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T
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Wisconsin
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39-1152983
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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N61 W23044 Harry's Way, Sussex, Wisconsin 53089-3995
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(414) 566-6000
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(Address of principal executive offices) (Zip Code)
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(Registrant's telephone number, including area code)
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Large accelerated filer
T
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Class
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Outstanding as of May 7, 2012
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Class A Common Stock
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32,725,188
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Class B Common Stock
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14,198,464
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Class C Common Stock
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245,353
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Page No.
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ITEM 1.
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Condensed Consolidated Financial Statements (Unaudited)
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Three Months Ended March 31,
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2012
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2011
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Net sales
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Products
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$
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875.2
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$
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905.0
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Services
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114.4
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117.4
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Total net sales
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989.6
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1,022.4
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Cost of sales
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Products
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686.7
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697.0
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Services
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86.2
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86.7
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Total cost of sales
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772.9
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783.7
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Selling, general and administrative expenses
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92.0
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97.9
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Depreciation and amortization
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84.6
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87.3
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Restructuring, impairment and transaction-related charges
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38.2
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28.7
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Total operating expenses
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987.7
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997.6
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Operating income from continuing operations
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1.9
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24.8
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Interest expense
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21.4
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29.8
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Loss from continuing operations before income taxes and equity in earnings of unconsolidated entities
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(19.5
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(5.0
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Income tax benefit
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(33.8
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(7.2
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Earnings from continuing operations before equity in earnings of unconsolidated entities
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14.3
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2.2
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Equity in earnings of unconsolidated entities
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1.1
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0.8
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Net earnings from continuing operations
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$
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15.4
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$
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3.0
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Loss from discontinued operations, net of tax
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(3.2
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(10.3
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Gain on disposal of discontinued operations, net of tax
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35.3
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—
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Net earnings (loss)
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$
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47.5
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$
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(7.3
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Net earnings attributable to noncontrolling interests
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(0.1
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—
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Net earnings (loss) attributable to Quad/Graphics common shareholders
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$
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47.4
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$
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(7.3
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Three Months Ended March 31,
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2012
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2011
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Earnings (loss) per share attributable to Quad/Graphics common shareholders:
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Basic:
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Continuing operations
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$
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0.33
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$
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0.07
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Discontinued operations
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0.68
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(0.22
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Earnings (loss) per share attributable to Quad/Graphics common shareholders
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$
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1.01
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$
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(0.15
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Diluted:
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Continuing operations
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$
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0.33
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$
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0.06
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Discontinued operations
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0.68
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(0.21
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Earnings (loss) per share attributable to Quad/Graphics common shareholders
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$
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1.01
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$
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(0.15
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Weighted average number of common shares outstanding:
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Basic
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46.8
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47.2
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Diluted
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46.9
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48.5
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Amounts attributable to Quad/Graphics common shareholders:
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Net earnings from continuing operations
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$
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15.4
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$
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3.0
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Net earnings attributable to noncontrolling interests
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(0.1
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—
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Net earnings from continuing operations attributable to Quad/Graphics common shareholders
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$
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15.3
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$
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3.0
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Loss from discontinued operations, net of tax
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$
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(3.2
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$
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(10.3
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Gain on disposal of discontinued operations, net of tax
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35.3
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—
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Net gain (loss) from discontinued operations, net of tax
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$
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32.1
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$
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(10.3
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Net earnings (loss) attributable to Quad/Graphics common shareholders
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$
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47.4
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$
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(7.3
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Three Months Ended March 31,
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2012
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2011
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Net earnings (loss)
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$
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47.5
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$
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(7.3
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Other comprehensive income
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Foreign currency translation adjustments
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13.0
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13.0
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Pension and other postretirement benefit liability amortization, net of tax
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(0.3
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(0.5
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Total other comprehensive income
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12.7
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12.5
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Total comprehensive income
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60.2
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5.2
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Less: comprehensive income attributable to noncontrolling interests
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(0.1
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(0.2
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Comprehensive income attributable to Quad/Graphics common shareholders
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$
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60.1
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$
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5.0
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March 31,
2012 |
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December 31,
2011 |
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ASSETS
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Cash and cash equivalents
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$
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27.1
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$
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25.6
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Receivables, less allowances for doubtful accounts of $78.0 at March 31, 2012 and $73.7 at December 31, 2011
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561.2
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656.1
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Inventories
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250.7
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249.5
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Prepaid expenses and other current assets
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94.1
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142.3
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Deferred income taxes
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68.8
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86.7
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Short-term restricted cash
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10.4
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8.5
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Current assets of discontinued operations (Note 4)
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—
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72.6
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Total current assets
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1,012.3
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1,241.3
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Property, plant and equipment—net
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2,083.5
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2,123.3
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Goodwill
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787.4
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787.1
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Other intangible assets—net
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279.7
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295.6
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Long-term restricted cash
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58.0
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67.4
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Equity method investments in unconsolidated entities
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74.2
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69.4
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Other long-term assets
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50.5
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46.2
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Long-term assets of discontinued operations (Note 4)
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—
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104.9
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Total assets
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$
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4,345.6
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$
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4,735.2
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Accounts payable
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$
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261.3
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$
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301.9
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Amounts owing in satisfaction of bankruptcy claims
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16.9
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19.5
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Accrued liabilities
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355.0
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393.9
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Purchase price payable on business exchange transaction (Note 3)
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—
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62.4
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|
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Short-term debt and current portion of long-term debt
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95.0
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82.1
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|
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Current portion of capital lease obligations
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10.1
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20.7
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Current liabilities of discontinued operations (Note 4)
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—
|
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48.4
|
|
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|
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Total current liabilities
|
738.3
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928.9
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Long-term debt
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1,252.6
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1,342.8
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|
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Unsecured notes to be issued
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31.3
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38.7
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|
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Capital lease obligations
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23.2
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24.9
|
|
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Deferred income taxes
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438.9
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471.9
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|
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Other long-term liabilities
|
504.0
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521.5
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|
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Long-term liabilities of discontinued operations (Note 4)
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—
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99.6
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|
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Total liabilities
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2,988.3
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3,428.3
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|
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|
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Commitments and contingencies (Note 11)
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|
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Redeemable equity (Note 20)
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3.4
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3.5
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|
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Quad/Graphics common stock and other equity (Note 20)
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|
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Preferred stock
|
—
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—
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Common stock, Class A
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1.0
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1.0
|
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Common stock, Class B
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0.4
|
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|
0.4
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Common stock, Class C
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—
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—
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Additional paid-in capital
|
976.1
|
|
|
984.2
|
|
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Treasury stock, at cost
|
(283.7
|
)
|
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(295.4
|
)
|
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Retained earnings
|
684.3
|
|
|
650.2
|
|
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Accumulated other comprehensive loss
|
(25.0
|
)
|
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(37.7
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)
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||||
Quad/Graphics common stock and other equity
|
1,353.1
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|
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1,302.7
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Noncontrolling interests
|
0.8
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|
0.7
|
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|
||||
Total common stock and other equity and noncontrolling interests
|
1,353.9
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|
|
1,303.4
|
|
||
|
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|
||||
Total liabilities and shareholders' equity
|
$
|
4,345.6
|
|
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$
|
4,735.2
|
|
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Three Months Ended March 31,
|
||||||
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2012
|
|
2011
|
||||
OPERATING ACTIVITIES
|
|
|
|
||||
Net earnings (loss)
|
$
|
47.5
|
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$
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(7.3
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)
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Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
|
|
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|
||||
Depreciation and amortization
|
84.6
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90.5
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|
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Impairment charges
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8.4
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—
|
|
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Amortization of debt issuance costs
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1.1
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|
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3.3
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|
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Stock-based compensation charges
|
3.6
|
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2.6
|
|
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Gain on disposal of discontinued operations, net of tax
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(35.3
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)
|
|
—
|
|
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Loss on sales or disposal of property, plant and equipment
|
1.1
|
|
|
0.7
|
|
||
Deferred income taxes
|
(13.5
|
)
|
|
10.3
|
|
||
Equity in earnings of unconsolidated entities
|
(1.1
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)
|
|
(0.8
|
)
|
||
Dividends from unconsolidated entities
|
—
|
|
|
0.3
|
|
||
Changes in operating assets and liabilities—net of acquisitions
|
14.2
|
|
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(62.9
|
)
|
||
|
|
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|
||||
Net cash provided by operating activities
|
110.6
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|
|
36.7
|
|
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|
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|
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INVESTING ACTIVITIES
|
|
|
|
||||
Purchases of property, plant and equipment
|
(21.6
|
)
|
|
(40.5
|
)
|
||
Investment in ManipalTech (Note 3)
|
(18.1
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)
|
|
—
|
|
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Proceeds from the sale of property, plant and equipment
|
2.4
|
|
|
0.2
|
|
||
Transfers from restricted cash
|
7.5
|
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|
9.6
|
|
||
Deposit refunded related to business exchange transaction (Note 3)
|
50.0
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—
|
|
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Purchase price payments on business exchange transaction (Note 3)
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(4.2
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)
|
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—
|
|
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Acquisition of business—net of cash acquired
|
(6.6
|
)
|
|
—
|
|
||
|
|
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|
||||
Net cash provided by (used in) investing activities
|
9.4
|
|
|
(30.7
|
)
|
||
|
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|
||||
FINANCING ACTIVITIES
|
|
|
|
||||
Payments of long-term debt
|
(4.5
|
)
|
|
(5.2
|
)
|
||
Payments of capital lease obligations
|
(13.4
|
)
|
|
(7.2
|
)
|
||
Borrowings on revolving credit facilities
|
40.2
|
|
|
84.8
|
|
||
Payments on revolving credit facilities
|
(116.0
|
)
|
|
(85.7
|
)
|
||
Bankruptcy claim payments on unsecured notes to be issued
|
(7.4
|
)
|
|
—
|
|
||
Proceeds from issuance of common stock
|
—
|
|
|
1.6
|
|
||
Payment of cash dividends
|
(11.7
|
)
|
|
—
|
|
||
Payment of tax distributions
|
—
|
|
|
(1.1
|
)
|
||
|
|
|
|
||||
Net cash used in financing activities
|
(112.8
|
)
|
|
(12.8
|
)
|
||
|
|
|
|
||||
Effect of exchange rates on cash and cash equivalents
|
(5.7
|
)
|
|
1.0
|
|
||
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
1.5
|
|
|
(5.8
|
)
|
||
|
|
|
|
||||
Cash and cash equivalents at beginning of period
|
25.6
|
|
|
20.5
|
|
||
|
|
|
|
||||
Cash and cash equivalents at end of period
|
$
|
27.1
|
|
|
$
|
14.7
|
|
|
|
Preliminary Purchase Price Allocation
|
||
Accounts receivable
|
|
$
|
15.3
|
|
Other current assets
|
|
11.9
|
|
|
Property, plant and equipment
|
|
35.7
|
|
|
Identifiable intangible assets
|
|
4.6
|
|
|
Other long-term assets
|
|
0.5
|
|
|
Accounts payable and accrued liabilities
|
|
(14.9
|
)
|
|
Other long-term liabilities
|
|
(0.6
|
)
|
|
Goodwill
|
|
11.1
|
|
|
Preliminary purchase price
|
|
$
|
63.6
|
|
|
|
As of March 1, 2012
|
||
Fair value of the acquired Transcontinental Mexican operations
|
|
$
|
63.6
|
|
Cash paid to Transcontinental
|
|
(5.4
|
)
|
|
Net proceeds
|
|
$
|
58.2
|
|
Net assets of discontinued operations
|
|
(26.3
|
)
|
|
Cumulative translation adjustment of discontinued operations
|
|
3.4
|
|
|
Gain on disposal of discontinued operations, net of tax
(1)
|
|
$
|
35.3
|
|
(1)
|
For tax purposes the disposal of discontinued operations resulted in a long-term capital loss, for which a deferred tax asset was recorded. An offsetting valuation allowance against the deferred tax asset was recorded to reflect the expected value at which the asset will be recovered.
|
|
2012
|
|
2011
|
||||
Total net sales
|
$
|
32.2
|
|
|
$
|
79.9
|
|
|
|
|
|
||||
Loss from discontinued operations before income taxes
|
(3.2
|
)
|
|
(10.3
|
)
|
||
Income tax expense
|
—
|
|
|
—
|
|
||
Loss from discontinued operations, net of tax
|
$
|
(3.2
|
)
|
|
$
|
(10.3
|
)
|
|
|
December 31, 2011
|
||
Receivables—net
|
|
$
|
64.1
|
|
Inventories
|
|
7.5
|
|
|
Prepaid expenses and other current assets
|
|
1.0
|
|
|
Current assets of discontinued operations
|
|
72.6
|
|
|
|
|
|
||
Property, plant and equipment—net
|
|
71.8
|
|
|
Goodwill
|
|
20.9
|
|
|
Other intangible assets—net
|
|
12.2
|
|
|
Long-term assets of discontinued operations
|
|
104.9
|
|
|
|
|
|
||
Total assets
|
|
$
|
177.5
|
|
|
|
|
||
Accounts payable
|
|
$
|
15.0
|
|
Accrued liabilities
|
|
33.4
|
|
|
Current liabilities of discontinued operations
|
|
48.4
|
|
|
|
|
|
||
Other long-term liabilities
|
|
99.6
|
|
|
Long-term liabilities of discontinued operations
|
|
99.6
|
|
|
|
|
|
||
Total liabilities
|
|
$
|
148.0
|
|
|
|
|
||
Net assets of discontinued operations
|
|
$
|
29.5
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2012
|
|
2011
|
||||
Employee termination charges
|
|
$
|
10.4
|
|
|
$
|
11.0
|
|
Impairment charges
|
|
8.4
|
|
|
—
|
|
||
Transaction-related charges
|
|
1.5
|
|
|
—
|
|
||
Integration costs
|
|
11.9
|
|
|
6.4
|
|
||
Other restructuring charges
|
|
6.0
|
|
|
11.3
|
|
||
Total
|
|
$
|
38.2
|
|
|
$
|
28.7
|
|
•
|
Employee termination charges of
$10.4 million
and
$11.0 million
during the
three months ended
March 31, 2012
and
2011
, respectively. The Company reduced its workforce through facility consolidations and involuntary separation programs.
|
•
|
Integration costs of
$11.9 million
and
$6.4 million
during the
three months ended
March 31, 2012
and
2011
, respectively. Integration costs were primarily related to preparing existing facilities to meet new production requirements resulting from work transferring from closed plants, as well as other costs related to the integration of the acquired companies. The integration costs during the three months ended March 31, 2011 are presented net of a
$7.1 million
gain on the collection of a note receivable for the June 2008 sale of World Color Press' European operations.
|
•
|
Other restructuring charges of
$6.0 million
and
$11.3 million
during the
three months ended
March 31, 2012
and
2011
, respectively. The Company recognized the following other restructuring charges for the
three months ended
March 31, 2012
: (1)
$3.5 million
of vacant facility carrying costs, (2)
$2.2 million
of equipment and infrastructure removal costs from closed plants and (3)
$0.3 million
of other restructuring charges. The Company recognized the following other restructuring charges for the
three months ended
March 31, 2011
: (1)
$3.9 million
of lease exit charges, (2)
$3.3 million
of vacant facility carrying costs and (3)
$4.1 million
of other restructuring charges.
|
|
Employee
Termination Charges
|
|
Impairment
Charges
|
|
Transaction-Related
Charges
|
|
Integration
Costs
|
|
Other
Restructuring
Charges
|
|
Total
|
||||||||||||
Balance at December 31, 2011
|
$
|
9.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18.2
|
|
|
$
|
26.7
|
|
|
$
|
54.2
|
|
Expense from continuing operations
|
10.4
|
|
|
8.4
|
|
|
1.5
|
|
|
11.9
|
|
|
6.0
|
|
|
38.2
|
|
||||||
Cash payments
|
(10.1
|
)
|
|
—
|
|
|
(0.8
|
)
|
|
(9.2
|
)
|
|
(10.0
|
)
|
|
(30.1
|
)
|
||||||
Non-cash adjustments
|
—
|
|
|
(8.4
|
)
|
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
(10.0
|
)
|
||||||
Balance at March 31, 2012
|
$
|
9.6
|
|
|
$
|
—
|
|
|
$
|
0.7
|
|
|
$
|
20.9
|
|
|
$
|
21.1
|
|
|
$
|
52.3
|
|
|
United States Print and Related Services
|
|
International
|
|
Total
|
||||||
Balance at December 31, 2011
|
$
|
757.4
|
|
|
$
|
29.7
|
|
|
$
|
787.1
|
|
Translation adjustment
|
—
|
|
|
0.3
|
|
|
0.3
|
|
|||
Balance at March 31, 2012
|
$
|
757.4
|
|
|
$
|
30.0
|
|
|
$
|
787.4
|
|
|
March 31, 2012
|
|
December 31, 2011
|
||||||||||||||||||||||||
|
Weighted
Average
Amortization
Period (years)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
and Foreign
Exchange
|
|
Net Book
Value
|
|
Weighted
Average
Amortization
Period (years)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
and Foreign
Exchange
|
|
Net Book
Value
|
||||||||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Trademarks, patents, licenses and agreements
|
5
|
|
$
|
10.8
|
|
|
$
|
(9.7
|
)
|
|
$
|
1.1
|
|
|
5
|
|
$
|
10.7
|
|
|
$
|
(9.6
|
)
|
|
$
|
1.1
|
|
Customer relationships
|
6
|
|
383.6
|
|
|
(111.0
|
)
|
|
272.6
|
|
|
6
|
|
383.6
|
|
|
(95.7
|
)
|
|
287.9
|
|
||||||
Capitalized software
|
5
|
|
4.1
|
|
|
(1.9
|
)
|
|
2.2
|
|
|
5
|
|
4.1
|
|
|
(1.7
|
)
|
|
2.4
|
|
||||||
Acquired technology
|
5
|
|
8.0
|
|
|
(4.4
|
)
|
|
3.6
|
|
|
5
|
|
8.0
|
|
|
(4.0
|
)
|
|
4.0
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total finite-lived intangible assets
|
|
406.5
|
|
|
(127.0
|
)
|
|
279.5
|
|
|
|
|
406.4
|
|
|
(111.0
|
)
|
|
295.4
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other indefinite-lived intangible assets
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|||||||
Total
|
|
$
|
406.7
|
|
|
$
|
(127.0
|
)
|
|
$
|
279.7
|
|
|
|
|
$
|
406.6
|
|
|
$
|
(111.0
|
)
|
|
$
|
295.6
|
|
Remainder of 2012
|
$
|
50.3
|
|
2013
|
66.2
|
|
|
2014
|
65.0
|
|
|
2015
|
64.6
|
|
|
2016
|
33.0
|
|
|
2017
|
0.4
|
|
|
Total
|
$
|
279.5
|
|
|
March 31,
2012 |
|
December 31,
2011 |
||||
Raw materials and manufacturing supplies
|
$
|
161.7
|
|
|
$
|
124.9
|
|
Work in process
|
41.4
|
|
|
72.0
|
|
||
Finished goods
|
47.6
|
|
|
52.6
|
|
||
Total
|
$
|
250.7
|
|
|
$
|
249.5
|
|
|
March 31,
2012 |
|
December 31,
2011 |
||||
Land
|
$
|
140.4
|
|
|
$
|
140.9
|
|
Buildings
|
927.8
|
|
|
930.1
|
|
||
Machinery and equipment
|
3,420.3
|
|
|
3,398.2
|
|
||
Other
|
206.9
|
|
|
201.7
|
|
||
Construction in progress
|
30.0
|
|
|
23.0
|
|
||
|
4,725.4
|
|
|
4,693.9
|
|
||
Less: accumulated depreciation
|
(2,641.9
|
)
|
|
(2,570.6
|
)
|
||
Total
|
$
|
2,083.5
|
|
|
$
|
2,123.3
|
|
|
March 31,
2012 |
|
December 31,
2011 |
||||
Defeasance of unsecured notes to be issued (see Note 12)
|
$
|
68.0
|
|
|
$
|
75.4
|
|
Other
|
0.4
|
|
|
0.5
|
|
||
Total restricted cash
|
$
|
68.4
|
|
|
$
|
75.9
|
|
Less: short-term restricted cash
|
(10.4
|
)
|
|
(8.5
|
)
|
||
Long-term restricted cash
|
$
|
58.0
|
|
|
$
|
67.4
|
|
|
Restricted Cash
|
|
Unsecured Notes
to be Issued
|
||||
Balance at December 31, 2011
|
$
|
75.4
|
|
|
$
|
38.7
|
|
Class 3 Claim payments during 2012
|
(7.4
|
)
|
|
(7.4
|
)
|
||
Balance at March 31, 2012
|
$
|
68.0
|
|
|
$
|
31.3
|
|
|
March 31,
2012 |
|
December 31,
2011 |
||||
Master note and security agreement
|
$
|
613.4
|
|
|
$
|
616.0
|
|
Term loan A—$450.0 million
|
450.0
|
|
|
450.0
|
|
||
Term loan B—$200.0 million
|
198.1
|
|
|
198.6
|
|
||
Revolving credit facility—$850.0 million
|
—
|
|
|
85.0
|
|
||
International term loan—$76.0 million
|
67.1
|
|
|
65.9
|
|
||
International revolving credit facility—$16.1 million
|
12.6
|
|
|
6.7
|
|
||
Other
|
6.4
|
|
|
2.7
|
|
||
Total debt
|
$
|
1,347.6
|
|
|
$
|
1,424.9
|
|
Less: short-term debt and current portion of long-term debt
|
(95.0
|
)
|
|
(82.1
|
)
|
||
Long-term debt
|
$
|
1,252.6
|
|
|
$
|
1,342.8
|
|
•
|
On a rolling twelve-month basis, the total leverage ratio, defined as total consolidated debt to consolidated EBITDA (as defined in the debt agreement), shall not exceed
3.50
to 1.00 (for the twelve months ended
March 31, 2012
, the Company's leverage ratio was
2.18
to 1.00).
|
•
|
On a rolling twelve-month basis, the minimum interest coverage ratio, defined as consolidated EBITDA to consolidated cash interest expense, shall not be less than
3.25
to 1.00 (for the twelve months ended
March 31, 2012
, the Company's interest coverage ratio was
6.96
to 1.00).
|
•
|
On a rolling twelve-month basis, the fixed charge coverage ratio, defined as consolidated EBITDA and rent expense to interest and rent expense, shall not be less than
1.50
to 1.00 (for the twelve months ended
March 31, 2012
, the Company's fixed charge coverage ratio was
3.52
to 1.00).
|
•
|
Consolidated net worth of at least
$745.8 million
plus
40%
of positive consolidated net income cumulatively for each year (as of
March 31, 2012
, the Company's consolidated net worth under the most restrictive covenant per the various debt agreements was
$1.28 billion
).
|
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 are no Level 3 recurring measurements of assets or liabilities as of
March 31, 2012
.
|
|
March 31,
2012 |
|
December 31,
2011 |
||||
Single employer pension and postretirement obligations
|
$
|
294.9
|
|
|
$
|
300.9
|
|
Multiemployer pension plans—withdrawal liability
|
82.8
|
|
|
83.5
|
|
||
Tax-related liabilities
|
18.0
|
|
|
30.7
|
|
||
Employee-related liabilities
|
44.6
|
|
|
45.0
|
|
||
Other
|
63.7
|
|
|
61.4
|
|
||
Total
|
$
|
504.0
|
|
|
$
|
521.5
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2012
|
|
2011
|
||||
Pension expense
|
|
|
|
|
||||
Service cost
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
Interest cost
|
|
7.8
|
|
|
8.5
|
|
||
Expected return on plan assets
|
|
(6.8
|
)
|
|
(6.9
|
)
|
||
Net periodic pension benefit expense
|
|
1.1
|
|
|
1.7
|
|
||
Settlement loss
|
|
0.1
|
|
|
—
|
|
||
Net pension expense
|
|
$
|
1.2
|
|
|
$
|
1.7
|
|
|
|
|
|
|
||||
Postretirement benefits income
|
|
|
|
|
||||
Service cost
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
Interest cost
|
|
0.3
|
|
|
0.4
|
|
||
Amortization of deferred gains, net
|
|
(0.5
|
)
|
|
(0.8
|
)
|
||
Net postretirement benefits income
|
|
$
|
(0.1
|
)
|
|
$
|
(0.3
|
)
|
|
|
Three Months Ended
|
||
|
|
March 31, 2012
|
||
Contributions on qualified pension plans
|
|
$
|
7.5
|
|
Settlement payments on non-qualified pension plans
|
|
3.2
|
|
|
Benefit payments on non-qualified pension plans
|
|
0.3
|
|
|
Benefit payments on postretirement plans
|
|
0.2
|
|
|
Total benefit plan payments
|
|
$
|
11.2
|
|
|
Three Months Ended March 31,
|
||||||
|
2012
|
|
2011
|
||||
Numerator:
|
|
|
|
||||
Net earnings from continuing operations
|
$
|
15.4
|
|
|
$
|
3.0
|
|
Net earnings attributable to noncontrolling interests
|
(0.1
|
)
|
|
—
|
|
||
Net earnings from continuing operations attributable to Quad/Graphics common shareholders
|
$
|
15.3
|
|
|
$
|
3.0
|
|
|
|
|
|
||||
Loss from discontinued operations, net of tax
|
$
|
(3.2
|
)
|
|
$
|
(10.3
|
)
|
Gain on disposal of discontinued operations, net of tax
|
35.3
|
|
|
—
|
|
||
Net gain (loss) from discontinued operations, net of tax
|
$
|
32.1
|
|
|
$
|
(10.3
|
)
|
|
|
|
|
||||
Earnings (loss) attributable to Quad/Graphics common shareholders
|
$
|
47.4
|
|
|
$
|
(7.3
|
)
|
|
|
|
|
||||
Denominator:
|
|
|
|
||||
Basic weighted average number of common shares outstanding for all classes of common shares
|
46.8
|
|
|
47.2
|
|
||
Plus: effect of dilutive equity incentive instruments
|
0.1
|
|
|
1.3
|
|
||
Diluted weighted average number of common shares outstanding for all classes of common shares
|
46.9
|
|
|
48.5
|
|
||
|
|
|
|
||||
Net earnings (loss) per share attributable to Quad/Graphics common shareholders:
|
|
|
|
||||
Basic:
|
|
|
|
||||
Continuing operations
|
$
|
0.33
|
|
|
$
|
0.07
|
|
Discontinued operations
|
0.68
|
|
|
(0.22
|
)
|
||
Earnings (loss) per share attributable to Quad/Graphics common shareholders
|
$
|
1.01
|
|
|
$
|
(0.15
|
)
|
|
|
|
|
||||
Diluted:
|
|
|
|
||||
Continuing operations
|
$
|
0.33
|
|
|
$
|
0.06
|
|
Discontinued operations
|
0.68
|
|
|
(0.21
|
)
|
||
Earnings (loss) per share attributable to Quad/Graphics common shareholders
|
$
|
1.01
|
|
|
$
|
(0.15
|
)
|
|
|
|
|
||||
Cash dividends paid per common share for all classes of common shares
|
$
|
0.25
|
|
|
$
|
—
|
|
|
|
Three Months Ended March 31,
|
||||
|
|
2012
|
|
2011
|
||
Expected volatility
|
|
36.7
|
%
|
|
36.0
|
%
|
Risk-free interest rate
|
|
1.3
|
%
|
|
2.3
|
%
|
Expected life (years)
|
|
7.0
|
|
|
7.0
|
|
Dividend yield
|
|
7.1
|
%
|
|
2.0
|
%
|
|
Shares Under
Option
(thousands)
|
|
Weighted Average
Exercise
Price
|
|
Weighted Average
Remaining
Contractual Term
(years)
|
|
Aggregate
Intrinsic Value
(millions)
|
|||||
Outstanding at December 31, 2011
|
3,984
|
|
|
$
|
21.09
|
|
|
7.7
|
|
$
|
1.1
|
|
Granted
|
448
|
|
|
14.14
|
|
|
7.0
|
|
|
|
||
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Cancelled/forfeited/expired
|
(2
|
)
|
|
29.68
|
|
|
|
|
|
|
||
Outstanding at March 31, 2012
|
4,430
|
|
|
$
|
20.35
|
|
|
7.7
|
|
$
|
0.5
|
|
|
|
|
|
|
|
|
|
|||||
Vested and expected to vest at March 31, 2012
|
4,086
|
|
|
$
|
20.28
|
|
|
7.7
|
|
$
|
0.5
|
|
Exercisable at March 31, 2012
|
1,875
|
|
|
$
|
18.46
|
|
|
7.4
|
|
$
|
0.4
|
|
|
Three Months Ended March 31,
|
||||||
|
2012
|
|
2011
|
||||
Total intrinsic value of stock options exercised
|
$
|
—
|
|
|
$
|
3.1
|
|
Cash received from stock option exercises
|
—
|
|
|
1.6
|
|
||
Total fair value of stock options vested
|
—
|
|
|
5.4
|
|
|
Restricted Stock
|
|
Restricted Stock Units
|
||||||||||||||||
|
Shares
(thousands)
|
|
Weighted-
Average
Grant Date
Fair Value
Per Share
|
|
Weighted-
Average
Remaining
Contractual
Term (years)
|
|
Units
(thousands)
|
|
Weighted-
Average
Grant Date
Fair Value
Per Share
|
|
Weighted-
Average
Remaining
Contractual
Term (years)
|
||||||||
Nonvested at December 31, 2011
|
110.2
|
|
|
$
|
41.21
|
|
|
2.0
|
|
|
10.1
|
|
|
$
|
37.81
|
|
|
2.0
|
|
Granted
|
310.7
|
|
|
14.34
|
|
|
3.0
|
|
|
15.8
|
|
|
14.34
|
|
|
3.0
|
|
||
Vested
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Forfeited
|
(0.6
|
)
|
|
41.26
|
|
|
—
|
|
|
(3.5
|
)
|
|
38.86
|
|
|
—
|
|
||
Nonvested at March 31, 2012
|
420.3
|
|
|
$
|
21.35
|
|
|
2.5
|
|
|
22.4
|
|
|
$
|
21.17
|
|
|
2.5
|
|
|
|
|
|
Issued Common Stock
|
|
|
|
|
||||||||||
|
|
Authorized Shares
|
|
Outstanding
|
|
Treasury
|
|
Issued Shares Classified as Common Stock
|
|
Issued Shares Classified as Redeemable Equity
|
|
Total Issued Shares
|
||||||
Class A stock ($0.025 par value)
|
|
80.0
|
|
|
|
|
|
|
|
|
|
|
|
|||||
March 31, 2012
|
|
|
|
32.7
|
|
|
7.3
|
|
|
40.0
|
|
|
—
|
|
|
40.0
|
|
|
December 31, 2011
|
|
|
|
32.4
|
|
|
7.6
|
|
|
40.0
|
|
|
—
|
|
|
40.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Class B stock ($0.025 par value)
|
|
80.0
|
|
|
|
|
|
|
|
|
|
|
|
|||||
March 31, 2012
|
|
|
|
14.2
|
|
|
0.8
|
|
|
15.0
|
|
|
—
|
|
|
15.0
|
|
|
December 31, 2011
|
|
|
|
14.2
|
|
|
0.8
|
|
|
15.0
|
|
|
—
|
|
|
15.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Class C stock ($0.025 par value)
|
|
20.0
|
|
|
|
|
|
|
|
|
|
|
|
|||||
March 31, 2012
|
|
|
|
—
|
|
|
0.2
|
|
|
0.2
|
|
|
0.3
|
|
|
0.5
|
|
|
December 31, 2011
|
|
|
|
—
|
|
|
0.2
|
|
|
0.2
|
|
|
0.3
|
|
|
0.5
|
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Dividend Amount per Share
|
||
2012
|
|
|
|
|
|
|
|
||
Q1 2012 Dividend
|
February 28, 2012
|
|
March 12, 2012
|
|
March 23, 2012
|
|
$
|
0.25
|
|
2011
|
|
|
|
|
|
|
|
||
Q1 2011 Dividend
(1)
|
N/A
|
|
N/A
|
|
N/A
|
|
—
|
|
(1)
|
There was no dividend declared during the
three months ended
March 31, 2011
.
|
|
Class C Common Stock
|
|
Total Redeemable Equity
|
|||||||
|
Shares
|
|
Redemption Value
|
|
||||||
Balance at December 31, 2011
|
0.3
|
|
|
$
|
3.5
|
|
|
$
|
3.5
|
|
Cash dividends declared
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
||
Balance at March 31, 2012
|
0.3
|
|
|
$
|
3.4
|
|
|
$
|
3.4
|
|
|
Quad/Graphics Common Stock and Other Equity
|
|
Noncontrolling Interests
|
||||
Balance at December 31, 2011
|
$
|
1,302.7
|
|
|
$
|
0.7
|
|
Net earnings attributable to Quad/Graphics common shareholders
|
47.4
|
|
|
—
|
|
||
Net earnings attributable to noncontrolling interests
|
—
|
|
|
0.1
|
|
||
Foreign currency translation adjustments
|
13.0
|
|
|
—
|
|
||
Cash dividends declared
|
(13.3
|
)
|
|
—
|
|
||
Stock-based compensation charges
|
3.6
|
|
|
—
|
|
||
Pension and other postretirement benefit liability adjustments, net of tax
|
(0.3
|
)
|
|
—
|
|
||
Balance at March 31, 2012
|
$
|
1,353.1
|
|
|
$
|
0.8
|
|
|
Net Sales
|
|
Operating Income/(Loss)
|
|
Restructuring, Impairment and Transaction-Related Charges
|
||||||||||
|
Products
|
|
Services
|
|
|
||||||||||
Three months ended March 31, 2012
|
|
|
|
|
|
|
|
||||||||
United States Print and Related Services
|
$
|
751.6
|
|
|
$
|
111.7
|
|
|
$
|
33.7
|
|
|
$
|
14.3
|
|
International
|
123.6
|
|
|
2.7
|
|
|
(8.2
|
)
|
|
10.5
|
|
||||
Total operating segments
|
875.2
|
|
|
114.4
|
|
|
25.5
|
|
|
24.8
|
|
||||
Corporate
|
—
|
|
|
—
|
|
|
(23.6
|
)
|
|
13.4
|
|
||||
Total
|
$
|
875.2
|
|
|
$
|
114.4
|
|
|
$
|
1.9
|
|
|
$
|
38.2
|
|
|
|
|
|
|
|
|
|
||||||||
Three months ended March 31, 2011
|
|
|
|
|
|
|
|
||||||||
United States Print and Related Services
|
$
|
792.6
|
|
|
$
|
114.6
|
|
|
$
|
46.7
|
|
|
$
|
21.4
|
|
International
|
112.4
|
|
|
2.8
|
|
|
(4.8
|
)
|
|
1.5
|
|
||||
Total operating segments
|
905.0
|
|
|
117.4
|
|
|
41.9
|
|
|
22.9
|
|
||||
Corporate
|
—
|
|
|
—
|
|
|
(17.1
|
)
|
|
5.8
|
|
||||
Total
|
$
|
905.0
|
|
|
$
|
117.4
|
|
|
$
|
24.8
|
|
|
$
|
28.7
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2012
|
|
2011
|
||||
Operating income from continuing operations
|
|
$
|
1.9
|
|
|
$
|
24.8
|
|
Less: interest expense
|
|
21.4
|
|
|
29.8
|
|
||
Loss from continuing operations before income taxes and equity in earnings of unconsolidated entities
|
|
$
|
(19.5
|
)
|
|
$
|
(5.0
|
)
|
ITEM 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Cautionary Statement Regarding Forward-Looking Statements.
|
•
|
Overview.
This section includes a general description of the Company's business and segments, an overview of key performance metrics the Company's management measures and utilizes to evaluate business performance, and an overview of trends affecting the Company, including management's actions related to the trends.
|
•
|
Results of Operations.
This section contains an analysis of the Company's results of operations by comparing the results for the
three months ended
March 31, 2012
to the
three months ended
March 31, 2011
. The comparability of the Company's results of operations between periods was impacted by the
September 8, 2011
acquisition of Transcontinental's Mexican operations. 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, non-GAAP financial measures that the Company uses to assess the performance of its business.
|
•
|
Liquidity and Capital Resources.
This section provides an analysis of the Company's capitalization and cash flows. The cash flows of the Company's Canadian operations have not been reported as discontinued operations and are included in all cash flow analysis. Forward-looking statements important to understanding the Company's financial condition are also included in this section. This section also provides a discussion of Free Cash Flow, a non-GAAP financial measure the Company uses to assess liquidity and capital deployment.
|
•
|
New Accounting Pronouncements.
This section provides a discussion of new accounting pronouncements and the anticipated impact of those accounting pronouncements to the Company's condensed consolidated financial statements.
|
•
|
The impact of significant overcapacity in the highly competitive commercial printing industry, which creates downward pricing pressure and fluctuating demand for printing services;
|
•
|
The inability of the Company to reduce costs and improve operating efficiency rapidly enough to meet market conditions;
|
•
|
The impact of electronic media and similar technological changes;
|
•
|
The impact of changing future economic conditions;
|
•
|
The failure to renew long-term contracts with customers, the renewal of those contracts under different terms, or customer nonperformance in accordance with the terms and for the duration of long-term contracts;
|
•
|
Significant capital expenditures may be needed to maintain the Company's platform and processes and to remain technologically and economically competitive;
|
•
|
The impact of fluctuations in costs (including labor-related costs, energy costs, freight rates and raw materials) and the impact of fluctuations in the availability of raw materials;
|
•
|
The impact of regulatory matters and legislative developments or changes in laws, including changes in environmental and privacy laws and postal rates, regulations and services;
|
•
|
The impact on Quad/Graphics class A common shareholders of a limited active market for Quad/Graphics common stock and the inability to independently elect directors or control decisions due to the class B common stock voting rights;
|
•
|
An other than temporary decline in operating results and enterprise value could lead to non-cash impairment charges due to the impairment of goodwill, other intangible assets and property, plant and equipment;
|
•
|
The liabilities of World Color Press with respect to pension, postretirement benefits and MEPPs could grow in the future and create additional costs;
|
•
|
Restrictions imposed by various covenants in the Company's debt facilities may affect the Company's ability to operate its business;
|
•
|
Failure to successfully integrate the operations of Quad/Graphics and World Color Press;
|
•
|
Risks associated with the Company's operations outside of the United States;
|
•
|
The inability to retain and attract additional, key employees, or the adverse effects of any strikes or other labor protests.
|
•
|
Print Solutions: including catalogs, consumer magazines, special interest publications, direct mail, packaging and other commercial and specialty printed products, retail inserts, books and directories.
|
•
|
Media Solutions: including creative, digital imaging, video, photography, workflow solutions, interactive technology including mobile and social media, and response data analytics services.
|
•
|
Logistics Services: including mailing, distribution, logistics and data optimization and hygiene services.
|
|
Operating Income from Continuing Operations
|
|
Operating Margin
|
|
Net Earnings (Loss) Attributable to Quad/Graphics Common Shareholders
|
|
Earnings (Loss) Per Share
Attributable to
Quad/Graphics Common
Shareholders—Diluted
|
|||||||
For the Three Months Ended March 31, 2011
|
$
|
24.8
|
|
|
2.4
|
%
|
|
$
|
(7.3
|
)
|
|
$
|
(0.15
|
)
|
2012 Restructuring, Impairment and Transaction-Related Charges
(1)
|
(38.2
|
)
|
|
(3.9
|
)%
|
|
(22.9
|
)
|
|
(0.49
|
)
|
|||
2011 Restructuring, Impairment and Transaction-Related Charges
(2)
|
28.7
|
|
|
2.8
|
%
|
|
17.2
|
|
|
0.35
|
|
|||
Decrease in Interest Expense
(3)
|
N/A
|
|
|
N/A
|
|
|
5.0
|
|
|
0.11
|
|
|||
Income Tax Benefit from Settlement of IRS Audits
(4)
|
N/A
|
|
|
N/A
|
|
|
31.2
|
|
|
0.67
|
|
|||
Decrease in Loss from Discontinued Operations, net of tax
(5)
|
N/A
|
|
|
N/A
|
|
|
7.1
|
|
|
0.15
|
|
|||
Increase in Gain on Disposal of Discontinued Operations, net of tax
(6)
|
N/A
|
|
|
N/A
|
|
|
35.3
|
|
|
0.75
|
|
|||
Decrease in Operating Income
(7)
|
(13.4
|
)
|
|
(1.1
|
)%
|
|
(18.2
|
)
|
|
(0.38
|
)
|
|||
For the Three Months Ended March 31, 2012
|
$
|
1.9
|
|
|
0.2
|
%
|
|
$
|
47.4
|
|
|
$
|
1.01
|
|
(1)
|
Restructuring, impairment and transaction-related charges of
$38.2 million
incurred during the
three months ended
March 31, 2012
included:
|
a.
|
$10.4 million
of employee termination charges related to workforce reductions through facility consolidations and involuntary separation programs;
|
b.
|
$8.4 million
of impairment charges for certain buildings and equipment no longer being utilized in production as a result of facility consolidations, primarily related to the Company's vacant Pila, Poland facility;
|
c.
|
$1.5 million
of transaction-related charges incurred primarily in connection with the transaction with Transcontinental;
|
d.
|
$11.9 million
of acquisition-related integration costs; and
|
e.
|
$6.0 million
of various other restructuring charges, including costs to maintain and exit closed facilities, as well as lease exit charges.
|
(2)
|
Restructuring, impairment and transaction-related charges of
$28.7 million
incurred during the
three months ended
March 31, 2011
included:
|
a.
|
$11.0 million
of employee termination charges related to workforce reductions through facility consolidations and involuntary separation programs;
|
b.
|
$6.4 million
of acquisition-related integration costs, net of a
$7.1 million
gain on the collection of a note receivable for the June 2008 sale of World Color Press' European operations; and
|
c.
|
$11.3 million
of various other restructuring charges, including costs to maintain and exit closed facilities, as well as lease exit charges.
|
(3)
|
Interest expense
decreased
$8.4 million
(
$5.0 million
net of tax) during the
three months ended
March 31, 2012
to
$21.4 million
. This change was due to a reduction in debt in 2012 and lower interest rates as a result of the
$1.5 billion
debt financing agreement entered into on
July 26, 2011
.
|
(4)
|
The Company settled IRS audits which resulted in an income tax benefit of
$31.2 million
during the
three months ended
March 31, 2012
.
|
(5)
|
Loss on discontinued operations, net of tax,
decreased
$7.1 million
during the
three months ended
March 31, 2012
to a
$3.2 million
loss primarily due to one less month of Canadian operations in
2012
as the Canadian discontinued operations were sold on
March 1, 2012
. Additionally, depreciation expense
decreased
$3.2 million
in
2012
, as the Company, in accordance with applicable accounting guidance, discontinued depreciation expense on the Canadian discontinued operations on
July 12, 2011
(when the definitive agreement was entered into with Transcontinental to sell the Canadian business).
|
(6)
|
Gain on disposal of discontinued operations, net of tax, was
$35.3 million
during the
three months ended
March 31, 2012
, due to the
March 1, 2012
completion of the sale of the Company's Canadian operations to Transcontinental.
|
(7)
|
Operating income
decreased
$13.4 million
primarily due to the margin impact of a
$32.8 million
, or
3.2%
, decline in net sales and
$9.5 million
in increased restructuring, impairment and transaction-related charges, partially offset by
$25 million
in incremental synergy savings from the integration of World Color Press' operations and
$2.7 million
in reduced depreciation and amortization expense. The
$18.2 million
decrease in net earnings in the table above reflects the
$13.4 million
decrease in operating income discussed in the previous sentence, and additional tax expense recorded primarily related to an increase in the liability for unrecognized tax benefits and losses for which tax benefits were fully valued against. The following discussion provides additional details.
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||||||||
|
2012
|
|
2011
|
|
|
|
|
|||||||||||||
|
(dollars in millions)
|
|
|
|||||||||||||||||
|
Amount
|
|
% of
Sales
|
|
Amount
|
|
% of
Sales
|
|
$ Change
|
|
%
Change
|
|||||||||
Net Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Products
|
$
|
875.2
|
|
|
88.4
|
%
|
|
$
|
905.0
|
|
|
88.5
|
%
|
|
$
|
(29.8
|
)
|
|
(3.3
|
)%
|
Services
|
114.4
|
|
|
11.6
|
%
|
|
117.4
|
|
|
11.5
|
%
|
|
(3.0
|
)
|
|
(2.6
|
)%
|
|||
Total Net Sales
|
989.6
|
|
|
100.0
|
%
|
|
1,022.4
|
|
|
100.0
|
%
|
|
(32.8
|
)
|
|
(3.2
|
)%
|
|||
Cost of Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Products
|
686.7
|
|
|
69.4
|
%
|
|
697.0
|
|
|
68.2
|
%
|
|
(10.3
|
)
|
|
(1.5
|
)%
|
|||
Services
|
86.2
|
|
|
8.7
|
%
|
|
86.7
|
|
|
8.5
|
%
|
|
(0.5
|
)
|
|
(0.6
|
)%
|
|||
Total Cost of Sales
|
772.9
|
|
|
78.1
|
%
|
|
783.7
|
|
|
76.7
|
%
|
|
(10.8
|
)
|
|
(1.4
|
)%
|
|||
Selling, General & Administrative Expenses
|
92.0
|
|
|
9.3
|
%
|
|
97.9
|
|
|
9.6
|
%
|
|
(5.9
|
)
|
|
(6.0
|
)%
|
|||
Restructuring, Impairment and Transaction-Related Charges
|
38.2
|
|
|
3.9
|
%
|
|
28.7
|
|
|
2.8
|
%
|
|
9.5
|
|
|
33.1
|
%
|
|||
Depreciation and Amortization
|
84.6
|
|
|
8.5
|
%
|
|
87.3
|
|
|
8.5
|
%
|
|
(2.7
|
)
|
|
(3.1
|
)%
|
|||
Total Operating Expenses
|
987.7
|
|
|
99.8
|
%
|
|
997.6
|
|
|
97.6
|
%
|
|
(9.9
|
)
|
|
(1.0
|
)%
|
|||
Operating Income From Continuing Operations
|
$
|
1.9
|
|
|
0.2
|
%
|
|
$
|
24.8
|
|
|
2.4
|
%
|
|
$
|
(22.9
|
)
|
|
(92.3
|
)%
|
|
Three Months Ended March 31,
|
||||||||||||
|
2012
|
|
2011
|
||||||||||
|
Amount
|
|
% of Net Sales
|
|
Amount
|
|
% of Net Sales
|
||||||
|
(dollars in millions)
|
||||||||||||
EBITDA and EBITDA margin
|
$
|
119.6
|
|
|
12.1
|
%
|
|
$
|
102.6
|
|
|
10.0
|
%
|
|
Three Months Ended March 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(dollars in millions)
|
||||||
Net Earnings (Loss) Attributable to Quad/Graphics Common Shareholders
(1)
|
$
|
47.4
|
|
|
$
|
(7.3
|
)
|
Interest Expense
|
21.4
|
|
|
29.8
|
|
||
Income Tax Benefit
|
(33.8
|
)
|
|
(7.2
|
)
|
||
Depreciation and Amortization
|
84.6
|
|
|
87.3
|
|
||
EBITDA
|
$
|
119.6
|
|
|
$
|
102.6
|
|
(1)
|
Net earnings (loss) attributable to Quad/Graphics common shareholders includes the effects of:
|
a.
|
Restructuring, impairment and transaction-related charges of
$38.2 million
and
$28.7 million
for the
three months ended
March 31, 2012
and
2011
, respectively;
|
b.
|
Loss from discontinued operations, net of tax, was
$3.2 million
and
$10.3 million
for the
three months ended
March 31, 2012
and
2011
, respectively. EBITDA from discontinued operations was
$3.2 million
and
$7.0 million
for the
three months ended
March 31, 2012
and
2011
, respectively, and include restructuring, impairment and transaction-related charges of
$1.7 million
and
$6.1 million
for the
three months ended
March 31, 2012
and
2011
, respectively; and
|
c.
|
Gain on disposal of discontinued operations, net of tax, was
$35.3 million
for the
three months ended
March 31, 2012
.
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2012
|
|
2011
|
|
|
|
|
|||||||
|
(dollars in millions)
|
|
|
|||||||||||
|
Amount
|
|
Amount
|
|
$ Change
|
|
% Change
|
|||||||
Net Sales:
|
|
|
|
|
|
|
|
|||||||
Products
|
$
|
751.6
|
|
|
$
|
792.6
|
|
|
$
|
(41.0
|
)
|
|
(5.2
|
)%
|
Services
|
111.7
|
|
|
114.6
|
|
|
(2.9
|
)
|
|
(2.5
|
)%
|
|||
Operating Income (including Restructuring, Impairment and Transaction-Related Charges)
|
33.7
|
|
|
46.7
|
|
|
(13.0
|
)
|
|
(27.8
|
)%
|
|||
Operating Margin
|
3.9
|
%
|
|
5.1
|
%
|
|
N/A
|
|
|
N/A
|
|
|||
Restructuring, Impairment and Transaction-Related Charges
|
$
|
14.3
|
|
|
$
|
21.4
|
|
|
$
|
(7.1
|
)
|
|
(33.2
|
)%
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2012
|
|
2011
|
|
|
|
|
|||||||
|
(dollars in millions)
|
|
|
|||||||||||
|
Amount
|
|
Amount
|
|
$ Change
|
|
% Change
|
|||||||
Net Sales:
|
|
|
|
|
|
|
|
|||||||
Products
|
$
|
123.6
|
|
|
$
|
112.4
|
|
|
$
|
11.2
|
|
|
10.0
|
%
|
Services
|
2.7
|
|
|
2.8
|
|
|
(0.1
|
)
|
|
(3.6
|
)%
|
|||
Operating Loss (including Restructuring, Impairment and Transaction-Related Charges)
|
(8.2
|
)
|
|
(4.8
|
)
|
|
(3.4
|
)
|
|
(70.8
|
)%
|
|||
Operating Margin
|
(6.5
|
)%
|
|
(4.2
|
)%
|
|
N/A
|
|
|
N/A
|
|
|||
Restructuring, Impairment and Transaction-Related Charges
|
10.5
|
|
|
1.5
|
|
|
9.0
|
|
|
600.0
|
%
|
|||
Equity in Earnings of Unconsolidated Entities
|
$
|
1.1
|
|
|
$
|
0.8
|
|
|
$
|
0.3
|
|
|
37.5
|
%
|
|
Three Months Ended March 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(dollars in millions)
|
||||||
Operating Expenses (including Restructuring, Impairment and Transaction-Related Charges)
|
$
|
23.6
|
|
|
$
|
17.1
|
|
Restructuring, Impairment and Transaction-Related Charges
|
13.4
|
|
|
5.8
|
|
|
Three Months Ended March 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(dollars in millions)
|
||||||
Net Cash Provided by Operating Activities
(1)
|
$
|
110.6
|
|
|
$
|
36.7
|
|
Less: Purchases of Property, Plant and Equipment
|
(21.6
|
)
|
|
(40.5
|
)
|
||
Free Cash Flow
|
$
|
89.0
|
|
|
$
|
(3.8
|
)
|
(1)
|
Net cash provided by operating activities includes:
|
a.
|
Net restructuring payments of
$16.3 million
and
$40.9 million
for the
three months ended
March 31, 2012
and
2011
, respectively. Net restructuring payments consist of total restructuring payments, less restructuring cash receipts for a
$14.7 million
and a
$7.1 million
collection of disputed pre-acquisition World Color Press notes receivable for the
three months ended
March 31, 2012
and
2011
, respectively; and
|
b.
|
Bankruptcy payments of
$2.0 million
and
$1.8 million
for the
three months ended
March 31, 2012
and
2011
, respectively.
|
•
|
$1.5 Billion
Debt Financing Agreement which includes:
|
◦
|
$850.0 million
Revolving Credit Facility (no borrowings outstanding as of
March 31, 2012
);
|
◦
|
$450.0 million
Term Loan A (
$450.0 million
outstanding as of
March 31, 2012
); and
|
◦
|
$200.0 million
Term Loan B (
$198.1 million
outstanding as of
March 31, 2012
);
|
•
|
Master Note and Security Agreement (
$613.4 million
outstanding as of
March 31, 2012
); and
|
•
|
Facilities Agreement - a
$92.1 million
foreign currency denominated facilities agreement including both term loan and revolving credit facility components (total of
$79.7 million
outstanding as of
March 31, 2012
).
|
•
|
On a rolling twelve-month basis, the total leverage ratio, defined as total consolidated debt to consolidated EBITDA (as defined in the debt financing agreement), shall not exceed
3.50
to 1.00 (for the twelve months ended
March 31, 2012
, the Company's leverage ratio was
2.18
to 1.00).
|
•
|
On a rolling twelve-month basis, the minimum interest coverage ratio, defined as consolidated EBITDA to consolidated cash interest expense, shall not be less than
3.25
to 1.00 (for the twelve months ended
March 31, 2012
, the Company's interest coverage ratio was
6.96
to 1.00).
|
•
|
On a rolling twelve-month basis, the fixed charge coverage ratio, defined as consolidated EBITDA and rent expense to interest and rent expense, shall not be less than
1.50
to 1.00 (for the twelve months ended
March 31, 2012
, the Company's fixed charge coverage ratio was
3.52
to 1.00).
|
•
|
Consolidated net worth of at least
$745.8 million
plus
40%
of positive consolidated net income cumulatively for each year (as of
March 31, 2012
, the Company's consolidated net worth under the most restrictive covenant per the various debt agreements was
$1.28 billion
).
|
•
|
the Company reduced consolidated debt and capital leases by
$89.6 million
during the
three months ended
March 31, 2012
, and
|
•
|
the purchase price payable from the Transcontinental business exchange transaction was satisfied during the
three months ended
March 31, 2012
with the
March 1, 2012
sale of the Canadian operations to Transcontinental.
|
ITEM 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
ITEM 4.
|
Controls and Procedures
|
ITEM 1A.
|
Risk Factors
|
ITEM 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
(a)
|
None.
|
(b)
|
Not applicable.
|
(c)
|
The following table provides information about the Company's repurchases of its class A stock in the
first quarter ended
March 31, 2012
:
|
|
|
Issuer Purchases of Equity Securities
|
||||||||||||
Period
|
|
Total Number of Shares Purchased
(1)
|
|
Average Price Paid Per Share
|
|
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
(1)
|
||||||
January 1, 2012 to January 31, 2012
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
91,768,100
|
|
February 1, 2012 to February 29, 2012
|
|
—
|
|
|
—
|
|
|
—
|
|
|
91,768,100
|
|
||
March 1, 2012 to March 31, 2012
|
|
—
|
|
|
—
|
|
|
—
|
|
|
91,768,100
|
|
||
Total
|
|
—
|
|
|
|
|
—
|
|
|
|
(1)
|
On
September 6, 2011
, the Company's board of directors authorized a share repurchase program of up to
$100.0 million
of the Company's outstanding class A stock. Such purchases may be made from time to time and can be discontinued at any time.
|
ITEM 6.
|
Exhibits
|
|
|
|
|
QUAD/GRAPHICS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
May 10, 2012
|
|
By:
|
/s/ J. Joel Quadracci
|
|
|
|
|
J. Joel Quadracci
|
|
|
|
|
Chairman, President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
Date:
|
May 10, 2012
|
|
By:
|
/s/ John C. Fowler
|
|
|
|
|
John C. Fowler
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
Exhibit Number
|
|
Exhibit Description
|
|
|
|
(10.1)
|
|
Form of Stock Option and Dividend Equivalent Award Agreement under the Quad/Graphics, Inc. 2010 Omnibus Incentive Plan.
|
|
|
|
(10.2)
|
|
Form of Restricted Stock Unit Award Agreement under the Quad/Graphics, Inc. 2010 Omnibus Incentive Plan.
|
|
|
|
(31.1)
|
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934.
|
|
|
|
(31.2)
|
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934.
|
|
|
|
(32)
|
|
Written Statement of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
|
|
|
|
(101*)
|
|
Financial statements from the Quarterly Report on Form 10-Q of Quad/Graphics, Inc. for the quarter ended March 31, 2012 formatted in eXtensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations (Unaudited), (ii) the Condensed Consolidated Statements of Comprehensive Income (Unaudited), (iii) the Condensed Consolidated Balance Sheets (Unaudited), (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited), (v) the Notes to Condensed Consolidated Financial Statements (Unaudited), and (vi) document and entity information.
|
*
|
In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
|
Grant Date:
|
November 18, 2011
|
|
|
|
|
Type of Option:
|
Nonqualified Stock Option
|
|
|
|
|
Total Number of Option Shares:
|
[ _______________ ]
|
|
|
|
|
Number of Vested Shares:
|
[ _______________ ]
|
|
|
|
|
Number of Unvested Shares (subject to vesting schedule defined below):
|
[ _______________ ]
|
|
|
|
|
Exercise Price per Share:
|
U.S. $[ __.__ ]
|
|
|
|
|
Vesting:
|
__________ of your Option will vest and become exercisable on each of the _____ anniversaries of the Grant Date, provided that you remain in continuous employment or service until the applicable vesting date.
|
|
|
|
|
|
The vesting of your Option will accelerate in the following circumstances:
|
|
|
|
|
|
|
If you are continuously employed with, or in the service of, the Company or its Affiliates through the date preceding the date of a “Change in Control” (as defined below), then this Option will vest in full on the date of such Change in Control
.
|
|
|
|
|
|
If your employment or service relationship with the Company and its Affiliates is terminated as a result of your death or disability (within the meaning of Code Section 22(e)(3)), then this Option will vest in full on the date of such termination.
|
|
|
|
|
|
For all options with an amended grant date in 1994, 1996, 1997, 1999, 2000, 2001, 2002 and 2003, use the following, otherwise exclude this paragraph: If your employment or service relationship with the Company and its Affiliates terminates as a result of your retirement upon or after age 60, then this Option will vest in full on the date of retirement.
|
|
|
|
|
Except as otherwise provided above, upon your termination of employment with, or cessation of services to, the Company and its Affiliates, the unvested portion of your Option will immediately terminate.
|
|
|
|
|
|
For purposes of this Award, a “Change in Control” means any event which results in the legal or beneficial ownership of shares of voting stock of the Company granting the holder or holders thereof a majority of the votes for the election of the majority of the Board of Directors (or other supervisory board) of the Company being owned by any person or entity (or group of persons or entities acting in concert) other than any one or more of the following acting alone or in concert: (i) the respective spouses and descendants of Harry V. Quadracci, Harry R. Quadracci or Thomas A. Quadracci and/or the spouses of any such descendants, (ii) the respective executors, administrators, guardians or conservators of the estates of any Harry V. Quadracci, Harry R. Quadracci, Thomas A Quadracci or the Persons described in clause (i) above, (iii) trustees holding shares of voting stock of the Company for the benefit of any of the persons described in clause (i) or (ii) above and (iv) any employee stock ownership or other benefit plan of the Company (together, the “Permitted Holders”).
|
|
Notwithstanding the foregoing, the transfer of legal or beneficial ownership of any of the shares of voting stock of the Company to a new entity shall not be a Change in Control if a majority of the voting stock of such new entity is owned by Permitted Holders. In the event such a transfer occurs, the foregoing definition of “Change in Control” shall be construed with respect to the new entity that owns all of the voting stock of the Company (as opposed to the Company itself).]
|
|
|
|
|
Termination Date:
|
Your Option expires at, and cannot be exercised after, the close of business at the Company's headquarters on the earliest to occur of:
|
|
|
|
|
|
|
The ______
anniversary of the Grant Date;
|
|
|
|
|
|
24 months after your termination of employment or service as a result of death;
|
|
|
|
|
|
36 months after your termination of employment or service upon retirement or as a result of disability (within the meaning of Code Section 22(e)(3)); or
|
|
|
|
|
|
90 days after your termination of employment or service for any other reason; provided that, if such termination of employment or service occurs prior to the date on which the Company's shareholders approve the Plan Amendments, your Option will not expire until 90 days after the date of such shareholder approval; and provided further that, if you die after such termination of employment or service and before the end of the applicable 90-day exercise period, the exercise period will be extended until 24 months after the date of your death.
|
|
|
|
|
If the date this Option terminates as specified above falls on a day on which the stock market is not open for trading or on a date on which you are prohibited by Company policy (such as an insider trading policy) from exercising the Option, the termination date shall be automatically extended to the first available trading day following the original termination date, but not beyond the tenth (10
th
) anniversary of the Grant Date.
|
|
|
|
|
Manner of Exercise:
|
You may exercise your Option only to the extent vested and only if it has not terminated. In addition, you may not exercise your Option until after the Company's shareholders have approved the Plan Amendments. To exercise your Option, you must complete the “Notice of Stock Option Exercise” form provided by the Company and return it to the address or send it via facsimile or email as indicated on the form. The form will be effective when it is received by the Company, but exercise will not be completed until you pay the total exercise price and all applicable withholding taxes due as a result of the exercise to the Company.
|
|
|
|
|
|
If someone else wants to exercise your Option after your death, that person must contact the Company and prove to the Company's satisfaction that he or she is entitled to do so.
|
|
|
|
|
|
Your ability to exercise your Option may be restricted by the Company if required by applicable law.
|
|
|
|
|
Restrictions on Resale:
|
By accepting your Option, you agree not to sell any Shares acquired under your Option at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale.
|
|
|
|
|
Restrictions on Transfer:
|
During your lifetime, this Option is only exercisable by you. You may not transfer, pledge or assign this Option, by operation of law or otherwise, except pursuant to your will or the laws of descent and distribution. If you attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option, except as provided above, or in the event this Option is subject to levy or attachment, execution or similar process, the Company may terminate this Option by providing written notice to you.
|
|
|
|
|
Recoupment; Rescission of Exercise:
|
If the Committee determines that recoupment of incentive compensation paid to you pursuant to your Option is required under any law or any recoupment policy of the Company, then your Option will terminate immediately on the date of such determination to the extent required by such law or recoupment policy, any prior exercise of such Option may be deemed to be rescinded, and the Committee may recoup any such incentive compensation in accordance with such recoupment policy or as required by law. The Company shall have the right to offset against any other amounts due from the Company to you the amount owed by you hereunder and any exercise price and withholding amount tendered by you with respect to any such incentive compensation.
|
Dividend Equivalent Rights:
|
If the Company pays a quarterly cash dividend on the Stock and the record date for such dividend occurs on or after the Grant Date and prior to the earlier of (i) the date on which all of the Option Shares have been issued under this Option as a result of your exercise of the Option or (ii) date on which this Option has terminated, then you will be credited as of the payment date for the dividend with an amount equal to the product of (x) the per share amount of the dividend and (y) the number of unexercised Option Shares subject to this Option on such record date. Any amounts credited to you under this paragraph will be paid to you in cash (without interest) on December 31 of the year in which the amounts are credited, regardless of whether this Option is exercised or terminated prior to such December 31 payment date; provided that any amounts that would otherwise be payable to you under this paragraph prior to the date the Company's shareholders approve the Plan Amendments shall be deferred and paid on the December 31 first following the date of such shareholder approval. If you die after amounts are credited to you under this paragraph but before the amounts are paid, the amounts will be paid to your estate on the December 31 on which payment would have been made to you.
|
|
|
|
|
Miscellaneous:
|
|
As a condition of the granting of your Option and the dividend equivalent rights, you agree, for yourself and your legal representatives or guardians, that this Award agreement shall be interpreted by the Committee and that any interpretation by the Committee of the terms of this Award agreement or the Plan and any determination made by the Committee pursuant to this Award agreement or the Plan shall be final, binding and conclusive.
|
|
|
|
|
|
Subject to the terms of the Plan, the Committee may modify or amend this Award agreement without your consent as permitted by Section 17(a) of the Plan or: (i) to the extent such action is deemed necessary by the Committee to comply with any applicable law or the listing requirements of any principal securities exchange or market on which shares of the Company's Class A Common Stock are then traded; (ii) to the extent the action is deemed necessary by the Committee to preserve favorable accounting or tax treatment of any Award for the Company; or (iii) to the extent the Committee determines that such action does not materially and adversely affect the value of this Award or that such action is in the best interest of you or any other person who may then have an interest in this Award.
|
|
|
|
|
|
Notwithstanding the foregoing, this Award agreement may not be amended, and the Company may not take any other action the effect of which is, to reduce the Exercise Price per Share of your Option other than (i) pursuant to Section 17(a) of the Plan, and in accordance with Section 1.409A-1(b)(5)(v)(B) of the Treasury Regulations, or (ii) in connection with a transaction which is considered the grant of a new option for purposes of Section 409A of the Code, provided that the new Exercise Price per Share is not less than Fair Market Value of a Share on the new grant date.
|
|
|
|
|
|
As a condition of the granting of your Option and the dividend equivalent rights, you acknowledge and agree that this Award agreement and the Plan constitute the entire agreement of the parties with respect to the subject matter of this Award and the Plan.
|
|
|
|
|
|
This Award agreement may be executed in counterparts.
|
|
|
|
Release:
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By signing below and accepting this Award, you acknowledge that, effective as of the Grant Date, the Company is terminating its 1990 Stock Option Plan and 1999 Nonqualified Stock Option Plan and all awards, including options held by you, that were granted under such plans. You also acknowledge and agree that, in consideration of this Award, you hereby consent to such termination and you release and forever discharge the Company and its Affiliates from any and all claims, demands, damages, suits, proceedings, actions and/or causes of action of any kind, whether known or unknown, that you now have or may have had arising out of or otherwise relating to the terminated plans and awards or the termination thereof.
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By:
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[Name of Authorized Officer]
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[Name of Option Recipient], Optionee
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Date:
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OPTIONEE INFORMATION
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DESCRIPTION OF OPTION(S) BEING EXERCISED
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Grant Date
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Exercise Price Per Share
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Number of Option Shares Being Purchased
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Total Exercise Price (multiply Exercise Price Per Share by Number of Option Shares Being Purchased)
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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Aggregate Exercise Price
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$
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Grant Date:
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[ _______________ ]
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Number of Restricted Stock Units:
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[ _______________ ]
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Vesting Schedule:
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One hundred percent (100%) of the Restricted Stock Units will vest on the third anniversary of the Grant Date, provided you are continuously employed by the Company or an Affiliate until the vesting date.
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The vesting of the Restricted Stock Units will accelerate in the following circumstances:
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If you are continuously employed with, or in the service of, the Company or its Affiliates through the date preceding the date of a “Change in Control” (as defined below), then 100% the Restricted Stock Units will vest in full on the date of such Change in Control.
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If your employment or service relationship with the Company and its Affiliates is terminated as a result of your death or disability (within the meaning of Code Section 22(e)(3)), then 100% of the Restricted Stock Units will vest in full on the date of such termination.
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If your employment or service relationship with the Company and its Affiliates terminates as a result of your retirement upon or after age 65, then, provided such retirement is approved by the Committee, a portion of the Restricted Stock Units will vest on the date of the retirement. Such portion shall be equal to the total number of Restricted Stock Units multiplied by a fraction, the numerator of which is the number of days from the Grant Date until the date of the retirement and the denominator of which is the total number of days from the Grant Date until the third anniversary of the Grant Date.
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Except as otherwise provided above, upon your termination of employment, or cessation of services to, the Company and its Affiliates prior to the date the Restricted Stock Units are vested, you will forfeit the unvested Restricted Stock Units.
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For purposes of this Agreement, a “Change in Control” means any event which results in the legal or beneficial ownership of shares of voting stock of the Company granting the holder or holders thereof a majority of the votes for the election of the majority of the Board of Directors (or other supervisory board) of the Company being owned by any person or entity (or group of persons or entities acting in concert) other than any one or more of the following acting alone or in concert: (i) the respective spouses and descendants of Harry V. Quadracci, Harry R. Quadracci or Thomas A. Quadracci and/or the spouses of any such descendants, (ii) the respective executors, administrators, guardians or conservators of the estates of any Harry V. Quadracci, Harry R. Quadracci, Thomas A Quadracci or the Persons described in clause (i) above, (iii) trustees holding shares of voting stock of the Company for the benefit of any of the persons described in clause (i) or (ii) above and (iv) any employee stock ownership or other benefit plan of the Company (together, the "Permitted Holders"). Notwithstanding the foregoing, the transfer of legal or beneficial ownership of any of the shares of voting stock of the Company to a new entity shall not be a Change in Control if a majority of the voting stock of such new entity is owned by Permitted Holders. In the event such a transfer occurs, the foregoing definition of "Change in Control" shall be construed with respect to the new entity that owns all of the voting stock of the Company (as opposed to the Company itself).
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Settlement of Restricted Stock Units:
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As soon as practicable after your Restricted Stock Units vest (but no later than two-and-one-half months from the end of the fiscal year in which vesting occurs), the Company will settle such vested Restricted Stock Units by electing either to (i) issue in your name certificate(s) or make an appropriate book entry for a number of Shares equal to the number of Restricted Stock Units that have vested or (ii) deliver an amount of cash equal to the Fair Market Value, determined as of the vesting date, of a number of Shares equal to the number of Restricted Stock Units that have vested.
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Transferability of
Restricted Stock Units:
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You may not sell, transfer or otherwise alienate or hypothecate any of your Restricted Stock Units until they are vested. In addition, by accepting this Award, you agree not to sell any Shares acquired under this Award other than as set forth in the Plan and at a time when applicable laws, Company policies or an agreement between the Company and its underwriters do not prohibit a sale. The Company also may require you to enter into a shareholder's agreement that will include additional restrictions on the transfer of Shares acquired under this Award that will remain effective after such Shares have vested.
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Dividend Equivalents:
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You will be credited with dividend equivalents equal to the amount of any dividends or other distributions paid with respect to the Shares underlying the Restricted Stock Units, so long as the applicable record date occurs before you forfeit the Restricted Stock Units. Any such dividend equivalents will be subject to the same terms and conditions (including vesting) as apply to the Restricted Stock Units with respect to which the dividend equivalents were paid and will be distributed at the same time as such Restricted Stock Units are settled.
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Rights as Shareholder:
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You will not be deemed for any purposes to be a shareholder of the Company with respect to any of the Restricted Stock Units unless and until a certificate for Shares is issued upon vesting of the Restricted Stock Units.
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Transferability of Award:
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You may not transfer or assign this Award for any reason, other than as set forth in the Plan. Any attempted transfer or assignment will be null and void.
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Market Stand-Off:
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In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, you agree that you shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Award without the prior written consent of the Company. Such restriction shall be in effect for such period of time following the date of the final prospectus for the offering as may be determined by the Company. In no event, however, shall such period exceed one hundred eighty (180) days.
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Tax Withholding:
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You understand that you (and not the Company or any Affiliate) shall be responsible for your own federal, state, local or foreign tax liability and any of your other tax consequences that may arise as a result of the transactions contemplated by this Award. You shall rely solely on the determinations of your tax advisors or your own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters.
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To the extent that the receipt or the vesting of the Restricted Stock Units results in income to you for federal, state or local income tax purposes, you shall deliver to the Company at the time the Company is obligated to withhold taxes in connection with such receipt, vesting or payment, as the case may be, such amount as the Company requires to meet its withholding obligation under applicable tax laws or regulations, and if you fail to do so, the Company has the right and authority to deduct or withhold from other compensation payable to you an amount sufficient to satisfy its withholding obligations.
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[You may satisfy the withholding requirement in connection with the vesting of the Restricted Stock Units, in whole or in part, by electing to have the Company withhold for its own account that number of Shares otherwise deliverable to you upon vesting having an aggregate Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that the Company must withhold in connection with the vesting of such Restricted Stock Units. Your election must be irrevocable, in writing, and submitted to the Secretary of the Company before the applicable vesting date. The Fair Market Value of any fractional Share not used to satisfy the withholding obligation (as determined on the date the tax is determined) will be paid to you in cash.
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Miscellaneous:
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As a condition of the granting of this Restricted Stock Unit Award, you agree, for yourself and your legal representatives or guardians, that this Restricted Stock Unit Award shall be interpreted by the Committee and that any interpretation by the Committee of the terms of this Restricted Stock Unit Award or the Plan and any determination made by the Committee pursuant to this Restricted Stock Unit Award shall be final, binding and conclusive.
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Subject to the terms of the Plan, the Committee may modify or amend this Restricted Stock Unit Award without your consent as permitted by Section 17(a) of the Plan or: (i) to the extent such action is deemed necessary by the Committee to comply with any applicable law or the listing requirements of any principal securities exchange or market on which shares of the Company's Class A Common Stock are then traded; (ii) to the extent the action is deemed necessary by the Committee to preserve favorable accounting or tax treatment of any Award for the Company; or (iii) to the extent the Committee determines that such action does not materially and adversely affect the value of this Restricted Stock Unit Award or that such action is in the best interest of you or any other person who may then have an interest in this Restricted Stock Unit Award.
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The Restricted Stock Units constitute a mere promise by the Company to make specified payments in the future if such benefits come due under the Award. You will have the status of a general creditor of the Company with respect to any vested Award.
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This Restricted Stock Unit Award may be executed in counterparts.
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By:
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[Name of Authorized Officer]
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[Name of Recipient]
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Date:
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Quad/Graphics, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date:
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May 10, 2012
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/s/ J. Joel Quadracci
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J. Joel Quadracci
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Chairman, President and Chief Executive Officer
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Quad/Graphics, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date:
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May 10, 2012
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/s/ John C. Fowler
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John C. Fowler
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Executive Vice President and Chief Financial Officer
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/s/ J. Joel Quadracci
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J. Joel Quadracci
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Chairman, President and Chief Executive Officer
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/s/ John C. Fowler
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John C. Fowler
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Executive Vice President and Chief Financial Officer
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