Company and sold to customers. No revenue is recognized for customer-supplied
paper. Revenues for the Company-supplied paper are recognized on a gross basis. In some instances, the Company will
64
deliver print work for a customer and bill the customer for postage. In these cases, the Company is acting as an agent
and billings are recorded on a net basis in net sales.
Significant Payment Terms
Payment terms and conditions for contracts with customers vary. The Company typically offers standard terms
of net 30 days. It is not the Company’s standard business practice to offer extended payment terms longer than one year.
The Company may offer cash discounts or prepayment and extended terms depending on certain facts and circumstances.
As such, when the timing of the Company’s delivery of products and services differs from the timing of payment, the
Company will record either a contract asset or a contract liability.
Variable Consideration
When evaluating the transaction price, the Company analyzes on a contract by contract basis all applicable
variable considerations and non-cash consideration and also performs a constraint analysis. The nature of the
Company’s contracts give rise to variable consideration, including, volume rebates, credits, discounts, and other similar
items that generally decrease the transaction price. These variable amounts generally are credited to the customer, based
on achieving certain levels of sales activity, when contracts are signed, or making payments within specific terms.
Product returns are not significant because the products are customized; however, the Company accrues for the
estimated amount of customer allowances at the time of sale based on historical experience and known trends.
When the transaction price requires allocation to multiple performance obligations, the Company uses the
estimated stand-alone selling prices using the adjusted market assessment approach.
Impairment of Property, Plant and Equipment and Finite-lived Intangible Assets
The Company performs impairment evaluations of its long-lived assets whenever business conditions, events or
circumstances indicate that those assets may be impaired, including whether the estimated useful life of such long-lived
assets may warrant revision or whether the remaining balance of an asset may not be recoverable. The Company’s most
significant long-lived assets are property, plant and equipment and customer relationship intangible assets recorded in
conjunction with an acquisition. Assessing the impairment of long-lived assets requires the Company to make important
estimates and assumptions, including, but not limited to, the expected future cash flows that the assets will generate, how
the assets will be used based on the strategic direction of the Company, their remaining useful life and their residual
value, if any. Considerable judgment is also applied in incorporating the potential impact of the current economic
climate on customer demand and selling prices, the cost of production and the limited activity on secondary markets for
the assets and on the cost of capital. When the estimated future undiscounted cash flows to be generated by the assets are
less than the carrying value of the long-lived assets, the assets are written down to fair value and a charge is recorded to
current operations. The Company uses internal discounted cash flow estimates, quoted market prices when available and
independent appraisals, as appropriate, to determine fair value. This fair value determination was categorized as Level 3
in the fair value hierarchy (see Note 15, “Financial Instruments and Fair Value Measurements,” to the consolidated
financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on
Form 10-K for the definition of Level 3 inputs).
The Company classifies long-lived assets to be sold as held for sale in the period in which: (i) there is an
approved plan to sell the asset and the Company is committed to that plan, (ii) the asset is available for immediate sale in
its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been
initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable
in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan
will be withdrawn. Assets held for sale are initially measured at the lower of the carrying value or the fair value less cost
to sell. Losses resulting from this measurement are recognized in the period in which the held for sale criteria are met
while gains are not recognized until the date of sale. Once designated as held for sale, the Company stops recording
depreciation expense on the property, plant and equipment. The fair value less cost to sell of long-lived assets held for
sale is assessed at each reporting period until it no longer meets this classification.
65
Based on the assessments completed during the years ended December 31, 2021, and 2020, the Company
recognized property, plant and equipment impairment charges from continuing operations of $2.8 million and
$64.1 million, respectively, primarily related to facility consolidations, as well as other capacity reduction and strategic
divestiture activities. There were no finite-lived intangible asset impairment charges recorded during the years ended
December 31, 2021 and 2020.
The Company continues to monitor groups of assets to identify any new events or changes in circumstances that
could indicate that their carrying values are not recoverable, particularly in light of potential declines in profitability that
may result from the highly competitive industry landscape and continued uncertainty in the global economy. In the event
that there are significant and unanticipated changes in circumstances, such as significant adverse changes in business
climate, adverse actions by regulators, unanticipated competition, loss of key customers and/or changes in technology or
markets, or that actual results differ from management’s estimates, a provision for impairment could be required in a
future period.
New Accounting Pronouncements
See Note 23, “New Accounting Pronouncements,” to the consolidated financial statements in Part II, Item 8,
“Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
Summarized Financial Information of Subsidiary Guarantors Indebtedness
On April 28, 2014, Quad completed an offering of the Senior Unsecured Notes (see Note 12, “Debt,” for further
details on the Senior Unsecured Notes). Each of the Company’s Guarantor Subsidiaries fully and unconditionally
guarantee or, in the case of future subsidiaries, will guarantee, on a joint and several basis, the Senior Unsecured Notes.
All of the current Guarantor Subsidiaries are 100% owned by the Company. Guarantor Subsidiaries will be
automatically released from these guarantees upon the occurrence of certain events, including the following:
•
•
•
the designation of any of the Guarantor Subsidiaries as an unrestricted subsidiary;
the release or discharge of any guarantee or indebtedness that resulted in the creation of the guarantee of the
Senior Unsecured Notes by any of the Guarantor Subsidiaries; or
the sale or disposition, including the sale of substantially all the assets, of any of the Guarantor
Subsidiaries.
66
The following tables present summarized financial information for Quad and the Guarantor Subsidiaries on a
combined basis after intercompany transactions have been eliminated, including adjustments to remove the equity in
earnings from the Non-Guarantor Subsidiaries.
Statement of Operations Financial Information
December 31, 2021
December 31, 2020
Year Ended
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,673.0 $
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net earnings (loss) attributable to noncontrolling interests . . . . . . . . . . .
2,156.2
516.8
54.5
—
54.5
—
Net earnings (loss) attributable to Quad common shareholders . . . . . . . . . . . $
54.5 $
2,660.6
2,114.4
546.2
(106.5)
(21.9)
(128.4)
(0.2)
(128.2)
Balance Sheet Financial Information
December 31, 2021
December 31, 2020
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
703.1 $
Total long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,402.4
843.6
783.1
—
580.0
1,555.5
598.1
1,143.3
0.7
Included in long-term assets in the table above are $0.9 million and $11.6 million of current intercompany loan
receivables due to Quad from the Non-Guarantor Subsidiaries as of December 31, 2021 and 2020, respectively. Also
included in long-term assets are $435.1 million and $428.8 million of intercompany investments by Quad and the
Guarantor Subsidiaries in the Non-Guarantor Subsidiaries. Included in current liabilities are $3.3 million and
$2.9 million of current intercompany payables due to the Non-Guarantor Subsidiaries from Quad and the Guarantor
Subsidiaries as of December 31, 2021 and 2020, respectively.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to a variety of market risks which may adversely impact the Company’s results of
operations and financial condition, including changes in interest and foreign currency exchange rates, changes in the
economic environment that would impact credit positions and changes in the prices of certain commodities. The
Company’s management takes an active role in the risk management process and has developed policies and procedures
that require specific administrative and business functions to assist in the identification, assessment and control of
various risks. These risk management strategies may not fully insulate the Company from adverse impacts due to market
risks.
Interest Rate Risk
The Company is exposed to interest rate risk on variable rate debt obligations and price risk on fixed rate debt
and finance leases. The variable rate debt outstanding at December 31, 2021, was primarily comprised of $575.4 million
outstanding on the Term Loan A. As of December 31, 2021, there was no outstanding balance on the revolving credit
facility. In order to reduce the variability of cash flows from interest payments related to a portion of Quad’s variable-
rate debt, the Company entered into a $250.0 million interest rate swap in February 2017 and a $130.0 million interest
rate swap in March 2019, and has classified $380.0 million of the Company’s variable rate debt as fixed rate debt.
Including the impact of the $380.0 million interest rate swap of variable rate to fixed rate debt, Quad had variable rate
debt outstanding of $196.5 million at a current weighted average interest rate of 3.2% and fixed rate debt and finance
67
leases outstanding of $607.2 million at a current weighted average interest rate of 5.4% as of December 31, 2021. A
hypothetical 10% increase in the market interest rates impacting the Company’s current weighted average interest rate on
variable rate debt obligations would not have a material impact on the Company’s interest expense. In addition, a
hypothetical 10% change in market interest rates would not have a material impact on the fair value of fixed rate debt at
December 31, 2021.
Foreign Currency Risk and Translation Exposure
The Company is exposed to the impact of foreign currency fluctuations in certain countries in which it operates.
The exposure to foreign currency movements is limited in most countries because the operating revenues and expenses
of its various subsidiaries and business units are substantially in the local currency of the country in which they operate.
To the extent revenues and expenses are not in the applicable local currency, the Company may enter into foreign
exchange forward contracts to hedge the currency risk.
Although operating in local currencies may limit the impact of currency rate fluctuations on the results of
operations of the Company’s non-United States subsidiaries and business units, rate fluctuations may impact the
consolidated financial position as the assets and liabilities of its foreign operations are translated into U.S. dollars in
preparing the Company’s consolidated balance sheets. As of December 31, 2021, the Company’s foreign subsidiaries
(excluding Argentina due to the economy’s status as highly inflationary) had net current assets (defined as current assets
less current liabilities) subject to foreign currency translation risk of $34.6 million. The potential decrease in net current
assets as of December 31, 2021, from a hypothetical 10% adverse change in quoted foreign currency exchange rates
would be approximately $3.5 million. This sensitivity analysis assumes a parallel shift in all major foreign currency
exchange rates versus the U.S. dollar. Exchange rates rarely move in the same direction relative to the U.S. dollar due to
positive and negative correlations of the various global currencies. This assumption may overstate or understate the
impact of changing exchange rates on individual assets and liabilities denominated in a foreign currency.
The Company’s hedging operations have historically not been material, and gains or losses from these
operations have not been material to the Company’s results of operations, financial position or cash flows. The
Company does not use derivative financial instruments for trading or speculative purposes.
These international operations are subject to risks typical of international operations, including, but not limited
to, differing economic conditions, changes in political climate, potential restrictions on the movement of funds, differing
tax structures, and other regulations and restrictions. Accordingly, future results could be adversely impacted by changes
in these or other factors.
The Company has considered the economy in Argentina to be highly inflationary, effective June 30, 2018. In
accordance with Accounting Standards Codification 830 - Foreign Currency Matters, a highly inflationary economy is
one that has experienced cumulative inflation of approximately 100 percent or more over a three-year period. An entity
is required to apply the revised accounting guidance in the reporting period following when the economy was deemed to
be highly inflationary. As a result of this classification, the functional currency of the Company's Argentina subsidiaries
was changed from the local currency to the U.S. Dollar, beginning July 1, 2018, and impacts from the change in the
value of the local currency for monetary assets and liabilities is now reflected in the consolidated statements of
operations. Due to the Argentina economy classification as highly inflationary, the impact from foreign currency losses
was $0.6 million and $5.9 million during the years ended December 31, 2021 and 2020, respectively, and was recorded
in restructuring, impairment and transaction-related charges in the consolidated statements of operations. The
Company’s operations in Argentina represented less than 1.0% of total consolidated assets as of December 31, 2021, and
less than 1.0% of total consolidated net sales for the year ended December 31, 2021.
68
Credit Risk
Credit risk is the possibility of loss from a client’s failure to make payments according to contract terms. Prior
to granting credit, each client is evaluated 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. Based on those client account reviews and the continued uncertainty of the global economy, the Company has
established an allowance for credit losses of $28.2 million as of December 31, 2021.
The Company has a large, diverse client base and does not have a high degree of concentration with any single
client account. During the year ended December 31, 2021, the Company’s largest client accounted for less than 5% of
the Company’s net sales. Even if the Company’s credit review and analysis mechanisms work properly, the Company
may experience financial losses in its dealings with clients and other parties. Any increase in nonpayment or
nonperformance by clients could adversely impact the Company’s results of operations and financial condition.
Economic disruptions, including the impacts from the COVID-19 pandemic, could result in significant future charges.
The Company is continuing to actively monitor the situation and related risks around the COVID-19 pandemic.
Commodity Risk
The primary raw materials that the Company uses in its print business are paper, ink and energy. At this time,
the Company’s supply of raw materials are available from numerous vendors; however, based on market conditions, the
current supply is under pressure due to supply chain shortages and higher than expected inflation. The Company
generally buys these raw materials based upon market prices that are established with the vendor as part of the
procurement process. The price of such raw materials has fluctuated over time and has caused fluctuations in the
Company’s net sales and cost of sales. This volatility may continue and the Company may experience increases in the
costs of its raw materials in the future as prices in the overall paper, ink and energy markets are expected to remain
beyond its control. The price and availability of paper may also be adversely affected by paper mills’ permanent or
temporary closures, and mills’ access to raw materials, conversion to produce other types of paper, and ability to
transport paper produced.
Approximately half of the paper used by the Company is supplied directly by its clients. For those clients that
do not directly supply their own paper, the Company makes use of its purchasing efficiencies to supply paper by
negotiating with leading paper vendors, uses a wide variety of paper grades, weights and sizes, and does not rely on any
one vendor. In addition, the Company generally includes price adjustment clauses in sales contracts for paper and other
critical raw materials in the printing process. Although these clauses generally mitigate paper price risk, higher paper
prices and tight paper supplies, as well as changes in the United States import or trade regulations may have an impact on
client demand for printed products. The Company’s working capital requirements, including the impact of seasonality,
are partially mitigated through the direct purchasing of paper by its clients.
The Company produces the majority of ink used in its print production, allowing it to control the quality, cost
and supply of key inputs. Raw materials for the ink manufacturing process are purchased externally from a variety of
vendors. The price and availability of ink and ink components may be adversely affected by the availability of
component raw materials, labor and transportation.
The Company generally cannot pass on to clients the impact of higher electric and natural gas energy prices on
its manufacturing costs, and increases in energy prices result in higher manufacturing costs for certain of its operations.
The Company mitigates its risk through natural gas hedges when appropriate. In its logistics operations, however, the
Company is able to pass a substantial portion of any increase in fuel prices directly to its clients.
To the extent the cost of other raw materials increase and the Company is not able to increase selling prices of
its products, then the Company may experience margin declines.
69
As a result, management believes a hypothetical 10% change in the price of paper and other raw materials
would not have a significant direct impact on the Company’s consolidated annual results of operations or cash flows;
however, significant increases in commodity pricing or tight supply could influence future client demand for printed
products.
70
Item 8.
Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Quad/Graphics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Quad/Graphics, Inc. and subsidiaries (the
“Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive
income (loss), shareholders' equity, and cash flows, for each of the two years in the period ended December 31, 2021,
and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the
results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in
conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated February 23, 2022, expressed an unqualified opinion on the Company’s
internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
71
Revenues - Refer to Notes 1 and 2 to the consolidated financial statements
Critical Audit Matter Description
The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount
that reflects the consideration the Company expects to receive in exchange for those products or services. The Company
has various products and service lines which have differing levels of involvement of management judgment and timing
of revenue recognition.
We identified revenues as a critical audit matter because of the diversity in products and service lines and diversity in
audit evidence obtained as each billing arrangement is individually unique which requires a higher degree of auditor
judgment and an increased extent of effort when designing and performing audit procedures to evaluate the
appropriateness of management’s estimates and audit evidence related to the recognition of revenues.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to revenues included the following:
• We tested the effectiveness of controls related to the revenue recognition process.
• We evaluated management’s significant accounting policies related to revenue recognition for
reasonableness.
• We selected a sample of recorded revenue transactions and performed the following procedures:
◦
◦
◦
Obtained customer source documents and the contract for each selection, including master
agreements and related amendments to evaluate if relevant contractual terms have been
appropriately considered by management.
Evaluated management’s application of their accounting policy and tested revenue recognition for
specific performance obligations by comparing management’s conclusions to the underlying
master agreement and any related amendments.
Tested the mathematical accuracy of management’s calculations of revenue and the associated
timing of revenue recognized in the financial statements.
/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
February 23, 2022
We have served as the Company's auditor since 2002.
72
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Quad/Graphics, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Quad/Graphics, Inc. and subsidiaries (the “Company”) as
of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company
and our report dated February 23, 2022, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
February 23, 2022
73
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74
QUAD/GRAPHICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
Year Ended December 31,
2021
2020
Net sales
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,247.1 $
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains from sale and leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, impairment and transaction-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
713.3
2,960.4
1,861.0
528.9
2,389.9
326.0
(24.5)
157.3
18.9
2,228.7
700.9
2,929.6
1,831.5
503.3
2,334.8
335.1
—
181.6
124.1
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,867.6
2,975.6
Operating income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net pension income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings (loss) from continuing operations before income taxes and equity in (earnings) loss of
unconsolidated entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings (loss) from continuing operations before equity in (earnings) loss of unconsolidated entity . . . . . . .
Equity in (earnings) loss of unconsolidated entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net loss attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92.8
59.6
(14.5)
0.7
47.0
9.5
37.5
(0.3)
37.8
—
37.8
—
Net earnings (loss) attributable to Quad common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
37.8 $
Earnings (loss) per share attributable to Quad common shareholders
Basic:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings (loss) per share attributable to Quad common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share attributable to Quad common shareholders . . . . . . . . . . . . . . . . . . . . . . . . $
0.74 $
—
0.74 $
0.71 $
—
0.71 $
Weighted average number of common shares outstanding
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51.3
53.0
See accompanying Notes to Consolidated Financial Statements.
(46.0)
68.8
(10.5)
1.8
(106.1)
0.3
(106.4)
0.2
(106.6)
(21.9)
(128.5)
(0.2)
(128.3)
(2.10)
(0.43)
(2.53)
(2.10)
(0.43)
(2.53)
50.6
50.6
75
QUAD/GRAPHICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
Year Ended December 31,
2021
2020
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
37.8 $
(128.5)
Other comprehensive income (loss)
Translation adjustments
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation of long-term loans to foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension benefit plan adjustments
Net gain arising during period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement charge on pension benefit plans included in net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . .
Total pension benefit plan adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8.2)
(1.1)
(9.3)
(2.7)
7.1
20.4
0.9
21.3
16.4
Income tax impact related to items of other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6.3)
Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: comprehensive loss attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.1
47.9
—
0.9
(0.7)
0.2
—
(7.5)
3.2
0.1
3.3
(4.0)
(0.1)
(4.1)
(132.6)
(0.2)
Comprehensive income (loss) attributable to Quad common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
47.9 $
(132.4)
See accompanying Notes to Consolidated Financial Statements.
76
QUAD/GRAPHICS, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
December 31,
2021
December 31,
2020
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Receivables, less allowances for credit losses of $28.2 million at December 31, 2021, and $33.8 million at
December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right-of-use assets—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity method investment in unconsolidated entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
179.9 $
55.2
362.0
226.2
41.0
809.1
727.0
125.7
86.4
75.3
—
66.5
399.1
170.2
54.7
679.2
884.2
81.0
103.0
104.3
2.6
73.4
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,890.0 $
1,927.7
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term debt and current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of finance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note 11)
Shareholders’ equity (Note 19)
Preferred stock, $0.01 par value; Authorized: 0.5 million shares; Issued: None . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock, Class A, $0.025 par value; Authorized: 105.0 million shares; Issued: 41.7 million shares
at December 31, 2021, and 40.4 million shares at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock, Class B, $0.025 par value; Authorized: 80.0 million shares; Issued: 13.5 million shares
at December 31, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock, Class C, $0.025 par value; Authorized: 20.0 million shares; Issued: 0.5 million shares
at December 31, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 1.4 million shares at December 31, 2021, and 0.8 million shares at December 31,
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quad’s shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity and noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
367.3 $
314.3
245.6
1.8
28.1
957.1
554.9
1.4
99.8
11.9
128.1
1,753.2
—
1.0
0.4
—
839.3
(14.9)
(527.8)
(161.2)
136.8
—
136.8
320.0
310.8
20.7
2.8
28.4
682.7
902.7
2.0
54.5
4.2
196.8
1,842.9
—
1.0
0.4
—
833.1
(13.1)
(566.0)
(171.3)
84.1
0.7
84.8
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,890.0 $
1,927.7
See accompanying Notes to Consolidated Financial Statements.
77
QUAD/GRAPHICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
OPERATING ACTIVITIES
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement charges on pension plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt issuance costs and original issue discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on the sale or disposal of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on the sale of businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain from property insurance claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in (earnings) loss of unconsolidated entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities—net of acquisitions and divestitures:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTING ACTIVITIES
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost investment in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the sale of businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from property insurance claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of businesses—net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of finance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings on revolving credit facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on revolving credit facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of debt issuance costs and financing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in ownership of noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity awards redeemed to pay employees’ tax obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rates on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
See accompanying Notes to Consolidated Financial Statements.
78
Year Ended December 31,
2020
2021
37.8 $
(128.5)
157.3
34.9
(2.7)
0.9
3.0
0.7
6.2
(49.0)
(20.9)
(13.4)
5.3
(0.3)
12.7
(58.3)
8.1
49.0
(34.8)
136.5
(50.0)
(1.4)
126.3
39.7
15.0
—
(0.2)
129.4
15.9
(139.5)
(3.0)
445.1
(440.5)
(5.9)
(1.9)
(1.1)
(1.4)
(8.6)
(140.9)
(0.3)
124.7
55.2
179.9 $
181.6
75.6
—
—
2.6
1.8
10.6
(1.8)
3.5
(4.7)
48.5
0.2
72.8
45.8
0.2
(90.5)
(27.5)
190.2
(61.0)
(0.5)
7.4
61.3
4.8
(2.2)
(0.1)
9.7
1.0
(177.9)
(7.4)
350.6
(351.7)
(2.7)
(22.4)
(1.0)
(9.5)
(2.6)
(223.6)
0.2
(23.5)
78.7
55.2
QUAD/GRAPHICS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions)
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Treasury Stock
Shares
Amount
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Quad’s
Shareholders’
Equity
Noncontrolling
Interests
54.3 $ 1.4 $ 847.4
(1.6) $ (31.5) $
(429.8) $
(167.2) $
220.3 $
—
—
—
—
—
(128.3)
Interest rate swap adjustments, net of tax . .
—
—
—
—
—
—
(5.4)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(7.9)
—
—
10.7
—
—
0.1
—
(19.6)
1.0
19.4
—
—
—
(0.2)
(1.0)
—
—
—
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
37.8
54.4 $ 1.4 $ 833.1
(0.8) $ (13.1) $
(566.0) $
(171.3) $
84.1 $
Balance at January 1, 2020 . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in ownership of noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . .
Pension benefit plan liability adjustments,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared ($0.15 per share) .
Stock-based compensation . . . . . . . . . . . . .
Issuance of share-based awards, net of
other activity . . . . . . . . . . . . . . . . . . . . . . . .
Equity awards redeemed to pay employees’
tax obligations . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2020 . . . . . . . . .
Change in ownership of noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . .
Reclassification of foreign currency
translation adjustments . . . . . . . . . . . . . . . .
Pension benefit plan liability adjustments,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrual reversal for cash dividends
declared . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . .
Issuance of share-based awards, net of
other activity . . . . . . . . . . . . . . . . . . . . . . . .
Equity awards redeemed to pay employees’
tax obligations . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2021 . . . . . . . . .
Interest rate swap adjustments, net of tax . .
—
—
—
—
—
—
—
—
—
—
—
—
(0.9)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6.2
—
—
1.3
—
0.9
(0.4)
(0.7)
—
—
—
(0.2)
(1.1)
—
—
0.2
3.3
(7.6)
—
—
—
—
(128.3)
(5.4)
0.2
3.3
(7.6)
(7.9)
10.7
(0.2)
(1.0)
—
—
(9.6)
(2.7)
16.8
5.6
—
—
—
—
37.8
(0.9)
(9.6)
(2.7)
16.8
5.6
0.4
6.2
0.2
(1.1)
—
—
—
—
—
—
—
—
—
0.4
—
—
—
17.7
(0.2)
(16.8)
—
—
—
—
—
—
—
0.7
—
(0.7)
—
—
—
—
—
—
—
—
—
55.7 $ 1.4 $ 839.3
(1.4) $ (14.9) $
(527.8) $
(161.2) $
136.8 $
See accompanying Notes to Consolidated Financial Statements.
79
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Note 1. Basis of Presentation and Summary of Significant Accounting Policies
Nature of Operations—As a worldwide marketing solutions partner, Quad leverages its more than 50-year
heritage of platform excellence, innovation, strong culture and social purpose to create a better way for its clients,
employees and communities. The Company’s integrated marketing platform removes friction throughout the marketing
process thereby helping brands and marketers reduce complexity, increase efficiency and enhance marketing spend
effectiveness. Quad provides its clients with a complete through-the-line marketing offering, providing unmatched scale
for on-site services and expanded subject expertise in marketing strategy, creative solutions, media deployment and
marketing management services. With a client-centric approach that drives the Company to continuously hone and
evolve its offering, combined with leading-edge technology, advanced data and analytics and single-source simplicity,
the Company has the resources and knowledge to help a wide variety of clients target, more deeply engage and grow
audiences in multiple verticals,
including those in established and emerging industries, such as retail, publishing, consumer technology, consumer
packaged goods, financial services, insurance, healthcare and direct-to-consumer.
The Company operates primarily in the commercial print portion of the printing industry as a printer of retail
inserts, publications, catalogs, special interest publications, journals, direct mail, directories, in-store marketing and
promotion, packaging, newspapers, custom print products, other commercial and specialty printed products and global
paper procurement. The Company’s products and services for a variety of industries are sold primarily throughout North
America, South America and Europe. In addition, the Company strategically sources packaging product manufacturing
over multiple end markets in Central America and Asia.
Principles of Consolidation and Basis of Presentation—The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned and majority-owned controlled subsidiaries and have been
prepared in accordance with GAAP. The results of operations and accounts of businesses acquired are included in the
consolidated financial statements from the dates of acquisition (see Note 3, “Strategic Investments”).
Investments in entities where the Company has both the ability to exert significant influence but not control and
an ownership interest of 50% or less but more than 20% are accounted for using the equity method of accounting.
Investments in entities where the Company does not exert significant influence or control and has an ownership interest
of less than 20% are accounted for using the cost method of accounting. Intercompany transactions and balances have
been eliminated in consolidation.
Discontinued Operations—The results of operations of the Company’s Book business have been reported as
discontinued operations for the year ended December 31, 2020, in accordance with Accounting Standards Codification
(“ASC”) 205-20 — Discontinued Operations. The sale of the Book business was completed during 2020. The financial
information pertaining to discontinued operations has been excluded from all relevant notes to the consolidated financial
statements, unless otherwise noted. See all required disclosures and further information in Note 4, “Discontinued
Operations” for information about the Company’s sale of its Book business.
Foreign Operations—Assets and liabilities denominated in foreign currencies are translated into United States
dollars at the exchange rate existing at the respective balance sheet dates. Income and expense items are translated at the
average rates during the respective periods. Translation adjustments resulting from fluctuations in exchange rates are
recorded as a separate component of accumulated other comprehensive income (loss) on the consolidated statements of
shareholders’ equity, while transaction gains and losses are recorded in selling, general and administrative expenses on
the consolidated statements of operations. Foreign exchange transactions resulted in losses of $2.9 million during the
year ended December 31, 2021 and losses of $2.0 million during the year ended December 31, 2020.
80
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
The Company had a 49% interest in Plural, a commercial printer based in São Paulo, Brazil, as of December 31,
2021. The Company accounts for this entity using the equity method of accounting. The Company’s equity in the
(earnings) loss of Plural’s operations was recorded in equity in (earnings) loss of unconsolidated entity in the Company’s
consolidated statements of operations, and was included within the International segment. Distributions received from
equity method investees follow the nature of the distribution approach, where each distribution is evaluated on the basis
of the source of the payment and is classified as either operating cash inflows or investing cash inflows. In January
2022, the Company sold its investment in Plural. As a result of the planned sale, the Company recorded a $32.1 million
impairment charge during the year ended December 31, 2021. Quad had no other significant unconsolidated entities as
of December 31, 2021.
Use of Estimates—The preparation of consolidated financial statements requires the use of management’s
estimates and assumptions that affect the reported assets and liabilities, disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from these estimates. Estimates are used when accounting for items and matters
including, but not limited to: allowances for doubtful accounts, inventory obsolescence, asset valuations and useful lives,
pension and postretirement benefits, self-insurance reserves, stock-based compensation, taxes, restructuring and other
provisions and contingencies.
Revenue Recognition—The Company recognizes its products and services revenue based on when the transfer
of control passes to the customer or when the service is completed and accepted by the customer. Under agreements
with certain customers, products may be stored by the Company for future delivery. In these situations, the Company
may receive warehouse management fees for the services it provides. Product returns are not significant because the
products are customized; however, the Company accrues for the estimated amount of customer allowances at the time of
sale based on historical experience and known trends.
Revenue from services is recognized as services are performed. Revenues related to the Company’s imaging
operations, which include digital content management, photography, color services and page production, are recognized
in accordance with the terms of the contract, typically upon completion of the performed service and acceptance by the
customer. Revenues related to the Company’s logistics operations, which includes the delivery of printed material, are
recognized upon completion of services.
Certain revenues earned by the Company require judgment to determine if revenue should be recorded gross as
a principal or net of related costs as an agent. Billings for third-party shipping and handling costs, primarily in the
Company’s logistics operations, and out-of-pocket expenses are recorded gross in net sales and cost of sales in the
consolidated statements of operations. Many of the Company’s operations process materials, primarily paper, that may
be supplied directly by customers or may be purchased by the Company and sold to customers. No revenue is
recognized for customer-supplied paper. Revenues for Company-supplied paper are recognized on a gross basis.
Byproduct Recoveries—The Company presents byproduct recoveries as a reduction of cost of sales–products in
the consolidated statements of operations. Classification of byproduct recoveries as a reduction of cost of sales aligns the
proceeds from byproduct recoveries with the corresponding manufacturing costs.
Financial Instruments—The Company uses derivative financial instruments for the purpose of hedging interest
rate, commodity and foreign exchange exposures that exist as part of ongoing business operations, including interest rate
swap agreements, natural gas forward purchase contracts and foreign exchange contracts. As a policy, the Company
does not engage in speculative or leveraged transactions, nor does the Company hold or issue financial instruments for
trading purposes.
81
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Derivative instruments are recorded on the consolidated balance sheets as either assets or liabilities measured at
their fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of
the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow
hedge, the effective portion of the changes in the fair value of the derivative are recorded as a component of accumulated
other comprehensive income (loss) and recognized in the consolidated statements of operations when the hedged item
affects earnings.
The ineffective portions of the changes in the fair value of hedges are insignificant and recognized in earnings.
Cash flows from derivatives that are accounted for as cash flow or fair value hedges are included in the consolidated
statements of cash flows in the same category as the item being hedged.
Fair Value Measurement—The Company applies fair value accounting for all assets and liabilities that are
recognized or disclosed at fair value in its consolidated financial statements on a recurring basis. Fair value represents
the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. When determining the fair value measurements for assets and liabilities
that are required to be recorded at fair value, the Company considers the principal or most advantageous market and the
market-based risk measurements or assumptions that market participants would use in pricing the asset or liability. See
Note 15, “Financial Instruments and Fair Value Measurements,” for further discussion.
Research and Development—Research and development costs related to the development of new products or
the adaptation of existing products are expensed as incurred, included in cost of sales and totaled $3.1 million and
$3.0 million during the years ended December 31, 2021 and 2020, respectively.
Cash and Cash Equivalents and Restricted Cash—The Company considers all highly liquid investments with
original maturities of three months or less to be cash equivalents.
Receivables—Receivables are stated net of allowances for credit losses. No single customer comprised more
than 5% of the Company’s consolidated net sales in 2021 or 2020, or 5% of the Company’s consolidated receivables as
of December 31, 2021 or 2020. On January 1, 2020, the Company adopted Accounting Standards Update 2016-13
“Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU
2016-13”), which changes the impairment model for most financial assets and certain other instruments. This new
impairment model, also known as the current expected credit loss (“CECL”) model, is based on expected losses rather
than incurred losses. Under ASC 326—Financial Instruments—Credit Losses (“ASC 326”), the Company is required to
measure expected credit losses for financial instruments, including trade receivables, based on historical experience,
current conditions and reasonable forecasts. See Note 7, “Receivables,” for further discussion on the transactions
affecting the allowances for doubtful accounts.
Inventories—Inventories include material, labor, and plant overhead and are stated at the lower of cost or net
realizable value. At December 31, 2021 and 2020, all inventories were valued using the first-in, first-out method. See
Note 8, “Inventories,” for the components of the Company’s inventories.
Leases—Leases are accounted for under the right-of-use model, which requires a lessee to record a right-of-use
asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases are classified
as either finance or operating, with classification affecting the pattern of expense recognition. See Note 13, “Leases,” for
additional accounting policies.
82
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Property, Plant and Equipment—Property, plant and equipment are recorded at cost, and are depreciated over
the estimated useful lives of the assets using the straight-line method for financial reporting purposes. See Note 9,
“Property, Plant and Equipment,” for the components of the Company’s property, plant and equipment. Major
improvements that extend the useful lives of existing assets are capitalized and charged to the asset accounts. Repairs
and maintenance, which do not significantly improve or extend the useful lives of the respective assets, are expensed as
incurred. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life of the
respective asset. When an asset is retired or disposed, the associated costs and accumulated depreciation are eliminated,
and the resulting gain or loss is recognized in the Company’s consolidated statements of operations.
Asset Category
Range of Useful Lives
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10 to 40 Years
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 to 15 Years
3 to 10 Years
Other Intangible Assets—Identifiable intangible assets are recognized apart from goodwill and are amortized
over their estimated useful lives.
Impairment of Long-Lived and Other Intangible Assets—The Company evaluates long-lived assets and other
intangible assets (of which the most significant are property, plant and equipment; right-of-use assets and customer
relationship intangible assets) whenever events and circumstances have occurred that indicate the carrying value of an
asset may not be recoverable. Determining whether impairment has occurred typically requires various estimates and
assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life
over which cash flows will occur, their amount and the asset’s residual value, if any. In turn, assessing whether there is
an impairment loss requires a determination of recoverability, which is generally estimated by the ability to recover the
balance of the assets from expected future operating cash flows on an undiscounted basis. If impairment is determined to
exist, any related impairment loss is calculated based on the difference in the fair value and carrying value of the asset.
Goodwill—Goodwill is reviewed annually for impairment as of October 31, or more frequently if events or
changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying
value. In performing this analysis, the Company compares each reporting unit’s fair value to its carrying value. The fair
value is estimated based on comparable company market valuations and/or expected future discounted cash flows to be
generated by the reporting unit. If the carrying value exceeds the reporting unit’s fair value, an impairment loss would
be charged to operations in the period identified. See Note 6, “Goodwill and Other Intangible Assets,” for further
discussion.
Income Taxes—The Company accounts for income taxes under the asset and liability method, which requires
the recognition of deferred tax assets and liabilities for the expected future tax consequences of items reported in the
financial statements. Under this method, deferred tax assets and liabilities are measured based on the differences
between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is
recognized in income in the period that includes the effective date of enactment.
83
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
The Company records net deferred tax assets to the extent the Company believes these assets will more likely
than not be realized. This determination is based upon all available positive and negative evidence, including future
reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and recent
financial operations. If the Company determines that a deferred income tax asset will not be fully realized in the future,
then a valuation allowance is established or increased to reflect the amount at which the asset will more likely than not be
realized, which would increase the Company’s provision for income taxes. In a period after a valuation allowance has
been established, if the Company determines the related deferred income tax assets will be realized in the future in excess
of their net recorded amount, then an adjustment to reduce the related valuation allowance will be made, which would
reduce the Company’s provision for income taxes.
The Company is regularly audited by foreign and domestic tax authorities. These audits occasionally result in
proposed assessments where the ultimate resolution might result in the Company owing additional taxes, including in
some cases, penalties and interest. The Company recognizes a tax position in its consolidated financial statements when
it is more likely than not that the position would be sustained upon examination by tax authorities. This recognized tax
position is then measured at the largest amount of benefit that is more likely than not of being recognized upon ultimate
settlement. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.
The determination of the Company’s worldwide tax provision and related tax assets and liabilities requires the
use of significant judgment in estimating the impact of uncertainties in the application of GAAP and the interpretation of
complex tax laws. In the ordinary course of business, there are transactions and calculations where the final tax outcome
is uncertain. Where fair market value is required to measure a tax asset or liability for GAAP purposes, the Company
periodically obtains independent, third party assistance to validate that such value is determined in conformity with
Internal Revenue Service fair market value guidelines. While the Company believes it has the appropriate support for
the positions taken, certain positions may be successfully challenged by taxing authorities. Resolution of these
uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s
financial condition and operating results. The Company applies the provisions of the authoritative guidance on
accounting for uncertain tax positions to determine the appropriate amount of tax benefits to be recognized with respect
to uncertain tax positions. The determination of the Company’s worldwide tax provision includes the impact of any
changes to the amount of tax benefits recognized with respect to uncertain tax positions. See Note 14, “Income Taxes,”
for further discussion.
Pension Plans—The Company assumed certain frozen underfunded defined benefit pension plans as part of the
2010 World Color Press acquisition. Pension plan costs are determined using actuarial methods and are funded through
contributions. The Company records amounts relating to its pension plans based on calculations which include various
actuarial assumptions including discount rates, assumed rates of return, and mortality. The Company reviews its
actuarial assumptions on an annual basis and modifies the assumptions based on current rates and trends when it is
appropriate to do so. The effects of modifications are recognized immediately on the consolidated balance sheets, but
are generally amortized into operating income over future periods, with the deferred amount recorded in accumulated
other comprehensive loss on the consolidated balance sheets. The Company believes that the assumptions utilized in
recording its obligations under its plans are reasonable based on its experience, market conditions and input from its
actuaries and investment advisors. For the purposes of calculating the expected return on plan assets, those assets are
valued at fair value. When an event gives rise to both a curtailment and a settlement, the curtailment is accounted for
prior to the settlement. The Company’s measurement date to measure the defined benefit plan assets and the projected
benefit obligation is December 31.
The Company has previously participated in MEPPs as a result of the acquisition of World Color Press. Due to
the significant underfunded status of the MEPPs, the Company has withdrawn from all significant MEPPs and replaced
these union sponsored “promise to pay in the future” defined benefit plans with a Company sponsored “pay as you go”
defined contribution plan, which is the form of retirement benefit provided to Quad’s employees. As a result of the
decision to withdraw, the Company recorded a withdrawal liability for the MEPPs as part of the World Color Press
84
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
purchase price allocation process based on information received from the MEPPs’ trustees. See Note 16, “Employee
Retirement Plans,” for further discussion.
Stock-Based Compensation—The Company recognizes stock-based compensation expense over the vesting
period for all stock-based awards made to employees and directors based on the fair value of the instrument at the time of
grant. Equity awards accounted for as liabilities are recorded at fair value on the initial issuance date and are remeasured
to fair value at each reporting period, with the change in fair value being recorded in selling, general and administrative
expense in the consolidated statements of operations. See Note 18, “Equity Incentive Programs,” for further discussion.
Accumulated Other Comprehensive Income (Loss)—Accumulated other comprehensive income (loss) consists
primarily of unrecognized actuarial gains and losses and prior service costs for pension plans, foreign currency
translation adjustments and interest rate swap adjustments, and is presented in the consolidated statements of
shareholders’ equity. See Note 20, “Accumulated Other Comprehensive Loss,” for further discussion.
COVID-19 Pandemic Impacts and Response - The COVID-19 pandemic has had, and will continue to have, a
negative impact on the Company’s business, financial condition, cash flows, results of operations, supply chain and raw
materials availability, although the full extent is still uncertain. Throughout the pandemic, the Company implemented
cost reduction and cash conservation initiatives in response to the pandemic’s impact on its business. The Company also
amended its Senior Secured Credit Facility during the second quarter of 2020 to provide for certain financial covenant
relief through the fiscal quarter ended September 30, 2021. With ongoing advancements against the COVID-19
pandemic, the effects on the Company have lessened from previous periods, particularly from the heavily impacted
second and third quarters of 2020. The Company continues to evaluate the impact and may implement additional cost
reduction measures as necessary. The COVID-19 pandemic has weakened demand for the Company’s products and
services, which has resulted in a decline in sales, and it remains uncertain what impact this weakened demand will have
on future sales once conditions continue to further improve. The pandemic has also disrupted the Company’s supply
chain and resulted in rising inflationary cost pressures within the Company’s raw materials, distribution and labor. The
ultimate impact of COVID-19 on the Company’s business, financial condition, cash flows, results of operations, supply
chain and raw materials availability, will depend on future developments, including the duration of the pandemic and the
related length of its impact on the global economy, all of which are still uncertain.
Supplemental Cash Flow Information—The following table summarizes certain supplemental cash flow
information for the years ended December 31, 2021 and 2020:
2021
2020
Interest paid, net of amounts capitalized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
41.8 $
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash finance lease additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash operating lease additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions of businesses:
Fair value of assets acquired, net of cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.3
1.4
74.6
—
—
Acquisition of businesses—net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
52.3
2.7
1.4
15.0
5.0
(2.8)
2.2
85
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 years ended December 31, 2021 and 2020:
United States Print
and Related Services
International
Total
Year ended December 31, 2021
Catalog, publications, retail inserts and directories . . . . . . $
1,368.6 $
231.5 $
Direct mail and other printed products . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Logistics services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Imaging, marketing services and other services . . . . . . . . .
Total Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
558.9
8.3
1,935.8
345.8
347.0
692.8
78.8
1.0
311.3
19.5
1.0
20.5
Total Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,628.6 $
331.8 $
Year ended December 31, 2020
Catalog, publications, retail inserts and directories . . . . . . $
1,402.0 $
230.0 $
Direct mail and other printed products . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Logistics services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Imaging, marketing services and other services . . . . . . . . .
Total Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
538.3
3.7
1,944.0
357.2
326.4
683.6
53.3
1.4
284.7
17.2
0.1
17.3
Total Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,627.6 $
302.0 $
Nature of Products and Services
1,600.1
637.7
9.3
2,247.1
365.3
348.0
713.3
2,960.4
1,632.0
591.6
5.1
2,228.7
374.4
326.5
700.9
2,929.6
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, catalogs, special interest publications, journals, direct mail, directories, in-store marketing and
promotion, packaging, newspapers, custom print products, other commercial and specialty printed products and global
paper procurement.
The Company 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.
86
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Performance Obligations
At contract inception, the Company assesses the products and services promised in its contracts with customers
and identifies performance obligations for each promise to transfer to the customer a product or service that is distinct.
To identify the performance obligations, the Company considers the goods or services promised in the contract
regardless of whether they are explicitly stated or are implied by customary business practices. The Company
determined that the following distinct products and services represent separate performance obligations:
•
•
•
Pre-Press Services
Print
Other Services
For Pre-Press and Other Services, the Company recognizes revenue at point-in-time upon completion of the
performed service and acceptance by the customer. The Company considers transfer of control to occur once the service
is performed as the Company has right to payment and the customer has legal title and risk and reward of ownership.
The Company recognizes its Print revenues upon transfer of title and the passage of risk of loss, which is point-
in-time upon shipment to the customer, and when there is a reasonable assurance as to collectability. Revenues related to
the Company’s logistics operations, which includes the delivery of printed material, are included in the Print
performance obligation and are also recognized at point-in-time as services are completed. Under agreements with
certain customers, products may be stored by the Company for future delivery. In these situations, the Company may
receive warehouse management fees for the services it provides. Revenue from warehouse management fees was
immaterial for the years ended December 31, 2021 and 2020.
Certain revenues earned by the Company require judgment to determine if revenue should be recorded gross as
principal or net of related costs as an agent. Billings for third-party shipping and handling costs, primarily in the
Company’s logistics operations, and out-of-pocket expenses are recorded gross in net sales and cost of sales in the
consolidated statements of operations. Many of the Company’s operations process materials, primarily paper, that may
be supplied directly by customers or may be purchased by the Company and sold to customers. No revenue is
recognized for customer-supplied paper. Revenues for the Company-supplied paper are recognized on a gross basis. In
some cases, the Company will print items that are mailed to consumers and bill the customer for postage. In these cases,
the Company is acting as an agent and billings are recorded on a net basis in net sales.
Significant Payment Terms
Payment terms and conditions for contracts with customers vary. The Company typically offers standard terms
of net 30 days. It is not the Company’s standard business practice to offer extended payment terms longer than one year.
The Company may offer cash discounts or prepayment and extended terms depending on certain facts and circumstances.
As such, when the timing of the Company’s delivery of products and services differs from the timing of payment, the
Company will record either a contract asset or a contract liability.
Variable Consideration
When evaluating the transaction price, the Company analyzes on a contract by contract basis all applicable
variable considerations and non-cash consideration and also performs a constraint analysis. The nature of the
Company’s contracts give rise to variable consideration, including, volume rebates, credits, discounts, and other similar
items that generally decrease the transaction price. These variable amounts generally are credited to the customer, based
on achieving certain levels of sales activity, when contracts are signed, or making payments within specific terms.
87
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Product returns are not significant because the products are customized; however, the Company accrues for the
estimated amount of customer allowances at the time of sale based on historical experience and known trends.
When the transaction price requires allocation to multiple performance obligations, the Company uses the
estimated stand-alone selling prices using the adjusted market assessment approach.
Costs to Obtain Contracts
In accordance with ASC 606 — Revenue from Contracts with Customers (“ASC 606”), the Company
capitalizes certain sales incentives of the sales compensation packages for costs that are directly attributed to being
awarded a customer contract or renewal and would not have been incurred had the contract not been obtained. The
Company also defers certain contract acquisition costs paid to the customer at contract inception. 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 year ended December 31,
2021, was as follows:
Balance at January 1, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs to obtain contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of costs to obtain contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
8.7
0.2
(3.8)
5.1
Costs to Obtain
Contracts
Practical Expedients
The Company has elected to apply the following practical expedients allowed under ASC 606:
•
•
•
•
•
For certain performance obligations related to print contracts, the Company has elected not to disclose
the value of unsatisfied performance obligations for the following: (1) contracts that have an original
expected length of one year or less; (2) contracts where revenue is recognized as invoiced; or
(3) contracts with variable consideration related to unsatisfied performance obligations. The Company
had no volume commitments in contracts that extend beyond one year as of December 31, 2021.
The Company expenses costs to obtain contracts as incurred when the contract duration is less than one
year.
The transaction amount is not adjusted for a significant financing component as the period between
transfer of the products or services and payment is less than one year.
The Company accounts for shipping and handling activities, which includes postage, that occur after
control of the related products or services transfers to the customer as fulfillment activities and are
therefore recognized at time of shipping.
The Company excludes from its transaction price any amounts collected from customers for sales
taxes.
88
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Note 3. Strategic Investments
Changes of Ownership in Rise Interactive
On June 15, 2020, the Company purchased units of equity in Rise from a previous holder in the form of a $15.9
million note payable paid in full on October 1, 2020, and $1.0 million cash paid on June 15, 2020. In addition, on
June 15, 2020, Rise purchased and retired units of equity from previous holders of Rise for $5.4 million in cash. These
transactions resulted in the Company’s ownership interest changing from 57% to 99%. On April 30, 2021, Rise
purchased and retired units of equity from previous holders of Rise for $1.9 million in cash. This transaction resulted in
the Company’s ownership interest changing from 99% to 100%. The Company began consolidating the results of Rise
in the Company’s consolidated financial statements when its equity ownership increased to 57% on March 14, 2018.
The portion of Rise’s operating results not owned by the Company of 43% through June 15, 2020 and of 1% from June
15, 2020 through April 30, 2021, was recorded as net earnings (loss) attributable to noncontrolling interests on the
consolidated statement of operations. The portion of net assets not owned by the Company was recorded as
noncontrolling interests as of the December 31, 2020 consolidated balance sheet.
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 consisted of three facilities: Versailles,
Kentucky; Fairfield, Pennsylvania; and Martinsburg, West Virginia. The Company’s Book business has historically
been included within the United States Print and Related Services segment and the Core Print and Related Services
reporting unit.
On July 1, 2020, the Company completed the sale of its Versailles, Kentucky book manufacturing plant to CJK
Group, Inc., which serves book, magazine, catalog and journal publishers, for $7.0 million in cash and the assumption of
approximately $3.0 million in finance lease obligation, resulting in a $10.1 million impairment charge related to
property, plant and equipment and a $3.0 million gain on the sale of the business during the year ended December 31,
2020. The Company used the proceeds from the sale to reduce debt.
On October 31, 2020, the Company completed the sale of its Fairfield, Pennsylvania and Martinsburg, West
Virginia book manufacturing plants to Berryville Graphics, a division of Bertelsmann Printing Group USA, a media,
services and education company, for $14.2 million in cash, resulting in a loss on the sale of the business of $3.5 million
and a $1.4 million impairment charge related to property plant and equipment during the year ended December 31, 2020.
The Company used the proceeds from the sale to reduce debt. This sale was the final step in the previously announced
strategic decision to divest the Company’s Book business to optimize its product portfolio.
89
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
The following table summarizes the results of operations of the Company’s Book business, which is included in
the loss from discontinued operations in the consolidated statements of operations for the year ended December 31, 2020.
For The Year Ended
December 31, 2020
Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total cost of sales, excluding depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, impairment and transaction-related charges (1)
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
79.4
80.4
4.2
—
16.4
—
0.3
(21.9)
—
(21.9)
______________________________
(1)
The Company recognized $11.5 million of impairment charges for tangible property, plant and equipment during the year ended
December 31, 2020, to reduce the carrying value of the Book business to its fair value, and recognized $2.2 million in employee
termination charges and $2.7 million in other restructuring charges during the year ended December 31, 2020.
The consolidated statements of cash flows for all periods have not been adjusted to separately disclose cash
flows related to discontinued operations. Cash flows related to the Book business during the the year ended
December 31, 2020 was as follows:
For The Year Ended
December 31, 2020
Cash flows used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cash flows provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3.9)
19.6
Note 5. Restructuring, Impairment and Transaction-Related Charges
The Company recorded restructuring, impairment and transaction-related charges for the years ended
December 31, 2021 and 2020, as follows:
Employee termination charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9.9 $
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Integration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
34.9
0.6
—
(26.5)
18.9 $
34.7
64.1
1.4
1.9
22.0
124.1
2021
2020
The costs related to these activities have been recorded on the consolidated statements of operations as
restructuring, impairment and transaction-related charges. See Note 21, “Segment Information,” for restructuring,
impairment and transaction-related charges by segment.
90
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Restructuring Charges
The Company began a restructuring program in 2010 related to eliminating excess manufacturing capacity and
properly aligning its cost structure. The Company classifies the following charges as restructuring:
•
•
•
Employee termination charges are incurred when the Company reduces its workforce through facility
consolidations and separation programs.
Integration costs are incurred primarily for the integration of acquired companies.
Other restructuring charges (income) are comprised of the following components and are presented net of
any gains on the sale of facilities and businesses. During the year ended December 31, 2021, the Company
recognized gains from the sale of the facilities located in Riverside, California, Oklahoma City, Oklahoma,
and Fernley, Nevada. During the year ended December 31, 2020, the Company recognized gains from the
sale of the facilities located in Midland, Michigan and Shakopee, Minnesota. The Company also
recognized a $20.9 million gain on the sale of a business and a $2.7 million gain from the reclassification of
foreign currency translation adjustments during the year ended December 31, 2021, and a $2.9 million loss
on the sale of a business during the year ended December 31, 2020, which are included within other
restructuring activities below. The components of other restructuring charges (income) consisted of the
following during the years ended December 31, 2021 and 2020:
Vacant facility carrying costs and lease exit charges . . . . . . . . . . . . . . . . . . . . . . . . $
19.8 $
Equipment and infrastructure removal costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains on the sale of facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other restructuring activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.6
(24.8)
(23.1)
Other restructuring charges (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(26.5) $
11.5
1.1
(1.6)
11.0
22.0
Year Ended December 31,
2021
2020
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 $34.9 million during the year ended December 31, 2021,
which consisted of $2.8 million, for machinery and equipment no longer being utilized in production as a result of
facility consolidations, as well as other capacity reduction and strategic divestiture activities, including $32.1 million of
impairment charges related to the Company’s investment in Plural.
The Company recognized impairment charges of $64.1 million during the year ended December 31, 2020,
which consisted of $22.1 million of impairment charges primarily for machinery and equipment no longer being utilized
in production as a result of facility consolidations, as well as other capacity reduction and strategic divestiture activities;
and $42.0 million of land and building impairment charges.
91
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
The fair values of the impaired assets were determined by the Company to be Level 3 under the fair value
hierarchy (see Note 15, “Financial Instruments and Fair Value Measurements,” for the definition of Level 3 inputs) and
were estimated based on 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.
Transaction-Related Charges
The Company incurs transaction-related charges primarily consisting of professional service fees related to
business acquisition and divestiture activities. The Company recognized transaction-related charges of $0.6 million and
$1.4 million during the years ended December 31, 2021 and 2020, respectively.
Restructuring Reserves
Activity impacting the Company’s restructuring reserves for the years ended December 31, 2021 and 2020, was
as follows:
Employee
Termination
Charges
Impairment
Charges
Transaction-
Related
Charges
(Income)
Integration
Costs
Other
Restructuring
Charges
Total
Balance at January 1, 2020 . . . $
9.9 $
— $
0.8 $
0.2 $
13.6 $
24.5
Expense, net . . . . . . . . . . . .
Cash payments, net . . . . . .
Non-cash adjustments/
reclassifications . . . . . . . . .
34.7
(29.7)
64.1
—
(0.3)
(64.1)
Balance at December 31, 2020 $
14.6 $
— $
Expense (income), net . . . .
Cash payments, net . . . . . .
Non-cash adjustments/
reclassifications . . . . . . . . .
Balance at December 31, 2021 $
9.9
(19.0)
34.9
—
(0.8)
4.7 $
(34.9)
— $
1.4
(1.7)
—
0.5 $
0.6
(0.7)
—
0.4 $
1.9
(2.1)
22.0
(10.5)
124.1
(44.0)
—
— $
—
—
—
0.7
(63.7)
25.8 $
(26.5)
(13.3)
64.2
40.9
18.9
(33.0)
28.5
55.3
— $
50.2 $
The Company’s restructuring reserves at December 31, 2021, included a short-term and a long-term component.
The short-term portion included $47.5 million in other current liabilities (see Note 10, “Other Current and Long-Term
Liabilities”) and $1.7 million in accounts payable in the consolidated balance sheets as the Company expects these
reserves to be settled within the next twelve months. The long-term portion of $6.1 million was included in other long-
term liabilities (see Note 10, “Other Current and Long-Term Liabilities”) in the consolidated balance sheets.
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.
92
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Due to the Company’s decision to sell its third-party logistics business on June 30, 2021, goodwill included in
the carrying amount of the third-party logistics business sold of $16.6 million was determined based on the relative fair
value of the third-party logistics business and the portion of the Core Print and Related Services reporting unit retained.
When only a portion of goodwill is allocated to a business to be sold, an interim goodwill impairment test was completed
on the remaining $86.4 million of goodwill in the Core Print and Related Services reporting unit. No impairment was
recorded as a result of the interim impairment test.
The Company completed its annual impairment test as of October 31, 2021, and identified no indicators of
impairment in any of the Company's reporting units during the year ended December 31, 2021. Fair value was
determined using an equal weighting of both the income and market approaches. Under the income approach, the
Company determined fair value based on estimated future cash flows discounted by an estimated weighted-average cost
of capital, which reflects the overall level of inherent risk and the rate of return an outside investor would expect to earn.
Under the market approach, the Company derived the fair value of the reporting units based on market multiples of
comparable publicly-traded companies. This fair value determination was categorized as Level 3 in the fair value
hierarchy (see Note 15, “Financial Instruments and Fair Value Measurements,” for the definition of Level 3 inputs).
No goodwill impairment charges were recorded related to the Company’s continuing operations during the
years ended December 31, 2021 or 2020. The accumulated goodwill impairment losses and the carrying value of
goodwill from continuing operations at December 31, 2021 and 2020, were as follows:
December 31, 2021
December 31, 2020
United States
Print and
Related
Services
International
Total
United States
Print and
Related
Services
International
Total
Goodwill . . . . . . . . . . . $
Accumulated goodwill
impairment loss . . . . . .
Goodwill, net of
accumulated goodwill
impairment loss . . . . . . $
864.7 $
30.0 $
894.7 $
881.3 $
30.0 $
911.3
(778.3)
(30.0)
(808.3)
(778.3)
(30.0)
(808.3)
86.4 $
— $
86.4 $
103.0 $
— $
103.0
Activity impacting goodwill for the year ended December 31, 2021, was as follows:
United States
Print and Related
Services
International
Total
Balance at January 1, 2021
Sale of third-party logistics business . . . . . . . . . . . . . . . .
Balance at December 31, 2021
$
$
103.0 $
(16.6)
86.4 $
— $
—
— $
103.0
(16.6)
86.4
There was no activity impacting goodwill for the year ended December 31, 2020.
93
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Other Intangible Assets
The components of other intangible assets at December 31, 2021 and 2020, were as follows:
December 31, 2021
December 31, 2020
Weighted
Average
Amortization
Period (Years)
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Finite-lived intangible assets:
Trademarks, patents, licenses and
agreements . . . . . . . . . . . . . . . . . . . . . . .
Capitalized software . . . . . . . . . . . . . . . .
Acquired technology . . . . . . . . . . . . . . .
6
5
5
Customer relationships . . . . . . . . . . . . . .
Total finite-lived intangible assets . . . . . . . . . . . . . . . . .
6
$
68.1 $
(50.7) $
17.4 $
69.6 $
(44.3) $
25.3
19.2
3.6
560.1
(14.3)
(1.2)
(509.5)
4.9
2.4
50.6
17.3
3.0
561.9
(11.7)
(0.5)
(491.0)
5.6
2.5
70.9
$
651.0 $
(575.7) $
75.3 $
651.8 $
(547.5) $
104.3
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 years ended December 31, 2021 and 2020.
Amortization expense for other intangible assets was $31.5 million and $39.1 million for the years ended
December 31, 2021 and 2020, respectively. The following table outlines the estimated future amortization expense
related to other intangible assets as of December 31, 2021:
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
30.4
26.2
15.1
2.7
0.9
75.3
Amortization Expense
Note 7. Receivables
The Company adopted ASU 2016-13 as of January 1, 2020, using a modified retrospective transition approach
and has recorded a cumulative-effect transition adjustment to accumulated deficit as of January 1, 2020. The transition
adjustment of $6.3 million to accumulated deficit included an $8.4 million increase in the allowance for credit losses,
partially offset by a $2.1 million increase in deferred tax benefit. The transition had no impact to the consolidated
statement of operations.
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.
94
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Specific client provisions are made when a review of significant outstanding amounts, utilizing information
about client creditworthiness, as well as current and future economic trends based on reasonable forecasts, indicates that
collection is doubtful. 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 a credit loss expense of $1.3 million and $9.1 million during the years ended
December 31, 2021 and 2020, respectively, which is included in selling, general and administrative expenses in the
consolidated statements of operations.
Receivables are stated net of allowances for credit losses in the consolidated balance sheets. Based on the
clients’ account reviews and the continued uncertainty of the global economy, the Company has established an allowance
for credit losses of $28.2 million as of December 31, 2021, and $33.8 million as of December 31, 2020.
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
33.8 $
Transition adjustment for adoption of ASU 2016-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at beginning of year, including transition adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
33.8
1.3
(6.9)
—
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
28.2 $
25.0
8.4
33.4
9.1
(8.8)
0.1
33.8
2021
2020
Note 8. Inventories
The components of inventories at December 31, 2021 and 2020, were as follows:
Raw materials and manufacturing supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
148.6 $
31.6
46.0
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
226.2 $
90.9
33.4
45.9
170.2
2021
2020
95
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Note 9. Property, Plant and Equipment
The components of property, plant and equipment at December 31, 2021 and 2020, were as follows:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment—gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021
2020
73.6 $
658.4
2,883.7
181.9
25.1
3,822.7
(3,095.7)
97.6
780.3
3,094.1
183.2
33.0
4,188.2
(3,304.0)
Property, plant and equipment—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
727.0 $
884.2
______________________________
(1) Other consists of computer equipment, vehicles, furniture and fixtures, leasehold improvements and communication related
equipment.
The Company recorded impairment charges of $2.8 million and $64.1 million during the years ended
December 31, 2021 and 2020, respectively, to reduce the carrying amounts of certain property, plant and equipment no
longer utilized in production, or due to other capacity reduction and strategic divestiture activities, to fair value (see
Note 5, “Restructuring, Impairment and Transaction-Related Charges,” for further discussion on impairment charges).
The Company recognized depreciation expense for continuing operations of $125.8 million and $142.5 million
for the years ended December 31, 2021 and 2020, respectively.
Assets Held for Sale from Continuing Operations
The Company considered certain closed facilities for held for sale classification in the consolidated balance
sheets. Assets held for sale are carried at the lesser of original cost or fair value, less the estimated costs to sell. There
were no assets held for sale as of December 31, 2021, and assets held for sale were $4.9 million as of December 31,
2020. The fair values were determined by the Company to be Level 3 under the fair value hierarchy (see Note 15,
“Financial Instruments and Fair Value Measurements,” for the definition of Level 3 inputs) and were estimated based on
quoted market prices where available and independent appraisals, as appropriate. Assets held for sale were included in
prepaid expenses and other current assets in the consolidated balance sheets.
Gains from Sale and Leaseback
On June 29, 2021, the Company executed a sale and leaseback of its Chalfont, Pennsylvania facility for net
proceeds of $20.0 million, which resulted in a $13.7 million gain. The leaseback is for a term of seven years and was
determined to be an operating lease. The leaseback resulted in a $9.4 million asset included in the operating lease right
of use assets - net, current operating lease obligation of $1.1 million and operating lease obligation of $8.3 million in the
consolidated balance sheet as of December 31, 2021.
On September 28, 2021, the Company executed a sale and leaseback of its West Allis, Wisconsin facility for net
proceeds of $31.9 million, which resulted in a $10.8 million gain. The leaseback is for a term of ten years and was
determined to be an operating lease. The leaseback resulted in a $22.7 million asset included in the operating lease right
of use assets - net, current operating lease obligation of $1.6 million and operating lease obligation of $21.1 million in
the consolidated balance sheet as of December 31, 2021.
96
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Note 10. Other Current and Long-Term Liabilities
The components of other current and long-term liabilities at December 31, 2021 and 2020, were as follows:
December 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)
Single employer pension
plan obligations . . . . . . . . .
Multiemployer pension
plans – withdrawal liability
Deferred Revenue . . . . . . .
Tax-related liabilities . . . . .
Restructuring liabilities . . .
Interest and rent liabilities .
Interest rate swap liabilities
Other . . . . . . . . . . . . . . . . .
128.8 $
52.8 $
181.6 $
130.2 $
69.1 $
199.3
1.6
3.8
66.4
20.0
47.5
2.8
0.7
42.7
17.6
28.4
2.1
5.3
6.1
—
4.4
11.4
19.2
32.2
68.5
25.3
53.6
2.8
5.1
54.1
1.7
3.5
52.9
25.3
33.1
3.6
—
60.5
54.9
32.2
2.6
5.3
7.2
—
14.4
11.1
56.6
35.7
55.5
30.6
40.3
3.6
14.4
71.6
Total . . . . . . . . . . . . . . . . . . $
314.3 $
128.1 $
442.4 $
310.8 $
196.8 $
507.6
______________________________
(1)
Employee-related liabilities consist primarily of payroll, bonus, vacation, health and workers’ compensation.
Note 11. Commitments and Contingencies
Commitments
The Company had firm commitments of $10.0 million as of December 31, 2021, to purchase press and finishing
equipment.
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 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 environment 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 consolidated
financial position.
97
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Note 12. Debt
The components of long-term debt at December 31, 2021 and 2020, were as follows:
Weighted
Average
Interest Rate
2021
2020
Master note and security agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.81 % $
7.2 $
Term loan A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior unsecured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International revolving credit facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: short-term debt and current portion of long-term debt . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.29 %
3.34 %
7.00 %
1.94 %
1.68 %
5.95 %
575.4
—
211.5
5.3
8.8
1.4
(9.1)
$
$
800.5 $
(245.6)
554.9 $
15.6
657.6
—
238.7
10.7
4.9
2.8
(6.9)
923.4
(20.7)
902.7
Description of Debt Obligations
Master Note and Security Agreement
On September 1, 1995, and as last amended on November 24, 2014, the Company entered into its Master Note
and Security Agreement. As of December 31, 2021, the borrowings outstanding under the Master Note and Security
Agreement were $7.2 million. The senior notes under the Master Note and Security Agreement had a weighted average
interest rate of 7.81% at December 31, 2021, which is fixed to maturity, with interest payable semiannually. Principal
payments commenced September 1997 and extend through April 2026 in various tranches. The notes are collateralized
by certain United States press equipment under the terms of the Master Note and Security Agreement.
The Company redeemed $37.6 million of its senior notes under the Master Note and Security Agreement, at par
(the outstanding principal balance as of the date of payment), during the year ended December 31, 2020. There was no
direct gain or loss recognized as a result of the tender as all notes were redeemed at par; however, $0.2 million of
unamortized debt issuance costs related to the tendered notes were recognized as a loss on debt extinguishment during
the year ended December 31, 2020. All tendered senior notes under the Master Note and Security Agreement were
canceled. The Company used cash flows from operating activities and borrowings under its revolving credit facility to
fund the tender. The tender was primarily completed to reallocate debt to the lower interest rate revolving credit facility
and thereby reduce interest expense based on the then current LIBOR rates.
Senior Secured Credit Facility
On April 28, 2014, the Company entered into its Senior Secured Credit Facility, which included a revolving
credit facility, Term Loan A and Term Loan B. The Company completed the fourth amendment to the Senior Secured
Credit Facility on June 29, 2020. The Senior Secured Credit Facility was amended to (a) provide for certain financial
covenant relief through the fiscal quarter ended September 30, 2021 (the Covenant Relief Period); (b) reduce the
aggregate amount of the existing revolving credit facility from $800.0 million to $500.0 million; (c) make certain
adjustments to pricing such as the addition of a 0.75% LIBOR floor; and (d) prohibit repurchases of capital stock and
98
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
payments of cash dividends during the Covenant Relief Period. Certain amendments were also made to the quarterly
financial covenants to which the Company is subject.
The Company completed the fifth amendment to the Senior Secured Credit Facility on November 2, 2021. The
Senior Secured Credit Facility was amended to (a) reduce the aggregate amount of the existing revolving credit facility
from $500.0 million to $432.5 million, and extend the maturity of a portion of the revolving credit facility such that
$90.0 million under the revolving credit facility is due on the existing maturity date of January 31, 2024 (the “Existing
Maturity Date”) and $342.5 million under the revolving credit facility is due on November 2, 2026 (the “Extended
Maturity Date”); (b) extend the maturity of a portion of the existing term loan facility such that $91.5 million of such
term loan facility is due on the Existing Maturity Date and $483.9 million is due on the Extended Maturity Date; (c)
make certain adjustments to pricing, including an increase of 0.50% to the interest rate margin applicable to the loans
maturing on the Extended Maturity Date; (d) modify certain financial and operational covenants; and (e) modify the
interest rate provisions relating to the phase-out of LIBOR as a reference rate.
Borrowings under the revolving credit facility and Term Loan A made under the Senior Secured Credit Facility
bear interest at 2.75% in excess of reserve adjusted LIBOR, or 1.75% in excess of an alternate base rate with a LIBOR
floor of 0.75% for the extended tranche and bear interest at 2.50% in excess of reserve adjusted LIBOR, or 1.50% in
excess of an alternate base rate with a LIBOR floor of 0.75% for the non-extending tranche.
At December 31, 2021, the Company had no outstanding borrowings on the revolving credit facility, and had
$35.8 million of issued letters of credit, leaving up to $396.7 million available for future borrowings. The Senior
Secured Credit Facility is secured by substantially all of the unencumbered assets of the Company. The Senior Secured
Credit Facility also requires the Company to provide additional collateral to the lenders in certain limited circumstances.
Senior Unsecured Notes
The Company issued $300.0 million aggregate principal amount of its Senior Unsecured Notes due May 1,
2022, on April 28, 2014, of which $211.5 million is outstanding as of December 31, 2021. The Senior Unsecured Notes
bear interest at 7.0%, and interest is payable semi-annually. The Company received $294.8 million in net proceeds from
the sale of the Senior Unsecured Notes, after deducting the initial purchasers’ discounts and commissions.
During the year ended December 31, 2021, the Company repurchased $27.2 million of its outstanding Senior
Unsecured Notes in the open market, resulting in a net loss on debt extinguishment of $0.5 million. During the year
ended December 31, 2020, the Company repurchased $4.7 million of its outstanding Senior Unsecured Notes in the open
market, resulting in a net gain on debt extinguishment of $0.8 million. All repurchased Senior Unsecured Notes were
canceled. The Company used cash flows from operating activities and borrowings under its revolving credit facility to
fund the repurchases. These repurchases were completed primarily to reduce interest expense.
Each of the Company’s existing and future domestic subsidiaries that is a borrower or guarantees indebtedness
under the Company’s Senior Secured Credit Facility or that guarantees certain of the Company’s other indebtedness or
indebtedness of the Company’s restricted subsidiaries (other than intercompany indebtedness) fully and unconditionally
guarantee or, in the case of future subsidiaries, will guarantee, on a joint and several basis, the Senior Unsecured Notes
(the “Guarantor Subsidiaries”). All of the Guarantor Subsidiaries are 100% owned by the Company. Guarantor
Subsidiaries will be automatically released from these guarantees upon the occurrence of certain events.
99
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
International Debt Obligations
The Company has two fixed rate, Euro denominated, international term loans for purposes of financing certain
capital expenditures and general business needs. The first international term loan in the amount of $21.7 million was
entered into on December 28, 2015, was fully funded during 2016 with a term of six years, and matured on
December 28, 2021. The second international term loan in the amount of $12.8 million was entered into on
December 21, 2018, bears interest at 1.96% and has a term of five years, maturing on December 31, 2023. As of
December 31, 2021, $5.3 million remained outstanding on the second international term loan.
The Company has two multicurrency international revolving credit facilities that are used for financing working
capital and general business needs. The Company had $8.8 million of borrowings outstanding at a weighted average
interest rate of 1.68% on the international revolving credit facilities as of December 31, 2021, leaving $7.3 million
available for future borrowing. The terms of the international revolving credit facilities includes certain financial
covenants, a guarantee of the international revolving credit facilities by the Company and a security agreement that
includes collateralizing substantially all of the Quad Europe Sp. z.o.o. assets. The first multicurrency international
revolving credit facility expires on October 29, 2022, and bears interest at the aggregate of the Warsaw Interbank
Offered Rate (“WIBOR”) plus 1.40% for any Polish Zloty denominated borrowings, the aggregate of Euro Interbank
Offered Rate (“EURIBOR”) plus 1.45% for any Euro denominated borrowings or the aggregate of British pound sterling
LIBOR plus 1.45% for any British pound sterling denominate borrowings. The second multicurrency international
revolving credit facility expires on December 16, 2022, and bears interest at the aggregate of WIBOR plus 1.00% for any
Polish Zloty denominated borrowings or the aggregate of EURIBOR plus 1.00% for any Euro denominated borrowings.
Fair Value of Debt
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 $0.8 billion and $0.9 billion at December 31, 2021 and 2020,
respectively. The fair value determination of the Company’s total debt was categorized as Level 2 in the fair value
hierarchy (see Note 15, “Financial Instruments and Fair Value Measurements,” for the definition of Level 2 inputs). As
of December 31, 2021, approximately $1.6 billion of the Company’s assets were pledged as security under various loans
and other agreements.
100
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Debt Issuance Costs
The debt issuance costs are amortized on a straight-line basis over the lives of the related debt instruments.
Activity impacting the Company’s capitalized debt issuance costs for the years ended December 31, 2021 and 2020, was
as follows:
Capitalized Debt
Issuance Costs
Balance at January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Debt issuance costs from June 29, 2020 debt financing arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on debt extinguishment from January 31, 2019 debt financing arrangement . . . . . . . . . . . . . . . . . . . . .
Loss on debt extinguishment from Master Note and Security Tender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs from November 2, 2021 debt financing arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write off of debt issuance costs from Term Loan A pre-payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9.3
2.6
(2.3)
(0.2)
(2.5)
6.9
5.2
(0.4)
(2.6)
9.1
Loss on Debt Extinguishment
2021 Loss on Debt Extinguishment
The loss on debt extinguishment recorded during the year ended December 31, 2021, was comprised of the
following:
Debt issuance costs from November 2, 2021 debt financing arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loss on debt extinguishment from Senior Unsecured Note Repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.2
0.5
0.7
2021 Loss on Debt
Extinguishment
2020 Loss on Debt Extinguishment
The loss on debt extinguishment recorded during the year ended December 31, 2020, was comprised of the
following:
Debt issuance costs from January 31, 2019 debt financing arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Debt issuance costs from June 29, 2020 debt financing arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on debt extinguishment from Master Note and Security Tender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on debt extinguishment from Senior Unsecured Note Repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.3
0.1
0.2
(0.8)
1.8
2020 Loss on Debt
Extinguishment
101
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
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). Among these covenants, the Company was required to
maintain the following as of December 31, 2021:
•
•
•
Total Leverage Ratio. On a rolling twelve-month basis, the Total Leverage Ratio, defined as consolidated
total indebtedness to consolidated EBITDA, shall not exceed 3.75 to 1.00 (for the twelve months ended
December 31, 2021, the Company’s Total Leverage Ratio was 3.22 to 1.00).
Liquidity, defined as unrestricted cash and permitted investments of the Company and its subsidiaries
(subject to certain conditions) plus the aggregate amount of the unused revolving credit facility
commitments, shall not be less than $181.6 million at any time during the period commencing December
15, 2023 and ending when all obligations owed under the Senior Secured Credit Facility to lenders that are
not extending lenders are paid in full.
If there is any amount outstanding on the Revolving Credit Facility or Term Loan A, or if any lender has
any revolving credit exposure or Term Loan A credit exposure, the Company is required to maintain the
following:
◦
•
Senior Secured Leverage Ratio. On a rolling four-quarter basis, the Senior Secured Leverage
Ratio, defined as the ratio of consolidated senior secured net indebtedness to consolidated
EBITDA, shall not exceed (a) 3.50 to 1.00 for any fiscal quarter ending prior to December 31,
2023, and (b) 3.25 to 1.00 for any fiscal quarter ending on or after December 31, 2023 (other than,
in the case of this clause (b), any fiscal quarter ending September 30 of any year, each of which
shall be subject to a maximum Senior Secured Leverage Ratio not to exceed 3.50 to 1.00) (for the
twelve months ended December 31, 2021, the Company’s Senior Secured Leverage Ratio was
1.68 to 1.00).
Interest Coverage Ratio. On a rolling twelve-month basis, the Interest Coverage Ratio, defined as
consolidated EBITDA to cash consolidated interest expense, shall not be less than 3.00 to 1.00 (for
the twelve months ended December 31, 2021, the Company’s Interest Coverage Ratio was
5.35 to 1.00).
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.
102
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
In addition to those covenants, the Senior Secured Credit Facility also includes certain limitations on
acquisitions, indebtedness, liens, dividends and repurchases of capital stock.
•
•
If the Company’s Total Leverage Ratio is greater than 2.75 to 1.00, the Company is prohibited from
making greater than $60.0 million of dividend payments, capital stock repurchases and certain other
payments, over the course of the agreement. If the Company’s Total Leverage Ratio is above 2.50 to 1.00
but below 2.75 to 1.00, the Company is prohibited from making greater than $100.0 million of dividend
payments, capital stock repurchases and certain other payments, over the course of the agreement. If the
Total Leverage Ratio is less than 2.50 to 1.00, there are no such restrictions. As the Company’s Total
Leverage Ratio as of December 31, 2021, was 3.22 to 1.00, the limitations described above are currently
applicable.
If the Company’s Senior Secured Leverage Ratio is greater than 3.00 to 1.00 or the Company’s Total Net
Leverage Ratio which, on a rolling twelve-month basis, is defined as consolidated net indebtedness to
consolidated EBITDA, is greater than 3.50 to 1.00, the Company is prohibited from voluntarily prepaying
any of the Senior Unsecured Notes and from voluntarily prepaying any other unsecured or subordinated
indebtedness, with certain exceptions (including any mandatory prepayments on the Senior Unsecured
Notes or any other unsecured or subordinated debt). If the Senior Secured Leverage Ratio is less than
3.00 to 1.00 and the Total Net Leverage Ratio is less than 3.50 to 1.00, there are no such restrictions. The
limitations described above are currently not applicable, as the Company’s Senior Secured Leverage Ratio
was 1.68 to 1.00 and Total Net Leverage Ratio was 2.53 to 1.00, as of December 31, 2021.
Estimated Principal Payments
The approximate annual principal amounts due on long-term debt, excluding $9.1 million for future
amortization of debt issuance costs, at December 31, 2021, were as follows:
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
245.8
50.2
146.2
70.5
296.9
809.6
Principal Payments
Note 13. Leases
The Company determines if an arrangement is or contains a lease at contract inception. The Company
recognizes a right-of-use (“ROU”) asset and a lease liability at the lease commencement date.
For operating and finance leases, the lease liability is initially measured at the present value of the unpaid lease
payments at the lease commencement date, and is subsequently measured at amortized cost using the effective interest
method.
Key estimates and judgments include how the Company determines the discount rate, lease term and lease
payments.
•
ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease
or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, the Company
103
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
cannot determine the implicit interest rate as it does not have access to the lessor’s estimated residual value
or the amount of the lessor’s deferred initial direct costs. Therefore, the Company generally uses its
incremental borrowing rate as the discount rate for the lease. The Company’s incremental borrowing rate
for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to
the lease payments under similar terms based on the published United States Treasury rates as well as the
Company’s credit rating at implementation or at the lease inception date.
The lease term for all of the Company’s leases includes the non-cancelable period of the lease, plus or
minus any additional periods covered by an option to extend or terminate the lease that the Company is
reasonably certain to exercise.
Lease payments included in the lease liability are comprised of fixed payments as well as any exercise price
of a Company option to purchase the underlying asset if the Company is reasonably certain to exercise.
The Company’s leases do not contain variable lease payments.
•
•
ROU assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted for
lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease
incentives received. For operating leases, the ROU asset is subsequently amortized by the straight-line lease expense
adjusted by the lease liability accretion over the lease term.
For finance leases, the ROU asset is subsequently amortized on a straight-line basis from the lease
commencement date to the earlier of the end of its useful life or the end of the lease term. Amortization of the ROU
asset is recognized and presented separately from interest expense on the lease liability.
The Company’s ROU assets for both operating and finance leases are reviewed for impairment losses on a
quarterly basis in line with ASC 360-10 — Property, Plant, and Equipment — Overall. The Company has not
recognized any impairment losses to date from continuing operations.
The Company also monitors its leases for events or changes in circumstances that require a reassessment of the
lease. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the
carrying amount of the ROU asset.
Operating leases are included in operating lease right-of-use assets—net, current portion of operating lease
obligations, and operating lease obligations in the consolidated balance sheets. Finance leases are included in property
and equipment—net, current portion of finance lease obligations, and finance lease obligations in the consolidated
balance sheets.
The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have an
original lease term of twelve months or less. Therefore, the Company recognizes the lease payments associated with
these short-term leases as an expense over the lease term in the consolidated statement of operations.
104
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Practical Expedients
The Company has elected to apply the following practical expedients allowed under ASU 842:
•
The Company elected the practical expedient package and therefore did not reassess for any existing leases:
◦
◦
◦
whether contracts are or contain leases;
the lease classification for any existing leases; and
any initial direct costs.
•
•
•
The Company elected the practical expedient related to land easements, allowing to carry forward the
accounting treatment for land easements on existing agreements.
The Company used “hindsight” judgments that impact the lease term.
The Company elected to combine lease and non-lease components into one lease component for select
underlying lease asset categories. Real estate leases are accounted for separately while all other leases,
primarily equipment leases, with separate lease and non-lease components are accounted for as a single
lease component.
Leases Financial Information
The Company enters into various lease agreements for real estate, such as office space and manufacturing
facilities, as well as equipment leases, including press, finishing and transportation equipment. Many of these leases
provide the Company with options to renew, terminate, or in the case of equipment leases, purchase the related
equipment at the termination value, as defined, and at various early buyout dates during the term of the lease. In general,
the Company has determined these options were not reasonably certain to be exercised, and therefore are not included in
the determination of the lease term.
105
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
The following summarizes certain lease information for the years ended December 31, 2021 and 2020:
Year Ended
Year Ended
December 31, 2021
December 31, 2020
Lease cost
Finance lease cost:
Amortization of right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest on lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sublease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2.9
0.2
28.4
—
(2.0)
Total lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
29.5
$
Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
$
Operating cash flows from operating leases . . . . . . . . . . . . . . . . . . . . . . . .
Financing cash flows from finance leases . . . . . . . . . . . . . . . . . . . . . . . . . .
Right-of-use assets obtained in exchange for new finance lease liabilities . . .
Right-of-use assets obtained in exchange for new operating lease liabilities .
Weighted-average remaining lease term — finance leases . . . . . . . . . . . . . . .
Weighted-average remaining lease term — operating leases . . . . . . . . . . . . .
Weighted-average discount rate — finance leases . . . . . . . . . . . . . . . . . . . . . .
Weighted-average discount rate — operating leases . . . . . . . . . . . . . . . . . . . .
27.9
3.0
1.4
74.6
2.3 years
5.7 years
4.5 %
5.4 %
3.6
0.4
32.6
0.3
(2.5)
34.4
—
33.4
6.6
1.4
15.0
2.0 years
4.0 years
5.0 %
6.3 %
The components of finance lease assets at December 31, 2021 and 2020, were as follows:
Leased equipment—gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased equipment—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021
2020
23.8 $
(20.7)
3.1 $
26.1
(20.5)
5.6
106
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Future maturities of lease liabilities at December 31, 2021, were as follows:
Future Maturities of
Operating Leases
Future Maturities of
Finance Leases
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
34.4 $
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: present value discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value of minimum payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29.5
21.9
17.8
14.5
30.1
148.2
(20.3)
127.9
(28.1)
Long-term lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
99.8 $
Note 14. Income Taxes
1.9
0.8
0.4
0.3
—
—
3.4
(0.2)
3.2
(1.8)
1.4
Income taxes from continuing operations have been based on the following components of earnings (loss) from
continuing operations before income taxes and equity in (earnings) loss of unconsolidated entity for the years ended
December 31, 2021 and 2020:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
52.4 $
(108.8)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5.4)
2.7
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
47.0 $
(106.1)
2021
2020
The components of income tax expense (benefit) from continuing operations for the years ended December 31,
2021, and 2020, were as follows:
Federal:
2021
2020
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.9 $
3.2
—
—
3.3
2.1
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9.5 $
(47.3)
32.3
(1.5)
17.0
0.6
(0.8)
0.3
107
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
The following table outlines the reconciliation of differences between the Federal statutory tax rate and the
Company’s income tax expense (benefit) from continuing operations for the years ended December 31, 2021 and 2020:
Federal statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustment to valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment on investment in Plural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact from foreign branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment of deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment of uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit of Net Operating Loss Carryback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021
2020
9.9 $
(17.1)
6.2
4.5
3.5
(1.9)
0.2
(0.1)
—
4.3
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9.5 $
(22.3)
13.1
—
2.1
2.0
(1.3)
0.8
15.4
(14.3)
4.8
0.3
The $17.1 million adjustment to valuation allowance in 2021 primarily relates to releasing reserves related to
deferred tax assets for net operating losses and interest limitation. The $13.1 million adjustment to valuation allowance
in 2020 primarily relates to establishing reserves related to deferred tax assets for net operating losses, credits and
interest limitation that were not expected to be realized in the future for federal income tax purposes. The $0.1 million
effective rate reconciling item for State taxes, net of federal benefit, in 2021 includes a $4.8 million adjustment for
partial release of valuation allowance reserves. The $15.4 million effective rate reconciling item for State taxes, net of
federal benefit, in 2020 includes a $19.1 million adjustment to valuation allowance primarily related to net operating
losses and credits that are not expected to be realized in the future for state income tax purposes.
On March 27, 2020, the United States government passed into law the Coronavirus Aid, Relief, and Economic
Security Act (the “CARES act”). This legislation included significant tax provisions and other measures to assist
individuals and businesses impacted by the economic effects of the COVID-19 pandemic. The $14.3 million rate
reconciling item for Benefit of Net Operating Loss Carryback in 2020, primarily relates to the provision from the
CARES act allowing a net operating loss (“NOL”) generated in 2019 and 2020 to be carried back five years to years
when the federal statutory tax rate was 35%. The amount of NOL available to be carried back was increased by other
provisions in the CARES act that temporarily increased the amount of interest expense businesses were allowed to
deduct in 2019 and 2020.
108
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Deferred Income Taxes
The significant deferred tax assets and liabilities as of December 31, 2021 and 2020, were as follows:
2021
2020
Deferred tax assets:
Net operating loss and other tax carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
125.2 $
145.9
Goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and workers compensation benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24.4
21.9
12.9
11.5
8.1
6.5
10.8
221.3
(116.3)
19.0
33.2
20.5
18.2
10.1
7.2
9.8
263.9
(143.9)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
105.0 $
120.0
Deferred tax liabilities:
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(99.2) $
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5.9)
(105.1)
(103.8)
(4.2)
(108.0)
Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(0.1) $
12.0
The Company has recorded deferred income tax liabilities of $11.9 million and $4.2 million as of December 31,
2021 and 2020, respectively, which were included in deferred income taxes in the consolidated balance sheets. The
Company has also recorded deferred income tax assets of $11.8 million and $16.2 million as of December 31, 2021 and
2020, respectively, which were included in other long-term assets in the consolidated balance sheets.
At December 31, 2021, the Company had the following gross amounts of tax-related carryforwards:
•
•
Net operating loss carryforwards of $46.5 million, $42.6 million and $612.1 million for federal, foreign and
state, respectively. The federal net operating loss carryforward was generated in 2020 and is available
without expiration. Of the foreign net operating loss carryforwards, $11.8 million is available without
expiration, while the remainder expires through 2041. The state net operating loss carryforwards expire in
varying amounts through 2041.
Various credit carryforwards of $9.0 million, $26.5 million and $35.8 million for federal, foreign and state,
respectively. The federal carryforward expires in 2040, the foreign credit carryforward expires in 2026,
and the state credit carryforwards include $25.4 million that is available without expiration, while the
remainder expires through 2041.
109
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
As of December 31, 2021, the Company has recorded a valuation allowance of $116.3 million on its
consolidated balance sheet primarily related to the tax-affected amounts of the above carryforwards. The valuation
allowance includes $6.4 million, $39.3 million and $70.6 million of federal, foreign and state deferred tax assets,
respectively, that are not expected to be realized.
Uncertain Tax Positions
The following table summarizes the activity of the Company’s liability for unrecognized tax benefits at
December 31, 2021 and 2020:
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
11.6 $
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapses of applicable statutes of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.5
(0.3)
(0.1)
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
11.7 $
17.8
0.9
(6.1)
(1.0)
11.6
2021
2020
As of December 31, 2021, $5.2 million of unrecognized tax benefits would impact the Company’s effective tax
rate, if recognized. Of that amount, it is reasonably possible that $0.5 million of the total amount of unrecognized tax
benefits will decrease within the next twelve months due to resolution of income tax audits or statute expirations.
The Company classified interest income and any related refunds related to income tax uncertainties as a
component of income tax expense. The following table summarizes the Company’s interest income related to tax
uncertainties and refunds recognized during the years ended December 31, 2021 and 2020:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021
2020
(0.5) $
(0.1)
(0.3)
—
Accrued interest and penalties related to income tax uncertainties are reported as components of other current
liabilities and other long-term liabilities in the consolidated balance sheets. The following table summarizes the
Company’s liabilities for accrued interest and penalties related to income tax uncertainties at December 31, 2021 and
2020:
December 31, 2021
December 31, 2020
Accrued
interest
Accrued
penalties
Accrued
interest
Accrued
penalties
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
0.2
0.2 $
— $
—
— $
0.5 $
0.1
0.6 $
0.1
—
0.1
The Company has tax years from 2013 through 2021 that remain open and subject to examination by the
Internal Revenue Service. Tax years from 2013 through 2021 remain open and subject to examination in the Company’s
various major state jurisdictions within the United States.
The Company’s practice and intention is to reinvest certain earnings of its non-U.S. subsidiaries in those
operations. The Company has analyzed its global working capital and cash requirements and the potential tax liabilities
attributable to repatriation of earnings, and has determined not to change its permanent reinvestment assertion. The
Company does not have significant prior year untaxed, undistributed earnings from its foreign operations at
110
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
December 31, 2021, and the Company does not provide for, nor expect to incur, any significant, additional taxes which
could become payable upon repatriation of such amounts.
Note 15. 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 Level 3 recurring measurements of
assets or liabilities as of December 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 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 $3.4 million of this balance to interest expense over the next twelve months.
Effective date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 29, 2019
Termination date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 28, 2024
February 28, 2017
February 28, 2022
Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notional amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed swap rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 years
$130.0
2.43%
5 years
$250.0
1.89%
March 19, 2019
Interest Rate Swap
February 7, 2017
Interest Rate Swap
111
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
The Company classifies the interest rate swaps as Level 2 because the inputs into the valuation model are
observable or can be derived or corroborated utilizing observable market data at commonly quoted intervals. The fair
values of the interest rate swaps classified as Level 2 as of December 31, 2021 and 2020, were as follows:
Interest rate swap liabilities . . . . . . . . . . . . . . . . Other current liabilities
$
Interest rate swap liabilities . . . . . . . . . . . . . . . . Other long-term liabilities
(0.7) $
(4.4)
—
(14.4)
Balance Sheet Location
December 31, 2021
December 31, 2020
Prior to the Company’s de-designation of the interest rate swaps as cash flow hedges, the interest rate swaps
were considered highly effective, with no amount of ineffectiveness recorded into earnings. The changes in the fair
value of the interest rate swaps have been included in other comprehensive loss in the consolidated statements of
comprehensive income (loss) through the first quarter of 2020, and have been recorded as an adjustment to interest
expense in the consolidated statements of operations in the periods thereafter. The cash flows associated with the interest
rate swaps have been recognized as an adjustment to interest expense in the consolidated statements of operations:
Year Ended December 31,
2021
2020
Cash Flow Impacts
Net interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7.6 $
5.6
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 . . . . $
(9.3) $
Amounts reclassified out of accumulated other comprehensive loss to interest expense . . . . .
Net interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.1
7.6
Total impact of swaps to interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5.4 $
(3.1)
3.6
5.6
6.1
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 December 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 years ended December 31, 2021 and 2020, as the Company takes delivery in the normal course of business.
112
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
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 12, “Debt,” for the fair value of the
Company’s debt as of December 31, 2021.
Nonrecurring Fair Value Measurements
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required
to record certain assets and liabilities at fair value on a nonrecurring basis, generally as a result of acquisitions or the
remeasurement of assets resulting in impairment charges. See Note 4, “Discontinued Operations”; Note 5,
“Restructuring, Impairment and Transaction-Related Charges”; Note 6, “Goodwill and Other Intangible Assets”; 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.
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 December 31, 2021 and 2020. See Note 16, “Employee Retirement Plans,” for
the details of Level 1 and Level 2 inputs related to employee retirement plans.
Note 16. Employee Retirement Plans
Defined Contribution Plans
The Quad/Graphics, Inc. Diversified Plan is comprised of participant-directed 401(k) contributions, Company
match and profit sharing contributions, with total participant assets of $2.3 billion as of December 31, 2021. Company
401(k) matching contributions were $13.2 million and $11.7 million for the years ended December 31, 2021 and 2020,
respectively. The Company’s 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 for the years ended
December 31, 2021 and 2020.
Defined Benefit 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 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.
113
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
The components of net pension income for the years ended December 31, 2021 and 2020, were as follows:
Pension Benefits
2021
2020
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(8.8) $
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic benefit income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24.2
15.4
(0.9)
Net pension income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
14.5 $
(13.6)
24.2
10.6
(0.1)
10.5
The Company made $0.8 million in benefit payments to its non-qualified defined benefit pension plans and
made $0.8 million in contributions to its qualified defined benefit pension plans during the year ended December 31,
2021.
The Company incurred non-cash settlement charges of $0.9 million during the year ended December 31, 2021
due to the significance of lump sum payments made in the current year. The non-cash settlement charges result in
accelerated recognition of actuarial losses on the consolidated statement of operations.
The underfunded pension obligations are calculated using generally accepted actuarial methods and are
measured annually as of December 31. The following table provides a reconciliation of the projected benefit obligation,
fair value of plan assets and the funded status of the pension plans as of December 31, 2021 and 2020:
Pension Benefits
2021
2020
Changes in benefit obligation
Projected benefit obligation, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(525.6) $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liability benefit from settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8.8)
23.1
47.5
1.1
(515.7)
(13.6)
(40.5)
43.6
0.6
Projected benefit obligation, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(462.7)
(525.6)
Changes in plan assets
Fair value of plan assets, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
469.0
20.4
1.6
(47.5)
443.5
436.8
68.0
7.8
(43.6)
469.0
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(19.2) $
(56.6)
The net underfunded defined benefit plan obligations decreased by $37.4 million during the year ended
December 31, 2021. This decrease was primarily due to a 40 basis point increase in the pension discount rate from
2.37% at December 31, 2020, to 2.77% at December 31, 2021 and $1.6 million of employer contributions. The asset
increase was partially offset by an actual return on pension plan assets of 5.11% during the year ended December 31,
2021, which was below the expected return on plan assets assumption of 5.50%.
114
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Amounts recognized on the consolidated balance sheets as of December 31, 2021 and 2020, were as follows:
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Pension Benefits
2021
2020
(1.6) $
(17.6)
(19.2) $
(1.7)
(54.9)
(56.6)
The following table provides a reconciliation of the Company’s accumulated other comprehensive loss prior to
any deferred tax effects at December 31, 2021 and 2020:
Balance at January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(41.4)
Amount arising during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of pension plan settlement charge included in net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount arising during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of pension plan settlement charge included in net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3.2
0.1
(38.1)
20.3
0.9
(16.9)
Actuarial Gain /
(Loss), net
Actuarial gains and losses in excess of 10% of the greater of the projected benefit obligation or the market-
related value of plan assets are recognized as a component of net periodic benefit costs over the average remaining
service period of a plan’s active employees. Unrecognized prior service costs or credits are also recognized as a
component of net periodic benefit cost over the average remaining service period of a plan’s active employees.
The weighted average assumptions used to determine net periodic benefit costs for the years ended
December 31, 2021 and 2020, were as follows:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension Benefits
2021
2020
2.37 %
5.50 %
3.20 %
5.75 %
The weighted average assumptions used to determine pension benefit obligations at December 31, 2021 and
2020, were as follows:
Discount rate (end of year rate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.77 %
2.37 %
The Company determines its assumed discount rate based on an index of high-quality corporate bond yields and
matched-funding yield curve analysis as of the measurement date.
Pension Benefits
2021
2020
115
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Estimated Company Contributions and Benefit Payments
In 2022, the Company does not expect to make any cash contributions to its qualified defined benefit pension
plans and expects to make estimated benefit payments of $1.6 million to its non-qualified defined benefit pension plans.
The actual pension contributions may differ based on the funding calculations, and the Company may choose to make
additional discretionary contributions. The estimated benefit payments may differ based on actual experience.
Estimated Future Benefit Payments by the Plans to or on Behalf of Plan Participants
An estimate of the Plans’ present value of future benefit payments to be made from funded qualified plans and
unfunded non-qualified plans to plan participants at December 31, 2021, were as follows:
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 - 2031 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Plan Assets and Investment Strategy
Future Pension
Benefit Payments
37.0
34.9
33.9
33.1
32.0
141.0
150.8
462.7
The Company follows a disciplined investment strategy, which provides diversification of investments by asset
class, foreign currency, sector and company. The Pension Committee has an approved investment policy for the pension
plan that establishes long-term asset mix targets based on several factors including the following: the funded status,
historical returns achieved by worldwide investment markets, the time horizon of the pension plan’s obligations, and the
investment risk. An allocation range by asset class is developed whereby a mix of equity securities and debt securities
are used to provide an appropriate risk-adjusted long-term return on plan assets. Third-party investment managers are
employed to invest assets in both passively-indexed and actively-managed strategies and investment returns and risks are
monitored on an ongoing basis. Derivatives are used at certain times to hedge foreign currency exposure. Gains or
losses on the derivatives are offset by a corresponding change in the value of the hedged assets. Derivatives are strictly
used for hedging purposes and not speculative purposes.
The current target allocations for plan assets on a weighted average basis are 25% equity securities and
75% debt securities, including cash and cash equivalents. The actual asset allocation as of December 31, 2021, and as of
December 31, 2020, was approximately 26% equity securities and 74% debt securities. Equity investments are
diversified by country, issuer and industry sector. Debt securities primarily consist of government bonds and corporate
bonds from diversified industries.
The expected long-term rate of return on assets assumption is selected by first identifying the expected range of
long-term rates of return for each major asset class. Expected long-term rates of return are developed based on long-term
historical averages, current expectations of future returns and anticipated inflation rates. The expected long-term rate of
return on plan assets is then calculated by weighting each asset class.
116
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
The fair values of the Company’s pension plan assets at December 31, 2021 and 2020, by asset category were as
follows:
December 31, 2021
December 31, 2020
Asset Category
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Cash and cash equivalents . . . . . . .
$
3.2 $
3.2 $ — $ — $
5.3 $
5.3 $ — $ —
Debt securities . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . .
120.6
22.2
—
—
120.6
22.2
—
—
125.7
28.9
—
—
125.7
28.9
—
—
Total pension plan assets,
excluding those measured at net
asset value (“NAV”) . . . . . . . . . .
146.0 $
3.2 $ 142.8 $ —
159.9 $
5.3 $ 154.6 $ —
Investments measured at NAV (1)
Total pension plan assets . . . . . . . .
. .
297.5
$ 443.5
309.1
$ 469.0
______________________________
(1)
These investments consist of privately placed funds that are valued based on NAV. NAV of the funds is based on the fair value
of each fund’s underlying investments. In accordance with ASC Subtopic 820-10, certain investments that are measured at fair
value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.
There were no Level 3 assets as of December 31, 2021 and 2020. See Note 15, “ Financial Instruments and Fair
Value Measurements,” for definitions of fair value levels.
The Company segregated its plan assets by the following major categories and levels for determining their fair
value as of December 31, 2021:
Cash and cash equivalents. Carrying value approximates fair value and these assets are classified as Level 1.
Debt Securities. This category consists of bonds, short-term fixed income securities and fixed income pooled
funds fair valued based on a compilation of primarily observable market information or broker quotes in over-
the-counter markets and are classified as Level 2.
Equity Securities. This category consists of equity pooled funds that are classified as Level 2 in the fair value
hierarchy. Level 2 assets are valued using quoted prices in markets that are not active, broker dealer quotations,
and other methods by which all significant input was observable at the measurement date.
The valuation methodologies described above may generate a fair value calculation that may not be indicative
of net realizable value or future fair values. While the Company believes the valuation methodologies used are
appropriate, the use of different methodologies or assumptions in calculating fair value could result in different amounts.
The Company invests in various assets in which valuation is determined by NAV. The Company believes that NAV is
representative of fair value at the reporting date, as there are no significant restrictions on redemption on these
investments or other reasons to indicate that the investment would be redeemed at an amount different than NAV.
117
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
The fair value measurements in common/collective trusts, calculated using a NAV and their redemption
restrictions, for the years ended December 31, 2021 and 2020, are as follows:
Fair Value
2021
2020
Redemption
Frequency (If
Currently Eligible)
Redemption
Notice Period
JP Morgan Chase Bank Strategic Property Fund . . $
12.8 $
12.8 Quarterly
Pyramis Long Corporate A or Better . . . . . . . . . . . .
Pyramis Long Duration . . . . . . . . . . . . . . . . . . . . . .
Pyramis 810 Corporate . . . . . . . . . . . . . . . . . . . . . .
Russell 3000 Index NL . . . . . . . . . . . . . . . . . . . . . .
55.4
46.9
101.3
81.1
98.5 Daily
98.8 Daily
— Daily
99.0 Daily
Total value of investments measured at NAV . . . . . $
297.5 $
309.1
30 days
15 days
15 days
15 days
1 day
Risk Management
For all directly invested funds, the concentration risk is monitored through specific guidelines in the investment
manager mandates. The investment manager mandates were developed by the Company’s external investment advisor,
and specify diversification standards such as the maximum exposure per issuer, and concentration limits per type of
security, industry and country when applicable.
For the investments made through pooled funds, the investment mandates of the funds were again reviewed by
the Company’s external investment advisor, to determine that the investment objectives and guidelines were consistent
with the Company’s overall pension plan risk management objectives. In managing the plan assets, management
reviews and manages risk associated with funded status risk, interest rate risk, market risk, counterparty risk, liquidity
risk and operational risk. Liability management and asset class diversification are central to the Company’s risk
management approach and are integral to the overall investment strategy.
Given the process in place to ensure a proper diversification of the portfolio, management believes that the
Company pension plan assets are not exposed to significant concentration risk.
Multiemployer Pension Plans
The Company has previously participated in a number of MEPPs under terms of collective bargaining
agreements that cover a number of its employees. The risks of participating in these MEPPs are different from single
employer plans in the following aspects:
•
•
•
Assets contributed to the MEPPs by one company may be used to provide benefits to employees of other
participating companies.
If a participating company stops contributing to the plan, the unfunded obligations of the plan may be borne
by the remaining participating companies.
If the Company stops participating in some or all of its MEPPs, and continues in business, the Company
would be required to pay an amount, referred to as a withdrawal liability, based on the unfunded status of
the plan.
118
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
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 GCIU and GCC, are significantly underfunded, and will require the Company to pay a withdrawal liability
to fund its pro rata share of the underfunding as of the plan year the full withdrawal was completed. As a result of the
decision to withdraw, the Company accrued the estimated withdrawal liability based on information provided by each
plan’s trustee, as part of the purchase price allocation for World Color Press.
The GCIU Plan is a defined benefit plan that provides retirement benefits, total and permanent disability
benefits, and pre-retirement death benefits for the participating union employees of the Company. The funded status of
the GCIU Plan is classified as critical and declining based on the GCIU Plan’s 2021 certification to the United States
Department of Labor, as the funded percentage for the plan is less than 65%, and the plan is projected to become
insolvent in 2031. As a result, the GCIU Plan implemented a rehabilitation plan to improve the plan’s funded status. In
2019, the Company and the GCIU reached a settlement agreement for all claims, with scheduled payments until April
2032.
The GCC Plan is a defined benefit plan that provides retirement benefits, disability benefits, and early
retirement benefits for the participating union employees of the Company. The funded status of the GCC Plan is
classified as critical and declining based on the GCC Plan’s 2021 certification to the United States Department of Labor,
as the funded percentage for the plan is less than 65%, and the plan is projected to become insolvent by 2023. As a
result, the GCC Plan implemented a rehabilitation plan to improve the plan’s funded status. In 2016, the Company and
the GCC reached a settlement agreement for all claims, with scheduled payments until February 2024.
The Company made payments totaling $6.2 million and $11.4 million for the years ended December 31, 2021
and 2020, respectively. The Company has reserved $32.2 million as the total MEPPs withdrawal liability as of
December 31, 2021, of which $28.4 million was recorded in other long-term liabilities and $3.8 million was recorded in
other current liabilities in the consolidated balance sheets.
Note 17. Earnings (Loss) Per Share Attributable to Quad Common Shareholders
Basic earnings (loss) per share attributable to Quad common shareholders is computed as net earnings (loss)
attributable to Quad common shareholders, divided by the basic weighted average common shares outstanding. The
calculation of diluted earnings (loss) per share attributable to Quad common shareholders includes the effect of any
dilutive equity incentive instruments. The Company uses the treasury stock method to calculate the effect of outstanding
dilutive equity incentive instruments, which requires the Company to compute total proceeds as the sum of the amount
the employee must pay upon exercise of the award and the amount of unearned stock-based compensation costs
attributed to future services.
Equity incentive instruments for which the total employee proceeds from exercise exceed the average fair value
of the same equity incentive instrument over the period have an anti-dilutive effect on earnings per share during periods
with net earnings, and accordingly, the Company excludes them from the calculation. Anti-dilutive equity instruments
excluded from the computation of diluted net earnings per shares were 0.4 million class A common shares for the year
ended December 31, 2021. Due to the net loss incurred during the year ended December 31, 2020, the assumed exercise
of all equity incentive instruments was anti-dilutive and therefore, not included in the diluted loss per share calculation.
119
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 for the years ended December 31, 2021 and 2020, are summarized as follows:
Numerator:
Net earnings (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
37.8 $
Less: net loss attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) from continuing operations attributable to Quad common shareholders . . . . .
Loss from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
37.8
—
(106.6)
(0.2)
(106.4)
(21.9)
2021
2020
Net earnings (loss) attributable to Quad common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . $
37.8 $
(128.3)
Denominator:
Basic weighted average number of common shares outstanding for all classes of common stock
Plus: effect of dilutive equity incentive instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted weighted average number of common shares outstanding for all classes of common
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51.3
1.7
53.0
Earnings (loss) per share attributable to Quad common shareholders:
Basic:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.74 $
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Basic earnings (loss) per share attributable to Quad common shareholders . . . . . . . . . . . . . . . . . $
0.74 $
Diluted:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.71 $
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Diluted earnings (loss) per share attributable to Quad common shareholders . . . . . . . . . . . . . . . . $
0.71 $
50.6
—
50.6
(2.10)
(0.43)
(2.53)
(2.10)
(0.43)
(2.53)
Cash dividends paid per common share for all classes of common shares . . . . . . . . . . . . . . . . . . $
— $
0.15
Note 18. 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, 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.
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
120
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
than 100% of the fair market value of the class A common stock on the date of grant. There were 2,946,300 shares of
class A common stock reserved for issuance under the 2020 Plan as of December 31, 2021. Authorized unissued shares
or treasury shares may be used for issuance under the Company’s equity incentive programs. The Company plans to
either use treasury shares of its class A common stock or issue shares of class A common stock to meet the stock
requirements of its awards in the future.
The Company recognizes compensation expense based on estimated grant date fair values for all share-based
awards issued to employees and non-employee directors, including stock options, performance shares, performance share
units, restricted stock, restricted stock units and deferred stock units. The Company recognizes these compensation costs
for only those awards expected to vest, on a straight-line basis over the requisite three to four year service period of the
awards, except DSU awards, which are fully vested and expensed on the grant date. The Company 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 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 years ended December 31, 2021 and 2020, was as follows:
Year ended December 31,
2021
2020
RS and RSU equity awards expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5.4 $
RSU liability awards income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DSU awards expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
0.8
Total equity incentive compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6.2 $
9.7
(0.1)
1.0
10.6
Total future compensation expense related to all equity incentive programs granted as of December 31, 2021, is
estimated to be $4.9 million, which consists entirely of expense for RS and RSU awards. Estimated future compensation
expense is $3.2 million for 2022, $1.5 million for 2023 and $0.2 million for 2024.
Stock Options
Options vested over four years, with no vesting in the first year and one-third vesting upon the second, third and
fourth anniversary dates. Options expire no later than the tenth anniversary of the grant date and are not credited with
dividend declarations. Stock options were only to be granted to employees.
121
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
There were no stock options granted, and no compensation expense was recognized related to stock options
during the years ended December 31, 2021 and 2020. There is no future compensation expense for stock options granted
as of December 31, 2021. The following table is a summary of the stock option activity for the year ended December 31,
2021:
Shares
Under
Option
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(years)
Aggregate
Intrinsic
Value
(millions)
Outstanding and exercisable at December 31, 2020 . . . . . . . . . . . . . . .
514,876 $
27.49
0.5
$
—
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Canceled/forfeited/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding and exercisable at December 31, 2021 (1)
. . . . . . . . . . . . .
(458,842)
56,034 $
—
—
29.12
14.14
______________________________
(1) All stock options outstanding as of December 31, 2021 expire on January 1, 2022.
0.0
$
—
The intrinsic value of options outstanding and exercisable as of December 31, 2021 and 2020, was based on the
fair value of the stock price. All outstanding options are vested as of December 31, 2021. There were no stock options
exercised for the years ended December 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 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 grants 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 RSUs are not entitled to vote
but do earn dividends. Upon vesting, RSUs will be settled either through cash payment equal to the fair market value of
the RSUs on the vesting date or through issuance of Company class A stock. In general, RS and RSU awards will vest
on the third anniversary of the grant date, provided the holder of the share is continuously employed by the Company
until the vesting date.
The following table is a summary of RS and RSU award activity for the year ended December 31, 2021:
Restricted Stock
Restricted Stock Units
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)
Shares
Nonvested at December 31, 2020 .
2,961,750 $
Granted . . . . . . . . . . . . . . . . . . . . . .
1,233,610
Vested . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . .
(576,524)
(565,817)
Nonvested at December 31, 2021 .
3,053,019 $
11.55
3.88
22.55
8.26
6.99
1.3
249,538 $
44,016
(24,742)
(46,719)
1.2
222,093 $
11.70
3.80
17.93
7.11
10.41
1.3
0.5
122
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
In the first quarter of 2019, the Company issued RSU awards in connection with the acquisition of Periscope,
Inc. that are accounted for as liability awards that will vest on March 1, 2022. The awards were recorded at fair value on
the initial issuance date and are remeasured to fair value at each reporting period, with the change in fair value being
recorded in selling, general and administrative expense in the consolidated statements of operations. The change in fair
value of the awards classified as liabilities resulted in no income or expense for the year ended December 31, 2021. As
of December 31, 2021, the fair value of the RSU awards classified as liabilities was $0.5 million and was included in
other current liabilities on the consolidated balance sheets.
In general, RS and RSU awards will vest on the third anniversary of the grant date, provided the holder of the
share is continuously employed by the Company until the vesting date. Compensation expense recognized for RS and
RSUs classified as equity was $5.4 million and $9.7 million for the years ended December 31, 2021 and 2020,
respectively.
Deferred Stock Units
Deferred stock units are awards of rights to shares of the Company’s class A stock and are awarded to non-
employee directors of the Company. The following table is a summary of DSU award activity for the year ended
December 31, 2021:
Outstanding at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend equivalents granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Stock Units
Weighted
Average Grant
Date Fair Value
Per Share
Units
500,961 $
221,616
—
(35,186)
687,391 $
10.69
3.82
—
11.53
8.26
Each DSU award entitles the grantee to receive one share of class A 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 stock. Compensation expense recognized for DSUs was $0.8 million
and $1.0 million for the years ended December 31, 2021 and 2020, respectively. As DSU awards are fully vested on the
grant date, all compensation expense was recognized at the date of grant.
123
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Note 19. Shareholders’ Equity
The Company has three classes of common stock as follows (share data in millions):
Authorized
Shares
Outstanding
Treasury
Total Issued
Shares
Issued Common Stock
Class A stock ($0.025 par value) . . . . . . . . . . . . .
105.0
December 31, 2021 . . . . . . . . . . . . . . . . . . . . .
December 31, 2020 . . . . . . . . . . . . . . . . . . . . .
Class B stock ($0.025 par value) . . . . . . . . . . . . . .
80.0
December 31, 2021 . . . . . . . . . . . . . . . . . . . . .
December 31, 2020 . . . . . . . . . . . . . . . . . . . . .
Class C stock ($0.025 par value) . . . . . . . . . . . . . .
20.0
December 31, 2021 . . . . . . . . . . . . . . . . . . . . .
December 31, 2020 . . . . . . . . . . . . . . . . . . . . .
40.8
40.2
13.5
13.5
—
—
0.9
0.2
—
—
0.5
0.5
41.7
40.4
13.5
13.5
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 stock.
The Company also has 0.5 million shares of $0.01 par value preferred stock authorized, of which none were
issued at December 31, 2021 and 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. Under the authorization, share repurchases may be made
at the Company’s discretion, from time to time, in the open market and/or in privately negotiated transactions as
permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any
repurchase will depend on economic and market conditions, share price, trading volume, applicable legal requirements
and other factors. The program may be suspended or discontinued at any time. There were no shares of the Company’s
class A stock repurchased during the years ended December 31, 2021 and 2020. As of December 31, 2021, there were
$100.0 million of authorized repurchases remaining under the program.
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. The following table
details the dividend activity related to the then outstanding shares of common stock for the year ended December 31,
2020:
Declaration Date
Record Date
Payment Date
Dividend Amount
per Share
2020
Q1 Dividend . . . . . . . . . . . . . . .
February 18, 2020
February 28, 2020
March 9, 2020
0.15
124
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Note 20. Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss by component, net of tax, for the years ended
December 31, 2021 and 2020, were as follows:
Translation
Adjustments
Interest Rate
Swap
Adjustments
Pension
Benefit Plan
Adjustments
Total
Balance at January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . $
(131.0) $
(4.7) $
(31.5) $
(167.2)
Other comprehensive income (loss) before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other
comprehensive loss to net loss . . . . . . . . . . . . . . . . . . . .
Net other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . .
0.2
—
0.2
Balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . .
(130.8)
Other comprehensive income (loss) before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other
comprehensive loss to net earnings . . . . . . . . . . . . . . . .
Net other comprehensive income (loss) . . . . . . . . . . . . . . .
(9.6)
(2.7)
(12.3)
(11.2)
3.6
(7.6)
(12.3)
—
5.6
5.6
3.2
0.1
3.3
(7.8)
3.7
(4.1)
(28.2)
(171.3)
16.1
0.7
16.8
6.5
3.6
10.1
Balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . $
(143.1) $
(6.7) $
(11.4) $
(161.2)
The details about the reclassifications from accumulated other comprehensive loss to net loss for the years
ended December 31, 2021 and 2020, were as follows:
Details about Accumulated Other
Comprehensive Loss Components
Year Ended December 31,
2021
2020
Consolidated Statements of Operations
Presentation
Amortization of amounts accumulated for interest rate
swaps de-designated as cash flow hedges . . . . . . . . . . .
$
Impact of income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of amounts accumulated for interest rate
swaps de-designated as cash flow hedges, net of tax . . .
Reclassification of foreign currency translation
adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of foreign currency translation
adjustments, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan settlements on pension benefit plans . . . . . . . . . . .
Impact of income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Plan settlements on pension benefit plans, net of tax . . .
7.1 $
3.6
Interest expense
(1.5)
5.6
(2.7)
—
(2.7)
0.9
(0.2)
0.7
—
Income tax expense
3.6
—
—
—
Restructuring, impairment and
transaction-related charges
Income tax expense
0.1 Pension income
—
Income tax expense
0.1
Total reclassifications for the period, net of tax
$
3.6 $
3.7
125
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Note 21. Segment Information
As a worldwide marketing solutions partner, Quad leverages its more than 50-year heritage of platform
excellence, innovation, strong culture and social purpose to create a better way for its clients, employees and
communities. 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 December 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.
126
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
The following is a summary of segment information for the years ended December 31, 2021 and 2020:
Net Sales
Products
Services
Operating
Income (Loss)
from Continuing
Operations
Depreciation
and
Amortization
Capital
Expenditures
Restructuring,
Impairment and
Transaction-
Related Charges
Year ended December 31, 2021
United States Print and Related Services . . . . $ 1,935.8 $
International . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating segments . . . . . . . . . . . . . .
2,247.1
311.3
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
20.5
713.3
—
(16.1)
147.0
(54.2)
17.5
156.2
1.1
3.6
50.0
—
692.8 $
163.1 $
138.7 $
46.4 $
(14.5)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,247.1 $
713.3 $
92.8 $
157.3 $
50.0 $
Year ended December 31, 2020
United States Print and Related Services . . . . $ 1,944.0 $
International . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating segments . . . . . . . . . . . . . .
2,228.7
284.7
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
683.6 $
1.7 $
160.8 $
58.8 $
17.3
700.9
—
(0.8)
0.9
(46.9)
18.9
179.7
1.9
2.1
60.9
0.1
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,228.7 $
700.9 $
(46.0) $
181.6 $
61.0 $
31.3
16.8
2.1
18.9
110.1
12.2
122.3
1.8
124.1
Capital expenditures shown in the above table includes capital expenditures from discontinued operations for
the year ended December 31, 2020. Restructuring, impairment and transaction-related charges for the years ended
December 31, 2021 and 2020, are further described in Note 5, “Restructuring, Impairment and Transaction-Related
Charges,” and are included in the operating income (loss) results by segment above.
A reconciliation of operating income from continuing operations to loss from continuing operations before
income taxes and equity in loss of unconsolidated entity as reported in the consolidated statements of operations for the
years ended December 31, 2021 and 2020, was as follows:
Operating income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
92.8 $
Less: interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net pension income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: loss on debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59.6
(14.5)
0.7
(46.0)
68.8
(10.5)
1.8
Earnings (loss) from continuing operations before income taxes and equity in (earnings) loss of
unconsolidated entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
47.0 $
(106.1)
2021
2020
Total assets by segment at December 31, 2021 and 2020, are shown in the following table.
United States Print and Related Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,459.7 $
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
252.7
1,712.4
177.6
1,612.3
265.7
1,878.0
49.7
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,890.0 $
1,927.7
2021
2020
127
QUAD/GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share and per share data and unless otherwise indicated)
Note 22. Geographic Area Information
The table below presents the Company’s net sales and long-lived assets as of and for the years ended
December 31, 2021 and 2020, by geographic region. The amounts in this table differ from the segment data presented in
Note 21, “Segment Information,” because each operating segment includes operations in multiple geographic regions,
based on the Company’s management reporting structure.
United States
Europe
Latin America
Other
Combined
2021
Net sales
Products . . . . . . . . . . . . . . . . . . . . . $
1,892.0 $
161.3 $
183.0 $
10.8 $
2,247.1
Services . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment—net . .
Operating lease right-of-use assets—
net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets—net . . . . . . . .
Other long-term assets . . . . . . . . . . . .
692.8
616.8
118.9
71.9
53.1
20.5
60.4
3.3
1.4
6.0
—
41.6
0.7
2.0
6.9
—
8.2
2.8
—
0.5
713.3
727.0
125.7
75.3
66.5
2020
Net sales
Products . . . . . . . . . . . . . . . . . . . . . $
1,908.2 $
156.0 $
154.7 $
9.8 $
2,228.7
Services . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment—net . .
Operating lease right-of-use assets—
net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets—net . . . . . . . .
Other long-term assets . . . . . . . . . . . .
683.6
756.9
74.7
99.2
55.4
17.3
71.6
2.1
3.0
7.4
—
49.8
2.0
2.1
10.2
—
5.9
2.2
—
0.4
700.9
884.2
81.0
104.3
73.4
Note 23. 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
consolidated financial statements.
128
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s principal executive officer and principal
financial officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of
the end of the period covered by this report and has concluded that, as of the end of such period, the Company’s
disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the fiscal quarter ended December 31,
2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Management’s Report on Internal Control Over Financial Reporting
The Company’s management, including the Company’s Chairman, President and Chief Executive Officer and
Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934. The Company’s
internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of published financial statements in accordance with generally accepted accounting
principles.
The Company’s management, including the Company’s Chairman, President and Chief Executive Officer and
Chief Financial Officer, has assessed the effectiveness of the Company’s internal control over financial reporting based
on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, the Company’s management has concluded that,
as of December 31, 2021, the Company’s internal control over financial reporting was effective based on that
framework.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that the
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Deloitte & Touche LLP (PCAOB ID No. 34) the Company’s independent registered public accounting firm,
issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31,
2021, which is included herein.
Audit Report of Independent Registered Public Accounting Firm
The audit report required under this Item 9A, “Controls and Procedures,” is contained in Item 8, “Financial
Statements and Supplementary Data,” of Part II of this Annual Report on Form 10-K under the heading “Report of
Independent Registered Public Accounting Firm.”
129
Item 9B.
Other Information
The Company has no other information to report pursuant to this item.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
130
Item 10.
Directors, Executive Officers and Corporate Governance
PART III
The information required by this Item with respect to directors and Section 16 compliance is included under the
captions “Election of Directors” and “Miscellaneous—Delinquent Section 16(a) Reports,” respectively, in the
Company’s definitive Proxy Statement for its 2022 Annual Meeting of Shareholders (“Proxy Statement”) and is hereby
incorporated herein by reference. Information with respect to the executive officers of the Company appears in Part I,
Item 1, “Business,” of this Annual Report on Form 10-K. The information required by this Item with respect to audit
committees and audit committee financial experts is included under the caption “Corporate Governance—Board
Committees—Audit Committee” in the Proxy Statement and is incorporated herein by reference.
The Company has adopted a Code of Business Conduct that applies to all of the Company’s employees,
including the Company’s Chief Executive Officer, Chief Financial Officer, Controller and other persons performing
similar functions. The Company has posted a copy of the Code of Business Conduct on its website at www.QUAD.com,
and such Code of Business Conduct is available in print, without charge, to any shareholder who requests it from the
Company’s Secretary. The Company intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K
regarding amendments to, or waivers from, the Code of Business Conduct by posting such information on its website at
www.QUAD.com. The Company is not including the information contained on its website as part of, or incorporating it
by reference into, this Annual Report on Form 10-K.
Item 11.
Executive Compensation
The information required by this Item is included under the captions “Compensation of Executive Officers,”
“2021 Summary Compensation Table,” “Grants of Plan Based Awards in 2021,” “Outstanding Equity Awards at
December 31, 2021,” “Option Exercises and Stock Vested in 2021,” “2021 Pension Benefits,” “2021 Nonqualified
Deferred Compensation,” “Director Compensation,” “Compensation Committee Report,” “Corporate Governance—
Board Committees—Compensation Committee Interlocks and Insider Participation,” and “Miscellaneous—Assessment
of Compensation-Related Risk,” in the Proxy Statement and is hereby incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this Item with respect to security ownership of certain beneficial owners and
management is included under the caption “Stock Ownership of Management and Others” in the Proxy Statement and is
hereby incorporated by reference.
131
Equity Compensation Plan Information
The following table sets forth information with respect to compensation plans under which equity securities of
the Company are authorized for issuance as of December 31, 2021. The table does not include employee benefit plans
intended to meet the qualification requirements of Section 401(a) of the Internal Revenue Code. All equity
compensation plans are described more fully in Note 18, “Equity Incentive Programs,” to the consolidated financial
statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
Plan Category
Equity compensation plans approved by security
holders(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation plans not approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of securities
to be issued upon the
exercise of
outstanding options,
warrants and rights
Weighted average
exercise price of
outstanding options,
warrants and rights(2)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
the first column)
4,018,537 $
—
14.14
—
14.14
2,946,300
—
2,946,300
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,018,537 $
______________________________
(1) Consists of the Company’s 2010 Omnibus Incentive Plan and 2020 Omnibus Incentive Plan. Awards under the Omnibus Plans
(no new awards can be made under the 2010 plan) may consist of incentive awards, stock options, stock appreciation rights,
performance shares, performance share units, shares of class A stock, restricted stock, restricted stock units, deferred stock units
or other stock-based awards as determined by the Company’s Board of Directors.
(2)
The weighted average exercise price of outstanding options, warrants and rights only includes stock options.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is included under the caption “Corporate Governance” in the Proxy
Statement and is hereby incorporated by reference.
Item 14.
Principal Accountant Fees and Services
The information required by this Item is included under the caption “Miscellaneous—Independent Registered
Public Accounting Firm” in the Proxy Statement and is hereby incorporated by reference.
132
Item 15.
Exhibit Index and Financial Statement Schedules
PART IV
1. Consolidated financial statements—The consolidated financial statements listed in the accompanying index to
consolidated financial statements are filed as part of this Annual Report on Form 10-K.
2. Financial statement schedule—All financial statement schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the schedules, or because the information
required is included in the consolidated financial statements and notes thereto.
3. Exhibits—The exhibits listed in the accompanying “Exhibit Index” are filed as part of this Annual Report on
Form 10-K.
133
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for each of the two years in the period ended December 31, 2021 . . . . . . . . .
Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December
31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2021 . . . . . . . .
Consolidated Statements of Shareholders’ Equity for each of the two years in the period ended December 31, 2021 .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page in this
Form 10-K
71
75
76
77
78
79
80
134
EXHIBIT INDEX
The exhibits listed in the exhibit index below are filed as part of this Annual Report on Form 10-K.
Exhibit
Number
(3.1)
Exhibit Description
Amended and Restated Articles of Incorporation of Quad/Graphics, Inc., as amended through May 23,
2019 (incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K, dated May
20, 2019, and filed on May 24, 2019.
(3.2)
(4.1)
(4.2)
(4.3)
(4.4)
(4.5)
(4.6)
(4.7)
Amended Bylaws of Quad/Graphics, Inc., as amended through May 15, 2017 (incorporated by
reference to Exhibit 3.2 to the Company's Current Report on Form 8-K dated May 15, 2017, and filed
on May 18, 2017).
Note Agreement, dated September 1, 1995, among Quad/Graphics, Inc., certain subsidiaries of Quad/
Graphics, Inc. and the purchasers named therein (incorporated by reference to Exhibit 4.4 to the
Company’s Registration Statement on Form S‑4 (Reg. No. 333-165259)).
First Amendment and Consent, dated June 1, 1996, to the Note Agreement, dated September 1, 1995,
among Quad/Graphics, Inc., certain subsidiaries of Quad/Graphics, Inc. and the purchasers named
therein (incorporated by reference to Exhibit 4.5 to the Company's Registration Statement on Form S‑4
(Reg. No. 333-165259)).
Second Amendment, dated as of March 24, 1998, to the Note Agreement, dated September 1, 1995,
among Quad/Graphics, Inc., certain subsidiaries of Quad/Graphics, Inc. and the purchasers named
therein (incorporated by reference to Exhibit 4.6 to the Company's Registration Statement on Form S‑4
(Reg. No. 333-165259)).
Third Amendment, dated as of January 26, 2006, to the Note Agreement, dated September 1, 1995,
among Quad/Graphics, Inc., certain subsidiaries of Quad/Graphics, Inc. and the purchasers named
therein (incorporated by reference to Exhibit 4.7 to the Company's Registration Statement on Form S‑4
(Reg. No. 333-165259)).
Fourth Amendment, dated as of November 24, 2014, to the Note Agreement, dated September 1, 1995,
among Quad/Graphics, Inc., certain subsidiaries of Quad/Graphics, Inc. and the purchasers named
therein (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8‑K dated
November 24, 2014 and filed on November 26, 2014).
Amendment No. 5, dated as of November 2, 2021, to Second Amended and Restated Credit Agreement,
dated as of April 28, 2014, by and among Quad/Graphics, Inc., as the Borrower, the Lenders party
thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to
Exhibit 4 to the Company’s Current Report on Form 8‑K dated November 2, 2021 and filed on
November 3, 2021).
Indenture, dated as of April 28, 2014, among Quad/Graphics, Inc., the subsidiary guarantors of Quad/
Graphics, Inc. set forth therein and U.S. Bank National Association, as trustee (incorporated by
reference to Exhibit 4.2 to the Company's Current Report on Form 8‑K dated April 28, 2014 and filed
on May 2, 2014).
135
Exhibit
Number
(4.8)
Quad/Graphics, Inc.’s Description of Securities (incorporated by reference to Exhibit 4 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and filed on February
24, 2021).
Exhibit Description
Certain other instruments, which would otherwise be required to be listed above, have not been so listed
as such instruments do not authorize long-term debt securities in an amount that exceeds 10% of the
total assets of Quad/Graphics, Inc. and its subsidiaries on a consolidated basis. Quad/Graphics, Inc.
agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon
request.
(9)
Amended and Restated Voting Trust Agreement, dated as of June 25, 2010, by Betty E. Quadracci, J.
Joel Quadracci, Elizabeth M. Quadracci-Harned and David A. Blais, as trustees as of the date of the
agreement's execution (incorporated by reference to Exhibit 9.1 to the Company's Current Report on
Form 8‑K dated July 2, 2010 and filed on July 9, 2010).
(10.1)++
Dividend/Discount Deferred Compensation Plan (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S‑4 (Reg. No. 333-165259)).
(10.2)++
(10.3)++
(10.4)++
Employment Agreement, effective as of January 1, 2004, by and between Quad/Graphics, Inc. and
James Joel Quadracci, as amended (incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S‑4 (Reg. No. 333-165259)).
Employment Agreement, effective as of January 1, 2004, by and between Quad/Graphics, Inc. and
Thomas J. Frankowski (incorporated by reference to Exhibit 10.12 to the Company's Registration
Statement on Form S‑4 (Reg. No. 333-165259)).
Form of Amendment, effective as of September 15, 2016, to the Employment Agreements by and
between Quad/Graphics, Inc. and each of J. Joel Quadracci and Thomas J. Frankowski (incorporated by
reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended
September 30, 2016 and filed on November 2, 2016).
(10.5)++
Form of Executive Salary Continuation Plan for James Joel Quadracci and Thomas J. Frankowski
(incorporated by reference to Exhibit 10.15 to the Company’s Registration Statement on Form S‑4
(Reg. No. 333-165259)).
(10.6)++
Executive Supplemental Retirement Plan (incorporated by reference to Exhibit 10.16 to the Company's
Registration Statement on Form S‑4 (Reg. No. 333-165259)).
(10.7)++
Quad/Graphics, Inc. 2010 Omnibus Incentive Plan, as amended through May 20, 2019 (incorporated by
reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on
April 10, 2019).
(10.8)++
Form of Stock Option Award Agreement under the Quad/Graphics, Inc. 2010 Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8‑K dated
December 16, 2010 and filed on December 17, 2010).
(10.9)++
Form of Stock Option and Dividend Equivalent Award Agreement under the Quad/Graphics, Inc. 2010
Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10‑Q for the quarter ended March 31, 2012 and filed on May 10, 2012).
136
Exhibit
Number
(10.10)++
Form of Deferred Stock Unit Award Agreement under the Quad/Graphics, Inc. 2010 Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form
8‑K dated December 16, 2010 and filed on December 17, 2010).
Exhibit Description
(10.11)++
Form of Restricted Stock Award Agreement under the Quad/Graphics, Inc. 2010 Omnibus Incentive
Plan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10‑Q for
the quarter ended March 31, 2014 and filed on May 7, 2014).
(10.12)++
Form of Restricted Stock Unit Award Agreement under the Quad/Graphics, Inc. 2010 Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form
10‑Q for the quarter ended March 31, 2014 and filed on May 7, 2014).
(10.13)++
Form of Performance Share Award Agreement under the Quad/Graphics, Inc. 2010 Omnibus Incentive
Plan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10‑Q for
the quarter ended June 30, 2014 and filed on August 7, 2014).
(10.14)++
Form of Performance Unit Award Agreement under the Quad/Graphics, Inc. 2010 Omnibus Incentive
Plan (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10‑Q for
the quarter ended June 30, 2014 and filed on August 7, 2014).
(10.15)++
Form of Restricted Stock Unit Award Agreement, with full retirement vesting, under the Quad/
Graphics, Inc. 2010 Omnibus Incentive Plan (incorporated by reference to Exhibit 10 to the Company's
Quarterly Report on Form 10‑Q for the quarter ended June 30, 2015 and filed on August 5, 2015).
(10.16)++
Quad/Graphics, Inc. Executive Severance Plan, effective as of September 15, 2016 [participants are
David Honan, Jennifer Kent, Eric Ashworth, Kelly Vanderboom, and Julie Currie] (incorporated by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended
September 30, 2016 and filed on November 2, 2016).
(10.17)++
Form of 2020 Cash Long-Term Incentive Plan Net Leverage Ratio Award Agreement under the Quad/
Graphics, Inc. 2010 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.17 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and filed on February
24, 2021).
(10.18)++
Form of 2020 Cash Long-Term Incentive Plan Net Sales Wins Award Agreement under the Quad/
Graphics, Inc. 2010 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.18 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and filed on February
24, 2021).
(10.19)++
Quad/Graphics, Inc. 2020 Omnibus Incentive Plan (incorporated by reference to Appendix A to the
Company’s Definitive Proxy Statement on Schedule 14A filed on April 8, 2020).
(10.20)++
Form of Deferred Stock Unit Award Agreement under the Quad/Graphics, Inc. 2020 Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2020 and filed on February 24, 2021).
(10.21)++
Form of Restricted Stock Award Agreement under the Quad/Graphics, Inc. 2020 Omnibus Incentive
Plan (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2020 and filed on February 24, 2021).
137
Exhibit
Number
(10.22)++
(10.23)++
Form of Restricted Stock Unit Award Agreement under the Quad/Graphics, Inc. 2020 Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2020 and filed on February 24, 2021).
Exhibit Description
Form of 2021 Cash Long-Term Incentive Plan Net Leverage Ratio Award Agreement under the Quad/
Graphics, Inc. 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.23 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and filed on February
24, 2021).
(10.24)++
Form of 2021 Cash Long-Term Incentive Plan Net Sales Wins Award Agreement under the Quad/
Graphics, Inc. 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.24 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and filed on February
24, 2021).
(10.25)++
Alternative Form of 2021 Cash Long-Term Incentive Plan Net Leverage Ratio Award Agreement under
the Quad/Graphics, Inc. 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 and filed on May 5,
2021).
(10.26)++
Quad/Graphics, Inc. Retirement and Release Agreement, effective December 31, 2021, by and between
Quad/Graphics, Inc. and Thomas J. Frankowski.
(21)
Subsidiaries of Quad/Graphics, Inc.
(22)
Guarantor Subsidiaries of Quad/Graphics, Inc.’s Senior Unsecured Notes.
(23)
Consent of Deloitte & Touche, LLP.
(31.1)
(31.2)
(32)
(99)
(101)
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the
Securities Exchange Act of 1934.
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities
Exchange Act of 1934.
Written Statement of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350.
Proxy Statement for the 2022 Annual Meeting of Shareholders. [To be filed with the Securities and
Exchange Commission under Regulation 14A within 120 days after December 31, 2021; except to the
extent specifically incorporated by reference, the Proxy Statement for the 2022 Annual Meeting of
Shareholders shall not be deemed to be filed with the Securities and Exchange Commission as part of
this Annual Report on Form 10‑K.]
Financial statements from the Annual Report on Form 10-K of Quad/Graphics, Inc. for the year
ended December 31, 2021 formatted in Inline eXtensible Business Reporting Language (iXBRL):
(i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive
Income (Loss), (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows,
(v) the Consolidated Statements of Shareholders’ Equity, (vi) the Notes to Consolidated Financial
Statements, and (vii) document and entity information.
138
Exhibit
Number
Exhibit Description
(104)
Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101).
______________________________
++ A management contract or compensatory plan or arrangement.
Item 16.
Form 10-K Summary
None.
139
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 23rd day of
February 2022.
QUAD/GRAPHICS, INC.
By:
/s/ J. Joel Quadracci
J. Joel Quadracci
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
/s/ J. Joel Quadracci
J. Joel Quadracci
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
/s/ Anthony C. Staniak
Anthony C. Staniak
Chief Financial Officer
(Principal Financial Officer)
/s/ Anne M. Bauer
Anne M. Bauer
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
/s/ Mark A. Angelson
Mark A. Angelson
/s/ Douglas P. Buth
Douglas P. Buth
Director
Director
/s/ Kathryn Quadracci Flores Director
Kathryn Quadracci Flores
/s/ John C. Fowler
John C. Fowler
/s/ Stephen M. Fuller
Stephen M. Fuller
Director
Director
/s/ Christopher B. Harned
Christopher B. Harned
Director
/s/ Jay O. Rothman
Jay O. Rothman
/s/ John S. Shiely
John S. Shiely
Director
Director
140
Date
February 23, 2022
February 23, 2022
February 23, 2022
February 23, 2022
February 23, 2022
February 23, 2022
February 23, 2022
February 23, 2022
February 23, 2022
February 23, 2022
February 23, 2022
B O A R D O F D I R E C T O R S
Jay O.
Rothman
Douglas P.
Buth
Mark A.
Angelson
John C.
Fowler
Kathryn
J. Joel
Quadracci Flores,
Quadracci
John S.
Shiely
Christopher B.
Steven M.
Harned
Fuller
M.D.
Mark A. Angelson
Former CEO, R.R. Donnelly & Sons Company;
Steven M. Fuller
Former Senior Vice President & CMO,
Former Chairman & CEO, World Color Press Inc.;
L.L. Bean Inc.
Former Chairman, NewPage Corporation
Douglas P. Buth
Retired Chairman & CEO, Appvion, Inc.
(Formerly Appleton Papers, Inc.)
Kathryn Quadracci Flores, M.D.
President of QuadMed;
President and Director, Windhover Foundation
Christopher B. Harned
Former Partner and Head of New York Office,
Arbor Investments
J. Joel Quadracci
Chairman, President & CEO, Quad/Graphics, Inc.
Jay O. Rothman
Chairman and CEO, Foley & Lardner LLP
John C. Fowler
Retired Vice Chairman and Executive Vice President
of Global Strategy & Corporate Development,
Quad/Graphics, Inc.
John S. Shiely
Retired Chairman and CEO,
Briggs & Stratton Corporation
Corporate
Headquarters
Quad/Graphics, Inc.
N61 W23044 Harry’s Way
Sussex, WI 53089-3995
info@quad.com
1 (888) 782 3226
(414) 566 6000 (Wisconsin)
Investor
Relations
Katie Krebsbach
Investor Relations Manager
ir@quad.com
http://quad.com/investors
Stock Transfer
Agent
Broadridge Financial Solutions
P.O. Box 1342
Brentwood, NY 11717
shareholder@broadridge.com
1 (877) 830 4936
https://shareholder.broadridge.com/quad
Quad’s 2021 Annual Report on Form 10-K accompanies this document. If you are a shareholder and would like to receive another copy of
the 2021 Form 10-K, without exhibits and without charge, please write to Jennifer Kent, Executive Vice President and Chief People & Legal
Officer, Quad/Graphics, Inc., N61 W23044 Harry’s Way, Sussex, WI 53089-3995. You can also access the 2021 Form 10-K on the Investor
Relations section of our website at quad.com/investors/annual-reports-proxy-statement.
N61 W23044 Harry’s Way
Sussex, WI 53089-3995
1 (888) 782 3226
QUAD.com
© 2022 Quad/Graphics, Inc. All rights reserved.