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x
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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
o
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Accelerated filer
x
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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 October 28, 2016
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Class A Common Stock
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36,851,752
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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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—
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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 September 30,
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Nine Months Ended September 30,
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2016
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2015
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2016
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2015
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Net sales
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Products
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$
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904.2
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$
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978.1
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$
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2,688.9
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$
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2,818.8
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Services
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152.2
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157.4
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442.3
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464.7
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Total net sales
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1,056.4
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1,135.5
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3,131.2
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3,283.5
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Cost of sales
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Products
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719.1
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797.3
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2,144.2
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2,306.1
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Services
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105.8
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112.6
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305.2
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336.9
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Total cost of sales
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824.9
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909.9
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2,449.4
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2,643.0
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Operating expenses
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Selling, general and administrative expenses
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109.9
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106.1
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341.9
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326.2
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Depreciation and amortization
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61.7
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81.0
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217.4
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245.7
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Restructuring, impairment and transaction-related charges
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26.1
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35.6
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62.4
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80.0
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Goodwill impairment
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—
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775.0
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—
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798.3
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Total operating expenses
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1,022.6
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1,907.6
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3,071.1
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4,093.2
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Operating income (loss)
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$
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33.8
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$
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(772.1
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)
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$
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60.1
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$
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(809.7
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)
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Interest expense
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19.6
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22.3
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58.9
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66.4
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Gain on debt extinguishment
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—
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—
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(14.1
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—
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Earnings (loss) before income taxes and equity in loss of unconsolidated entities
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14.2
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(794.4
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15.3
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(876.1
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)
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Income tax expense (benefit)
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2.9
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(244.9
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5.6
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(249.7
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Earnings (loss) before equity in loss of unconsolidated entities
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11.3
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(549.5
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9.7
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(626.4
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Equity in loss of unconsolidated entities
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—
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2.7
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2.3
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6.1
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Net earnings (loss)
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$
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11.3
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$
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(552.2
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$
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7.4
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$
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(632.5
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Earnings (loss) per share
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Basic
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$
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0.24
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$
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(11.50
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$
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0.16
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$
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(13.20
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Diluted
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$
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0.22
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$
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(11.50
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$
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0.15
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$
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(13.20
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Dividends declared per share
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$
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0.30
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$
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0.30
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$
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0.90
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$
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0.90
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Weighted average number of common shares outstanding
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Basic
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47.8
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48.0
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47.6
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47.9
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Diluted
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50.6
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48.0
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49.3
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47.9
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2016
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2015
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2016
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2015
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Net earnings (loss)
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$
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11.3
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$
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(552.2
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$
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7.4
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$
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(632.5
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Other comprehensive loss
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Translation adjustments
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(2.5
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(6.7
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4.6
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(29.8
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Pension benefit plan adjustments
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(23.4
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—
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(23.4
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—
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Other comprehensive loss, before tax
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(25.9
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(6.7
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(18.8
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(29.8
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Income tax benefit related to items of other comprehensive loss
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9.0
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—
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9.0
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—
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Other comprehensive loss, net of tax
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(16.9
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(6.7
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(9.8
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(29.8
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Comprehensive loss
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$
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(5.6
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$
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(558.9
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$
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(2.4
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$
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(662.3
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)
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September 30,
2016 |
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December 31,
2015 |
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ASSETS
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Cash and cash equivalents
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$
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11.5
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$
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10.8
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Receivables, less allowances for doubtful accounts of $54.1 million at September 30, 2016, and $50.1 million at December 31, 2015
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566.9
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648.7
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Inventories
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318.0
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280.1
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Prepaid expenses and other current assets
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49.9
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38.2
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Restricted cash
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14.6
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13.5
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Total current assets
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960.9
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991.3
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Property, plant and equipment—net
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1,531.1
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1,675.8
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Other intangible assets—net
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65.1
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110.5
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Equity method investments in unconsolidated entities
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2.8
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4.4
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Other long-term assets
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74.5
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65.5
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Total assets
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$
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2,634.4
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$
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2,847.5
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Accounts payable
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$
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341.8
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$
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358.8
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Amounts owing in satisfaction of bankruptcy claims
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2.3
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1.4
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Accrued liabilities
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357.8
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347.5
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Short-term debt and current portion of long-term debt
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92.3
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94.6
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Current portion of capital lease obligations
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5.6
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5.1
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Total current liabilities
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799.8
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807.4
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Long-term debt
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1,064.7
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1,239.9
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Unsecured notes to be issued
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6.8
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7.1
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|
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Capital lease obligations
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10.2
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9.7
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Deferred income taxes
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46.7
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59.0
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Other long-term liabilities
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306.7
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300.5
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Total liabilities
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2,234.9
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2,423.6
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Commitments and contingencies (Note 8)
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Shareholders' equity
|
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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
|
912.3
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|
|
956.7
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Treasury stock, at cost
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(124.6
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)
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(193.6
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)
|
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Accumulated deficit
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(227.3
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)
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(188.1
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)
|
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Accumulated other comprehensive loss
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(162.3
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)
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(152.5
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)
|
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Total shareholders' equity
|
399.5
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|
|
423.9
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Total liabilities and shareholders' equity
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$
|
2,634.4
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$
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2,847.5
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Nine Months Ended September 30,
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||||||
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2016
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2015
|
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OPERATING ACTIVITIES
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|
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Net earnings (loss)
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$
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7.4
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$
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(632.5
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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
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217.4
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245.7
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Impairment charges
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17.7
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39.9
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|
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Goodwill impairment
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—
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798.3
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Amortization of debt issuance costs and original issue discount
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3.2
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3.3
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Gain on debt extinguishment
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(14.1
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)
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—
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Stock-based compensation
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12.0
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4.0
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Foreign exchange losses on sale of investment
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—
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6.0
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Settlement loss on pension benefit plans
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6.5
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—
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Gain on sale or disposal of property, plant and equipment
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(6.0
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)
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(2.1
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)
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Deferred income taxes
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(3.8
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)
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(256.3
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)
|
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Equity in loss of unconsolidated entities
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2.3
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6.1
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Changes in operating assets and liabilities—net of acquisitions
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17.4
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(33.2
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)
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Net cash provided by operating activities
|
260.0
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|
179.2
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INVESTING ACTIVITIES
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Purchases of property, plant and equipment
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(57.7
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)
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(111.2
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)
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Cost investment in unconsolidated entities
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(9.9
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)
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(1.2
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)
|
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Proceeds from the sale of property, plant and equipment
|
11.4
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|
4.8
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|
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Proceeds from the sale of investments
|
—
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|
14.0
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|
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Transfers from restricted cash
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—
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0.6
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|
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Acquisition of businesses—net of cash acquired
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—
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(140.8
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)
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Net cash used in investing activities
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(56.2
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)
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(233.8
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)
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FINANCING ACTIVITIES
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Proceeds from issuance of long-term debt
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19.7
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—
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|
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Payments of long-term debt
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(170.6
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)
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(69.6
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)
|
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Payments of capital lease obligations
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(4.6
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)
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(3.6
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)
|
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Borrowings on revolving credit facilities
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712.0
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1,182.4
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|
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Payments on revolving credit facilities
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(727.6
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)
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(1,006.1
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)
|
||
Payments of debt financing fees
|
(0.1
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)
|
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—
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|
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Bankruptcy claim payments on unsecured notes to be issued
|
(0.3
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)
|
|
(0.1
|
)
|
||
Purchases of treasury stock
|
(8.8
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)
|
|
—
|
|
||
Sale of stock for options exercised
|
22.8
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|
|
2.2
|
|
||
Shares withheld from employees for the tax obligations paid on equity grants
|
(1.4
|
)
|
|
(1.6
|
)
|
||
Tax benefit on equity award activity
|
—
|
|
|
1.8
|
|
||
Payment of cash dividends
|
(44.0
|
)
|
|
(44.6
|
)
|
||
Net cash provided by (used in) financing activities
|
(202.9
|
)
|
|
60.8
|
|
||
Effect of exchange rates on cash and cash equivalents
|
(0.2
|
)
|
|
(1.6
|
)
|
||
Net increase in cash and cash equivalents
|
0.7
|
|
|
4.6
|
|
||
Cash and cash equivalents at beginning of period
|
10.8
|
|
|
9.6
|
|
||
Cash and cash equivalents at end of period
|
$
|
11.5
|
|
|
$
|
14.2
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Employee termination charges
|
$
|
1.5
|
|
|
$
|
9.0
|
|
|
$
|
8.1
|
|
|
$
|
21.5
|
|
Impairment charges
|
0.9
|
|
|
15.8
|
|
|
17.7
|
|
|
39.9
|
|
||||
Transaction-related charges (income)
|
0.4
|
|
|
0.9
|
|
|
1.9
|
|
|
(7.3
|
)
|
||||
Integration costs
|
—
|
|
|
0.6
|
|
|
0.1
|
|
|
4.4
|
|
||||
Other restructuring charges
|
23.3
|
|
|
9.3
|
|
|
34.6
|
|
|
21.5
|
|
||||
Total
|
$
|
26.1
|
|
|
$
|
35.6
|
|
|
$
|
62.4
|
|
|
$
|
80.0
|
|
•
|
Employee termination charges of
$1.5 million
and
$8.1 million
were recorded during the
three and nine months ended
September 30, 2016
, respectively, and
$9.0 million
and
$21.5 million
were recorded during the
three and nine months ended
September 30, 2015
, respectively. The Company reduced its workforce through facility consolidations and involuntary separation programs.
|
•
|
There were
no
integration costs recorded during the
three months ended
September 30, 2016
. Integration costs of
$0.1 million
were recorded during the
nine months ended
September 30, 2016
. Integration costs of
$0.6 million
and
$4.4 million
were recorded during the
three and nine months ended
September 30, 2015
, respectively, and 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 acquired companies.
|
•
|
Other restructuring charges of
$23.3 million
and
$34.6 million
were recorded during the
three and nine months ended
September 30, 2016
, respectively, which consisted of the following: (1)
$2.3 million
and
$9.4 million
, respectively, of vacant facility carrying costs; (2)
$0.6 million
and
$4.4 million
, respectively, of equipment and infrastructure removal costs from closed plants; and (3)
$2.7 million
and
$3.1 million
, respectively, of lease exit charges primarily related to the lease termination of the Pittsburg, California facility. The Company also recorded an
$11.2 million
adjustment to its multiemployer pension plans withdrawal liability during the
three and nine months ended
September 30, 2016
, and a
$6.5 million
non-cash pension settlement charge related to lump-sum pension payments during the
three and nine months ended
September 30, 2016
, (see
Note 14
, "
Employee Retirement Plans
," for additional details). Other restructuring charges of
$9.3 million
and
$21.5 million
, respectively, were recorded during the
three and nine months ended
September 30, 2015
, which consisted of the following: (1)
$2.6 million
and
$9.3 million
, respectively, of vacant facility carrying costs; (2)
$0.3 million
and
$1.6 million
, respectively, of equipment and infrastructure removal costs from closed plants; and (3)
$0.4 million
and
$4.6 million
, respectively, of lease exit charges primarily related to the closure of the Atlanta, Georgia facility. The Company also recorded a
$6.0 million
non-cash expense during the
three and nine months ended
September 30, 2015
, to recognize accumulated foreign exchange losses on the sale of the Chile equity method investment (see
Note 7
, "
Equity Method Investments in Unconsolidated Entities
," for additional details).
|
|
Employee
Termination
Charges
|
|
Impairment
Charges
|
|
Transaction-Related
Charges
|
|
Integration
Costs
|
|
Other
Restructuring
Charges
|
|
Total
|
||||||||||||
Balance at December 31, 2015
|
$
|
24.4
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
1.4
|
|
|
$
|
13.0
|
|
|
$
|
38.9
|
|
Expense
|
8.1
|
|
|
17.7
|
|
|
1.9
|
|
|
0.1
|
|
|
34.6
|
|
|
62.4
|
|
||||||
Cash payments
|
(27.4
|
)
|
|
—
|
|
|
(1.8
|
)
|
|
(0.3
|
)
|
|
(19.5
|
)
|
|
(49.0
|
)
|
||||||
Non-cash adjustments
|
(0.2
|
)
|
|
(17.7
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
(7.9
|
)
|
|
(25.9
|
)
|
||||||
Balance at September 30, 2016
|
$
|
4.9
|
|
|
$
|
—
|
|
|
$
|
0.2
|
|
|
$
|
1.1
|
|
|
$
|
20.2
|
|
|
$
|
26.4
|
|
|
United States Print and Related Services
|
|
International
|
|
Total
|
||||||
Goodwill
|
$
|
778.3
|
|
|
$
|
30.0
|
|
|
$
|
808.3
|
|
Accumulated goodwill impairment loss
|
(778.3
|
)
|
|
(30.0
|
)
|
|
(808.3
|
)
|
|||
Balance at September 30, 2016 and December 31, 2015
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
Weighted
Average
Amortization
Period (years)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
||||||||||||
Trademarks, patents, licenses and agreements
|
7
|
|
$
|
22.8
|
|
|
$
|
(8.9
|
)
|
|
$
|
13.9
|
|
|
$
|
22.1
|
|
|
$
|
(5.5
|
)
|
|
$
|
16.6
|
|
Capitalized software
|
5
|
|
6.6
|
|
|
(6.3
|
)
|
|
0.3
|
|
|
6.5
|
|
|
(6.2
|
)
|
|
0.3
|
|
||||||
Acquired technology
|
5
|
|
6.4
|
|
|
(6.4
|
)
|
|
—
|
|
|
6.2
|
|
|
(5.9
|
)
|
|
0.3
|
|
||||||
Customer relationships
|
6
|
|
459.9
|
|
|
(409.0
|
)
|
|
50.9
|
|
|
459.4
|
|
|
(366.1
|
)
|
|
93.3
|
|
||||||
Total
|
|
$
|
495.7
|
|
|
$
|
(430.6
|
)
|
|
$
|
65.1
|
|
|
$
|
494.2
|
|
|
$
|
(383.7
|
)
|
|
$
|
110.5
|
|
|
Amortization Expense
|
||
Remainder of 2016
|
$
|
4.6
|
|
2017
|
18.1
|
|
|
2018
|
17.6
|
|
|
2019
|
12.9
|
|
|
2020
|
7.6
|
|
|
2021 and thereafter
|
4.3
|
|
|
Total
|
$
|
65.1
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Raw materials and manufacturing supplies
|
$
|
163.4
|
|
|
$
|
154.8
|
|
Work in process
|
61.1
|
|
|
51.0
|
|
||
Finished goods
|
93.5
|
|
|
74.3
|
|
||
Total
|
$
|
318.0
|
|
|
$
|
280.1
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Land
|
$
|
126.5
|
|
|
$
|
135.9
|
|
Buildings
|
941.9
|
|
|
952.6
|
|
||
Machinery and equipment
|
3,605.6
|
|
|
3,603.9
|
|
||
Other
(1)
|
189.3
|
|
|
194.1
|
|
||
Construction in progress
|
25.5
|
|
|
24.2
|
|
||
Property, plant and equipment—gross
|
$
|
4,888.8
|
|
|
$
|
4,910.7
|
|
Less: accumulated depreciation
|
(3,357.7
|
)
|
|
(3,234.9
|
)
|
||
Property, plant and equipment—net
|
$
|
1,531.1
|
|
|
$
|
1,675.8
|
|
(1)
|
Other consists of computer equipment, vehicles, furniture and fixtures, leasehold improvements and communication-related equipment.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net sales
|
$
|
19.6
|
|
|
$
|
20.9
|
|
|
$
|
52.1
|
|
|
$
|
88.8
|
|
Operating (income) loss
|
(1.2
|
)
|
|
4.7
|
|
|
1.8
|
|
|
10.9
|
|
||||
Net loss
|
—
|
|
|
5.5
|
|
|
4.6
|
|
|
12.4
|
|
|
Restricted Cash
|
|
Unsecured
Notes
to be Issued
|
||||
Balance at December 31, 2015
|
$
|
11.5
|
|
|
$
|
7.1
|
|
Class 3 Claim payments
|
—
|
|
|
(0.3
|
)
|
||
Balance at September 30, 2016
|
$
|
11.5
|
|
|
$
|
6.8
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Defeasance of unsecured notes to be issued
|
$
|
11.5
|
|
|
$
|
11.5
|
|
Restricted cash for Class 4 Claim payments
|
1.1
|
|
|
—
|
|
||
Other
|
2.0
|
|
|
2.0
|
|
||
Total
|
$
|
14.6
|
|
|
$
|
13.5
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Master note and security agreement
|
$
|
163.7
|
|
|
$
|
260.4
|
|
Term loan A—$450.0 million due April 2019
|
385.3
|
|
|
410.6
|
|
||
Term loan B—$300.0 million due April 2021
|
291.3
|
|
|
293.2
|
|
||
Revolving credit facility—$850.0 million due April 2019
|
46.5
|
|
|
70.8
|
|
||
Senior unsecured notes—$300.0 million due May 2022
|
243.5
|
|
|
300.0
|
|
||
International term loan—$20.0 million
|
17.9
|
|
|
—
|
|
||
International revolving credit facility—$13.1 million
|
8.7
|
|
|
—
|
|
||
Equipment term loans
|
10.5
|
|
|
13.4
|
|
||
Other
|
1.8
|
|
|
2.2
|
|
||
Debt issuance costs
|
(12.2
|
)
|
|
(16.1
|
)
|
||
Total debt
|
$
|
1,157.0
|
|
|
$
|
1,334.5
|
|
Less: short-term debt and current portion of long-term debt
|
(92.3
|
)
|
|
(94.6
|
)
|
||
Long-term debt
|
$
|
1,064.7
|
|
|
$
|
1,239.9
|
|
|
Master Note and Security Agreement
|
|
Senior Unsecured Notes
|
|
Total
|
||||||
Principal amount repurchased
|
$
|
60.1
|
|
|
$
|
56.5
|
|
|
$
|
116.6
|
|
|
|
|
|
|
|
||||||
Repurchase price
|
61.2
|
|
|
42.5
|
|
|
103.7
|
|
|||
Less: accrued interest paid
|
(1.2
|
)
|
|
(1.1
|
)
|
|
(2.3
|
)
|
|||
Net repurchase price
|
60.0
|
|
|
41.4
|
|
|
101.4
|
|
|||
|
|
|
|
|
|
||||||
Debt financing fees expensed
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|||
Debt issuance costs expensed
|
(0.2
|
)
|
|
(0.8
|
)
|
|
(1.0
|
)
|
|||
Gain (loss) on debt extinguishment
|
$
|
(0.2
|
)
|
|
$
|
14.3
|
|
|
$
|
14.1
|
|
•
|
Total Leverage Ratio.
On a rolling twelve-month basis, the total leverage ratio, defined as total consolidated debt to consolidated EBITDA, shall not exceed
3.75
to 1.00 (for the twelve months ended
September 30, 2016
, the Company's total leverage ratio was
2.36
to 1.00).
|
•
|
Senior Secured Leverage Ratio.
On a rolling twelve-month basis, the senior secured leverage ratio, defined as senior secured debt to consolidated EBITDA, shall not exceed
3.50
to 1.00 (for the twelve months ended
September 30, 2016
, the Company's senior secured leverage ratio was
1.88
to 1.00).
|
•
|
Minimum Interest Coverage Ratio.
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
3.50
to 1.00 (for the twelve months ended
September 30, 2016
, the Company's minimum interest coverage ratio was
6.61
to 1.00).
|
•
|
If the Company's total leverage ratio is greater than
3.00
to 1.00 (as defined in the
Senior Secured Credit Facility
), the Company is prohibited from making greater than
$120.0 million
of annual dividend payments, capital stock repurchases and certain other payments. If the total leverage ratio is less than
3.00
to 1.00, there are no such restrictions.
|
•
|
If the Company's senior secured leverage ratio is greater than
3.00
to 1.00 or the Company's total leverage ratio is greater than
3.50
to 1.00 (these ratios as defined in the
Senior Secured Credit Facility
), the Company is prohibited from voluntarily prepaying any of the
Senior Unsecured Notes
and from voluntarily prepaying any other unsecured or subordinated indebtedness, with certain exceptions (including any mandatory prepayments on the
Senior Unsecured Notes
or any other unsecured or subordinated debt). If the senior secured leverage ratio is less than
3.00
to 1.00 and the total leverage ratio is less than
3.50
to 1.00, there are no such restrictions.
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities.
|
Level 2:
|
Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
|
Level 3:
|
Unobservable inputs for the asset or liability. There were no Level 3 recurring measurements of assets or liabilities as of
September 30, 2016
.
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Single employer pension obligations
|
$
|
145.0
|
|
|
$
|
136.0
|
|
Multiemployer pension plans—withdrawal liability
|
23.0
|
|
|
31.0
|
|
||
Tax-related liabilities
|
22.9
|
|
|
22.2
|
|
||
Employee-related liabilities
|
62.9
|
|
|
64.6
|
|
||
Restructuring reserve
|
15.9
|
|
|
6.6
|
|
||
Other
|
37.0
|
|
|
40.1
|
|
||
Total
|
$
|
306.7
|
|
|
$
|
300.5
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Interest cost
|
$
|
(4.0
|
)
|
|
$
|
(6.7
|
)
|
|
$
|
(14.3
|
)
|
|
$
|
(20.1
|
)
|
Expected return on plan assets
|
7.3
|
|
|
8.7
|
|
|
23.1
|
|
|
26.1
|
|
||||
Net periodic pension income
|
3.3
|
|
|
2.0
|
|
|
8.8
|
|
|
6.0
|
|
||||
Settlement charge
|
(6.5
|
)
|
|
—
|
|
|
(6.5
|
)
|
|
—
|
|
||||
Net pension income (expense)
|
$
|
(3.2
|
)
|
|
$
|
2.0
|
|
|
$
|
2.3
|
|
|
$
|
6.0
|
|
|
Nine Months Ended
|
||
|
September 30, 2016
|
||
Contributions on qualified pension plans
|
$
|
10.8
|
|
Benefit payments on non-qualified pension plans
|
1.4
|
|
|
Total
|
$
|
12.2
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Numerator
|
|
|
|
|
|
|
|
||||||||
Net earnings (loss)
|
$
|
11.3
|
|
|
$
|
(552.2
|
)
|
|
$
|
7.4
|
|
|
$
|
(632.5
|
)
|
|
|
|
|
|
|
|
|
||||||||
Denominator
|
|
|
|
|
|
|
|
||||||||
Basic weighted average number of common shares outstanding for all classes of common shares
|
47.8
|
|
|
48.0
|
|
|
47.6
|
|
|
47.9
|
|
||||
Plus: effect of dilutive equity incentive instruments
|
2.8
|
|
|
—
|
|
|
1.7
|
|
|
—
|
|
||||
Diluted weighted average number of common shares outstanding for all classes of common shares
|
50.6
|
|
|
48.0
|
|
|
49.3
|
|
|
47.9
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Earnings (loss) per share
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.24
|
|
|
$
|
(11.50
|
)
|
|
$
|
0.16
|
|
|
$
|
(13.20
|
)
|
Diluted
|
$
|
0.22
|
|
|
$
|
(11.50
|
)
|
|
$
|
0.15
|
|
|
$
|
(13.20
|
)
|
|
|
|
|
|
|
|
|
||||||||
Cash dividends paid per common share for all classes of common shares
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.90
|
|
|
$
|
0.90
|
|
|
Shares Under
Option
|
|
Weighted Average
Exercise
Price
|
|
Weighted Average
Remaining
Contractual Term
(years)
|
|
Aggregate
Intrinsic Value
(millions)
|
|||||
Outstanding at December 31, 2015
|
3,290,336
|
|
|
$
|
21.37
|
|
|
3.6
|
|
$
|
—
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Exercised
|
(1,182,322
|
)
|
|
19.27
|
|
|
|
|
|
|
||
Canceled/forfeited/expired
|
(21,485
|
)
|
|
26.54
|
|
|
|
|
|
|
||
Outstanding and exercisable at September 30, 2016
|
2,086,529
|
|
|
$
|
22.50
|
|
|
3.3
|
|
$
|
14.7
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Total intrinsic value of stock options exercised
|
$
|
8.9
|
|
|
$
|
—
|
|
|
$
|
9.7
|
|
|
$
|
1.3
|
|
Cash received from stock option exercises
|
21.1
|
|
|
—
|
|
|
22.8
|
|
|
2.2
|
|
||||
Total grant date fair value of stock options vested
|
—
|
|
|
—
|
|
|
0.3
|
|
|
1.8
|
|
|
Restricted Stock
|
|
Restricted Stock Units
|
||||||||||||||
|
Shares
|
|
Weighted-
Average
Grant Date
Fair Value
Per Share
|
|
Weighted-
Average
Remaining
Contractual
Term (years)
|
|
Units
|
|
Weighted-
Average
Grant Date
Fair Value
Per Share
|
|
Weighted-
Average
Remaining
Contractual
Term (years)
|
||||||
Nonvested at December 31, 2015
|
1,549,624
|
|
|
$
|
22.56
|
|
|
1.3
|
|
97,746
|
|
|
$
|
16.58
|
|
|
1.7
|
Granted
|
1,315,571
|
|
|
9.44
|
|
|
|
|
175,228
|
|
|
10.08
|
|
|
|
||
Vested
|
(331,979
|
)
|
|
20.39
|
|
|
|
|
(22,282
|
)
|
|
22.79
|
|
|
|
||
Forfeited
|
(38,009
|
)
|
|
23.05
|
|
|
|
|
(14,806
|
)
|
|
18.55
|
|
|
|
||
Nonvested at September 30, 2016
|
2,495,207
|
|
|
$
|
15.92
|
|
|
1.7
|
|
235,886
|
|
|
$
|
11.04
|
|
|
2.1
|
|
Deferred Stock Units
|
|||||
|
Units
|
|
Weighted-Average Grant Date Fair Value Per Share
|
|||
Outstanding at December 31, 2015
|
156,807
|
|
|
$
|
20.51
|
|
Granted
|
78,750
|
|
|
9.30
|
|
|
Dividend equivalents granted
|
11,383
|
|
|
19.23
|
|
|
Settled
|
—
|
|
|
—
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
Outstanding at September 30, 2016
|
246,940
|
|
|
$
|
16.88
|
|
|
|
|
Issued Common Stock
|
||||||||
|
Authorized Shares
|
|
Outstanding
|
|
Treasury
|
|
Total Issued Shares
|
||||
Class A stock ($0.025 par value)
|
80.0
|
|
|
|
|
|
|
|
|||
September 30, 2016
|
|
|
36.8
|
|
|
3.2
|
|
|
40.0
|
|
|
December 31, 2015
|
|
|
35.4
|
|
|
4.6
|
|
|
40.0
|
|
|
|
|
|
|
|
|
|
|
||||
Class B stock ($0.025 par value)
|
80.0
|
|
|
|
|
|
|
|
|||
September 30, 2016
|
|
|
14.2
|
|
|
0.8
|
|
|
15.0
|
|
|
December 31, 2015
|
|
|
14.2
|
|
|
0.8
|
|
|
15.0
|
|
|
|
|
|
|
|
|
|
|
||||
Class C stock ($0.025 par value)
|
20.0
|
|
|
|
|
|
|
|
|||
September 30, 2016
|
|
|
—
|
|
|
0.5
|
|
|
0.5
|
|
|
December 31, 2015
|
|
|
—
|
|
|
0.5
|
|
|
0.5
|
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Dividend Amount
per Share
|
||
2016
|
|
|
|
|
|
|
|
||
Q3 Dividend
|
August 1, 2016
|
|
August 29, 2016
|
|
September 9, 2016
|
|
$
|
0.30
|
|
Q2 Dividend
|
May 3, 2016
|
|
June 6, 2016
|
|
June 17, 2016
|
|
0.30
|
|
|
Q1 Dividend
|
February 19, 2016
|
|
March 7, 2016
|
|
March 18, 2016
|
|
0.30
|
|
|
2015
|
|
|
|
|
|
|
|
||
Q3 Dividend
|
August 4, 2015
|
|
September 7, 2015
|
|
September 18, 2015
|
|
$
|
0.30
|
|
Q2 Dividend
|
May 5, 2015
|
|
June 8, 2015
|
|
June 19, 2015
|
|
0.30
|
|
|
Q1 Dividend
|
February 23, 2015
|
|
March 9, 2015
|
|
March 20, 2015
|
|
0.30
|
|
|
Shareholders' Equity
|
||
Balance at December 31, 2015
|
$
|
423.9
|
|
Net earnings
|
7.4
|
|
|
Foreign currency translation adjustments
|
4.6
|
|
|
Cash dividends declared
|
(46.6
|
)
|
|
Stock-based compensation
|
12.0
|
|
|
Purchases of treasury stock
|
(8.8
|
)
|
|
Sale of stock for options exercised
|
22.8
|
|
|
Shares withheld from employees for the tax obligations paid on equity grants
|
(1.4
|
)
|
|
Pension benefit plan adjustments, net of tax
|
(14.4
|
)
|
|
Balance at September 30, 2016
|
$
|
399.5
|
|
|
Translation Adjustments
|
|
Pension Benefit Plan Adjustments
|
|
Total
|
||||||
Balance at December 31, 2015
|
$
|
(126.9
|
)
|
|
$
|
(25.6
|
)
|
|
$
|
(152.5
|
)
|
Other comprehensive income (loss) before reclassifications
|
4.6
|
|
|
(18.4
|
)
|
|
(13.8
|
)
|
|||
Amounts reclassified from accumulated other comprehensive loss to net earnings
|
—
|
|
|
4.0
|
|
|
4.0
|
|
|||
Net other comprehensive income (loss)
|
4.6
|
|
|
(14.4
|
)
|
|
(9.8
|
)
|
|||
Balance at September 30, 2016
|
$
|
(122.3
|
)
|
|
$
|
(40.0
|
)
|
|
$
|
(162.3
|
)
|
|
Translation Adjustments
|
|
Pension Benefit Plan Adjustments
|
|
Total
|
||||||
Balance at December 31, 2014
|
$
|
(88.7
|
)
|
|
$
|
(27.9
|
)
|
|
$
|
(116.6
|
)
|
Other comprehensive loss before reclassifications
|
(37.5
|
)
|
|
—
|
|
|
(37.5
|
)
|
|||
Amounts reclassified from accumulated other comprehensive loss to net loss
|
7.7
|
|
|
—
|
|
|
7.7
|
|
|||
Net other comprehensive loss
|
(29.8
|
)
|
|
—
|
|
|
(29.8
|
)
|
|||
Balance at September 30, 2015
|
$
|
(118.5
|
)
|
|
$
|
(27.9
|
)
|
|
$
|
(146.4
|
)
|
Details about Accumulated Other
Comprehensive Loss Components |
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
Condensed Consolidated Statements of Operations Presentation
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
||||||||||
Revaluation loss on sale of equity method investment (see Note 7)
|
|
$
|
—
|
|
|
$
|
7.7
|
|
|
$
|
—
|
|
|
$
|
7.7
|
|
|
Restructuring, impairment and transaction-related charges
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Settlement charge on pension benefit plans (see Note 14)
|
|
6.5
|
|
|
—
|
|
|
6.5
|
|
|
—
|
|
|
Restructuring, impairment and transaction-related charges
|
||||
Income tax benefit
|
|
(2.5
|
)
|
|
—
|
|
|
(2.5
|
)
|
|
—
|
|
|
Income tax expense (benefit)
|
||||
Settlement charge on pension benefit plans, net of tax
|
|
4.0
|
|
|
—
|
|
|
4.0
|
|
|
—
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total reclassifications for the period
|
|
6.5
|
|
|
7.7
|
|
|
6.5
|
|
|
7.7
|
|
|
|
||||
Impact of income taxes
|
|
(2.5
|
)
|
|
—
|
|
|
(2.5
|
)
|
|
—
|
|
|
|
||||
Total reclassifications for the period, net of tax
|
|
$
|
4.0
|
|
|
$
|
7.7
|
|
|
$
|
4.0
|
|
|
$
|
7.7
|
|
|
|
|
Net Sales
|
|
Operating Income (Loss)
|
|
Restructuring, Impairment and Transaction-
Related Charges
|
|
Goodwill Impairment
|
||||||||||||
|
Products
|
|
Services
|
|
|
|
|||||||||||||
Three months ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
United States Print and Related Services
|
$
|
808.6
|
|
|
$
|
147.9
|
|
|
$
|
58.6
|
|
|
$
|
8.8
|
|
|
$
|
—
|
|
International
|
95.6
|
|
|
4.3
|
|
|
5.5
|
|
|
(1.3
|
)
|
|
—
|
|
|||||
Total operating segments
|
904.2
|
|
|
152.2
|
|
|
64.1
|
|
|
7.5
|
|
|
—
|
|
|||||
Corporate
|
—
|
|
|
—
|
|
|
(30.3
|
)
|
|
18.6
|
|
|
—
|
|
|||||
Total
|
$
|
904.2
|
|
|
$
|
152.2
|
|
|
$
|
33.8
|
|
|
$
|
26.1
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Three months ended September 30, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
United States Print and Related Services
|
$
|
887.4
|
|
|
$
|
153.0
|
|
|
$
|
(742.9
|
)
|
|
$
|
8.8
|
|
|
$
|
775.0
|
|
International
|
90.7
|
|
|
4.4
|
|
|
(10.3
|
)
|
|
14.0
|
|
|
—
|
|
|||||
Total operating segments
|
978.1
|
|
|
157.4
|
|
|
(753.2
|
)
|
|
22.8
|
|
|
775.0
|
|
|||||
Corporate
|
—
|
|
|
—
|
|
|
(18.9
|
)
|
|
12.8
|
|
|
—
|
|
|||||
Total
|
$
|
978.1
|
|
|
$
|
157.4
|
|
|
$
|
(772.1
|
)
|
|
$
|
35.6
|
|
|
$
|
775.0
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nine months ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
United States Print and Related Services
|
$
|
2,405.1
|
|
|
$
|
428.8
|
|
|
$
|
114.6
|
|
|
$
|
40.4
|
|
|
$
|
—
|
|
International
|
283.8
|
|
|
13.5
|
|
|
7.5
|
|
|
0.7
|
|
|
—
|
|
|||||
Total operating segments
|
2,688.9
|
|
|
442.3
|
|
|
122.1
|
|
|
41.1
|
|
|
—
|
|
|||||
Corporate
|
—
|
|
|
—
|
|
|
(62.0
|
)
|
|
21.3
|
|
|
—
|
|
|||||
Total
|
$
|
2,688.9
|
|
|
$
|
442.3
|
|
|
$
|
60.1
|
|
|
$
|
62.4
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nine months ended September 30, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
United States Print and Related Services
|
$
|
2,550.2
|
|
|
$
|
450.5
|
|
|
$
|
(712.6
|
)
|
|
$
|
31.5
|
|
|
$
|
775.0
|
|
International
|
268.6
|
|
|
14.2
|
|
|
(65.7
|
)
|
|
41.4
|
|
|
23.3
|
|
|||||
Total operating segments
|
2,818.8
|
|
|
464.7
|
|
|
(778.3
|
)
|
|
72.9
|
|
|
798.3
|
|
|||||
Corporate
|
—
|
|
|
—
|
|
|
(31.4
|
)
|
|
7.1
|
|
|
—
|
|
|||||
Total
|
$
|
2,818.8
|
|
|
$
|
464.7
|
|
|
$
|
(809.7
|
)
|
|
$
|
80.0
|
|
|
$
|
798.3
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Operating income (loss)
|
$
|
33.8
|
|
|
$
|
(772.1
|
)
|
|
$
|
60.1
|
|
|
$
|
(809.7
|
)
|
Less: interest expense
|
19.6
|
|
|
22.3
|
|
|
58.9
|
|
|
66.4
|
|
||||
Less: gain on debt extinguishment
|
—
|
|
|
—
|
|
|
(14.1
|
)
|
|
—
|
|
||||
Earnings (loss) before income taxes and equity in loss of unconsolidated entities
|
$
|
14.2
|
|
|
$
|
(794.4
|
)
|
|
$
|
15.3
|
|
|
$
|
(876.1
|
)
|
•
|
the designation of any of the Guarantor Subsidiaries as an unrestricted subsidiary;
|
•
|
the release or discharge of any guarantee or indebtedness that resulted in the creation of the guarantee of the Senior Unsecured Notes by any of the Guarantor Subsidiaries; or
|
•
|
the sale or disposition, including the sale of substantially all the assets, of any of the Guarantor Subsidiaries.
|
|
Quad/Graphics,
Inc. |
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
||||||||||
Net sales
|
$
|
443.9
|
|
|
$
|
617.5
|
|
|
$
|
112.4
|
|
|
$
|
(117.4
|
)
|
|
$
|
1,056.4
|
|
Cost of sales
|
336.1
|
|
|
515.4
|
|
|
90.8
|
|
|
(117.4
|
)
|
|
824.9
|
|
|||||
Selling, general and administrative expenses
|
55.1
|
|
|
45.3
|
|
|
9.5
|
|
|
—
|
|
|
109.9
|
|
|||||
Depreciation and amortization
|
29.1
|
|
|
25.4
|
|
|
7.2
|
|
|
—
|
|
|
61.7
|
|
|||||
Restructuring, impairment and transaction-related charges
|
25.7
|
|
|
1.7
|
|
|
(1.3
|
)
|
|
—
|
|
|
26.1
|
|
|||||
Total operating expenses
|
446.0
|
|
|
587.8
|
|
|
106.2
|
|
|
(117.4
|
)
|
|
1,022.6
|
|
|||||
Operating income (loss)
|
$
|
(2.1
|
)
|
|
$
|
29.7
|
|
|
$
|
6.2
|
|
|
$
|
—
|
|
|
$
|
33.8
|
|
Interest expense (income)
|
20.1
|
|
|
(1.4
|
)
|
|
0.9
|
|
|
—
|
|
|
19.6
|
|
|||||
Earnings (loss) before income taxes and equity in (earnings) loss of consolidated and unconsolidated entities
|
(22.2
|
)
|
|
31.1
|
|
|
5.3
|
|
|
—
|
|
|
14.2
|
|
|||||
Income tax expense (benefit)
|
0.1
|
|
|
2.4
|
|
|
0.4
|
|
|
—
|
|
|
2.9
|
|
|||||
Earnings (loss) before equity in (earnings) loss of consolidated and unconsolidated entities
|
(22.3
|
)
|
|
28.7
|
|
|
4.9
|
|
|
—
|
|
|
11.3
|
|
|||||
Equity in (earnings) loss of consolidated entities
|
(33.6
|
)
|
|
(1.3
|
)
|
|
—
|
|
|
34.9
|
|
|
—
|
|
|||||
Equity in (earnings) loss of unconsolidated entities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net earnings (loss)
|
$
|
11.3
|
|
|
$
|
30.0
|
|
|
$
|
4.9
|
|
|
$
|
(34.9
|
)
|
|
$
|
11.3
|
|
|
Quad/Graphics,
Inc. |
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
||||||||||
Net earnings (loss)
|
$
|
11.3
|
|
|
$
|
30.0
|
|
|
$
|
4.9
|
|
|
$
|
(34.9
|
)
|
|
$
|
11.3
|
|
Other comprehensive income (loss), net of tax
|
(16.9
|
)
|
|
(14.7
|
)
|
|
(2.8
|
)
|
|
17.5
|
|
|
(16.9
|
)
|
|||||
Total comprehensive income (loss)
|
$
|
(5.6
|
)
|
|
$
|
15.3
|
|
|
$
|
2.1
|
|
|
$
|
(17.4
|
)
|
|
$
|
(5.6
|
)
|
|
Quad/Graphics,
Inc. |
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
||||||||||
Net sales
|
$
|
435.8
|
|
|
$
|
700.8
|
|
|
$
|
110.2
|
|
|
$
|
(111.3
|
)
|
|
$
|
1,135.5
|
|
Cost of sales
|
339.1
|
|
|
595.1
|
|
|
87.0
|
|
|
(111.3
|
)
|
|
909.9
|
|
|||||
Selling, general and administrative expenses
|
63.1
|
|
|
33.0
|
|
|
10.0
|
|
|
—
|
|
|
106.1
|
|
|||||
Depreciation and amortization
|
44.6
|
|
|
27.7
|
|
|
8.7
|
|
|
—
|
|
|
81.0
|
|
|||||
Restructuring, impairment and transaction-related charges
|
30.9
|
|
|
(9.3
|
)
|
|
14.0
|
|
|
—
|
|
|
35.6
|
|
|||||
Goodwill impairment
|
—
|
|
|
751.3
|
|
|
23.7
|
|
|
—
|
|
|
775.0
|
|
|||||
Total operating expenses
|
477.7
|
|
|
1,397.8
|
|
|
143.4
|
|
|
(111.3
|
)
|
|
1,907.6
|
|
|||||
Operating income (loss)
|
$
|
(41.9
|
)
|
|
$
|
(697.0
|
)
|
|
$
|
(33.2
|
)
|
|
$
|
—
|
|
|
$
|
(772.1
|
)
|
Interest expense (income)
|
21.5
|
|
|
(0.5
|
)
|
|
1.3
|
|
|
—
|
|
|
22.3
|
|
|||||
Earnings (loss) before income taxes and equity in (earnings) loss of consolidated and unconsolidated entities
|
(63.4
|
)
|
|
(696.5
|
)
|
|
(34.5
|
)
|
|
—
|
|
|
(794.4
|
)
|
|||||
Income tax expense (benefit)
|
(26.9
|
)
|
|
(219.2
|
)
|
|
1.2
|
|
|
—
|
|
|
(244.9
|
)
|
|||||
Earnings (loss) before equity in (earnings) loss of consolidated and unconsolidated entities
|
(36.5
|
)
|
|
(477.3
|
)
|
|
(35.7
|
)
|
|
—
|
|
|
(549.5
|
)
|
|||||
Equity in (earnings) loss of consolidated entities
|
515.7
|
|
|
23.4
|
|
|
—
|
|
|
(539.1
|
)
|
|
—
|
|
|||||
Equity in (earnings) loss of unconsolidated entities
|
—
|
|
|
—
|
|
|
2.7
|
|
|
—
|
|
|
2.7
|
|
|||||
Net earnings (loss)
|
$
|
(552.2
|
)
|
|
$
|
(500.7
|
)
|
|
$
|
(38.4
|
)
|
|
$
|
539.1
|
|
|
$
|
(552.2
|
)
|
|
Quad/Graphics,
Inc. |
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
||||||||||
Net earnings (loss)
|
$
|
(552.2
|
)
|
|
$
|
(500.7
|
)
|
|
$
|
(38.4
|
)
|
|
$
|
539.1
|
|
|
$
|
(552.2
|
)
|
Other comprehensive income (loss), net of tax
|
(6.7
|
)
|
|
(0.2
|
)
|
|
(7.1
|
)
|
|
7.3
|
|
|
(6.7
|
)
|
|||||
Total comprehensive income (loss)
|
$
|
(558.9
|
)
|
|
$
|
(500.9
|
)
|
|
$
|
(45.5
|
)
|
|
$
|
546.4
|
|
|
$
|
(558.9
|
)
|
|
Quad/Graphics,
Inc. |
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
||||||||||
Net sales
|
$
|
1,302.9
|
|
|
$
|
1,790.1
|
|
|
$
|
336.9
|
|
|
$
|
(298.7
|
)
|
|
$
|
3,131.2
|
|
Cost of sales
|
960.0
|
|
|
1,518.7
|
|
|
269.4
|
|
|
(298.7
|
)
|
|
2,449.4
|
|
|||||
Selling, general and administrative expenses
|
193.9
|
|
|
114.6
|
|
|
33.4
|
|
|
—
|
|
|
341.9
|
|
|||||
Depreciation and amortization
|
118.8
|
|
|
75.2
|
|
|
23.4
|
|
|
—
|
|
|
217.4
|
|
|||||
Restructuring, impairment and transaction-related charges
|
44.6
|
|
|
17.0
|
|
|
0.8
|
|
|
—
|
|
|
62.4
|
|
|||||
Total operating expenses
|
1,317.3
|
|
|
1,725.5
|
|
|
327.0
|
|
|
(298.7
|
)
|
|
3,071.1
|
|
|||||
Operating income (loss)
|
$
|
(14.4
|
)
|
|
$
|
64.6
|
|
|
$
|
9.9
|
|
|
$
|
—
|
|
|
$
|
60.1
|
|
Interest expense (income)
|
59.8
|
|
|
(3.8
|
)
|
|
2.9
|
|
|
—
|
|
|
58.9
|
|
|||||
Gain on debt extinguishment
|
(14.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.1
|
)
|
|||||
Earnings (loss) before income taxes and equity in (earnings) loss of consolidated and unconsolidated entities
|
(60.1
|
)
|
|
68.4
|
|
|
7.0
|
|
|
—
|
|
|
15.3
|
|
|||||
Income tax expense (benefit)
|
5.9
|
|
|
(0.9
|
)
|
|
0.6
|
|
|
—
|
|
|
5.6
|
|
|||||
Earnings (loss) before equity in (earnings) loss of consolidated and unconsolidated entities
|
(66.0
|
)
|
|
69.3
|
|
|
6.4
|
|
|
—
|
|
|
9.7
|
|
|||||
Equity in (earnings) loss of consolidated entities
|
(73.4
|
)
|
|
(4.6
|
)
|
|
—
|
|
|
78.0
|
|
|
—
|
|
|||||
Equity in (earnings) loss of unconsolidated entities
|
—
|
|
|
—
|
|
|
2.3
|
|
|
—
|
|
|
2.3
|
|
|||||
Net earnings (loss)
|
$
|
7.4
|
|
|
$
|
73.9
|
|
|
$
|
4.1
|
|
|
$
|
(78.0
|
)
|
|
$
|
7.4
|
|
|
Quad/Graphics,
Inc. |
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
||||||||||
Net earnings (loss)
|
$
|
7.4
|
|
|
$
|
73.9
|
|
|
$
|
4.1
|
|
|
$
|
(78.0
|
)
|
|
$
|
7.4
|
|
Other comprehensive income (loss), net of tax
|
(9.8
|
)
|
|
(16.0
|
)
|
|
2.8
|
|
|
13.2
|
|
|
(9.8
|
)
|
|||||
Total comprehensive income (loss)
|
$
|
(2.4
|
)
|
|
$
|
57.9
|
|
|
$
|
6.9
|
|
|
$
|
(64.8
|
)
|
|
$
|
(2.4
|
)
|
|
Quad/Graphics,
Inc. |
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
||||||||||
Net sales
|
$
|
1,286.4
|
|
|
$
|
1,998.2
|
|
|
$
|
309.8
|
|
|
$
|
(310.9
|
)
|
|
$
|
3,283.5
|
|
Cost of sales
|
985.3
|
|
|
1,713.1
|
|
|
255.5
|
|
|
(310.9
|
)
|
|
2,643.0
|
|
|||||
Selling, general and administrative expenses
|
186.0
|
|
|
112.2
|
|
|
28.0
|
|
|
—
|
|
|
326.2
|
|
|||||
Depreciation and amortization
|
134.3
|
|
|
87.2
|
|
|
24.2
|
|
|
—
|
|
|
245.7
|
|
|||||
Restructuring, impairment and transaction-related charges
|
24.6
|
|
|
14.3
|
|
|
41.1
|
|
|
—
|
|
|
80.0
|
|
|||||
Goodwill impairment
|
—
|
|
|
751.3
|
|
|
47.0
|
|
|
—
|
|
|
798.3
|
|
|||||
Total operating expenses
|
1,330.2
|
|
|
2,678.1
|
|
|
395.8
|
|
|
(310.9
|
)
|
|
4,093.2
|
|
|||||
Operating income (loss)
|
$
|
(43.8
|
)
|
|
$
|
(679.9
|
)
|
|
$
|
(86.0
|
)
|
|
$
|
—
|
|
|
$
|
(809.7
|
)
|
Interest expense (income)
|
63.7
|
|
|
(1.2
|
)
|
|
3.9
|
|
|
—
|
|
|
66.4
|
|
|||||
Earnings (loss) before income taxes and equity in (earnings) loss of consolidated and unconsolidated entities
|
(107.5
|
)
|
|
(678.7
|
)
|
|
(89.9
|
)
|
|
—
|
|
|
(876.1
|
)
|
|||||
Income tax expense (benefit)
|
(34.5
|
)
|
|
(218.8
|
)
|
|
3.6
|
|
|
—
|
|
|
(249.7
|
)
|
|||||
Earnings (loss) before equity in (earnings) loss of consolidated and unconsolidated entities
|
(73.0
|
)
|
|
(459.9
|
)
|
|
(93.5
|
)
|
|
—
|
|
|
(626.4
|
)
|
|||||
Equity in (earnings) loss of consolidated entities
|
559.5
|
|
|
25.6
|
|
|
—
|
|
|
(585.1
|
)
|
|
—
|
|
|||||
Equity in (earnings) loss of unconsolidated entities
|
—
|
|
|
—
|
|
|
6.1
|
|
|
—
|
|
|
6.1
|
|
|||||
Net earnings (loss)
|
$
|
(632.5
|
)
|
|
$
|
(485.5
|
)
|
|
$
|
(99.6
|
)
|
|
$
|
585.1
|
|
|
$
|
(632.5
|
)
|
|
Quad/Graphics,
Inc. |
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
||||||||||
Net earnings (loss)
|
$
|
(632.5
|
)
|
|
$
|
(485.5
|
)
|
|
$
|
(99.6
|
)
|
|
$
|
585.1
|
|
|
$
|
(632.5
|
)
|
Other comprehensive income (loss), net of tax
|
(29.8
|
)
|
|
(0.3
|
)
|
|
(31.1
|
)
|
|
31.4
|
|
|
(29.8
|
)
|
|||||
Total comprehensive income (loss)
|
$
|
(662.3
|
)
|
|
$
|
(485.8
|
)
|
|
$
|
(130.7
|
)
|
|
$
|
616.5
|
|
|
$
|
(662.3
|
)
|
|
Quad/Graphics,
Inc. |
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
||||||||||
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash from operating activities
|
$
|
116.2
|
|
|
$
|
136.4
|
|
|
$
|
7.4
|
|
|
$
|
—
|
|
|
$
|
260.0
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases of property, plant and equipment
|
(24.0
|
)
|
|
(18.5
|
)
|
|
(15.2
|
)
|
|
—
|
|
|
(57.7
|
)
|
|||||
Acquisition related investing activities—net of cash acquired
|
(0.9
|
)
|
|
0.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Intercompany investing activities
|
12.1
|
|
|
(121.8
|
)
|
|
19.1
|
|
|
90.6
|
|
|
—
|
|
|||||
Other investing activities
|
(6.1
|
)
|
|
5.4
|
|
|
2.2
|
|
|
—
|
|
|
1.5
|
|
|||||
Net cash from (used in) investing activities
|
(18.9
|
)
|
|
(134.0
|
)
|
|
6.1
|
|
|
90.6
|
|
|
(56.2
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from issuance of long-term debt
|
—
|
|
|
—
|
|
|
19.7
|
|
|
—
|
|
|
19.7
|
|
|||||
Payments of long-term debt and capital lease obligations
|
(170.4
|
)
|
|
(2.6
|
)
|
|
(2.2
|
)
|
|
—
|
|
|
(175.2
|
)
|
|||||
Borrowings on revolving credit facilities
|
648.9
|
|
|
—
|
|
|
63.1
|
|
|
—
|
|
|
712.0
|
|
|||||
Payments on revolving credit facilities
|
(673.2
|
)
|
|
—
|
|
|
(54.4
|
)
|
|
—
|
|
|
(727.6
|
)
|
|||||
Purchases of treasury stock
|
(8.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8.8
|
)
|
|||||
Payment of cash dividends
|
(44.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(44.0
|
)
|
|||||
Intercompany financing activities
|
128.5
|
|
|
0.1
|
|
|
(38.0
|
)
|
|
(90.6
|
)
|
|
—
|
|
|||||
Other financing activities
|
21.3
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
21.0
|
|
|||||
Net cash used in financing activities
|
(97.7
|
)
|
|
(2.8
|
)
|
|
(11.8
|
)
|
|
(90.6
|
)
|
|
(202.9
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Effect of exchange rates on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
(0.2
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
(0.4
|
)
|
|
(0.4
|
)
|
|
1.5
|
|
|
—
|
|
|
0.7
|
|
|||||
Cash and cash equivalents at beginning of period
|
2.3
|
|
|
2.8
|
|
|
5.7
|
|
|
—
|
|
|
10.8
|
|
|||||
Cash and cash equivalents at end of period
|
$
|
1.9
|
|
|
$
|
2.4
|
|
|
$
|
7.2
|
|
|
$
|
—
|
|
|
$
|
11.5
|
|
|
Quad/Graphics,
Inc. |
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Total
|
||||||||||
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash from operating activities
|
$
|
46.4
|
|
|
$
|
111.9
|
|
|
$
|
20.9
|
|
|
$
|
—
|
|
|
$
|
179.2
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases of property, plant and equipment
|
(45.3
|
)
|
|
(56.3
|
)
|
|
(9.6
|
)
|
|
—
|
|
|
(111.2
|
)
|
|||||
Acquisition related investing activities—net of cash acquired
|
—
|
|
|
(63.3
|
)
|
|
(77.5
|
)
|
|
—
|
|
|
(140.8
|
)
|
|||||
Intercompany investing activities
|
(133.0
|
)
|
|
(163.8
|
)
|
|
(0.4
|
)
|
|
297.2
|
|
|
—
|
|
|||||
Other investing activities
|
1.2
|
|
|
6.3
|
|
|
10.7
|
|
|
—
|
|
|
18.2
|
|
|||||
Net cash from (used in) investing activities
|
(177.1
|
)
|
|
(277.1
|
)
|
|
(76.8
|
)
|
|
297.2
|
|
|
(233.8
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
||||||||||
Payments of long-term debt and capital lease obligations
|
(70.7
|
)
|
|
(2.5
|
)
|
|
—
|
|
|
—
|
|
|
(73.2
|
)
|
|||||
Borrowings on revolving credit facilities
|
1,141.6
|
|
|
—
|
|
|
40.8
|
|
|
—
|
|
|
1,182.4
|
|
|||||
Payments on revolving credit facilities
|
(965.3
|
)
|
|
—
|
|
|
(40.8
|
)
|
|
—
|
|
|
(1,006.1
|
)
|
|||||
Payment of cash dividends
|
(44.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(44.6
|
)
|
|||||
Intercompany financing activities
|
67.7
|
|
|
165.9
|
|
|
63.6
|
|
|
(297.2
|
)
|
|
—
|
|
|||||
Other financing activities
|
2.4
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
2.3
|
|
|||||
Net cash from (used in) financing activities
|
131.1
|
|
|
163.3
|
|
|
63.6
|
|
|
(297.2
|
)
|
|
60.8
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Effect of exchange rates on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
—
|
|
|
(1.6
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
0.4
|
|
|
(1.9
|
)
|
|
6.1
|
|
|
—
|
|
|
4.6
|
|
|||||
Cash and cash equivalents at beginning of period
|
1.9
|
|
|
5.6
|
|
|
2.1
|
|
|
—
|
|
|
9.6
|
|
|||||
Cash and cash equivalents at end of period
|
$
|
2.3
|
|
|
$
|
3.7
|
|
|
$
|
8.2
|
|
|
$
|
—
|
|
|
$
|
14.2
|
|
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 (1) the
three months ended
September 30, 2016
, to the
three months ended
September 30, 2015
; and (2) the
nine months ended
September 30, 2016
, to the
nine months ended
September 30, 2015
. The comparability of the Company's results of operations between periods was impacted by acquisitions, including the 2015 acquisitions of Marin's, Copac and Specialty. The results of operations of all acquisitions are included in the Company's condensed consolidated results prospectively from their respective acquisition dates. 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, cash flows, a statement about off-balance sheet arrangements and a discussion of outstanding debt and commitments. Forward-looking statements important to understanding the Company's financial condition are included in this section. This section also provides a discussion of Free Cash Flow and Debt Leverage Ratio, non-
GAAP
financial measures that the Company uses to assess liquidity and capital allocation and deployment.
|
•
|
New Accounting Pronouncements.
|
•
|
The impact of decreasing demand for printed materials and significant overcapacity in the highly competitive commercial printing industry creates downward pricing pressures;
|
•
|
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, including digital substitution by consumers;
|
•
|
The impact of changing future economic conditions;
|
•
|
The impact of the various covenants in the Company's debt facilities that impose restrictions may affect the Company's ability to operate its business;
|
•
|
The failure of clients to perform under contracts or to renew contracts with clients on favorable terms or at all;
|
•
|
The impact of fluctuations in costs (including labor and labor-related costs, energy costs, freight rates and raw materials) and the impact of fluctuations in the availability of raw materials;
|
•
|
The impact of changes in postal rates, service levels or regulations;
|
•
|
The failure to successfully identify, manage, complete and integrate acquisitions and investments;
|
•
|
The impact of increased business complexity as a result of the Company's entry into additional markets;
|
•
|
The impact of risks associated with the operations outside of the United States, including costs incurred or reputational damage suffered due to improper conduct of its employees, contractors or agents.
|
•
|
The impact of regulatory matters and legislative developments or changes in laws, including changes in cyber-security, privacy and environmental laws;
|
•
|
The impact of an other than temporary decline in operating results and enterprise value that could lead to non-cash impairment charges due to the impairment of property, plant and equipment and other intangible assets;
|
•
|
The impact on the holders of Quad/Graphics' class A common stock of a limited active market for such shares and the inability to independently elect directors or control decisions due to the voting power of the class B common stock; and
|
•
|
Significant capital expenditures may be needed to maintain the Company's platform and processes and to remain technologically and economically competitive.
|
•
|
Print.
Including retail inserts, publications, catalogs, special interest publications, journals, direct mail, books, directories, in-store marketing and promotion, packaging, newspapers, custom print products, other commercial and specialty printed products and global paper procurement.
|
•
|
Logistics.
Including mailing solutions, postal consultation, delivery optimization and hygiene services, delivery monitoring and tracking, and distribution, logistics and transportation services.
|
•
|
Digital.
Including email, social, mobile (activated print, apps, websites), digital publishing and beacon technology.
|
•
|
Strategy.
Including brand, campaign, and media planning and placement.
|
•
|
Data.
Including data insights, segmentation and response analysis.
|
•
|
Creative.
Including concept and design, page layout and production, copywriting, photography, retouching, mobile, video production and optimization.
|
•
|
Workflow.
Including content management, process management, production and facilities management services, color management, and digital file processing and proofing.
|
•
|
Strengthen the Core.
Quad/Graphics core print categories—retail inserts, publications, catalogs, books and directories—have been under pressure in recent years, but remain foundational to most marketers' and publishers' business strategies and generate a significant amount of cash flow for the Company. Quad/Graphics utilizes a disciplined return on capital framework and historically has made significant investments in its print manufacturing platform and data management capabilities that have resulted in what it believes is one of the most integrated, automated, efficient and modern manufacturing platforms in the industry. The Company's ability to maintain the strength of its core product lines promotes sustainable cash flow and continued value creation to support future growth opportunities.
|
•
|
Grow the Business Profitably.
The Company believes it is well positioned to grow the business profitably through ongoing innovation, organic growth and disciplined acquisitions that expand the business into new product categories and geographies, transform an existing product line, or create value-driven industry consolidation. Helping clients use print in combination with other media channels, including digital, mobile, social and signage, to increase response rates and deliver high levels of marketing Return On Investment ("
ROI
") is of particular focus. The Company is adept at leveraging existing client relationships in key vertical industries to drive innovation and develop complementary products and services that help brand owners market their products, services and content more efficiently and effectively across media channels. The Company will look to grow through compelling, ongoing investments in its platform, as well as through acquisitions that create value either through providing an enhanced range of products and services or through creating manufacturing and distribution efficiencies.
|
•
|
Walk in the Shoes of our Clients.
The Company
is focused on creating a client experience that creates loyalty to the Quad/Graphics brand by partnering with our clients to fully understand their internal processes, marketing strategies and challenges so the Company can better deliver the solutions that will help them achieve their business objectives. Quad/Graphics examines everything from clients' marketing strategy—including how clients manage their customer data—to production and marketing workflow processes. Through a consultative approach, the Company's goal is to become an invaluable strategic partner to its clients—a partner who is focused on helping each client successfully navigate today's changing media landscape.
|
•
|
Engage Employees.
Quad/Graphics looks to engage employees through the Company's distinct corporate culture, which encourages employees to take pride and ownership in their work; take advantage of continuous learning, apprentice and job advancement opportunities; share knowledge by mentoring others; and innovate solutions. Quad/Graphics believes one of the most important ways it can drive employee engagement is by acting on a continuous employee feedback loop. Quad/Graphics believes in transparent and regular two-way communication with employees and provides the opportunity for all employees to have a voice or share an opinion through a number of different channels, including surveys and open forums at Company town hall and department meetings.
|
•
|
Enhance Financial Strength and Create Shareholder Value.
Quad/Graphics follows a disciplined approach to maintaining and enhancing financial strength to create shareholder value, which is essential given ongoing industry challenges. This key strategic goal is centered on the Company's ability to maximize Free Cash Flow, net earnings and EBITDA; maintain consistent financial policies to ensure a strong balance sheet and liquidity level; and retain the financial flexibility needed to strategically allocate and deploy capital as circumstances change.
|
•
|
The Company completed the acquisition of Specialty on
August 25, 2015
, for a net purchase price of
$61 million
, excluding acquired cash. Specialty is a full-service paperboard folding carton manufacturer and logistics provider located in Omaha, Nebraska.
|
•
|
The Company completed the acquisition of Copac on
April 14, 2015
, for a net purchase price of
$59 million
, excluding acquired cash. Copac is a leading international provider of innovative packaging and supply chain solutions, including turnkey packaging design, production and fulfillment services across a range of end markets, headquartered in Spartanburg, South Carolina. Copac manufactures products such as folding cartons, labels, inserts, tags and specialty envelopes, and has production facilities in Spartanburg and Santo Domingo, Dominican Republic, as well as strategically sourcing packaging product manufacturing over multiple end markets in Central America and Asia, giving it a global footprint.
|
•
|
The Company completed the acquisition of Marin's on
February 3, 2015
, for a net purchase price of
$21 million
, excluding acquired cash. Marin's is a worldwide leader in the point-of-sale display industry and specializes in the research and design of display solutions, headquartered in Paris, France. Marin's products are produced by a global network of licensees, including Quad/Graphics, as well as one wide-format digital print, kitting and fulfillment facility in Paris. Marin's uses its own European-based sales force and the global licensees to sell its patented product portfolio.
|
|
Operating
Income (Loss)
|
|
Operating Margin
|
|
Net Earnings (Loss)
|
|
Diluted Earnings (Loss) Per Share
|
|||||||
For the Three Months Ended September 30, 2015
|
$
|
(772.1
|
)
|
|
(68.0
|
)%
|
|
$
|
(552.2
|
)
|
|
$
|
(11.50
|
)
|
2016 restructuring, impairment and transaction-related charges
(1)
|
(26.1
|
)
|
|
(2.5
|
)%
|
|
(15.7
|
)
|
|
(0.31
|
)
|
|||
2015 restructuring, impairment and transaction-related charges
(2)
|
35.6
|
|
|
3.1
|
%
|
|
23.8
|
|
|
0.50
|
|
|||
2015 goodwill impairment
(3)
|
775.0
|
|
|
68.3
|
%
|
|
532.6
|
|
|
11.10
|
|
|||
Interest expense
(4)
|
N/A
|
|
|
N/A
|
|
|
1.6
|
|
|
0.03
|
|
|||
Income taxes
(5)
|
N/A
|
|
|
N/A
|
|
|
5.6
|
|
|
0.11
|
|
|||
Investments in unconsolidated entities, net of tax
(6)
|
N/A
|
|
|
N/A
|
|
|
2.7
|
|
|
0.05
|
|
|||
Operating income
(7)
|
21.4
|
|
|
2.3
|
%
|
|
12.9
|
|
|
0.24
|
|
|||
For the Three Months Ended September 30, 2016
|
$
|
33.8
|
|
|
3.2
|
%
|
|
$
|
11.3
|
|
|
$
|
0.22
|
|
(1)
|
Restructuring, impairment and transaction-related charges of
$26.1 million
(
$15.7 million
, net of tax) incurred during the
three months ended
September 30, 2016
, included the following:
|
a.
|
$1.5 million
of employee termination charges related to workforce reductions through facility consolidations and involuntary separation programs;
|
b.
|
$0.9 million
of impairment charges for machinery and equipment no longer being utilized in production as a result of facility consolidations;
|
c.
|
$0.4 million
of transaction-related charges, consisting of professional service fees for business acquisition and divestiture activities;
|
d.
|
$23.3 million
of various other restructuring charges, including costs to maintain and exit closed facilities, as well as lease exit charges. Other restructuring charges includes an $11.2 million adjustment to the Company's MEPPs withdrawal liability and a $6.5 million non-cash pension settlement charge related to lump-sum pension payments.
|
(2)
|
Restructuring, impairment and transaction-related charges of
$35.6 million
(
$23.8 million
, net of tax) incurred during the
three months ended
September 30, 2015
, included the following:
|
a.
|
$9.0 million
of employee termination charges related to workforce reductions through facility consolidations and involuntary separation programs;
|
b.
|
$15.8 million
of impairment charges primarily for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction restructuring initiatives;
|
c.
|
$0.9 million
of transaction-related charges, consisting of professional service fees for business acquisition and divestiture activities;
|
d.
|
$0.6 million
of acquisition-related integration costs 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 acquired companies; and
|
e.
|
$9.3 million
of various other restructuring charges, including costs to maintain and exit closed facilities, as well as lease exit charges. Other restructuring charges includes a
$6.0 million
non-cash and nondeductible expense to recognize accumulated foreign exchange losses on the sale of the Chile equity method investment.
|
(3)
|
A
$775.0 million
(
$532.6 million
after tax) non-cash goodwill impairment charge was recorded during the
three months ended
September 30, 2015
, related to the three reporting units in the United States Print and Related Services segment.
|
(4)
|
Interest expense
decreased
$2.7 million
(
$1.6 million
, net of tax) during the
three months ended
September 30, 2016
, to
$19.6 million
. This change was due to lower average debt levels in the
third
quarter of
2016
as compared to the
third
quarter of
2015
.
|
|
Three Months Ended September 30,
|
|
|
||||||||
|
2016
|
|
2015
|
|
$ Change
|
||||||
Earnings (loss) before income taxes and equity in loss of unconsolidated entities
|
$
|
14.2
|
|
|
$
|
(794.4
|
)
|
|
$
|
808.6
|
|
Goodwill impairment
|
—
|
|
|
775.0
|
|
|
(775.0
|
)
|
|||
Nondeductible foreign exchange losses on the sale of investment
|
—
|
|
|
6.0
|
|
|
(6.0
|
)
|
|||
Earnings (loss) subject to income taxes
|
$
|
14.2
|
|
|
$
|
(13.4
|
)
|
|
$
|
27.6
|
|
40% normalized tax rate
|
40.0
|
%
|
|
40.0
|
%
|
|
40.0
|
%
|
|||
Income tax expense (benefit) at 40% normalized tax rate
|
5.6
|
|
|
(5.4
|
)
|
|
11.0
|
|
|||
|
|
|
|
|
|
||||||
Plus: tax benefit related to goodwill impairment charge
|
—
|
|
|
(242.4
|
)
|
|
(242.4
|
)
|
|||
|
5.6
|
|
|
(247.8
|
)
|
|
(253.4
|
)
|
|||
|
|
|
|
|
|
||||||
Income tax expense (benefit) from the condensed consolidated statements of operations
|
2.9
|
|
|
(244.9
|
)
|
|
(247.8
|
)
|
|||
|
|
|
|
|
|
||||||
Impact of income taxes
|
$
|
2.7
|
|
|
$
|
(2.9
|
)
|
|
$
|
(5.6
|
)
|
(6)
|
The decrease in net loss attributable to investments in unconsolidated entities, net of tax, of
$2.7 million
during the
three months ended
September 30, 2016
, was primarily related to a $2.4 million decrease in losses from unconsolidated entities at the Company's investment in Plural, the Company's Brazilian joint venture and a $0.3 million decrease in losses at the Company's investment in Chile that was sold on July 31, 2015.
|
(7)
|
Operating income, excluding restructuring, impairment and transaction-related charges,
increased
$21.4 million
(
$12.9 million
, net of tax) primarily due to the following: (1) a $19.3 million decrease in depreciation and amortization; and (2) lower costs primarily associated with production cost reduction initiatives. These impacts were partially offset by the following: (1) lower print volume and pricing in product lines owned more than one year; and (2) a $3.8 million increase in selling, general and administrative expenses primarily due to increased incentive compensation expense.
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||||||||
|
2016
|
|
2015
|
|
|
|
|
|||||||||||||
|
(dollars in millions, except margin data)
|
|
|
|||||||||||||||||
|
Amount
|
|
% of
Sales
|
|
Amount
|
|
% of
Sales
|
|
$ Change
|
|
%
Change
|
|||||||||
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Products
|
$
|
904.2
|
|
|
85.6
|
%
|
|
$
|
978.1
|
|
|
86.1
|
%
|
|
$
|
(73.9
|
)
|
|
(7.6
|
)%
|
Services
|
152.2
|
|
|
14.4
|
%
|
|
157.4
|
|
|
13.9
|
%
|
|
(5.2
|
)
|
|
(3.3
|
)%
|
|||
Total net sales
|
1,056.4
|
|
|
100.0
|
%
|
|
1,135.5
|
|
|
100.0
|
%
|
|
(79.1
|
)
|
|
(7.0
|
)%
|
|||
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Products
|
719.1
|
|
|
68.1
|
%
|
|
797.3
|
|
|
70.2
|
%
|
|
(78.2
|
)
|
|
(9.8
|
)%
|
|||
Services
|
105.8
|
|
|
10.0
|
%
|
|
112.6
|
|
|
9.9
|
%
|
|
(6.8
|
)
|
|
(6.0
|
)%
|
|||
Total cost of sales
|
824.9
|
|
|
78.1
|
%
|
|
909.9
|
|
|
80.1
|
%
|
|
(85.0
|
)
|
|
(9.3
|
)%
|
|||
Selling, general & administrative expenses
|
109.9
|
|
|
10.4
|
%
|
|
106.1
|
|
|
9.4
|
%
|
|
3.8
|
|
|
3.6
|
%
|
|||
Depreciation and amortization
|
61.7
|
|
|
5.8
|
%
|
|
81.0
|
|
|
7.1
|
%
|
|
(19.3
|
)
|
|
(23.8
|
)%
|
|||
Restructuring, impairment and transaction-related charges
|
26.1
|
|
|
2.5
|
%
|
|
35.6
|
|
|
3.1
|
%
|
|
(9.5
|
)
|
|
(26.7
|
)%
|
|||
Goodwill impairment
|
—
|
|
|
—
|
%
|
|
775.0
|
|
|
68.3
|
%
|
|
(775.0
|
)
|
|
nm
|
|
|||
Total operating expenses
|
1,022.6
|
|
|
96.8
|
%
|
|
1,907.6
|
|
|
168.0
|
%
|
|
(885.0
|
)
|
|
(46.4
|
)%
|
|||
Operating income (loss)
|
$
|
33.8
|
|
|
3.2
|
%
|
|
$
|
(772.1
|
)
|
|
(68.0
|
)%
|
|
$
|
805.9
|
|
|
nm
|
|
|
Three Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
||||||||||
|
Amount
|
|
% of Net Sales
|
|
Amount
|
|
% of Net Sales
|
||||||
|
(dollars in millions, except margin data)
|
||||||||||||
EBITDA and EBITDA margin
|
$
|
95.5
|
|
|
9.0
|
%
|
|
$
|
(693.8
|
)
|
|
(61.1
|
)%
|
|
Three Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
|
(dollars in millions)
|
||||||
Net earnings (loss)
(1)
|
$
|
11.3
|
|
|
$
|
(552.2
|
)
|
Interest expense
|
19.6
|
|
|
22.3
|
|
||
Income tax expense (benefit)
|
2.9
|
|
|
(244.9
|
)
|
||
Depreciation and amortization
|
61.7
|
|
|
81.0
|
|
||
EBITDA
|
$
|
95.5
|
|
|
$
|
(693.8
|
)
|
(1)
|
Net earnings (loss) included the following:
|
a.
|
Restructuring, impairment and transaction-related charges of
$26.1 million
and
$35.6 million
for the
three months ended
September 30, 2016
and
2015
, respectively;
|
b.
|
A non-cash goodwill impairment charge of
$775.0 million
for the
three months ended
September 30, 2015
; and
|
c.
|
Equity in loss of unconsolidated entities of
$2.7 million
for the
three months ended
September 30, 2015
.
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
|
|
|
|||||||
|
(dollars in millions, except margin data)
|
|
|
|||||||||||
|
Amount
|
|
Amount
|
|
$ Change
|
|
% Change
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Products
|
$
|
808.6
|
|
|
$
|
887.4
|
|
|
$
|
(78.8
|
)
|
|
(8.9
|
)%
|
Services
|
147.9
|
|
|
153.0
|
|
|
(5.1
|
)
|
|
(3.3
|
)%
|
|||
Operating income (loss) (including restructuring, impairment and transaction-related charges)
|
58.6
|
|
|
(742.9
|
)
|
|
801.5
|
|
|
nm
|
|
|||
Operating margin
|
6.1
|
%
|
|
(71.4
|
)%
|
|
N/A
|
|
|
N/A
|
|
|||
Restructuring, impairment and transaction-related charges
|
$
|
8.8
|
|
|
$
|
8.8
|
|
|
$
|
—
|
|
|
—
|
%
|
Goodwill impairment
|
—
|
|
|
775.0
|
|
|
(775.0
|
)
|
|
nm
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
|
|
|
|||||||
|
(dollars in millions, except margin data)
|
|
|
|||||||||||
|
Amount
|
|
Amount
|
|
$ Change
|
|
% Change
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Products
|
$
|
95.6
|
|
|
$
|
90.7
|
|
|
$
|
4.9
|
|
|
5.4
|
%
|
Services
|
4.3
|
|
|
4.4
|
|
|
(0.1
|
)
|
|
(2.3
|
)%
|
|||
Operating income (loss) (including restructuring, impairment and transaction-related charges)
|
5.5
|
|
|
(10.3
|
)
|
|
15.8
|
|
|
nm
|
|
|||
Operating margin
|
5.5
|
%
|
|
(10.8
|
)%
|
|
N/A
|
|
|
N/A
|
|
|||
Restructuring, impairment and transaction-related charges (income)
|
$
|
(1.3
|
)
|
|
$
|
14.0
|
|
|
$
|
(15.3
|
)
|
|
(109.3
|
)%
|
Equity in loss of unconsolidated entities
|
—
|
|
|
2.7
|
|
|
(2.7
|
)
|
|
(100.0
|
)%
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
|
|
|
|||||||
|
(dollars in millions)
|
|
|
|||||||||||
|
Amount
|
|
Amount
|
|
$ Change
|
|
% Change
|
|||||||
Operating expenses (including restructuring, impairment and transaction-related charges)
|
$
|
30.3
|
|
|
$
|
18.9
|
|
|
$
|
11.4
|
|
|
60.3
|
%
|
Restructuring, impairment and transaction-related charges
|
18.6
|
|
|
12.8
|
|
|
5.8
|
|
|
45.3
|
%
|
|
Operating
Income (Loss)
|
|
Operating Margin
|
|
Net Earnings (Loss)
|
|
Diluted Earnings (Loss) Per Share
|
|||||||
For the nine months ended September 30, 2015
|
$
|
(809.7
|
)
|
|
(24.7
|
)%
|
|
$
|
(632.5
|
)
|
|
$
|
(13.20
|
)
|
2016 restructuring, impairment and transaction-related charges
(1)
|
(62.4
|
)
|
|
(2.0
|
)%
|
|
(37.4
|
)
|
|
(0.76
|
)
|
|||
2015 restructuring, impairment and transaction-related charges
(2)
|
80.0
|
|
|
2.4
|
%
|
|
57.1
|
|
|
1.19
|
|
|||
2015 goodwill impairment
(3)
|
798.3
|
|
|
24.3
|
%
|
|
555.9
|
|
|
11.61
|
|
|||
Interest expense
(4)
|
N/A
|
|
|
N/A
|
|
|
4.5
|
|
|
0.09
|
|
|||
2016 gain on debt extinguishment
(5)
|
N/A
|
|
|
N/A
|
|
|
8.5
|
|
|
0.17
|
|
|||
Income taxes
(6)
|
N/A
|
|
|
N/A
|
|
|
15.3
|
|
|
0.31
|
|
|||
Investments in unconsolidated entities, net of tax
(7)
|
N/A
|
|
|
N/A
|
|
|
3.8
|
|
|
0.08
|
|
|||
Operating income
(8)
|
53.9
|
|
|
1.9
|
%
|
|
32.2
|
|
|
0.66
|
|
|||
For the nine months ended September 30, 2016
|
$
|
60.1
|
|
|
1.9
|
%
|
|
$
|
7.4
|
|
|
$
|
0.15
|
|
(1)
|
Restructuring, impairment and transaction-related charges of
$62.4 million
(
$37.4 million
, net of tax) incurred during the
nine months ended
September 30, 2016
, included the following:
|
a.
|
$8.1 million
of employee termination charges related to workforce reductions through facility consolidations and involuntary separation programs;
|
b.
|
$17.7 million
of impairment charges, including
$12.1 million
of impairment charges for land and building related to the Atglen, Pennsylvania plant closure and
$5.6 million
of impairment charges for machinery and equipment no longer being utilized in production as a result of facility consolidations, including Atglen, Pennsylvania; Augusta, Georgia; East Greenville, Pennsylvania; and Queretaro, Mexico, as well as other capacity reduction restructuring activities;
|
c.
|
$1.9 million
of transaction-related charges, consisting of professional service fees for business acquisition and divestiture activities;
|
d.
|
$0.1 million
of acquisition-related integration costs; and
|
e.
|
$34.6 million
of various other restructuring charges, including costs to maintain and exit closed facilities, as well as lease exit charges. Other restructuring charges includes an $11.2 million adjustment to the Company's MEPPs withdrawal liability and a $6.5 million non-cash pension settlement charge related to lump-sum pension payments.
|
(2)
|
Restructuring, impairment and transaction-related charges of
$80.0 million
(
$57.1 million
, net of tax) incurred during the
nine months ended
September 30, 2015
, included the following:
|
a.
|
$21.5 million
of employee termination charges related to workforce reductions through facility consolidations and involuntary separation programs;
|
b.
|
$39.9 million
of impairment charges, including the following: (1)
$16.7 million
of impairment charges to reduce the book value of the Company's equity method investment in Chile to fair value (see
Note 7
, "
Equity Method Investments in Unconsolidated Entities
," to the condensed consolidated financial statements in
Item 1
, "
Condensed Consolidated Financial Statements (Unaudited)
," of this Quarterly Report on Form 10-Q for additional details related to the impairment of the Company's equity method investment in Chile); (2)
$21.0 million
of impairment charges for machinery and equipment no longer being utilized in production as a result of facility consolidations, including Atlanta, Georgia; Dickson, Tennessee; and Queretaro, Mexico, as well as other capacity reduction restructuring initiatives; and (3)
$2.2 million
of impairment charges recorded in the first quarter of 2015 for property, plant and equipment and other intangible assets as a result of the restructuring proceedings in Argentina for the Company's
Argentina Subsidiaries
;
|
c.
|
$(7.3) million
of transaction-related charges (income), including a
$10.0 million
non-recurring gain as a result of Courier's termination of the agreement pursuant to which Quad/Graphics was to acquire Courier, partially offset by
$2.7 million
of professional service fees, including fees for the terminated acquisition of Courier and the acquisitions of Marin's, Copac, and Specialty;
|
d.
|
$4.4 million
of acquisition-related integration costs 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; and
|
e.
|
$21.5 million
of various other restructuring charges, including a $6.0 million non-cash and nondeductible expense to recognize accumulated foreign exchange losses on the sale of the Chile equity method investment and $3.0 million of lease exit charges related to the closure of the Atlanta, Georgia facility, as well as other costs to maintain and exit closed facilities.
|
(3)
|
Pre-tax non-cash goodwill impairment charges of
$798.3 million
(
$555.9 million
after tax) were recorded during the
nine months ended
September 30, 2015
, of which
$775.0 million
related to the three reporting units in the United States Print and Related Services segment and
$23.3 million
related to the Latin America reporting unit in the International segment.
|
(4)
|
Interest expense
decreased
$7.5 million
(
$4.5 million
, net of tax) during the
nine months ended
September 30, 2016
, to
$58.9 million
. This change was due to lower average debt levels in the
nine months ended
September 30, 2016
, as compared to the
nine months ended
of
September 30, 2015
.
|
(5)
|
A
$14.1 million
gain on debt extinguishment (
$8.5 million
, net of tax) primarily from the repurchase of
$56.5 million
aggregate principal amount of
Senior Unsecured Notes
was recognized during the
nine months ended
September 30, 2016
.
|
(6)
|
The
$15.3 million
impact of income taxes as calculated in the following table is primarily due to decreased losses in foreign jurisdictions where the Company does not receive a tax benefit and tax benefits related to legal entity restructuring:
|
|
Nine Months Ended September 30,
|
|
|
||||||||
|
2016
|
|
2015
|
|
$ Change
|
||||||
Earnings (loss) before income taxes and equity in loss of unconsolidated entities
|
$
|
15.3
|
|
|
$
|
(876.1
|
)
|
|
$
|
891.4
|
|
Goodwill impairment
|
—
|
|
|
798.3
|
|
|
(798.3
|
)
|
|||
Nondeductible equity method investment impairment
|
—
|
|
|
16.7
|
|
|
(16.7
|
)
|
|||
Nondeductible foreign exchange losses on the sale of investment
|
—
|
|
|
6.0
|
|
|
(6.0
|
)
|
|||
Earnings (loss) subject to income taxes
|
15.3
|
|
|
(55.1
|
)
|
|
70.4
|
|
|||
40% normalized tax rate
|
40.0
|
%
|
|
40.0
|
%
|
|
40.0
|
%
|
|||
Income tax expense (benefit) at 40% normalized tax rate
|
6.1
|
|
|
(22.1
|
)
|
|
28.2
|
|
|||
|
|
|
|
|
|
||||||
Plus: tax benefit related to goodwill impairment charges
|
—
|
|
|
(242.4
|
)
|
|
(242.4
|
)
|
|||
|
6.1
|
|
|
(264.5
|
)
|
|
(270.6
|
)
|
|||
|
|
|
|
|
|
||||||
Income tax expense (benefit) from the condensed consolidated statements of operations
|
5.6
|
|
|
(249.7
|
)
|
|
(255.3
|
)
|
|||
|
|
|
|
|
|
||||||
Impact of income taxes
|
$
|
0.5
|
|
|
$
|
(14.8
|
)
|
|
$
|
(15.3
|
)
|
(7)
|
The
decrease
in net loss attributable to investments in unconsolidated entities, net of tax, of
$3.8 million
during the
nine months ended
September 30, 2016
, was primarily related to a $3.0 million decrease in losses from unconsolidated entities at the Company's investment in Plural, the Company's Brazilian joint venture, and a $0.8 million decrease in losses at the Company's investment in Chile that was sold on July 31, 2015.
|
(8)
|
Operating income, excluding restructuring, impairment and transaction-related charges and non-cash goodwill impairment charges, increased
$53.9 million
(
$32.2 million
, net of tax) during the
nine months ended
September 30, 2016
, primarily due to the following: (1) lower costs primarily associated with increased labor productivity and other production cost reduction initiatives; (2) a $28.3 million decrease in depreciation and amortization expense; (3) the 2016 collection of a $10.4 million vendor receivable that was written-off in the fourth quarter of 2015 due to collectability concerns; and (4) the additional earnings on sales generated from acquisitions. These impacts were partially offset by the following: (1) lower print volume and pricing in product lines owned more than a year; (2) a $15.7 million increase in selling, general and administrative expenses primarily due to increased incentive compensation expense; and (3) a $4.0 million vacation expense reduction in 2015 due to a vacation policy change that did not repeat in 2016.
|
|
Nine Months Ended September 30,
|
|
|
|
|
|||||||||||||||
|
2016
|
|
2015
|
|
|
|
|
|||||||||||||
|
(dollars in millions, except margin data)
|
|
|
|||||||||||||||||
|
Amount
|
|
% of
Sales
|
|
Amount
|
|
% of
Sales
|
|
$ Change
|
|
%
Change
|
|||||||||
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Products
|
$
|
2,688.9
|
|
|
85.9
|
%
|
|
$
|
2,818.8
|
|
|
85.8
|
%
|
|
$
|
(129.9
|
)
|
|
(4.6
|
)%
|
Services
|
442.3
|
|
|
14.1
|
%
|
|
464.7
|
|
|
14.2
|
%
|
|
(22.4
|
)
|
|
(4.8
|
)%
|
|||
Total net sales
|
3,131.2
|
|
|
100.0
|
%
|
|
3,283.5
|
|
|
100.0
|
%
|
|
(152.3
|
)
|
|
(4.6
|
)%
|
|||
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Products
|
2,144.2
|
|
|
68.5
|
%
|
|
2,306.1
|
|
|
70.2
|
%
|
|
(161.9
|
)
|
|
(7.0
|
)%
|
|||
Services
|
305.2
|
|
|
9.7
|
%
|
|
336.9
|
|
|
10.3
|
%
|
|
(31.7
|
)
|
|
(9.4
|
)%
|
|||
Total cost of sales
|
2,449.4
|
|
|
78.2
|
%
|
|
2,643.0
|
|
|
80.5
|
%
|
|
(193.6
|
)
|
|
(7.3
|
)%
|
|||
Selling, general & administrative expenses
|
341.9
|
|
|
10.9
|
%
|
|
326.2
|
|
|
9.9
|
%
|
|
15.7
|
|
|
4.8
|
%
|
|||
Depreciation and amortization
|
217.4
|
|
|
7.0
|
%
|
|
245.7
|
|
|
7.5
|
%
|
|
(28.3
|
)
|
|
(11.5
|
)%
|
|||
Restructuring, impairment and transaction-related charges
|
62.4
|
|
|
2.0
|
%
|
|
80.0
|
|
|
2.5
|
%
|
|
(17.6
|
)
|
|
(22.0
|
)%
|
|||
Goodwill impairment
|
—
|
|
|
—
|
%
|
|
798.3
|
|
|
24.3
|
%
|
|
(798.3
|
)
|
|
nm
|
|
|||
Total operating expenses
|
3,071.1
|
|
|
98.1
|
%
|
|
4,093.2
|
|
|
124.7
|
%
|
|
(1,022.1
|
)
|
|
(25.0
|
)%
|
|||
Operating income (loss)
|
$
|
60.1
|
|
|
1.9
|
%
|
|
$
|
(809.7
|
)
|
|
(24.7
|
)%
|
|
$
|
869.8
|
|
|
nm
|
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
||||||||||
|
Amount
|
|
% of Net Sales
|
|
Amount
|
|
% of Net Sales
|
||||||
|
(dollars in millions, except margin data)
|
||||||||||||
EBITDA and EBITDA margin
|
$
|
289.3
|
|
|
9.2
|
%
|
|
$
|
(570.1
|
)
|
|
(17.4
|
)%
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
|
(dollars in millions)
|
||||||
Net earnings (loss)
(1)
|
$
|
7.4
|
|
|
$
|
(632.5
|
)
|
Interest expense
|
58.9
|
|
|
66.4
|
|
||
Income tax expense (benefit)
|
5.6
|
|
|
(249.7
|
)
|
||
Depreciation and amortization
|
217.4
|
|
|
245.7
|
|
||
EBITDA
|
$
|
289.3
|
|
|
$
|
(570.1
|
)
|
(1)
|
Net earnings (loss) included the following:
|
a.
|
Restructuring, impairment and transaction-related charges of
$62.4 million
and
$80.0 million
for the
nine months ended
September 30, 2016
and
2015
, respectively;
|
b.
|
A non-cash goodwill impairment charge of
$798.3 million
for the
nine months ended
September 30, 2015
;
|
c.
|
Gain on debt extinguishment of
$14.1 million
for the
nine months ended
September 30, 2016
; and
|
d.
|
Equity in loss of unconsolidated entities of
$2.3 million
and
$6.1 million
for the
nine months ended
September 30, 2016
and
2015
, respectively.
|
|
Nine Months Ended September 30,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
|
|
|
|||||||
|
(dollars in millions, except margin data)
|
|
|
|||||||||||
|
Amount
|
|
Amount
|
|
$ Change
|
|
% Change
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Products
|
$
|
2,405.1
|
|
|
$
|
2,550.2
|
|
|
$
|
(145.1
|
)
|
|
(5.7
|
)%
|
Services
|
428.8
|
|
|
450.5
|
|
|
(21.7
|
)
|
|
(4.8
|
)%
|
|||
Operating income (loss) (including restructuring, impairment and transaction-related charges)
|
114.6
|
|
|
(712.6
|
)
|
|
827.2
|
|
|
nm
|
|
|||
Operating margin
|
4.0
|
%
|
|
(23.7
|
)%
|
|
N/A
|
|
|
N/A
|
|
|||
Restructuring, impairment and transaction-related charges
|
$
|
40.4
|
|
|
$
|
31.5
|
|
|
$
|
8.9
|
|
|
28.3
|
%
|
Goodwill impairment
|
—
|
|
|
775.0
|
|
|
(775.0
|
)
|
|
nm
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
|
|
|
|||||||
|
(dollars in millions, except margin data)
|
|
|
|||||||||||
|
Amount
|
|
Amount
|
|
$ Change
|
|
% Change
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Products
|
$
|
283.8
|
|
|
$
|
268.6
|
|
|
$
|
15.2
|
|
|
5.7
|
%
|
Services
|
13.5
|
|
|
14.2
|
|
|
(0.7
|
)
|
|
(4.9
|
)%
|
|||
Operating income (loss) (including restructuring, impairment and transaction-related charges and goodwill impairment)
|
7.5
|
|
|
(65.7
|
)
|
|
73.2
|
|
|
nm
|
|
|||
Operating margin
|
2.5
|
%
|
|
(23.2
|
)%
|
|
N/A
|
|
|
N/A
|
|
|||
Restructuring, impairment and transaction-related charges
|
$
|
0.7
|
|
|
$
|
41.4
|
|
|
$
|
(40.7
|
)
|
|
(98.3
|
)%
|
Goodwill impairment
|
—
|
|
|
23.3
|
|
|
(23.3
|
)
|
|
nm
|
|
|||
Equity in loss of unconsolidated entities
|
2.3
|
|
|
6.1
|
|
|
(3.8
|
)
|
|
(62.3
|
)%
|
|
Nine Months Ended September 30,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
|
|
|
|||||||
|
(dollars in millions)
|
|
|
|||||||||||
|
Amount
|
|
Amount
|
|
$ Change
|
|
% Change
|
|||||||
Operating expenses (including restructuring, impairment and transaction-related charges)
|
$
|
62.0
|
|
|
$
|
31.4
|
|
|
$
|
30.6
|
|
|
97.5
|
%
|
Restructuring, impairment and transaction-related charges
|
21.3
|
|
|
7.1
|
|
|
14.2
|
|
|
nm
|
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
|
(dollars in millions)
|
||||||
Net cash provided by operating activities
|
$
|
260.0
|
|
|
$
|
179.2
|
|
Less: purchases of property, plant and equipment
|
(57.7
|
)
|
|
(111.2
|
)
|
||
Free Cash Flow
|
$
|
202.3
|
|
|
$
|
68.0
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
(dollars in millions)
|
||||||
Total debt and capital lease obligations on the condensed consolidated balance sheets
|
$
|
1,172.8
|
|
|
$
|
1,349.3
|
|
|
|
|
|
||||
Divided by: EBITDA as adjusted for purposes of calculating the Debt Leverage Ratio
|
494.1
|
|
|
468.5
|
|
||
|
|
|
|
||||
Debt Leverage Ratio
|
2.37
|
x
|
|
2.88
|
x
|
|
|
|
Add
|
|
Subtract
|
|
Trailing Twelve
Months Ended
|
||||||||
|
Year Ended
|
|
Nine Months Ended
|
|
|||||||||||
|
December 31, 2015
(1)
|
|
September 30,
2016 |
|
September 30,
2015 |
|
September 30,
2016 |
||||||||
Net earnings (loss)
|
$
|
(641.9
|
)
|
|
$
|
7.4
|
|
|
$
|
(632.5
|
)
|
|
$
|
(2.0
|
)
|
Interest expense
|
88.4
|
|
|
58.9
|
|
|
66.4
|
|
|
80.9
|
|
||||
Income tax expense (benefit)
|
(282.8
|
)
|
|
5.6
|
|
|
(249.7
|
)
|
|
(27.5
|
)
|
||||
Depreciation and amortization
|
325.3
|
|
|
217.4
|
|
|
245.7
|
|
|
297.0
|
|
||||
EBITDA
|
$
|
(511.0
|
)
|
|
$
|
289.3
|
|
|
$
|
(570.1
|
)
|
|
$
|
348.4
|
|
Restructuring, impairment and transaction-related charges
|
164.9
|
|
|
62.4
|
|
|
80.0
|
|
|
147.3
|
|
||||
Goodwill impairment
|
808.3
|
|
|
—
|
|
|
798.3
|
|
|
10.0
|
|
||||
Gain on debt extinguishment
|
—
|
|
|
(14.1
|
)
|
|
—
|
|
|
(14.1
|
)
|
||||
Equity in loss of unconsolidated entities
|
6.3
|
|
|
2.3
|
|
|
6.1
|
|
|
2.5
|
|
||||
EBITDA as adjusted for purposes of calculating the Debt Leverage Ratio
|
$
|
468.5
|
|
|
$
|
339.9
|
|
|
$
|
314.3
|
|
|
$
|
494.1
|
|
(1)
|
Financial information for the year ended
December 31, 2015
, is included as reported in the Company's
2015
Annual Report on Form 10-K filed with the SEC on
February 23, 2016
.
|
•
|
$1.9 billion
Debt Financing Arrangements, which includes the following:
|
◦
|
Senior Secured Credit Facility:
|
▪
|
$850.0 million
revolving credit facility (
$46.5 million
outstanding as of
September 30, 2016
);
|
▪
|
$450.0 million
Term Loan A (
$385.3 million
outstanding as of
September 30, 2016
); and
|
▪
|
$300.0 million
Term Loan B (
$291.3 million
outstanding as of
September 30, 2016
);
|
◦
|
Senior Unsecured Notes (
$243.5 million
outstanding as of
September 30, 2016
);
|
•
|
Master Note and Security Agreement (
$163.7 million
outstanding as of
September 30, 2016
); and a
|
•
|
International Term Loan (
$17.9 million
outstanding as of
September 30, 2016
).
|
•
|
Total Leverage Ratio.
On a rolling twelve-month basis, the total leverage ratio, defined as total consolidated debt to consolidated EBITDA, shall not exceed
3.75
to 1.00 (for the twelve months ended
September 30, 2016
, the Company's total leverage ratio was
2.36
to 1.00).
|
•
|
Senior Secured Leverage Ratio.
On a rolling twelve-month basis, the senior secured leverage ratio, defined as senior secured debt to consolidated EBITDA, shall not exceed
3.50
to 1.00 (for the twelve months ended
September 30, 2016
, the Company's senior secured leverage ratio was
1.88
to 1.00).
|
•
|
Minimum Interest Coverage Ratio.
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
3.50
to 1.00 (for the twelve months ended
September 30, 2016
, the Company's minimum interest coverage ratio was
6.61
to 1.00).
|
•
|
If the Company's total leverage ratio is greater than
3.00
to 1.00 (as defined in the Senior Secured Credit Facility), the Company is prohibited from making greater than
$120.0 million
of annual dividend payments, capital stock repurchases and certain other payments. If the total leverage ratio is less than
3.00
to 1.00, there are no such restrictions.
|
•
|
If the Company's senior secured leverage ratio is greater than
3.00
to 1.00 or the Company's total leverage ratio is greater than
3.50
to 1.00 (these ratios as defined in the Senior Secured Credit Facility), the Company is prohibited from voluntarily prepaying any of the Senior Unsecured Notes and from voluntarily prepaying any other unsecured or subordinated indebtedness, with certain exceptions (including any mandatory prepayments on the Senior Unsecured Notes or any other unsecured or subordinated debt). If the senior secured leverage ratio is less than
3.00
to 1.00 and the total leverage ratio is less than
3.50
to 1.00, there are no such restrictions.
|
(1)
|
Facilitated lump-sum pension payments to terminated vested participants. During the
nine months ended
September 30, 2016
, the Company settled
$90.1 million
of pension liabilities for
$71.3 million
of pension payouts. Payments to eligible participants who elected to receive a lump-sum pension payment were funded from existing pension plan assets and constituted a settlement of the Company’s pension liabilities with respect to these participants.
|
(2)
|
Made contributions to the qualified pension plans of $10.8 million. This included $10.4 million of contributions above the minimum statutory funding requirements, enabled by the Company's Free Cash Flow generation during 2016. In addition to improving the funded status of the pension plans, these contributions also lowered future Pension Benefit Guaranty Corporation premiums.
|
ITEM 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
ITEM 4.
|
Controls and Procedures
|
ITEM 1.
|
Legal Proceedings
|
ITEM 1A.
|
Risk Factors
|
ITEM 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
(a)
|
None.
|
(b)
|
Not applicable.
|
(c)
|
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 common stock. Under the authorization, share repurchases may be made at the Company's discretion, from time to time, in the open market and/or in privately negotiated transactions as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchase will depend on economic and market conditions, share price, trading volume, applicable legal requirements and other factors. The program may be suspended or discontinued at any time. There were
no
share repurchases during the
three months ended
September 30, 2016
. During the
nine months ended
September 30, 2016
, the Company repurchased
984,190
shares of its class A common stock at a weighted average price of
$8.96
per share for a total purchase price of
$8.8 million
. As of
September 30, 2016
, there were
$82.9 million
of authorized repurchases remaining under the program.
|
ITEM 6.
|
Exhibits
|
|
|
|
|
QUAD/GRAPHICS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
November 2, 2016
|
|
By:
|
/s/ J. Joel Quadracci
|
|
|
|
|
J. Joel Quadracci
|
|
|
|
|
Chairman, President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
Date:
|
November 2, 2016
|
|
By:
|
/s/ David J. Honan
|
|
|
|
|
David J. Honan
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
Exhibit Number
|
|
Exhibit Description
|
|
|
|
(10.1)
|
|
Quad/Graphics, Inc. Executive Severance Plan, effective as of September 15, 2016 [participants are David Honan, Jennifer Kent, Eric Ashworth and Renee Badura].
|
|
|
|
(10.2)
|
|
Form of Amendment, effective as of September 15, 2016, to the Employment Agreements by and between Quad/Graphics, Inc. and each of J. Joel Quadracci, John C. Fowler, Thomas J. Frankowski and David A. Blais.
|
|
|
|
(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 September 30, 2016 formatted in eXtensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations (Unaudited), (ii) the Condensed Consolidated Statements of Comprehensive Loss (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.
|
1.1
|
Establishment of the Plan.
Quad/Graphics, Inc. (hereinafter referred to as the "Company") hereby establishes a severance plan to be known as the "Quad/Graphics, Inc. Executive Severance Plan" (the "Plan"). The Plan provides severance benefits to certain employees of the Company ("Executives") who (A) are listed in Appendix A and (B) have executed an acknowledgement and agreement to be bound by the terms of this Plan, upon certain terminations of their employment from the Company.
|
1.2
|
Initial Term.
This Plan will commence on September 15, 2016 (the "Effective Date") and shall continue in effect for a period of three (3) years (the "Initial Term").
|
1.3
|
Successive Periods; Notice.
The term of this Plan shall automatically be extended for one (1) additional year at the end of the Initial Term, and then again after each successive one (1) year period thereafter (each such one (1) year period following the Initial Term is referred to as a "Successive Period"). However, the Board or the Committee may terminate this Plan at the end of the Initial Term, or at the end of any Successive Period thereafter, by giving the then-covered Executives written notice of intent to terminate the Plan, delivered prior to the September 15th preceding the year in which such Initial Term or Successive Period is scheduled to end. If such notice is properly delivered by the Company, this Plan, along with all corresponding rights, duties, and covenants, shall automatically expire at the end of the Initial Term or Successive Period then in progress.
Each Executive shall be required to provide the Company with at least sixty (60) days' notice prior to terminating his or her employment other than for Good Reason or for Limited Good Reason.
|
1.4
|
Change in Control Renewal.
Notwithstanding the provisions of Section 1.3 above, in the event that a Change in Control of the Company occurs during the Initial Term or any Successive Period, upon the effective date of such Change in Control, the term of this Plan shall automatically and irrevocably be renewed for a period of two (2) years from the effective date of such Change in Control and this Plan cannot be terminated prior to the end of such period. Further, this Plan shall be assumed and continued to the extent required by Section 7.1 herein. This Plan shall thereafter automatically terminate following such two (2) year Change in Control renewal period.
|
2.1
|
Whenever used in this Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized.
|
(a)
|
"Affiliate"
means any person or entity from time to time controlling, controlled by or under common control with the Company. For this purpose, the terms "controlling," "controlled by" or "under common control with" mean direct or indirect ownership of more than fifty percent (50%) of the voting power of another entity. "Applicable Affiliates" means those Affiliates identified with respect to each Executive on Appendix B; "Applicable Foreign Affiliates" means those Applicable Affiliates identified on Appendix B as being incorporated in a jurisdiction other than a state in the United States; and "Applicable U.S. Affiliates" means those Applicable Affiliates identified on Appendix B as being incorporated in a state in the United States.
|
(b)
|
"Base Salary"
means the greater of the Executive's annual rate of salary, whether or not deferred, at: (i) the Effective Date of Termination, or (ii) at the date of the Change in Control.
|
(c)
|
"Beneficiary"
means the persons or entities designated or deemed designated by the Executive pursuant to Section 8.6 herein.
|
(d)
|
"Board"
means the Board of Directors of the Company.
|
(e)
|
"Cause"
shall mean:
|
(i)
|
any intentional and willful act of Executive involving fraud, embezzlement or theft of the assets of the Company or any of its Affiliates or the assets of customers of the Company or any of its Affiliates; or
|
(ii)
|
gross misconduct on the part of the Executive that is intentional and willful and that materially and demonstrably causes serious financial injury to the Company or any of its Affiliates; or
|
(iii)
|
Executive's conviction of or plea of nolo contendere to a felony; or
|
(iv)
|
any breach by Executive of Section 4.1(b) or 4.1(c) that materially and demonstrably causes serious financial injury to the Company or any of its Affiliates; or
|
(v)
|
any breach of Section 4.1(a); or
|
(vi)
|
any intentional, willful and material failure of Executive to perform Executive's employment duties (other than any such failure resulting from Executive's Disability) for thirty (30) days after the Board delivers a written demand for performance to Executive that specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive's employment duties.
|
(f)
|
"Change in Control"
shall mean:
|
(i)
|
a sale, in one transaction or series of related transactions, of the Company's stock or Quad/Graphics, Inc. Voting Trust certificates, its merger, consolidation, reorganization or other transaction, the result of which is that voting control sufficient to elect a majority of the Board (or the Board of Directors of any Surviving Entity (as defined in Section 7.1 herein)) no longer resides (A) in the Quad/Graphics, Inc. Voting Trust and any successor thereto, or (B) collectively in the family of Harry V. and Betty Quadracci, their lineal descendants, trusts, estates, foundations and other entities established for their benefit or effectively controlled by some or all of them; or
|
(ii)
|
a sale of all or substantially all of the assets of the Company to an entity that is not controlled by one or more of the entities described in 2(f)(i)(A) or (B) above.
|
(g)
|
"Code"
means the United States Internal Revenue Code of 1986, as amended, and any successors thereto.
|
(h)
|
"Committee"
means the Compensation Committee of the Board or any other committee appointed by the Board to perform the functions of the Compensation Committee.
|
(i)
|
"Company"
means Quad/Graphics, Inc., a Wisconsin corporation, or any successor thereto as provided in Article 7 herein.
|
(j)
|
"Disability"
shall mean with respect to an Executive that if, as a result of the Executive's incapacity due to physical or mental illness, the Executive is considered disabled within the meaning of the Company's long-term disability insurance plan or, in the absence of such plan, the Executive is unable to perform the essential duties, responsibilities and functions of his position with the Company as a result of any mental or physical disability or incapacity that lasts for a period of one hundred and eighty (180) consecutive days even with reasonable accommodations of such disability or incapacity provided by the Company or if providing such accommodations would be unreasonable, all as determined by the Committee in its good faith judgment. Each Executive shall cooperate in all respects with the Company if a question arises as to whether the Executive has become Disabled (including, without limitation, submitting to an examination by a medical doctor or other health care specialists selected by the Company and authorizing such medical doctor or such other health care specialist to discuss the Executive's condition with the Company).
|
(k)
|
"Effective Date"
means the commencement date of this Plan as specified in Section 1.2 of this Plan.
|
(l)
|
"Effective Date of Termination"
means the date on which a Qualifying Change in Control Termination or a Qualifying General Severance Termination occurs, as defined hereunder.
|
(m)
|
"Good Reason"
shall mean without the Executive's express written consent the occurrence of any one or more of the following:
|
(i)
|
The Company materially reduces the amount of the Executive's then current Base Salary or annual bonus target (other than any change that applies to substantially all other executive officers); or
|
(ii)
|
The Company requires the Executive to be based at a location in excess of sixty (60) miles from the location of the Executive's principal job location or office as of the effective date of the Executive's participation in the Plan; or
|
(iii)
|
A material diminution in the Executive's title, authority, power, duties, reporting requirements, or responsibilities or the assignment of duties to the Executive which are materially inconsistent with the Executive's position; or
|
(iv)
|
The failure of the Company to obtain the express assumption of, and agreement to perform under, this Plan when such action is required pursuant to Section 7.1 herein; or
|
(v)
|
Any other action or inaction by the Company that constitutes a material breach by the Company of the terms and conditions of this Plan.
|
(n)
|
"Inventions"
shall mean all designs, discoveries, improvements, ideas, and works of authorship, whether or not patentable, trademarkable or copyrightable, including, without limitation, any novel or improved products, software, computer programs, processes, machines, promotional and advertising materials, data processing systems, circuits, mask works, flowcharts, algorithms, drawings, blue prints, schematics and other manufacturing and sales techniques, that were developed, generated or produced by Executive, either solely or jointly with others, at any time during Executive's employment with the Company and either (i) relate to (A) the business of the Company or any of its Affiliates or (B) the actual or demonstrably anticipated research or development of the Company or any of its Affiliates, (ii) result from any work performed by Executive for or on behalf of the Company or any of its Affiliates or (iii) are developed using property, assets, or Protected Information of the Company or its Affiliates.
|
(o)
|
"Limited Good Reason"
shall mean without the Executive's express written consent the occurrence of the Company reducing the amount of the Executive's then current Base Salary by more than 10% (other than any change that applies to substantially all other executive officers). For purposes of this Plan, the Executive is not entitled to assert that the termination is for Limited Good Reason unless the Executive gives the Board written
|
(p)
|
"Notice of Termination"
shall mean a written notice which shall indicate the specific termination provision in this Plan relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated.
|
(q)
|
"Protected Information"
shall mean proprietary business and other information of the Company and its Affiliates which is confidential and not generally known to, or readily ascertainable by, competitors of the Company or its Affiliates including, but not limited to: customer lists (including lists of potential customers); information regarding customer relationships, needs, or practices; skills, experience, compensation, incentives, and evaluations for employees; nonpublic financial information; sources of supply; processes; strategic plans; business methods; investment strategies and plans; sales and marketing plans and materials; future market and product plans; pricing information; research and development techniques, processes, product development, work processes or methodologies; analytical analyses; product analyses; inventions, formulas, or techniques; efficiency data and testing data; technology; drawings, engineering, code, code writing, software and hardware development and platform information; and internal memoranda and policies; provided, however, that information that is (i) in the public domain (other than as a result of a breach of this Plan or other unlawful means), (ii) approved for immediate release by the Company for use and disclosure without restriction, (iii) lawfully obtained from third parties who are not bound by a confidentiality agreement with the Company or its Affiliates, or (iv) independently developed without reliance on other Protected Information is not Protected Information.
|
(r)
|
"Qualifying Change in Control Termination"
means a termination of employment from the Company and its Affiliates under the following circumstances:
|
(i)
|
An involuntary termination of the Executive's employment by the Company for reasons other than Cause, death or Disability pursuant to a Notice of Termination delivered to the Executive by the Company upon or within 24 months after a Change in Control; or
|
(ii)
|
A voluntary termination by the Executive for Good Reason pursuant to a Notice of Termination delivered to the Company by the Executive upon or within 24 months after a Change in Control.
|
(s)
|
"Qualifying General Severance Termination"
means a termination of employment from the Company and its Affiliates under the following circumstances:
|
(i)
|
An involuntary termination of the Executive's employment by the Company for reasons other than Cause, death or Disability pursuant to a Notice of Termination delivered to the Executive by the Company at any time other than upon or within 24 months after a Change in Control; or
|
(ii)
|
A voluntary termination by the Executive for Limited Good Reason pursuant to a Notice of Termination delivered to the Company by the Executive at any time other than upon or within 24 months after a Change in Control.
|
(t)
|
"
Restricted Products/Services
" collectively means (i) products or services that compete with (A) the products or services that were sold, provided, or offered for sale by the Company or the Applicable U.S. Affiliates within the continental United States ("Restricted U.S. Products/Services"), or (B) the products or services that were sold, provided, or offered for sale by the Applicable Foreign Affiliates in any country of the world ("Restricted Foreign Products"), within the twenty-four (24) months prior to Executive's Effective Date of Termination; and (ii) products or services that were the subject of documented research, development, or pre-production efforts by the Company or any of the Applicable Affiliates, within the twenty-four (24) months prior to Executive's Effective Date of Termination and regarding which the Executive had knowledge of Protected Information or Trade Secrets or personal involvement in customer relationships ("Other Restricted Products/Services").
|
(u)
|
"Severance Benefits"
means the payment of compensation following a Qualifying Change in Control Termination or (as appropriate) a Qualifying General Severance Termination as provided in Article 3 herein.
|
(v)
|
"Trade Secrets"
means information of the Company, including a formula, pattern, compilation, program, device, method, technique or process to which all of the following apply: (i) the information derives independent economic value, actual or potential, from not being known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) the information is the subject of efforts to maintain its secrecy that are reasonable under the circumstances.
|
3.1
|
Right to Severance Benefits
|
(a)
|
Change in Control Severance Benefits.
The Executive shall be entitled to receive, from the Company, Change in Control Severance Benefits, as described in Section 3.2 herein, if a Qualifying Change in Control Termination of the Executive's employment has occurred.
|
(b)
|
General Severance Benefits.
Executive shall be entitled to receive, from the Company, General Severance Benefits, as described in Section 3.3 herein, if a Qualifying General Severance Termination of the Executive's employment has occurred that is not a Qualifying Change in Control Termination.
|
(c)
|
No Severance Benefits.
The Executive shall not be entitled to receive Severance Benefits if the Executive's employment with the Company ends for reasons other than a Qualifying Change in Control Termination or a Qualifying General Severance Termination.
|
(d)
|
General Release and Acknowledgement of Restrictive Covenants.
As a condition to receiving and retaining Severance Benefits under either Section 3.2 (other than Section 3.2(a) to the extent required by law) or Section 3.3 (other than Section 3.3(a) to the extent required by law) herein, the Executive shall be obligated to execute a general release of claims in favor of the Company, its current and former affiliates and shareholders, and the current and former directors, officers, employees, and agents of the Company in a form acceptable to the Company. The general release of claims must be provided to the Company prior to the thirtieth (30
th
) day following the Effective Date of Termination; provided that the Company provides the form of release within fifteen (15) days following the Effective Date of Termination.
|
(e)
|
No Duplication of Severance Benefits.
If the Executive becomes entitled to Severance Benefits, the Severance Benefits provided for under Section 3.2 or Section 3.3 hereunder shall be in lieu of all other severance payments or other benefits provided to the Executive under any other Company-related severance plans, programs, or agreements.
|
3.2
|
Description of Change in Control Severance Benefits.
In the event the Executive becomes entitled to receive Change in Control Severance Benefits, as provided in Section 3.1(a) herein, the Company shall provide the Executive with the following:
|
(a)
|
A lump-sum amount paid promptly following the Effective Date of Termination equal to the Executive's unpaid Base Salary, accrued vacation pay, unreimbursed business expenses, and all other items earned by and owed to the Executive through and including the Effective Date of Termination.
|
(b)
|
A lump-sum amount paid on the sixtieth (60th) calendar day following the Effective Date of Termination equal to the product of (i) two (2) and (ii) the sum of the following: (A) the Executive's Base Salary and (B) the Executive's annual target bonus opportunity in the year of termination (or, if more favorable to the Executive, the Executive's annual target bonus opportunity for the year of the Change in Control).
|
(c)
|
A lump-sum amount, paid on the sixtieth (60th) calendar day following the Effective Date of Termination, equal to the Executive's then current target bonus opportunity established under the bonus plan in which the Executive is then participating, for the plan year in which a Qualifying Change in Control Termination occurs (or, if the target bonus opportunity has not yet been established for such plan year, the target bonus opportunity for the prior year), adjusted on a pro rata basis based on the number of days the Executive was actually employed during the bonus plan year in which the Qualifying Change in Control Termination occurs.
|
(d)
|
A lump-sum amount paid on the sixtieth (60) calendar day following the Effective Date of Termination equal to the product of (i) two (2) and (ii) the annual employer contributions for the Executive's medical and life insurance coverage in effect for the year of termination. For purposes of calculating this amount, the employer contribution should be based on the same coverage level and cost to the Executive as in effect immediately prior to the Executive's Effective Date of Termination.
|
(e)
|
Treatment of outstanding long-term incentives shall be in accordance with Section 3.4 herein.
|
(f)
|
Outplacement services through the provider of the Company's choice with the total cost not to exceed $50,000. In no event shall such outplacement services continue for more than two (2) years following the Effective Date of Termination.
|
(g)
|
Full vesting of the Executive's accrued benefit as of the Effective Date of Termination under the Company's Supplemental Executive Retirement Plan (or any successor plan thereto).
|
3.3
|
Description of General Severance Benefits.
In the event the Executive becomes entitled to receive General Severance Benefits, as provided in Section 3.1(b) herein, the Company shall provide the Executive (or his dependents, if applicable, in the case of group health, dental and life insurance benefits) with the following:
|
(a)
|
A lump-sum amount paid promptly following the Effective Date of Termination equal to the Executive's accrued and unpaid Base Salary, accrued vacation pay, unreimbursed business expenses, and all other items earned by and owed to the Executive through and including the Effective Date of Termination.
|
(b)
|
An amount equal to the sum of the following: (A) the Executive's Base Salary and (B) the Executive's annual target bonus opportunity in the year of termination, paid in substantially equal installments in accordance with the Company's customary payroll practices over the twelve (12) month period commencing on the first payroll date following the sixtieth (60
th
) calendar day after the Effective Date of Termination.
|
(c)
|
A lump sum amount, if any, paid within two and one half months after the end of the calendar year that includes the Effective Date of Termination, equal to the actual bonus that would have been payable to the Executive for the calendar year that includes the Effective Date of Termination based on actual performance if the Executive had remained employed through the end of such calendar year; provided however, that such amount shall be adjusted on a pro rata basis based on the number of days the Executive was actually employed during the bonus plan year in which the Qualifying General Severance Termination occurs.
|
(d)
|
Group health, dental and life insurance benefits for twelve (12) months following the Effective Date of Termination to the extent that such benefits were in effect for the Executive and his family as of the Effective Date of Termination, subject to the Executive's timely election of group health and/or dental continuation coverage pursuant to COBRA or similar state laws and timely payment of his or her share of the applicable premiums at the same rate (if any) he or she was paying before the Effective Date of Termination. Benefit continuation under this paragraph shall be concurrent with any coverage under the Company's plans pursuant to COBRA or similar state laws. Such benefits shall be terminated to the extent permitted by COBRA (for health and dental coverage) at such time as Executive has obtained new employment and is covered by benefits which in
|
(e)
|
Treatment of outstanding long-term incentives shall be in accordance with Section 3.4 herein.
|
(f)
|
Outplacement services through the provider of the Company's choice with the total cost not to exceed $50,000. In no event shall such outplacement services continue for more than two (2) years following the Effective Date of Termination.
|
3.4
|
Impact on Long-Term Incentives.
All awards will be paid pursuant to the long-term incentive plan under which the award was granted, the related award agreement, or the Board's discretion.
|
4.1
|
During the Executive's employment with the Company and in the event the Executive has a termination of employment (regardless of whether the Executive becomes entitled to receive Change in Control Severance Benefits or General Severance Benefits as provided in Sections 3.2 and 3.3 herein), the following shall apply:
|
(a)
|
Noncompetition.
Executive acknowledges that he or she has obtained and will continue to obtain during employment with the Company, knowledge of Protected Information and Trade Secrets, and had personal involvement in the Company's customer relationships, that would, in the event Executive were to unfairly use or disclose that Protected Information or Trade Secrets or employ that personal involvement on behalf of a competitor of the Company or of any Applicable Affiliate, cause irreparable harm to the Company and/or the Applicable Affiliates. In return for at-will employment with the Company, and in consideration of the Executive's inclusion under this Plan, during the Executive's employment and for a period of twenty-four (24) months after the Executive's Effective Date of Termination (the "Noncompete Period"), the Executive shall not directly or indirectly (as a director, officer, employee, shareholder, investor, partner, consultant or otherwise) provide services under circumstances in which (i) disclosure or use of Protected Information or Trade Secrets known to Executive, or (ii) use of Executive's personal involvement in the Company's or any Applicable Affiliate's customer relationships, would reasonably be considered competitively beneficial to any other company, business, person or entity (including the Executive) who/which: (A) produces or sells, or plans to produce or sell, Restricted U.S. Products/Services within the continental United States, (B) produces or sells, or plans to produce or sell, Restricted Foreign Products in any country of the world in which the Applicable Foreign Affiliates sold products or services during the twenty-four (24) months prior to Executive's Effective Date of Termination, or (C) produces or sells, or plans to produce or sell, Other Restricted Products/Services in either the continental United States or in any country of the world in which the Applicable Foreign Affiliates sold products or services during the twenty-four (24) months prior to Executive's Effective Date of Termination.
|
(b)
|
Nonsolicitation of Customers
. For a period of twenty-four (24) months after the Executive's Effective Date of Termination, the Executive shall not solicit, for the purpose of selling Restricted Products/Services, any customer of the Company or any Applicable Affiliate:
|
i.
|
to whom/which the Company or its Applicable Affiliates have sold or provided Restricted Products/Services during the twenty-four (24) months prior to the Executive's Effective Date of Termination; and
|
ii.
|
with respect to whom/which the Executive received Protected Information or had substantial personal involvement in the customer relationship during the twenty-four (24) months prior to the Executive's Effective Date of Termination.
|
(c)
|
Nonsolicitation of Employees and Contractors.
During the Executive's employment and for a period of twenty-four (24) months after the Executive's Effective Date of Termination, the Executive shall not directly or indirectly:
|
i.
|
solicit any individual who is employed or engaged as a contractor by the Company or the Applicable Affiliates and is someone with whom the Executive had personal contact or about whom Executive has learned (by name or by role) because of Executive's access to Protected Information during the twenty-four (24) months prior to the Executive's Effective Date of Termination (an "Employee/Contractor") for employment with, or as a provider of services to, a company, business, entity or person who competes with the Company or the Applicable Affiliates;
|
ii.
|
engage in discussions encouraging any Employee/Contractor to terminate his/her employment or engagement with the Company or any Applicable Affiliates;
|
iii.
|
in any way prompt any Employee/Contractor to diminish the services he/she/it provides to the Company or any Applicable Affiliates; or
|
iv.
|
assist any third party with respect to any of the foregoing.
|
i.
|
prohibit the Executive from offering employment to, or having an independent contractor relationship with, any such person who initiates employment or independent contractor relationship discussions with Executive's then-current employer without any direct or indirect solicitation or involvement by Executive; or
|
ii.
|
during the term of the Executive's employment with the Company, restrict the Executive from encouraging any Employee/Contractor of the Company or any Applicable Affiliate to resign or to terminate his/her/its contractual relationship with the Company or any Applicable Affiliate, or from terminating any Employee/Contractor of the Company or any Applicable Affiliates, provided that such discussions are in the best interest of the Company or the Applicable Affiliates.
|
(d)
|
Confidentiality
. The Company has advised the Executive and the Executive acknowledges that it is the policy of the Company to maintain as secret and confidential all Protected Information and that Protected Information has been and will be developed at substantial cost and effort to the Company and the Applicable Affiliates. The Executive shall not, at any time during the Executive's employment with the Company or its Affiliates, and for a period of twenty-four (24) months after the Executive's Effective Date of Termination, directly or indirectly, divulge, furnish, or make accessible to any person, firm, corporation, association, or other entity (otherwise than as may be required in the regular course of the Executive's employment), any Protected Information, or cause any such Protected Information of the Company or an Applicable Affiliate to enter the public domain. Notwithstanding the limitations set forth above, the Executive understands and agrees to maintain the the secrecy of, and not to misappropriate, threaten to misappropriate or provide any assistance to anyone seeking to ascertain or reverse engineer, any Trade Secret of the Company or any Applicable Affiliates without limitation, except as provided under applicable trade secret law. This Plan is in addition to and not in lieu of any obligations to protect the Company's Trade Secrets and Protected Information pursuant to the Company's written policies concerning Trade Secrets and Protected Information. Notwithstanding anything in this Plan to the contrary, nothing herein is intended to discourage or restrict the Executive from reporting any theft of Trade Secrets pursuant to the Defend Trade Secrets Act of 2016 ("DTSA") or other applicable state or federal law. The DTSA prohibits retaliation against an employee because of whistleblower activity in connection with the disclosure of Trade Secrets, so long as any such disclosure is made either (i) in confidence to an attorney or a federal, state, or local government official and solely to report or investigate a suspected violation of the law, or (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding. Nothing in this Plan shall limit, curtail or diminish the Company's statutory rights under the DTSA, any applicable state law regarding trade secrets or common law.
|
(e)
|
Executive Acknowledgement
. Recognizing the specialized nature of the Company and the Applicable Affiliates, Executive acknowledges and agrees that the duration, geographic scope and activity restrictions of the covenants set forth in paragraphs (a) through (d) of this Article 4 are reasonable, are necessary to protect the Company's legitimate business interests, do not violate public policy, and will not prevent the Executive from earning a living.
|
(f)
|
Return of Information and Other Property.
On or before the last day of the Executive's employment with the Company (or any other time upon the Company's request), Executive shall deliver to the Company the original
|
(g)
|
Assignment/Cooperation.
Executive hereby assigns to the Company all of the Executive's right, title and interest in and to all Inventions. During Executive's employment with the Company and at all times thereafter, upon the request of an authorized executive officer of the Company, Executive shall do any reasonable act and thing to assist the Company in any way to vest in the Company all of Executive's right, title and interest in and to all Inventions and to obtain, defend and enforce the Company's rights in all Inventions including, without limitation, agreeing to testify in any suit or other proceeding involving any Invention or document, to review, return or sign all documents that the Company reasonably determines to be necessary or proper, and to apply for, obtain or enforce any patents or copyrights relating to any Invention. If, after reasonable effort, the Company cannot secure Executive's signature on any document or thing needed in connection with the actions specified in this paragraph, Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executive's agent to act for and on Executive's behalf to execute, verify, and file any documents or do any other reasonable act or thing to further the purposes of this paragraph with the same force and effect as if executed or done by Executive. The Company shall compensate Executive at a reasonable rate for time actually spent assisting the Company with any of the foregoing after the last day of Executive's employment with the Company. Executive further waives all claims of any nature whatsoever which Executive now has or may in the future obtain for infringement of any rights assigned under this Plan or otherwise.
|
(h)
|
Nondisparagement.
At all times, the Executive agrees not to disparage the Company or otherwise make comments harmful to the Company's reputation. However, nothing in this provision will be construed to prevent the Executive from (i) testifying in response to a lawfully served subpoena, giving truthful testimony under oath, or otherwise complying with a lawful court or agency order; (ii) filing a charge with the Equal Employment Opportunity Commission (or cross-filing any equivalent fair employment charge with any state or local fair employment agency); (iii) cooperating with the Equal Employment Opportunity Commission or any federal, state, or local fair employment agency; or (iv) filing a complaint or cooperating with any other government or law enforcement agency.
|
5.1
|
Best Net
. It is the object of this paragraph to provide for the maximum after-tax income to each Executive with respect to any payment or distribution to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the Plan or any other plan, arrangement or agreement, that would be subject to the excise tax imposed by Section 4999 of the Code) or any similar federal, state or local tax that may hereafter be imposed (a "Payment") (Section 4999 of the Code or any similar federal, state or local tax are collectively referred to as the "Excise Tax"). Accordingly, before any Payments are made under this Plan, a determination will be made as to which of two alternatives will maximize such Executive's after-tax proceeds, and the Company must notify the Executive in writing of such determination. The first alternative is the payment in full of all Payments potentially subject to the Excise Tax. The second alternative is the payment of only a part of the Executive's Payments so that the Executive receives the largest payment and benefits possible without causing the Excise Tax to be payable by the Executive. This second alternative is referred to in this paragraph as "Limited Payment". The Executive's Payments shall be paid only to the extent permitted under the alternative determined to maximize the Executive's after-tax proceeds, and the Executive shall have no rights to any greater payments on his or her Payments. If Limited Payment applies, Payments shall be reduced in a manner that would not result in the Executive incurring an additional tax under Code Section 409A.
|
(a)
|
Accordingly, Payments not constituting nonqualified deferred compensation under Code Section 409A shall be reduced first, in this order but only to the extent that doing so avoids the Excise Tax (e.g., accelerated vesting or payment provisions in an award will be ignored to the extent that such provisions would trigger the Excise Tax):
|
(i)
|
Payment of the Severance Benefits to the extent such payments do not constitute deferred compensation under Code Section 409A.
|
(ii)
|
Awards that can be earned based on performance ("Performance-Based Awards"), but excluding Performance-Based Awards subject to Code Section 409A.
|
(iii)
|
Awards that can be earned solely on the passage of time ("Service-Based Awards"), but excluding Service-Based Awards subject to Code Section 409A.
|
(iv)
|
Awards of stock options and SARs under a Company omnibus or incentive plan.
|
(b)
|
Then, if the foregoing reductions are insufficient, Payments constituting deferred compensation under Code Section 409A shall be reduced, in this order:
|
(i)
|
Payment of the Severance Benefits to the extent such payments constitute deferred compensation under Code Section 409A.
|
(ii)
|
Performance-Based Awards subject to Code Section 409A.
|
(iii)
|
Service-Based Awards subject to Code Section 409A.
|
6.1
|
Payment of Legal Fees.
Except as otherwise agreed to by the parties, the Company shall pay the Executive for costs of litigation or other disputes including, without limitation, reasonable attorneys' fees incurred by the Executive in asserting any claims or defenses under this Plan, except that the Executive shall bear his/her own costs of such litigation or disputes (including, without limitation, attorneys' fees) if the court (or arbitrator) finds in favor of the Company with respect to any material claims or defenses asserted by the Executive.
|
6.2
|
Notice.
Any notices, requests, demands, or other communications provided for by this Plan shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address he or she has filed in writing with the Company or, in the case of the Company, at its principal offices.
|
7.1
|
Successors to the Company.
The Company shall require any person or entity (a) to which the Company sells, assigns or transfers all or substantially all of its business and assets, (b) into which the Company merges or consolidates or otherwise combines (where the Company does not survive such combination) or (c) that otherwise acquires or becomes a successor to the Company, whether or not in connection with a Change in Control (a "Surviving Entity") to expressly in writing assume and agree to perform under this Plan in the same manner and to the same extent that the Company would be required to perform if no such transaction had taken place; provided that no such express assumption or agreement shall be required to the extent such assumption and obligation to perform occurs automatically by operation of law or to the extent the Surviving Entity is otherwise required to perform under this Plan without such assumption. Regardless of whether such agreement is executed, the terms of this Plan shall be binding upon any Surviving Entity in accordance with the operation of law and such Surviving Entity shall be deemed the "Company" for purposes of this Plan.
|
7.2
|
Assignment by the Executive.
This Plan shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be payable to him or her hereunder had he or she continued to
|
8.1.
|
Code Section 409A.
To the extent applicable, it is intended that the Plan comply with the provisions of Code Section 409A. The Plan will be administered and interpreted in a manner consistent with this intent, and any provision that would cause the Plan to fail to satisfy Code Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Code Section 409A). Notwithstanding anything contained herein to the contrary, for all purposes of this Plan, Executive shall not be deemed to have had a termination of employment until Executive has incurred a separation from service as defined in Treasury Regulation §1.409A-1(h) and, solely to the extent required to avoid accelerated taxation and/or tax penalties under Code Section 409A, payment of the amounts payable under the Plan that would otherwise be payable during the six-month period after the date of termination shall instead be paid on the first business day after the expiration of such six-month period, plus interest thereon, at a rate equal to the applicable "Federal short-term rate" (as defined in Code Section 1274(d)) for the month in which such date of termination occurs, from the respective dates on which such amounts would otherwise have been paid until the actual date of payment. In addition, for purposes of the Plan, each amount to be paid and each installment payment shall be construed as a separate, identified payment for purposes of Code Section 409A. With respect to expenses eligible for reimbursement under the terms of this Plan: (i) the amount of such expenses eligible for reimbursement in any taxable year shall not affect the expenses eligible for reimbursement in another taxable year; and (ii) any reimbursements of such expenses shall be made no later than the end of the calendar year following the calendar year in which the related expenses were incurred, except, in each case, to the extent that the right to reimbursement does not provide for a "deferral of compensation" within the meaning of Code Section 409A.
|
8.2
|
Employment Status.
Except as may be provided under any other agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and may be terminated by either the Executive or the Company at any time, subject to applicable law.
|
8.3
|
Entire Plan
. This Plan supersedes any prior agreements or understandings, oral or written, between the parties hereto, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto. Without limiting the generality of the foregoing sentence, this Plan completely supersedes any and all prior employment agreements entered into by and between the Company and the Executive, and all amendments thereto, in their entirety.
|
8.4
|
Severability.
In the event that any provision or portion of this Plan shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Plan shall be unaffected thereby and shall remain in full force and effect.
|
8.5
|
Tax Withholding.
The Company may withhold from any benefits payable under this Plan all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.
|
8.6
|
Beneficiaries.
The Executive may designate one (1) or more persons or entities as the primary and/or contingent beneficiaries of any amounts to be received under this Plan. Such designation must be in the form of a signed writing acceptable to the Board or the Board's designee. The Executive may make or change such designation at any time. The last designation filed with the Company prior to the date of the Executive's will be applicable.
|
8.7
|
Payment Obligation Absolute.
The Company's obligation to make the payments provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else.
|
8.8
|
Contractual Rights to Benefits.
Subject to approval and ratification by the Board, this Plan establishes and vests in the Executive a contractual right to the benefits to which he or she is entitled hereunder. However, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to
|
8.9
|
Modification; Survival.
No provision of this Plan may be modified, waived, or discharged in a manner adverse to an Executive unless such modification, waiver, or discharge is agreed to in a writing signed by the affected Executive and by an authorized member of the Committee, or by the respective parties' legal representatives and successors. Additional executives may be added to Appendix A by the Committee from time to time provided that the Executive meets the requirements of Section 1.1. The termination of this Plan pursuant to Section 1.3 or Section 1.4 shall not affect (A) any obligation of the Company to pay any Severance Benefits due to a Qualifying Change in Control Termination or a Qualifying General Severance Termination occurring prior to the effective date of such termination or (B) the obligations of the Executives pursuant to Article 4.
|
8.10
|
Gender and Number.
Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.
|
8.11
|
Applicable Law.
To the extent not preempted by the laws of the United States, the internal laws of the state of Wisconsin (without regard to its laws concerning choice of law) shall be the controlling law in all matters relating to this Plan.
|
By:
|
/s/ J. Joel Quadracci
|
|
Name:
|
J. Joel Quadracci
|
|
Title:
|
Chairman, President and Chief Executive Officer
|
|
|
|
|
|
|
|
Appendix A - Covered Executives
|
Appendix B - Applicable Affiliates
|
(x)
|
prohibit the Executive from offering employment to, or having an independent contractor relationship with, any such person who initiates employment or independent contractor relationship discussions with Executive's then-current employer without any direct or indirect solicitation or involvement by Executive; or
|
(y)
|
during the term of the Executive's employment with the Company, restrict the Executive from encouraging any Employee/Contractor of the Company or any Applicable Affiliate to resign or terminate his/her/its contractual relationship with the Company or any Applicable Affiliate, or from terminating any Employee/Contractor of the Company or any Applicable Affiliates, provided that such discussions are in the best interest of the Company or the Applicable Affiliates.
|
Applicable Affiliate
|
Country/State of Incorporation/Organized
|
Anselmo L. Morvillo S.A.
|
Argentina
|
Chemical Research/Technology Co.
|
WI
|
COPAC, Inc.
|
SC
|
Marin's International SAS
|
France
|
Plural Industria Grafica Ltda.
|
Brazil
|
QG Printing II LLC
|
CT
|
QG Printing III Co.
|
DE
|
QG, LLC
|
DE
|
Quad Logistics Services, LLC
|
DE
|
Quad Packaging, Inc.
|
WI
|
Quad/Graphics Colombia S.A.
|
Colombia
|
Quad/Graphics Commercial & Specialty LLC
|
WI
|
Quad/Graphics Europe Sp. z o.o
|
Poland
|
Quad/Graphics Marketing, LLC
|
WI
|
Quad/Graphics Peru S.A.
|
Peru
|
[
For Messrs. Quadracci and Fowler only
: Quad/Med, LLC]
|
WI
|
Quad/Tech, Inc.
|
WI
|
Reproducciones Fotomecanicas S.A. de C.V.
|
Mexico
|
Tempt LLC
|
WI
|
Transpak Corporation
|
WI
|
Unigraphic, Inc.
|
MA
|
|
|
|
|
Quad/Graphics, Inc.
|
|
|
|
("Company")
|
|
|
("Executive")
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Quad/Graphics, Inc.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
(a)
|
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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November 2, 2016
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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):
|
(a)
|
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)
|
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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November 2, 2016
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|
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/s/ David J. Honan
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David J. Honan
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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/ David J. Honan
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David J. Honan
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Executive Vice President and Chief Financial Officer
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