UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2022~~March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-34806

Quad/Graphics, Inc.

(Exact name of registrant as specified in its charter)


Wisconsin						39-1152983
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

N61 W23044 Harry’s Way, Sussex, Wisconsin 53089-3995

(Address of principal executive offices) (Zip Code)

(414) 566-6000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.025 per share	QUAD	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.


Class						Outstanding as of ~~July 29, 2022~~April 28, 2023
Class A Common Stock						~~40,627,794~~39,153,019
Class B Common Stock						13,556,858
Class C Common Stock						—

Table of Contents

QUAD/GRAPHICS, INC.

FORM 10-Q INDEX

For the Quarter Ended ~~June 30, 2022~~March 31, 2023

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements (Unaudited)

QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(UNAUDITED)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Net sales	Net sales									Net sales
Products	Products	$	593.9	$	511.6	$	1,174.8	$	1,037.6	Products		$	607.9	$	580.9
Services	Services	163.8		182.3		327.1		362.1		Services		158.6		163.3
Total net sales	Total net sales	757.7		693.9		1,501.9		1,399.7		Total net sales		766.5		744.2
Cost of sales	Cost of sales									Cost of sales
Products	Products	503.8		413.7		1,006.9		842.0		Products		516.1		503.1
Services	Services	114.3		140.5		230.8		272.0		Services		101.4		116.5
Total cost of sales	Total cost of sales	618.1		554.2		1,237.7		1,114.0		Total cost of sales		617.5		619.6
Operating expenses	Operating expenses									Operating expenses
Selling, general and administrative expenses	Selling, general and administrative expenses	86.9		80.1		166.0		160.6		Selling, general and administrative expenses		89.2		79.1
Gain from sale and leaseback		—		(13.7)		—		(13.7)

Depreciation and amortization	Depreciation and amortization	35.3		38.7		71.8		80.6		Depreciation and amortization		33.7		36.5
Restructuring, impairment and transaction-related charges	Restructuring, impairment and transaction-related charges	3.2		(13.4)		6.8		(10.8)		Restructuring, impairment and transaction-related charges		26.0		3.6

Total operating expenses	Total operating expenses	743.5		645.9		1,482.3		1,330.7		Total operating expenses		766.4		738.8
Operating income	Operating income	14.2		48.0		19.6		69.0		Operating income		0.1		5.4
Interest expense	Interest expense	10.9		15.6		20.2		30.1		Interest expense		16.3		9.3
Net pension income	Net pension income	(3.1)		(3.5)		(6.3)		(7.6)		Net pension income		(0.4)		(3.2)

Earnings before income taxes and equity in loss of unconsolidated entity		6.4		35.9		5.7		46.5
Loss before income taxes										Loss before income taxes		(15.8)		(0.7)
Income tax expense	Income tax expense	1.1		1.3		1.4		1.8		Income tax expense		8.8		0.3
Earnings before equity in loss of unconsolidated entity		5.3		34.6		4.3		44.7
Equity in loss of unconsolidated entity		—		0.2		—		0.1
Net earnings		5.3		$	34.4	$	4.3	$	44.6

Earnings per share
Basic		$	0.10	$	0.67	$	0.08	$	0.87
Diluted		$	0.10	$	0.66	$	0.08	$	0.85

Net loss										Net loss		$	(24.6)	$	(1.0)

Loss per share										Loss per share
Basic and diluted										Basic and diluted		$	(0.50)	$	(0.02)

Weighted average number of common shares outstanding	Weighted average number of common shares outstanding									Weighted average number of common shares outstanding
Basic		52.1		51.3		51.8		51.3
Diluted		54.1		52.5		53.8		52.7
Basic and diluted										Basic and diluted		49.2		51.5

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

Table of Contents

QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

(UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net earnings $ 5.3 $ 34.4 $ 4.3 $ 44.6
Other comprehensive income (loss)
Translation adjustments (6.0) 2.2 (5.2) (3.8)
Interest rate swap adjustments 0.7 1.8 2.1 3.6
Pension benefit plan adjustments — 0.7 — 0.7
Other comprehensive income (loss), before tax (5.3) 4.7 (3.1) 0.5
Income tax impact related to items of other comprehensive income (loss) (0.1) — (0.4) —
Other comprehensive income (loss), net of tax (5.4) 4.7 (3.5) 0.5
Comprehensive income (loss) $ (0.1) $ 39.1 $ 0.8 $ 45.1


	Three Months Ended March 31,
		2023		2022
Net loss		$	(24.6)	$	(1.0)

Other comprehensive income
Translation adjustments		6.5		0.8
Interest rate derivatives adjustments		0.8		1.4
Pension benefit plan adjustments		0.1		—
Other comprehensive income, before tax		7.4		2.2

Income tax impact related to items of other comprehensive income		(0.2)		(0.3)

Other comprehensive income, net of tax		7.2		1.9

Comprehensive income (loss)		$	(17.4)	$	0.9

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

Table of Contents

QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)


		(UNAUDITED) June 30, 2022		December 31, 2021			(UNAUDITED) March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	11.8	$	179.9	Cash and cash equivalents	$	8.7	$	25.2
Receivables, less allowance for credit losses of $29.1 million at June 30, 2022, and $28.2 million at December 31, 2021		344.5		362.0
Receivables, less allowance for credit losses of $26.8 million at March 31, 2023, and $26.4 million at December 31, 2022						Receivables, less allowance for credit losses of $26.8 million at March 31, 2023, and $26.4 million at December 31, 2022	348.6		372.6
Inventories	Inventories	278.5		226.2		Inventories	239.3		260.7
Prepaid expenses and other current assets	Prepaid expenses and other current assets	47.6		41.0		Prepaid expenses and other current assets	45.5		46.0

Total current assets	Total current assets	682.4		809.1		Total current assets	642.1		704.5

Property, plant and equipment—net	Property, plant and equipment—net	695.7		727.0		Property, plant and equipment—net	668.8		672.1
Operating lease right-of-use assets—net	Operating lease right-of-use assets—net	126.4		125.7		Operating lease right-of-use assets—net	104.7		111.1
Goodwill	Goodwill	86.4		86.4		Goodwill	86.4		86.4
Other intangible assets—net	Other intangible assets—net	61.3		75.3		Other intangible assets—net	40.2		46.9

Other long-term assets	Other long-term assets	71.7		66.5		Other long-term assets	84.7		80.8

Total assets	Total assets	$	1,723.9	$	1,890.0	Total assets	$	1,626.9	$	1,701.8

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	Accounts payable	$	379.8	$	367.3	Accounts payable	$	405.8	$	456.6
Other current liabilities	Other current liabilities	257.5		314.3		Other current liabilities	174.0		249.1
Short-term debt and current portion of long-term debt	Short-term debt and current portion of long-term debt	49.9		245.6		Short-term debt and current portion of long-term debt	152.4		61.1
Current portion of finance lease obligations	Current portion of finance lease obligations	1.0		1.8		Current portion of finance lease obligations	2.0		0.8
Current portion of operating lease obligations	Current portion of operating lease obligations	29.2		28.1		Current portion of operating lease obligations	26.2		27.8

Total current liabilities	Total current liabilities	717.4		957.1		Total current liabilities	760.4		795.4

Long-term debt	Long-term debt	643.9		554.9		Long-term debt	478.9		506.7
Finance lease obligations	Finance lease obligations	1.1		1.4		Finance lease obligations	6.9		1.6
Operating lease obligations	Operating lease obligations	100.3		99.8		Operating lease obligations	82.3		87.1
Deferred income taxes	Deferred income taxes	13.6		11.9		Deferred income taxes	22.2		9.3
Other long-term liabilities	Other long-term liabilities	109.3		128.1		Other long-term liabilities	121.7		128.8

Total liabilities	Total liabilities	1,585.6		1,753.2		Total liabilities	1,472.4		1,528.9

Commitments and contingencies (Note 6)	Commitments and contingencies (Note 6)	0		0		Commitments and contingencies (Note 6)

Shareholders’ equity	Shareholders’ equity					Shareholders’ equity
Preferred stock	Preferred stock	—		—		Preferred stock	—		—
Common stock, Class A	Common stock, Class A	1.0		1.0		Common stock, Class A	1.0		1.0
Common stock, Class B	Common stock, Class B	0.4		0.4		Common stock, Class B	0.4		0.4
Common stock, Class C	Common stock, Class C	—		—		Common stock, Class C	—		—
Additional paid-in capital	Additional paid-in capital	839.6		839.3		Additional paid-in capital	838.5		841.8
Treasury stock, at cost	Treasury stock, at cost	(14.5)		(14.9)		Treasury stock, at cost	(21.2)		(23.5)
Accumulated deficit	Accumulated deficit	(523.5)		(527.8)		Accumulated deficit	(543.1)		(518.5)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(164.7)		(161.2)		Accumulated other comprehensive loss	(121.1)		(128.3)
Total shareholders’ equity	Total shareholders’ equity	138.3		136.8		Total shareholders’ equity	154.5		172.9
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	1,723.9	$	1,890.0	Total liabilities and shareholders’ equity	$	1,626.9	$	1,701.8

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

Table of Contents

QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(UNAUDITED)


		Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net earnings		$	4.3	$	44.6
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Net loss						Net loss	$	(24.6)	$	(1.0)
Adjustments to reconcile net loss to net cash used in operating activities:						Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	71.8		80.6		Depreciation and amortization	33.7		36.5

Impairment charges	Impairment charges	0.1		1.7		Impairment charges	9.5		0.1
Settlement charges on pension plans		—		0.6

Amortization of debt issuance costs and original issue discount	Amortization of debt issuance costs and original issue discount	1.2		1.4		Amortization of debt issuance costs and original issue discount	0.5		0.7

Stock-based compensation	Stock-based compensation	3.8		4.7		Stock-based compensation	1.0		1.9

Gain on the sale of businesses		—		(20.9)

Gain on the sale or disposal of property, plant and equipment	Gain on the sale or disposal of property, plant and equipment	(1.2)		(23.3)		Gain on the sale or disposal of property, plant and equipment	(0.1)		(0.4)
Deferred income taxes	Deferred income taxes	1.1		2.1		Deferred income taxes	10.3		0.3
Equity in loss of unconsolidated entity		—		0.1

Changes in operating assets and liabilities—net of acquisitions and divestitures		(104.6)		(2.7)
Net cash provided by (used in) operating activities		(23.5)		88.9

Changes in operating assets and liabilities—net of divestitures						Changes in operating assets and liabilities—net of divestitures	(80.9)		(55.0)
Net cash used in operating activities						Net cash used in operating activities	(50.6)		(16.9)

INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(33.5)		(27.2)		Purchases of property, plant and equipment	(28.7)		(19.1)
Cost investment in unconsolidated entities	Cost investment in unconsolidated entities	(2.7)		(0.7)		Cost investment in unconsolidated entities	(0.3)		(1.9)
Proceeds from the sale of property, plant and equipment	Proceeds from the sale of property, plant and equipment	3.2		35.0		Proceeds from the sale of property, plant and equipment	7.1		0.5
Proceeds from the sale of a business		—		39.0

Other investing activities	Other investing activities	1.8		(0.2)		Other investing activities	(4.5)		1.8
Net cash provided by (used in) investing activities		(31.2)		45.9
Net cash used in investing activities						Net cash used in investing activities	(26.4)		(18.7)

FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Payments of current and long-term debt	Payments of current and long-term debt	(222.1)		(83.0)		Payments of current and long-term debt	(7.4)		(3.7)
Payments of finance lease obligations	Payments of finance lease obligations	(1.5)		(1.6)		Payments of finance lease obligations	(0.3)		(0.8)
Borrowings on revolving credit facilities	Borrowings on revolving credit facilities	344.2		120.1		Borrowings on revolving credit facilities	413.8		25.5
Payments on revolving credit facilities	Payments on revolving credit facilities	(229.8)		(114.5)		Payments on revolving credit facilities	(343.5)		(23.1)
Proceeds from issuance of long-term debt		1.1		—

Changes in ownership of noncontrolling interests		—		(1.9)

Purchases of treasury stock	Purchases of treasury stock	(0.9)		—		Purchases of treasury stock	(0.3)		—

Equity awards redeemed to pay employees’ tax obligations	Equity awards redeemed to pay employees’ tax obligations	(2.5)		(1.1)		Equity awards redeemed to pay employees’ tax obligations	(1.7)		(2.5)
Payment of cash dividends	Payment of cash dividends	(1.4)		(1.4)		Payment of cash dividends	(0.1)		(1.4)
Other financing activities	Other financing activities	(0.3)		(8.1)		Other financing activities	(0.2)		(0.1)
Net cash used in financing activities		(113.2)		(91.5)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	60.3		(6.1)

Effect of exchange rates on cash and cash equivalents	Effect of exchange rates on cash and cash equivalents	(0.2)		(0.2)		Effect of exchange rates on cash and cash equivalents	0.2		0.1
Net increase (decrease) in cash and cash equivalents		(168.1)		43.1
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	(16.5)		(41.6)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	179.9		55.2		Cash and cash equivalents at beginning of period	25.2		179.9
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	11.8	$	98.3	Cash and cash equivalents at end of period	$	8.7	$	138.3

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

Table of Contents

QUAD/GRAPHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

~~AND NONCONTROLLING INTERESTS~~

(in millions)

(UNAUDITED)

Condensed Consolidated Statement of Shareholders’ Equity For the ~~Six~~Three Months Ended ~~June 30, 2022~~March 31, 2023
Common Stock Additional
Paid-in
Capital Treasury Stock Accumulated
Deficit Accumulated
Other
Comprehensive
Loss Quad’s
Shareholders’
Equity Noncontrolling
Interests
Shares Amount Shares Amount
Balance at December 31, 2021 55.7 $ 1.4 $ 839.3 (1.4) $ (14.9) $ (527.8) $ (161.2) $ 136.8 $ —
Net earnings — — — — — (1.0) — (1.0) —
Foreign currency translation adjustments — — — — — — 0.8 0.8 —
Interest rate swap adjustments, net of tax — — — — — — 1.1 1.1 —
Stock-based compensation — — 1.7 — — — — 1.7 —
Issuance of share-based awards, net of other activity 0.9 — (2.4) 0.8 2.8 — — 0.4 —
Awards redeemed to pay employees’ tax obligations — — — (0.4) (2.5) — — (2.5) —
Balance at March 31, 2022 56.6 $ 1.4 $ 838.6 (1.0) $ (14.6) $ (528.8) $ (159.3) $ 137.3 $ —
Net earnings — — — — — 5.3 — 5.3 —
Foreign currency translation adjustments — — — — — — (6.0) (6.0) —
Interest rate swap adjustments, net of tax — — — — — — 0.6 0.6 —
Stock-based compensation — — 1.9 — — — — 1.9 —
Purchases of treasury stock — — — (0.3) (0.9) — — (0.9) —
Issuance of share-based awards, net of other activity — — (0.9) 0.2 1.0 — — 0.1 —
Balance at June 30, 2022 56.6 $ 1.4 $ 839.6 (1.1) $ (14.5) $ (523.5) $ (164.7) $ 138.3 $ —


	Common Stock			Additional Paid-in Capital		Treasury Stock			Accumulated Deficit		Accumulated Other Comprehensive Loss		Quad’s Shareholders’ Equity
	Shares	Amount				Shares	Amount
Balance at December 31, 2022	56.6	$	1.4	$	841.8	(3.9)	$	(23.5)	$	(518.5)	$	(128.3)	$	172.9
Net loss	—	—		—		—	—		(24.6)		—		(24.6)

Foreign currency translation adjustments	—	—		—		—	—		—		6.5		6.5
Interest rate derivatives adjustments, net of tax	—	—		—		—	—		—		0.6		0.6
Pension benefit plan liability adjustments, net of tax	—	—		—		—	—		—		0.1		0.1

Stock-based compensation	—	—		1.0		—	—		—		—		1.0

Purchases of treasury stock	—	—		—		(0.1)	(0.3)		—		—		(0.3)

Issuance of share-based awards, net of other activity	—	—		(4.3)		1.4	4.3		—		—		—
Equity awards redeemed to pay employees’ tax obligations	—	—		—		(0.3)	(1.7)		—		—		(1.7)
Balance at March 31, 2023	56.6	$	1.4	$	838.5	(2.9)	$	(21.2)	$	(543.1)	$	(121.1)	$	154.5

Condensed Consolidated Statement of Shareholders’ Equity For the ~~Six~~Three Months Ended ~~June 30, 2021~~March 31, 2022
Common Stock Additional
Paid-in
Capital Treasury Stock Accumulated
Deficit Accumulated
Other
Comprehensive
Loss Quad’s
Shareholders’
Equity Noncontrolling
Interests
Shares Amount Shares Amount
Balance at December 31, 2020 54.4 $ 1.4 $ 833.1 (0.8) $ (13.1) $ (566.0) $ (171.3) $ 84.1 $ 0.7
Net earnings — — — — — 10.2 — 10.2 —
Foreign currency translation adjustments — — — — — — (6.0) (6.0) —
Interest rate swap adjustments, net of tax — — — — — — 1.8 1.8 —
Stock-based compensation — — 3.0 — — — — 3.0 —
Issuance of share-based awards, net of other activity 1.3 — (0.6) — 1.0 — — 0.4 —
Awards redeemed to pay employees’ tax obligations — — — (0.2) (1.1) — — (1.1) —
Balance at March 31, 2021 55.7 $ 1.4 $ 835.5 (1.0) $ (13.2) $ (555.8) $ (175.5) $ 92.4 $ 0.7
Net earnings — — — — — 34.4 — 34.4 —
Change in ownership of noncontrolling interests — — (1.1) — — — — (1.1) (0.7)
Foreign currency translation adjustments — — — — — — 2.2 2.2 —
Interest rate swap adjustments, net of tax — — — — — — 1.8 1.8 —
Pension benefit plan adjustments, net of tax — — — — — — 0.7 0.7 —
Cash dividends declared — — — — — 0.1 — 0.1 —
Stock-based compensation — — 1.6 — — — — 1.6 —
Issuance of share-based awards, net of other activity — — 0.4 (0.1) (0.4) — — — —
Balance at June 30, 2021 55.7 $ 1.4 $ 836.4 (1.1) $ (13.6) $ (521.3) $ (170.8) $ 132.1 $ —


	Common Stock			Additional Paid-in Capital		Treasury Stock			Accumulated Deficit		Accumulated Other Comprehensive Loss		Quad’s Shareholders’ Equity
	Shares	Amount				Shares	Amount
Balance at December 31, 2021	55.7	$	1.4	$	839.3	(1.4)	$	(14.9)	$	(527.8)	$	(161.2)	$	136.8
Net loss	—	—		—		—	—		(1.0)		—		(1.0)

Foreign currency translation adjustments	—	—		—		—	—		—		0.8		0.8
Interest rate derivatives adjustments, net of tax	—	—		—		—	—		—		1.1		1.1


Stock-based compensation	—	—		1.7		—	—		—		—		1.7



Issuance of share-based awards, net of other activity	0.9	—		(2.4)		0.8	2.8		—		—		0.4
Equity awards redeemed to pay employees’ tax obligations	—	—		—		(0.4)	(2.5)		—		—		(2.5)
Balance at March 31, 2022	56.6	$	1.4	$	838.6	(1.0)	$	(14.6)	$	(528.8)	$	(159.3)	$	137.3

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

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE ~~AND SIX~~ MONTHS ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

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

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements for Quad/Graphics, Inc. and its subsidiaries (the “Company” or “Quad”) have been prepared by the Company pursuant to the rules and regulations for interim financial information of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to such SEC rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated annual financial statements as of and for the year ended December 31, ~~2021,~~2022, and notes thereto included in the Company’s latest Annual Report on Form 10-K filed with the SEC on February ~~23, 2022.~~27, 2023.

The Company is subject to seasonality in its quarterly results as net sales and operating income are ~~typically~~ higher in the third and fourth quarters of the calendar year as compared to the first and second quarters. The fourth quarter is typically the highest seasonal quarter for cash flows ~~provided by~~from operating activities and Free Cash Flow due to the reduction of working capital requirements that reach peak levels during the third quarter. Seasonality is driven by increased catalogs and retail inserts ~~and catalogs~~ primarily due to back-to-school and holiday-related advertising and promotions. ~~Due to the impacts from supply chain disruptions in 2022, the Company expects to reach higher than typical levels of working capital requirements during the first and second quarters.~~ The Company expects seasonality impacts to continue in future years.

The financial information contained herein reflects all adjustments, in the opinion of management, necessary for a fair presentation of the Company’s results of operations for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. All of these adjustments are of a normal recurring nature, except as otherwise noted. All intercompany transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements include estimates and assumptions of management that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates.

~~COVID-19 Pandemic~~Economic Impacts and Response - ~~The COVID-19 pandemic has had, and will continue to~~Macroeconomic conditions have ~~a negative impact on~~weakened demand for the Company’s ~~business, financial condition, cash flows, results of operations,~~products and services, disrupted the Company’s supply chain and ~~raw materials availability, although the full extent is still uncertain. Throughout the pandemic, the Company implemented~~resulted in rising inflationary cost ~~reduction~~ and cash conservation initiatives in response to the pandemic’s impact on its business. With ongoing advancements against the COVID-19 pandemic, the effects on the Company have lessened from previous periods.labor pressures, distribution challenges, recessionary concerns and other evolving macroeconomic conditions. The Company continues to evaluate the ~~impact~~current economic environment and may implement additional cost reduction measures as necessary. The pandemic has also disrupted the Company’s supply chain and contributed to rising inflationary cost pressures within the Company’s raw materials, distribution and labor. The ultimate impact of COVID-19 on the Company’s business, financial condition, cash flows, results of operations, supply chain and raw materials availability, will depend on future developments, including the continuing duration of the pandemic and the related length of its impact on the global economy, all of which are still uncertain.

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE ~~AND SIX~~ MONTHS ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

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

Note 2. Revenue Recognition

Revenue Disaggregation

The following tables provide information about disaggregated revenue by the Company’s operating segments and major products and services offerings for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:

United States Print
and Related Services International Total
Three months ended June 30, 2022
Catalog, publications, retail inserts, and directories $ 331.8 $ 67.7 $ 399.5
Direct mail and other printed products 156.5 35.3 191.8
Other 2.3 0.3 2.6
Total products 490.6 103.3 593.9
Logistics services 71.9 4.8 76.7
Marketing services and medical services 86.9 0.2 87.1
Total services 158.8 5.0 163.8
Total net sales $ 649.4 $ 108.3 $ 757.7
Three months ended June 30, 2021
Catalog, publications, retail inserts, and directories $ 299.8 $ 59.0 $ 358.8
Direct mail and other printed products 131.4 19.0 150.4
Other 2.1 0.3 2.4
Total products 433.3 78.3 511.6
Logistics services 93.6 4.3 97.9
Marketing services and medical services 84.0 0.4 84.4
Total services 177.6 4.7 182.3
Total net sales $ 610.9 $ 83.0 $ 693.9

~~Table of Contents~~

~~QUAD/GRAPHICS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022~~

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


		United States Print and Related Services		International		Total			United States Print and Related Services		International		Total
Six months ended June 30, 2022
Catalog, publications, retail inserts, and directories		$	673.5	$	128.2	$	801.7
Three months ended March 31, 2023								Three months ended March 31, 2023
Catalog, publications, retail inserts and directories								Catalog, publications, retail inserts and directories	$	360.9	$	57.3	$	418.2
Direct mail and other printed products	Direct mail and other printed products	305.7		62.2		367.9		Direct mail and other printed products	142.0		45.9		187.9
Other	Other	4.7		0.5		5.2		Other	1.6		0.2		1.8
Total products	Total products	983.9		190.9		1,174.8		Total products	504.5		103.4		607.9
Logistics services	Logistics services	142.9		10.1		153.0		Logistics services	64.4		5.1		69.5
Marketing services and medical services	Marketing services and medical services	173.7		0.4		174.1		Marketing services and medical services	88.7		0.4		89.1
Total services	Total services	316.6		10.5		327.1		Total services	153.1		5.5		158.6
Total net sales	Total net sales	$	1,300.5	$	201.4	$	1,501.9	Total net sales	$	657.6	$	108.9	$	766.5

Six months ended June 30, 2021
Catalog, publications, retail inserts, and directories		$	629.5	$	108.0	$	737.5
Three months ended March 31, 2022								Three months ended March 31, 2022
Catalog, publications, retail inserts and directories								Catalog, publications, retail inserts and directories	$	341.7	$	60.5	$	402.2
Direct mail and other printed products	Direct mail and other printed products	260.4		35.8		296.2		Direct mail and other printed products	149.2		26.9		176.1
Other	Other	3.3		0.6		3.9		Other	2.4		0.2		2.6
Total products	Total products	893.2		144.4		1,037.6		Total products	493.3		87.6		580.9
Logistics services	Logistics services	186.3		9.4		195.7		Logistics services	71.0		5.3		76.3
Marketing services and medical services	Marketing services and medical services	166.0		0.4		166.4		Marketing services and medical services	86.8		0.2		87.0
Total services	Total services	352.3		9.8		362.1		Total services	157.8		5.5		163.3
Total net sales	Total net sales	$	1,245.5	$	154.2	$	1,399.7	Total net sales	$	651.1	$	93.1	$	744.2

Nature of Products and Services

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

The products offering is predominantly comprised of the Company’s print operations which includes retail inserts, publications, catalogs, special interest publications, journals, direct mail, directories, in-store marketing and promotion, packaging, newspapers, custom print products, other commercial and specialty printed products and global paper procurement.

The Company considers its ~~logistics~~logistic operations as services, which include the delivery of printed material. The services offering also includes revenues related to the Company’s marketing services operations, which include ~~digital content management, photography, color services, page production, marketing strategy, creative~~data and analytics, technology solutions, media ~~planning~~services, creative and ~~placement~~content solutions, managed services and ~~facilities management,~~execution in non-print channels (e.g., digital and broadcast), as well as medical services.

109

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE ~~AND SIX~~ MONTHS ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

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

Costs to Obtain Contracts

In accordance with Accounting Standards Codification 606 — Revenue from Contracts with Customers, the Company capitalizes certain sales incentives of the sales compensation packages for costs that are directly attributed to being awarded a client contract or renewal and would not have been incurred had the contract not been obtained. The Company also defers certain contract acquisition costs paid to the client at contract inception. Costs to obtain contracts with a duration of less than one year are expensed as incurred. For all contract costs with contracts over one year, the Company amortizes the costs to obtain contracts on a straight-line basis over the estimated life of the contract and reviews quarterly for impairment. Activity impacting costs to obtain contracts for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, was as follows:


	Costs to Obtain Contracts
Balance at December 31, ~~2021~~2022	$	~~5.1~~3.3
Costs to obtain contracts	~~0.1~~0.5
Amortization of costs to obtain contracts	~~(1.0)~~(0.4)
Balance at ~~June 30, 2022~~March 31, 2023	$	~~4.2~~3.4

Note 3. Restructuring, Impairment and Transaction-Related Charges

The Company recorded restructuring, impairment and transaction-related charges for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Employee termination charges	Employee termination charges	$	0.5	$	2.8	$	1.6	$	7.5	Employee termination charges		$	13.1	$	1.1
Impairment charges	Impairment charges	—		0.9		0.1		1.7		Impairment charges		9.5		0.1
Transaction-related charges	Transaction-related charges	0.3		0.2		0.5		0.4		Transaction-related charges		0.6		0.2

Other restructuring charges (income)		2.4		(17.3)		4.6		(20.4)
Integration costs										Integration costs		0.5		—
Other restructuring charges										Other restructuring charges		2.3		2.2
Total	Total	$	3.2	$	(13.4)	$	6.8	$	(10.8)	Total		$	26.0	$	3.6

The costs related to these activities have been recorded in the condensed consolidated statements of operations as restructuring, impairment and transaction-related charges. See Note 15, “Segment Information,” for restructuring, impairment and transaction-related charges by segment.

Restructuring Charges

The Company has a restructuring program related to eliminating excess manufacturing capacity and properly aligning its cost structure. The Company classifies the following charges as restructuring:

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

•~~Other restructuring charges (income)~~Integration costs are ~~presented net~~incurred primarily for the integration of the gains on the sale of facilities and businesses, including a gain on the sale of the Riverside, California facility during the first quarter of 2021 and gains on the sale of other facilities during the second quarter of 2021. The Company also recognized a $20.9 million gain on the sale of a business during the second quarter of 2021, which is included within other restructuring activities below. The components of other restructuring charges (income) consisted of the following during the three and six months ended June 30, 2022 and 2021:acquired companies.

1110

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE ~~AND SIX~~ MONTHS ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

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

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Vacant facility carrying costs and lease exit charges $ 1.1 $ 6.3 $ 2.1 $ 10.2
Equipment and infrastructure removal costs — 0.2 — 1.0
Gains on the sale of facilities — (2.3) — (10.1)
Other restructuring activities 1.3 (21.5) 2.5 (21.5)
Other restructuring charges (income) $ 2.4 $ (17.3) $ 4.6 $ (20.4)
•Other restructuring charges consisted of the following during the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
		2023		2022
Vacant facility carrying costs and lease exit charges		$	1.9	$	1.0
Equipment and infrastructure removal costs		0.3		—

Other restructuring activities		0.1		1.2
Other restructuring charges		$	2.3	$	2.2

The restructuring charges recorded were based on plans that have been committed to by management and were, in part, based upon management’s best estimates of future events. Changes to the estimates may require future restructuring charges and adjustments to the restructuring liabilities. The Company expects to incur additional restructuring charges related to these and other initiatives.

Impairment Charges

The Company recognized impairment charges of ~~$0.1 million during the six months ended June 30, 2022, and $0.9~~$9.5 million and ~~$1.7~~$0.1 million ~~during the three and six months ended June 30, 2021, respectively. There were no impairment charges recognized~~ during the three months ended ~~June 30, 2022.~~March 31, 2023 and 2022, respectively. The impairment charges were primarily for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction ~~and strategic divestiture~~ activities.

The fair values of the impaired assets were determined by the Company to be Level 3 under the fair value hierarchy (see Note 9, “Financial Instruments and Fair Value Measurements,” for the definition of Level 3 inputs) and were estimated based on broker quotes, internal expertise related to current marketplace conditions and estimated future discounted cash flows. These assets were adjusted to their estimated fair values at the time of impairment. If estimated fair values subsequently decline, the carrying values of the assets are adjusted accordingly.

Transaction-Related Charges

The Company incurs transaction-related charges primarily consisting of professional service fees related to business acquisition and divestiture activities. Transaction-related charges of ~~$0.3~~$0.6 million and ~~$0.5~~$0.2 million were recorded during the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~respectively, and $0.2 million and $0.4 million were recorded during the three and six months ended June 30, 2021,~~ respectively.

Restructuring Reserves

Activity impacting the Company’s restructuring reserves for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, was as follows:
Employee
Termination
Charges Impairment
Charges Transaction-Related
Charges Other
Restructuring
Charges Total
Balance at December 31, 2021 $ 4.7 $ — $ 0.4 $ 50.2 $ 55.3
Expense, net 1.6 0.1 0.5 4.6 6.8
Cash payments, net (2.7) — (0.4) (8.6) (11.7)
Non-cash adjustments/reclassifications and translation (0.5) (0.1) — (0.4) (1.0)
Balance at June 30, 2022 $ 3.1 $ — $ 0.5 $ 45.8 $ 49.4


	Employee Termination Charges		Impairment Charges		Transaction-Related Charges		Integration Costs		Other Restructuring Charges		Total
Balance at December 31, 2022	$	2.9	$	—	$	1.5	$	—	$	5.2	$	9.6
Expense, net	13.1		9.5		0.6		0.5		2.3		26.0
Cash payments, net	(4.3)		—		(1.3)		(0.5)		(3.6)		(9.7)
Non-cash adjustments/reclassifications	—		(9.5)		—		—		0.4		(9.1)
Balance at March 31, 2023	$	11.7	$	—	$	0.8	$	—	$	4.3	$	16.8

~~Table of Contents~~

~~QUAD/GRAPHICS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022~~

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

The Company’s restructuring reserves at ~~June 30, 2022,~~March 31, 2023, included a short-term and a long-term component. The short-term portion included ~~$44.8~~$12.6 million in other current liabilities and $0.6 million in accounts payable in the condensed consolidated balance sheets as the Company expects these reserves to be settled within the next twelve months. The long-term portion of ~~$4.0~~$3.6 million is included in other long-term liabilities in the condensed consolidated balance sheets.

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2023

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

Note 4. Receivables

Prior to granting credit, the Company evaluates each client in an underwriting process, taking into consideration the prospective client’s financial condition, past payment experience, credit bureau information and other financial and qualitative factors that may affect the client’s ability to pay. Specific credit reviews and standard industry credit scoring models are used in performing this evaluation. Clients’ financial condition is continuously monitored as part of the normal course of business. Some of the Company’s clients are highly leveraged or otherwise subject to their own operating and regulatory risks.

Specific client provisions are made when a review of significant outstanding amounts, utilizing information about client creditworthiness, as well as current and future economic trends based on reasonable forecasts, indicates that collection is doubtful. The Company also records a general provision based on the overall risk profile of the receivables and through the assessment of reasonable economic forecasts. The risk profile is assessed on a quarterly basis using various methods, including external resources and credit scoring models. Accounts that are deemed uncollectible are written off when all reasonable collection efforts have been exhausted.

The Company has recorded credit loss expense of ~~$0.8~~$0.9 million and ~~$1.5~~$0.7 million during the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~respectively, and $0.2 million and $0.8 million during the three and six months ended June 30, 2021,~~ respectively, which is included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Activity impacting the allowance for credit losses for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, was as follows:


	Allowance for Credit Losses
Balance at December 31, ~~2021~~2022	$	~~28.2~~26.4
Provisions	~~1.5~~0.9
Write-offs	(0.7)

Translation ~~and other~~	~~0.1~~0.2
Balance at ~~June 30, 2022~~March 31, 2023	$	~~29.1~~26.8

Note 5. Inventories

The components of inventories at ~~June 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, were as follows:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Raw materials and manufacturing supplies	Raw materials and manufacturing supplies	$	197.6	$	148.6	Raw materials and manufacturing supplies	$	150.6	$	173.7
Work in process	Work in process	38.2		31.6		Work in process	44.4		38.3
Finished goods	Finished goods	42.7		46.0		Finished goods	44.3		48.7
Total	Total	$	278.5	$	226.2	Total	$	239.3	$	260.7

1312

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE ~~AND SIX~~ MONTHS ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

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

Note 6. Commitments and Contingencies

Litigation

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

Environmental Reserves

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

Note 7. Debt

Senior Secured Credit Facility

The Company completed the seventh amendment to the Senior Secured Credit Facility on January 24, 2023, which transitioned the Company’s reference rate from London Interbank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”) effective February 1, 2023. The Company elected the practical expedient outlined in Accounting Standards Update (“ASU”) 2020-04 and ASU 2021-01 which allowed the Company to prospectively adjust the effective interest rate after the reference rate change. The transition from LIBOR to SOFR did not have a material impact on the condensed consolidated financial statements.

Senior Unsecured Notes

During the first quarter of 2022, the Company repurchased $2.4 million of its outstanding unsecured 7.0% senior notes due May 1, 2022 (the “Senior Unsecured Notes”) in the open market. All repurchased Senior Unsecured Notes were canceled. The Company used cash flows from operating activities to fund the repurchases. These repurchases were completed primarily to reduce interest expense.

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

Note 8. Income Taxes

The Company records income tax expense on an interim basis. The estimated annual effective income tax rate is adjusted quarterly. For the ~~six~~three months ended ~~June 30,~~March 31, 2023, the estimated annual effective income tax rate differs from the statutory tax rate primarily due to estimated non-deductible expenses, income from foreign branches, and net increases in valuation allowance reserves. For the three months ended March 31, 2022, ~~and 2021,~~ the estimated annual effective income tax rate differs from the statutory tax rate primarily from decreases in valuation allowance reserves. The effective income tax rate for the current interim period differs further from the statutory tax rate due to items discrete to the interim period ~~including changes in the liability for unrecognized tax benefits~~primarily related to ~~the establishment and settlement of~~an increase in income tax ~~exposures and expenses related to share-based compensation.~~payable for an anticipated audit settlement.

The Company currently has various open tax audits in multiple jurisdictions. From time to time, the Company will receive tax assessments as part of the process. Based on the information available as of ~~June 30, 2022,~~March 31, 2023, the Company has recorded its best estimate of the potential settlements of these audits. Actual results could differ from the estimated amounts.

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2023

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

The Company’s liability for unrecognized tax benefits ~~as of June 30, 2022~~ was ~~$11.6 million, a decrease of $0.1 million from $11.7~~$11.1 million as of March 31, 2023 and December 31, ~~2021.~~2022. The Company anticipates a ~~$0.5~~$0.2 million decrease to its liability for unrecognized tax benefits within the next twelve months due to the resolution of income tax audits or statute expirations.

~~Table of Contents~~

~~QUAD/GRAPHICS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022~~

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

Note 9. Financial Instruments and Fair Value Measurements

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

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

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

Level 3: Unobservable inputs for the asset or liability. There were no ~~recurring~~ Level 3 ~~fair value~~recurring measurements of assets or liabilities as of ~~June 30, 2022.~~March 31, 2023.

Interest Rate Swaps

The Company currently holds one active interest rate swap contract. Another previously held interest rate swap, effective on February 28, 2017, terminated on February 28, 2022. The purpose of entering into the contracts was to reduce the variability of cash flows from interest payments related to a portion of Quad’s variable-rate debt. The interest rate swaps were previously designated as cash flow hedges as they effectively converted the notional value of the Company’s variable rate debt based on one-month ~~London Interbank Offered Rate (“LIBOR”)~~LIBOR to a fixed rate, including a spread on underlying debt, and a monthly reset in the variable interest rate. However, the Company amended its Senior Secured Credit Facility during the second quarter of 2020, which added a 0.75% LIBOR floor to the Company’s variable rate debt, changing the critical terms of the hedged instrument. Due to this change in critical terms, the Company had elected to de-designate the swaps as cash flow hedges, resulting in future changes in fair value being recognized in interest expense. The balance of the accumulated other comprehensive loss attributable to the interest rate swaps as of June 30, 2020 was then amortized to interest expense on a straight-line basis over the remaining lives of the swap contracts. The Company expects to reclassify $2.7 million of this balance, attributable to its active interest rate swap contract, to interest expense over the next twelve months. Due to the Company’s transition from LIBOR to SOFR during the first quarter of 2023, the active interest rate swap’s fixed swap rate was amended to be based on one-month term SOFR.

The key terms of the active interest rate swap is as follows:


			March 19, 2019 Interest Rate Swap
Effective date			March 29, 2019
Termination date			March 28, 2024
Term			5 years
Notional amount			$130.0

Fixed swap rate			~~2.43%~~2.40%

1514

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE ~~AND SIX~~ MONTHS ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

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

The Company classifies interest rate swaps as Level 2 because the inputs into the valuation model are observable or can be derived or corroborated utilizing observable market data at commonly quoted intervals. The fair value of the interest rate swaps classified as Level 2 as of ~~June 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, were as follows:

~~Balance Sheet Location~~

~~June 30, 2022~~

~~December 31, 2021~~

~~Interest rate swap assets~~

~~Prepaid expenses and other current assets~~

~~1.5~~

—

~~Interest rate swap liabilities~~

~~Other current liabilities~~

—

~~(0.7)~~

~~Interest rate swap liabilities~~

~~Other long-term liabilities~~

—

~~(4.4)~~


	Balance Sheet Location	March 31, 2023		December 31, 2022
Interest rate swap assets	Prepaid expenses and other current assets	$	2.8	$	3.8

Prior to the Company’s de-designation of the interest rate swaps as a cash flow hedge, the interest rate swaps were considered highly effective, with no amount of ineffectiveness recorded into earnings. The change in the fair value of the interest rate swaps are recorded as an adjustment to interest expense in the condensed consolidated statements of operations. The cash flows associated with the interest rate swaps have been recognized as an adjustment to interest expense in the condensed consolidated statements of operations:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Cash Flow Impacts	Cash Flow Impacts									Cash Flow Impacts
Net interest paid	Net interest paid	$	0.5	$	1.9	$	2.0	$	3.7	Net interest paid		$	(0.7)	$	1.5

Impacts with Swaps as Nonhedging Instruments	Impacts with Swaps as Nonhedging Instruments									Impacts with Swaps as Nonhedging Instruments
Income recognized in interest expense excluded from hedge effectiveness assessments	Income recognized in interest expense excluded from hedge effectiveness assessments	(1.7)		(1.7)		(6.7)		(4.4)		Income recognized in interest expense excluded from hedge effectiveness assessments		1.0		(5.0)
Amounts reclassified out of accumulated other comprehensive loss to interest expense	Amounts reclassified out of accumulated other comprehensive loss to interest expense	0.7		1.8		2.1		3.6		Amounts reclassified out of accumulated other comprehensive loss to interest expense		0.7		1.4
Net interest expense	Net interest expense	0.5		1.9		2.0		3.7		Net interest expense		(0.7)		1.5
Total impact of swaps to interest expense	Total impact of swaps to interest expense	$	(0.5)	$	2.0	$	(2.6)	$	2.9	Total impact of swaps to interest expense		$	1.0	$	(2.1)

Interest Rate Collars

The Company has entered into two interest rate collar contracts, both effective February 1, 2023. The purpose of entering into the contracts is to reduce the variability of cash flows from interest payments related to a portion of Quad’s variable-rate debt. The interest rate collars have been designated as cash flow hedges as they effectively convert the notional value of the Company’s variable rate debt based on one-month term SOFR to a fixed rate if that month’s interest rate is outside of the collars’ floor and ceiling rates, including a spread on underlying debt, and a monthly reset in the variable interest rate. The key terms of the interest rate collars are as follows:


	December 12, 2022 Interest Rate Collar	December 14, 2022 Interest Rate Collar
Effective date	February 1, 2023	February 1, 2023
Termination date	October 30, 2026	October 31, 2025
Term	45 Months	33 Months
Notional amount	$75.0	$75.0
Floor Rate	2.09%	2.25%
Ceiling Rate	5.00%	5.00%

The Company classifies interest rate collars as Level 2 because the inputs into the valuation model are observable or can be derived or corroborated utilizing observable market data at commonly quoted intervals. The fair value of the interest rate collars classified as Level 2 as of March 31, 2023, and December 31, 2022, were as follows:


	Balance Sheet Location	March 31, 2023		December 31, 2022
Interest rate collar assets	Prepaid expenses and other current assets	$	0.1	$	—

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2023

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

The interest rate collars were highly effective as of March 31, 2023. No amount of ineffectiveness has been recorded into earnings related to these cash flow hedges. The cash flows associated with the interest rate collars will be recognized as an adjustment to interest expense in the condensed consolidated statements of operations. There has been no interest paid or received related to the interest rate collars during the three months ended March 31, 2023. The changes in the fair value of the interest rate collars have been included in other comprehensive income (loss) in the condensed consolidated statements of comprehensive income (loss):


	Three Months Ended March 31,
		2023		2022



Gain recognized in other comprehensive income (loss)		$	(0.1)	$	—

Foreign Exchange Contracts

The Company has operations in countries that have transactions outside their functional currencies and periodically enters into foreign exchange contracts. These contracts are used to hedge the net exposures of changes in foreign currency exchange rates and are designated as either cash flow hedges or fair value hedges. Gains or losses on net foreign currency hedges are intended to offset losses or gains on the underlying net exposures in an effort to reduce the earnings volatility resulting from fluctuating foreign currency exchange rates. ~~There~~As of March 31, 2023, there were nofour open foreign currency exchange contracts designated as cash flow hedges, with a total notional value of ~~June 30, 2022.~~$5.9 million.

Natural Gas Forward Contracts

The Company periodically enters into natural gas forward purchase contracts to hedge against increases in commodity costs. The Company’s commodity contracts qualified for the exception related to normal purchases and sales during the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ as the Company takes delivery in the normal course of business.

Debt

The Company measures fair value on its debt instruments using interest rates available to the Company for borrowings with similar terms and maturities and is categorized as Level 2. Based upon the interest rates available to the Company for borrowings with similar terms and maturities, the fair value of the Company’s total debt was approximately ~~$0.7 billion and $0.8~~$0.6 billion at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively.~~2022.

~~Table of Contents~~

~~QUAD/GRAPHICS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022~~

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

Nonrecurring Fair Value Measurements

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record certain assets and liabilities at fair value on a nonrecurring basis, generally as a result of acquisitions or the remeasurement of assets resulting in impairment charges, which are categorized as Level 3. See Note 3, “Restructuring, Impairment and Transaction-Related Charges” for further discussion on impairment charges recorded as a result of the remeasurement of certain long-lived assets.

Other Estimated Fair Value Measurements

The Company records the fair value of its forward contracts and pension plan assets on a recurring basis. The fair value of cash and cash equivalents, receivables, inventories, accounts payable and other current liabilities approximate their carrying values as of ~~June 30, 2022,~~March 31, 2023, and December 31, ~~2021.~~2022.

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2023

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

Note 10. Employee Retirement Plans

Defined Contribution Plans

The Quad/Graphics, Inc. Employee Stock Ownership Plan (“ESOP”) holds profit sharing contributions of Company stock, which are made at the discretion of the Company’s Board of Directors. There were no profit sharing contributions during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Pension Plans

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

The components of net pension income for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022

Interest cost	Interest cost	$	(2.4)	$	(2.1)	$	(4.8)	$	(4.2)	Interest cost		$	(4.4)	$	(2.4)
Expected return on plan assets	Expected return on plan assets	5.5		6.2		11.1		12.4		Expected return on plan assets		5.0		5.6
Net periodic pension income										Net periodic pension income		0.6		3.2
Amortization of actuarial loss										Amortization of actuarial loss		(0.2)		—

Net periodic pension income		3.1		4.1		6.3		8.2
Settlement charge		—		(0.6)		—		(0.6)

Net pension income	Net pension income	$	3.1	$	3.5	$	6.3	$	7.6	Net pension income		$	0.4	$	3.2

The Company made ~~$0.3~~$0.2 million in benefit payments to its non-qualified defined benefit pension plans ~~during the six months ended June 30, 2022. There were~~and made no contributions to its qualified defined benefit pension plans during the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023.

The Company incurred a non-cash settlement charge of $0.6 million during the six months ended June 30, 2021 due to the significance of lump sum payments made in that period. The non-cash settlement charge resulted in accelerated recognition of actuarial losses on the condensed consolidated statement of operations.

~~Table of Contents~~

~~QUAD/GRAPHICS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022~~

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

Multiemployer Pension Plans (“MEPPs”)

The Company has withdrawn from all significant MEPPs and replaced these union sponsored “promise to pay in the future” defined benefit plans with a Company sponsored “pay as you go” defined contribution plan. The 2two MEPPs, the Graphic Communications International Union – Employer Retirement Fund (“GCIU”) and the Graphic Communications Conference of the International Brotherhood of Teamsters National Pension Fund (“GCC”), are significantly underfunded, and require the Company to pay a withdrawal liability to fund its pro rata share of the underfunding as of the plan year the full withdrawal was completed. As a result of the decision to withdraw, the Company accrued a withdrawal liability based on information provided by each plan’s trustee. The Company has reserved ~~$30.3~~$27.3 million for the total MEPPs withdrawal liability as of ~~June 30, 2022,~~March 31, 2023, of which ~~$26.3~~$23.5 million was recorded in other long-term liabilities and ~~$4.0~~$3.8 million was recorded in other current liabilities in the condensed consolidated balance sheets. The Company is scheduled to make payments to the GCIU and GCC until April 2032 and February 2024, respectively. The Company made payments totaling ~~$3.1~~$1.5 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Note 11. ~~Earnings~~Loss Per Share

Basic earnings (loss) per share is computed as net earnings (loss) divided by the basic weighted average common shares outstanding. The calculation of diluted earnings (loss) per share includes the effect of any dilutive equity incentive instruments. The Company uses the treasury stock method to calculate the effect of outstanding dilutive equity incentive instruments, which requires the Company to compute total proceeds as the sum of the amount the employee must pay upon exercise of the award and the amount of unearned stock-based compensation costs attributable to future services.

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2023

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

Equity incentive instruments for which the total employee proceeds from exercise exceed the average fair value of the same equity incentive instrument over the period have an anti-dilutive effect on earnings per share during periods with net earnings, and accordingly, the Company excludes them from the calculation. ~~Anti-dilutive equity instruments excluded from~~Due to the ~~computation of diluted~~ net earnings per share were 0.4 million for the six months ended June 30, 2022 and 1.1 million and 1.0 million class A common shares for the three and six months ended June 30, 2021, respectively. There were no anti-dilutive equity instruments excluded from the computation of diluted net earnings per share forloss incurred during the three months ended ~~June 30, 2022.~~March 31, 2023 and 2022, the assumed exercise of all equity incentive instruments was anti-dilutive and therefore, not included in the diluted loss per share calculation.

Reconciliations of the numerator and the denominator of the basic and diluted per share computations for the Company’s common stock for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ are summarized as follows:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Numerator
Net earnings $ 5.3 $ 34.4 $ 4.3 $ 44.6
Denominator
Basic weighted average number of common shares outstanding for all classes of common shares 52.1 51.3 51.8 51.3
Plus: effect of dilutive equity incentive instruments 2.0 1.2 2.0 1.4
Diluted weighted average number of common shares outstanding for all classes of common shares 54.1 52.5 53.8 52.7
Earnings per share
Basic $ 0.10 $ 0.67 $ 0.08 $ 0.87
Diluted $ 0.10 $ 0.66 $ 0.08 $ 0.85


	Three Months Ended March 31,
		2023		2022
Numerator
Net loss		$	(24.6)	$	(1.0)



Denominator
Basic weighted average number of common shares outstanding for all classes of common stock		49.2		51.5
Plus: effect of dilutive equity incentive instruments		—		—
Diluted weighted average number of common shares outstanding for all classes of common shares		49.2		51.5

Loss per share
Basic and diluted		$	(0.50)	$	(0.02)

~~Table of Contents~~

~~QUAD/GRAPHICS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022~~

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

Note 12. Equity Incentive Programs

Equity Incentive Compensation Expense

Equity incentive compensation expense was recorded primarily in selling, general and administrative expenses in the condensed consolidated statements of operations and includes expense recognized for liability awards that are remeasured on a quarterly basis. The total compensation expense recognized related to all equity incentive programs for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ was as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Restricted Stock (“RS”) and Restricted Stock Units (“RSU”) equity awards expense	Restricted Stock (“RS”) and Restricted Stock Units (“RSU”) equity awards expense	$	1.2	$	1.6	$	2.9	$	3.8	Restricted Stock (“RS”) and Restricted Stock Units (“RSU”) equity awards expense		$	0.9	$	1.7
RSU liability awards expense	RSU liability awards expense	—		0.1		0.2		0.1		RSU liability awards expense		—		0.2
Deferred Stock Units (“DSU”) awards expense	Deferred Stock Units (“DSU”) awards expense	0.7		—		0.7		0.8		Deferred Stock Units (“DSU”) awards expense		0.1		—
Total equity incentive compensation expense	Total equity incentive compensation expense	$	1.9	$	1.7	$	3.8	$	4.7	Total equity incentive compensation expense		$	1.0	$	1.9

Total future compensation expense related to all equity incentive programs granted as of ~~June 30, 2022,~~March 31, 2023, was estimated to be ~~$8.2~~$10.7 million, which consists entirely of expense for RS and RSU awards. Estimated future compensation expense is ~~$2.3~~$3.9 million for the remainder of ~~2022, $3.4~~2023, $4.1 million for ~~2023, $2.2~~2024, $2.4 million for ~~2024~~2025 and $0.3 million for ~~2025.~~2026.

~~Restricted Stock and Restricted Stock Units~~

~~The following table is a summary of RS and RSU award activity for the six months ended June 30, 2022:~~
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, 2021 3,053,019 $ 6.99 1.2 222,093 $ 10.41 0.5
Granted 1,654,473 4.00 54,014 4.00
Vested (1,039,567) 12.31 (169,489) 12.33
Forfeited (55,210) 4.30 (6) 12.33
Nonvested at June 30, 2022 3,612,715 $ 4.13 1.9 106,612 $ 4.11 1.9

1918

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE ~~AND SIX~~ MONTHS ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

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

Restricted Stock and Restricted Stock Units

The following table is a summary of RS and RSU award activity for the three months ended March 31, 2023:


	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, 2022	3,606,295	$	4.11	1.4	100,943	$	4.08	1.5
Granted	1,761,308	4.09			66,879	4.08
Vested	(817,768)	4.64			(19,842)	4.67
Forfeited	(424,371)	4.19			—	—
Nonvested at March 31, 2023	4,125,464	$	3.99	2.1	147,980	$	4.00	2.2

Deferred Stock Units

The following table is a summary of DSU award activity for the ~~six~~three months ended ~~June 30, 2022:~~March 31, 2023:
Deferred Stock Units
Units Weighted-Average Grant Date Fair Value Per Share
Outstanding at December 31, 2021 687,391 $ 8.26
Granted 187,632 3.89
Dividend equivalents granted — —
Settled (101,829) 7.90
Outstanding at June 30, 2022 773,194 $ 7.25


	Deferred Stock Units
	Units	Weighted-Average Grant Date Fair Value Per Share
Outstanding at December 31, 2022	773,194	$	7.25
Granted	8,460	4.88

Settled	(114,592)	5.65
Outstanding at March 31, 2023	667,062	$	7.49

Note 13. Shareholders’ Equity

The Company has 3three classes of common stock as follows (share data in millions):
Issued Common Stock
Authorized Shares Outstanding Treasury Total Issued Shares
Class A stock ($0.025 par value)
June 30, 2022 105.0 42.0 0.6 42.6
December 31, 2021 105.0 40.8 0.9 41.7
Class B stock ($0.025 par value)
June 30, 2022 80.0 13.5 — 13.5
December 31, 2021 80.0 13.5 — 13.5
Class C stock ($0.025 par value)
June 30, 2022 20.0 — 0.5 0.5
December 31, 2021 20.0 — 0.5 0.5


		Issued Common Stock
	Authorized Shares	Outstanding	Treasury	Total Issued Shares
Class A stock ($0.025 par value)
March 31, 2023	105.0	40.1	2.4	42.5
December 31, 2022	105.0	39.2	3.4	42.6

Class B stock ($0.025 par value)
March 31, 2023	80.0	13.6	—	13.6
December 31, 2022	80.0	13.6	—	13.6

Class C stock ($0.025 par value)
March 31, 2023	20.0	—	0.5	0.5
December 31, 2022	20.0	—	0.5	0.5

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2023

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

In accordance with the Articles of Incorporation, each class A common share has 1one vote per share and each class B and class C common share has 10ten votes per share on all matters voted upon by the Company’s shareholders. Liquidation rights are the same for all 3three classes of common stock.

The Company also has 0.5 million shares of $0.01 par value preferred stock authorized, of which none were issued at ~~June 30, 2022,~~March 31, 2023, and December 31, ~~2021.~~2022. The Company has no present plans to issue any preferred stock.

On July 30, 2018, the Company’s Board of Directors authorized a share repurchase program of up to $100.0 million of the Company’s outstanding class A common stock. During the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, the Company repurchased ~~290,123~~64,271 shares of its Class A common stock at a weighted average price of ~~$3.05~~$3.98 per share for a total purchase price of ~~$0.9~~$0.3 million. There were no shares repurchased during the three ~~and six~~ months ended ~~June 30, 2021.~~March 31, 2022. As of ~~June 30, 2022,~~March 31, 2023, there were ~~$99.1~~$89.8 million of authorized repurchases remaining under the program.

~~Table of Contents~~

~~QUAD/GRAPHICS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022~~

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

In accordance with the Articles of Incorporation, dividends are paid equally for all 3three classes of common shares. Due to uncertainty in client demand as a result of the COVID-19 pandemic, the Company’s Board of Directors proactively suspended the Company’s quarterly dividends beginning in the second quarter of 2020.

Note 14. Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss by component, net of tax, for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, were as follows:
Translation Adjustments Interest Rate Swap Adjustments Pension Benefit Plan Adjustments Total
Balance at December 31, 2021 $ (143.1) $ (6.7) $ (11.4) $ (161.2)
Other comprehensive income (loss) before reclassifications (5.2) — — (5.2)
Amounts reclassified from accumulated other comprehensive loss to net earnings — 1.7 — 1.7
Net other comprehensive income (loss) (5.2) 1.7 — (3.5)
Balance at June 30, 2022 $ (148.3) $ (5.0) $ (11.4) $ (164.7)


	Translation Adjustments		Interest Rate Derivatives Adjustments		Pension Benefit Plan Adjustments		Total
Balance at December 31, 2022	$	(88.6)	$	(4.1)	$	(35.6)	$	(128.3)
Other comprehensive income before reclassifications	6.5		0.1		—		6.6
Amounts reclassified from accumulated other comprehensive loss to net earnings	—		0.5		0.1		0.6
Net other comprehensive income	6.5		0.6		0.1		7.2
Balance at March 31, 2023	$	(82.1)	$	(3.5)	$	(35.5)	$	(121.1)

The changes in accumulated other comprehensive loss by component, net of tax, for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, were as follows:
Translation Adjustments Interest Rate Swap Adjustments Pension Benefit Plan Adjustments Total
Balance at December 31, 2020 $ (130.8) $ (12.3) $ (28.2) $ (171.3)
Other comprehensive income (loss) before reclassifications (3.8) — 0.1 (3.7)
Amounts reclassified from accumulated other comprehensive loss to net earnings — 3.6 0.6 4.2
Net other comprehensive income (loss) (3.8) 3.6 0.7 0.5
Balance at June 30, 2021 $ (134.6) $ (8.7) $ (27.5) $ (170.8)


	Translation Adjustments		Interest Rate Derivatives Adjustments		Pension Benefit Plan Adjustments		Total
Balance at December 31, 2021	$	(143.1)	$	(6.7)	$	(11.4)	$	(161.2)
Other comprehensive income before reclassifications	0.8		—		—		0.8
Amounts reclassified from accumulated other comprehensive loss to net loss	—		1.1		—		1.1
Net other comprehensive income	0.8		1.1		—		1.9
Balance at March 31, 2022	$	(142.3)	$	(5.6)	$	(11.4)	$	(159.3)

2120

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE ~~AND SIX~~ MONTHS ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

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

The details of the reclassifications from accumulated other comprehensive loss to net ~~earnings~~loss for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ were as follows:


Details of Accumulated Other Comprehensive Loss Components	Details of Accumulated Other Comprehensive Loss Components	Three Months Ended June 30,				Six Months Ended June 30,				Condensed Consolidated Statements of Operations Presentation	Details of Accumulated Other Comprehensive Loss Components	Three Months Ended March 31,			Condensed Consolidated Statements of Operations Presentation
		2022		2021		2022		2021					2023				2022
Amortization of amounts accumulated for interest rate swaps de-designated as cash flow hedges	Amortization of amounts accumulated for interest rate swaps de-designated as cash flow hedges	$	0.7	$	1.8	$	2.1	$	3.6	Interest expense	Amortization of amounts accumulated for interest rate swaps de-designated as cash flow hedges		$	0.7	$	1.4		Interest expense
Impact of income taxes	Impact of income taxes	(0.1)		—		(0.4)		—		Income tax expense	Impact of income taxes		(0.2)		(0.3)			Income tax expense
Amortization of amounts accumulated for interest rate swaps de-designated as cash flow hedges, net of tax	Amortization of amounts accumulated for interest rate swaps de-designated as cash flow hedges, net of tax	$	0.6	$	1.8	$	1.7	$	3.6		Amortization of amounts accumulated for interest rate swaps de-designated as cash flow hedges, net of tax		$	0.5	$	1.1

Non-cash settlement charge on pension benefit plan		$	—	$	0.6	$	—	$	0.6	Net pension income
Impact of income taxes		—		—		—		—		Income tax expense
Non-cash settlement charge on pension benefit plan, net of tax		$	—	$	0.6	$	—	$	0.6
Amortization of pension and other postretirement benefit plan adjustments											Amortization of pension and other postretirement benefit plan adjustments		$	0.1	$	—		Net pension income

Total reclassifications for the period	Total reclassifications for the period	$	0.7	$	2.4	$	2.1	$	4.2		Total reclassifications for the period		$	0.8	$	1.4
Impact of income taxes	Impact of income taxes	(0.1)		—		(0.4)		—			Impact of income taxes		(0.2)		(0.3)
Total reclassifications for the period, net of tax	Total reclassifications for the period, net of tax	$	0.6	$	2.4	$	1.7	$	4.2		Total reclassifications for the period, net of tax		$	0.6	$	1.1

Note 15. Segment Information

AsQuad is a global marketing experience company ~~Quad~~that gives brands a more streamlined, impactful, flexible and frictionless way to go to market and reach consumers. The Company leverages its ~~more than 50-year heritage of~~three key competitive advantages - integrated marketing platform excellence, ongoing innovation, ~~strong~~and culture and social purpose - to create a better way for its clients, employees and communities. The Company’s operating and reportable segments are aligned with how the chief operating decision maker of the Company currently manages the business. The Company’s operating and reportable segments, including their product and service offerings, and a “Corporate” category are as follows:

•United States Print and Related Services

•International

•Corporate

United States Print and Related Services

The United States Print and Related Services segment is predominantly comprised of the Company’s United States printing operations and is managed as one integrated platform. This includes print execution and logistics for retail inserts, catalogs, long-run publications, ~~catalogs,~~ special interest publications, journals, direct mail, directories, in-store marketing and promotion, packaging, newspapers, custom print products, as well as other commercial and specialty printed products, ~~and~~along with global paper procurement, ~~together with~~and marketing and other complementary services, ~~including consumer insights, audience targeting, personalization,~~such as data and analytics, technology solutions, media ~~planning~~services, creative and ~~placement, process optimization, campaign planning~~content solutions, managed services and ~~creation, pre-media production, videography, photography,~~execution in non-print channels (e.g. digital ~~execution, print execution~~ and ~~logistics.~~broadcast). This segment also includes the manufacture of ink.

International

The International segment consists of the Company’s printing operations in Europe and Latin America, including operations in England, France, Germany, Poland, Colombia, Mexico and Peru, as well as investments in printing operations in India. The International segment included printing operations in Argentina until the business was sold in December 2022. This segment provides printed products and marketing and other complementary services consistent with the United States Print and Related Services segment.

2221

Table of Contents

QUAD/GRAPHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE ~~AND SIX~~ MONTHS ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

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

~~International~~

The International segment consists of the Company’s printing operations in Europe and Latin America, including operations in England, France, Germany, Poland, Argentina, Colombia, Mexico and Peru, as well as investments in printing opera~~tions in India. This segment provides printed products and marketing and other complementary services consistent with the United States Print and Related Services segment.~~

Corporate

Corporate consists of unallocated general and administrative activities and associated expenses including, in part, executive, legal and finance, as well as certain expenses and income from frozen employee retirement plans, such as pension benefit plans.

The following is a summary of segment information for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Net Sales				Operating Income (Loss)		Restructuring, Impairment and Transaction- Related Charges				Net Sales					Operating Income (Loss)		Restructuring, Impairment and Transaction- Related Charges
		Products		Services						Products		Services		Operating Income (Loss)		Restructuring, Impairment and Transaction- Related Charges
Three months ended June 30, 2022

Three months ended March 31, 2023											Three months ended March 31, 2023
United States Print and Related Services	United States Print and Related Services	$	490.6	$	158.8	$	19.9	$	1.6		United States Print and Related Services	$	504.5	$	153.1		$	7.3	$	22.5
International	International	103.3		5.0		6.2		1.3			International	103.4		5.5			7.7		2.6
Total operating segments	Total operating segments	593.9		163.8		26.1		2.9			Total operating segments	607.9		158.6			15.0		25.1
Corporate	Corporate	—		—		(11.9)		0.3			Corporate	—		—			(14.9)		0.9
Total	Total	$	593.9	$	163.8	$	14.2	$	3.2		Total	$	607.9	$	158.6		$	0.1	$	26.0

Three months ended June 30, 2021
Three months ended March 31, 2022											Three months ended March 31, 2022
United States Print and Related Services	United States Print and Related Services	$	433.3	$	177.6	$	55.8	$	(14.5)		United States Print and Related Services	$	493.3	$	157.8		$	11.8	$	1.7
International	International	78.3		4.7		3.0		0.9			International	87.6		5.5			3.7		1.6
Total operating segments	Total operating segments	511.6		182.3		58.8		(13.6)			Total operating segments	580.9		163.3			15.5		3.3
Corporate	Corporate	—		—		(10.8)		0.2			Corporate	—		—			(10.1)		0.3
Total	Total	$	511.6	$	182.3	$	48.0	$	(13.4)		Total	$	580.9	$	163.3		$	5.4	$	3.6

Six months ended June 30, 2022
United States Print and Related Services		$	983.9	$	316.6	$	31.7	$	3.3
International		190.9		10.5		9.9		2.9
Total operating segments		1,174.8		327.1		41.6		6.2
Corporate		—		—		(22.0)		0.6
Total		$	1,174.8	$	327.1	$	19.6	$	6.8

Six months ended June 30, 2021
United States Print and Related Services		$	893.2	$	352.3	$	88.3	$	(13.4)
International		144.4		9.8		4.5		1.7
Total operating segments		1,037.6		362.1		92.8		(11.7)
Corporate		—		—		(23.8)		0.9
Total		$	1,037.6	$	362.1	$	69.0	$	(10.8)

~~Table of Contents~~

~~QUAD/GRAPHICS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022~~

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

Restructuring, impairment and transaction-related charges for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ are further described in Note 3, “Restructuring, Impairment and Transaction-Related Charges,” and are included in the operating income (loss) results by segment above.

A reconciliation of operating income to ~~earnings~~loss before income taxes ~~and equity in loss of unconsolidated entity~~ as reported in the condensed consolidated statements of operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ was as follows:

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Operating income $ 14.2 $ 48.0 $ 19.6 $ 69.0
Less: interest expense 10.9 15.6 20.2 30.1
Less: net pension income (3.1) (3.5) (6.3) (7.6)
Earnings before income taxes and equity in loss of unconsolidated entity $ 6.4 $ 35.9 $ 5.7 $ 46.5

~~Note 16. New Accounting Pronouncements~~

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform. ASU 2020-04 permits entities to apply certain expedients and exceptions for contracts, hedging relationships, and other transactions impacted by the anticipated transition away from the use of LIBOR or other interbank offered rates to alternative reference rates. This optional guidance is effective as of March 12, 2020, through December 31, 2022. The Company is evaluating the impact of the adoption of ASU 2020-04 on the condensed consolidated financial statements.


	Three Months Ended March 31,
		2023		2022
Operating income		$	0.1	$	5.4
Less: interest expense		16.3		9.3
Less: net pension income		(0.4)		(3.2)

Loss before income taxes		$	(15.8)	$	(0.7)

2422

Table of Contents

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

The following discussion of the financial condition and results of operations of Quad should be read together with (1) the condensed consolidated financial statements for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ including the notes thereto, included in Item 1, “Condensed Consolidated Financial Statements (Unaudited),” of this Quarterly Report on Form 10-Q; and (2) the audited consolidated annual financial statements as of and for the year ended December 31, ~~2021,~~2022, and notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on February ~~23, 2022.~~27, 2023.

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

•Cautionary Statement Regarding Forward-Looking Statements.

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

•Results of Operations. This section contains an analysis of the Company’s results of operations by comparing the results for ~~(1)~~ the three months ended ~~June 30, 2022,~~March 31, 2023, to the three months ended June 30, 2021; and (2) the six months ended June 30, 2022, to the six months ended June 30, 2021. The comparability of the Company’s results of operations between periods was impacted by the divestiture of the Company’s third-party logistics business on June 30, 2021. The results of operations of the divestiture are included in the Company’s condensed consolidated results until the date of disposition.March 31, 2022. Forward-looking statements providing a general description of recent and projected industry and Company developments that are important to understanding the Company’s results of operations are included in this section. This section also provides a discussion of EBITDA and EBITDA margin, financial measures that the Company uses to assess the performance of its business that are not prepared in accordance with GAAP.

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

2523

Table of Contents

Cautionary Statement Regarding Forward-Looking Statements

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

These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the control of the Company. These risks, uncertainties and other factors could cause actual results to differ materially from those expressed or implied by those forward-looking statements. Among risks, uncertainties and other factors that may impact Quad are those described in Part I, Item 1A, “Risk Factors,” of the Company’s ~~2021~~2022 Annual Report on Form 10-K, filed with the SEC on February ~~23, 2022,~~27, 2023, as such may be amended or supplemented in Part II, Item 1A, “Risk Factors,” of the Company’s subsequently filed Quarterly Reports on Form 10-Q (including this report), and the following:

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

•The impact of fluctuations in costs (including labor and labor-related costs, energy costs, freight rates and raw materials, including paper and the materials to manufacture ink) and the impact of fluctuations in the availability of raw materials, including paper, parts for equipment and the materials to manufacture ink;

•The impact of ~~inflationary cost pressures~~macroeconomic conditions, including inflation, rising interest rates and ~~supply chain shortages,~~recessionary concerns, as well as ~~rising interest rates;~~

•~~The impact of decreasing demand for printed materials~~ongoing supply chain challenges, labor availability and ~~significant overcapacity in a highly competitive environment creates downward pricing~~cost pressures, distribution challenges and ~~potential under-utilization of assets;~~

•~~The negative impacts~~ the COVID-19 pandemic, ~~has~~have had, and ~~will~~may continue to have, on the Company’s business, financial condition, cash flows and results of operations ~~and supply chain, including rising inflationary cost pressures on raw materials, distribution and labor, and~~(including future uncertain ~~impacts;~~

•~~The failure to attract and retain qualified talent across the enterprise;~~impacts);

•The impact of increased business complexity as a result of the Company’s transformation to a marketing experience company;

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

•The inability of the Company to reduce costs and improve operating efficiency rapidly enough to meet market conditions;

•The impact of changes in postal rates, service levels or regulations, including delivery ~~delays due~~delays;

•The failure to ~~ongoing COVID-19 impacts on daily operational staffing at~~attract and retain qualified talent across the ~~United States Postal Service;~~enterprise;

•The impact of a data-breach of sensitive information, ransomware attack or other cyber incident on the Company;

•The ~~impact negative publicity could have on our business;~~fragility and decline in overall distribution channels;

•The impact of ~~changing future economic conditions;~~digital media and similar technological changes, including digital substitution by consumers;

•The impact negative publicity could have on our business and brand reputation;

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

•The ~~fragility~~impact of risks associated with the operations outside of the United States (“U.S.”), including trade restrictions, currency fluctuations, the global economy, costs incurred or reputational damage suffered due to improper conduct of its employees, contractors or agents, and ~~decline in overall distribution channels;~~geopolitical events like war and terrorism;

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

2624

Table of Contents

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

~~assets;~~

•The impact of risks associated with the operations outside of the United States (“U.S.”), including costs incurred or reputational damage suffered due to improper conduct of its employees, contractors or agents, and geopolitical events like war and terrorism;

•Significant investments may be needed to maintain the Company’s platforms, processes, systems, client and product technology, marketing and ~~marketing~~talent, and to remain technologically and economically competitive;

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

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

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

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

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

2725

Table of Contents

Overview

Business Overview

Quad is a global marketing experience company that ~~helps~~gives brands ~~reimagine their marketing to be~~a more streamlined, impactful, flexible and ~~frictionless. Quad’s strategic priorities are powered by~~frictionless way to go to market and reach consumers. The Company leverages its three key competitive advantages ~~that include~~— integrated marketing platform excellence, ongoing innovation, and culture and social ~~purpose.~~purpose — to create a better way for its clients, employees and communities. With a marketing platform intentionally built for integrated marketing execution, Quad helps brands reduce the complexity of working with multiple agency partners and vendors; increase marketing process efficiency; and maximize marketing effectiveness. The Company’s ~~integrated~~holistic, multichannel, through-the-line marketing ~~platform is powered by a set of core specialties including business~~solutions include strategy ~~insights~~and consulting, data and analytics, technology solutions, media services, creative and content solutions, and managed services. With unmatched scale for client-based, on-site services ~~agency~~ and ~~studio solutions, media, print, in-store~~highly qualified talent with expansive subject matter expertise, the Company has the resources and ~~packaging.~~knowledge to help a wide variety of clients across multiple verticals, including those in industries such as retail, publishing, consumer packaged goods, financial services, healthcare, insurance and direct-to-consumer. Serving ~~over 4,600~~more than 2,900 clients, Quad has ~~more than~~approximately 15,000 people working in 14 countries around the world.

~~Quad’s~~Quad delivers its overarching business strategy and singular vision as a ~~global~~ marketing experience company ~~is achieved through~~by executing the ~~execution of the following~~Company’s five consistent strategic ~~priorities:~~priorities, as outlined here:

Walk in the Shoes of Clients

~~The Company~~Quad encourages all employees, regardless of job title, to walk in the shoes of clients by putting a priority on listening to clients’ needs and challenges, and doing what they can to make it easy to work with Quad ~~and making the client experience enjoyable and inclusive~~ at every touchpoint. ~~With a focus~~Quad focuses on solving problems, and removing pain points and sources of friction wherever a client experiences it in the marketing ~~process,~~process. Quad seeks to become an invaluable strategic marketing partner ~~for~~by helping its clients ~~helping them~~ successfully navigate today’s constantly evolving media landscape through innovative, data-driven solutions that are produced and deployed efficiently and at scale, across ~~multiple~~offline and online media channels. A key component of Quad’s client-facing strategy is to strengthen relationships at higher levels within a client’s organization so the Company can better understand, anticipate and satisfy the organization’s requirements, including their ~~diversity, equity and inclusion goals, and~~ broader environmental, social and governance objectives. The Company also ~~believes its~~delivers proactive thought leadership ~~in the~~about key issues facing its clients — including data-driven marketing, mar-tech and postal reform ~~will~~— to help foster loyalty to the Quad brand.

Grow the Business Profitably

This strategic priority centers on ~~Quad’s ability to defend against significant media disruption, deploy balanced use of capital, including disciplined and compelling investments, and grow the business~~profitably growing Quad as a marketing experience company. Key components of this priority are:

•Acquire new and expand existing account relationships by introducing clients to the Company’s ~~complete~~holistic, multichannel, through-the-line marketing ~~offering~~solutions – ~~from~~encompassing strategy and ~~creative through production, execution~~consulting, data and analytics, technology solutions, media services, creative and content solutions, and managed services – ~~that helps~~to help them market more efficiently and ~~effectively.~~effectively across offline and online media channels. To this end, Quad is focused on ensuring it has the right talent in the right positions to facilitate strategic marketing conversations and tailored solutions based on a ~~better~~deeper understanding of ~~their~~its clients’ needs.

•Expand in key vertical industries with growth opportunities, such as consumer ~~technology, consumer-packaged~~packaged goods, financial services, healthcare, insurance ~~healthcare~~ and direct-to-consumer, while continuing to capitalize on the Company’s established expertise in retail and publishing. Through existing and new ~~offerings,~~products and services, Quad delivers solutions ~~dedicated to solving~~that solve client marketing challenges and ~~process challenges.~~drive success for their business.

•Make disciplined and compelling investments that take many different forms. The Company intends to continue to pursue growth investments that help expand and strengthen its integrated marketing platform. In addition, the Company intends to continue making long-term investments in its talent, such as hiring business professionals with client-side marketing ~~experience~~ and consulting expertise, to enhance its position as a marketing experience company, as well as investments to attract new employees, and increase existing employee engagement, retention and productivity.

2826

Table of Contents

~~Bolster~~Advance One-of-a-Kind Integrated Marketing Platform ~~Strength~~

The Company operates what it believes to be a ~~superior and unparalleled~~truly differentiated integrated marketing platform, ~~which it has consciously~~intentionally built to remove friction infrom the marketing process and ~~speed the overall~~maximize marketing ~~journey through reduced~~effectiveness by reducing complexity ~~increased efficiencies~~ and ~~enhanced marketing spend effectiveness across channels.~~increasing efficiency. Through this unique and scalable platform, the Company offers ~~a complete~~holistic, multichannel, through-the-line marketing ~~offering featuring agency,~~solutions. Quad’s solutions include strategy and consulting, data and ~~implementation~~analytics, technology solutions, ~~encompassing marketing strategy, including consumer insights~~media services, creative and ~~data analytics; creative~~content solutions, ~~for producing quality content at scale;~~ and ~~media deployment~~managed services, which the Company deploys efficiently across multiple offline and ~~optimization for all~~online media channels including ~~print, broadcast,~~ digital, direct marketing, in-store, ~~out-of-home~~packaging and ~~packaging supported by 24/7 global production, including industry-leading print manufacturing~~print. With expertise and ~~mail-distribution capabilities.~~resources in planning, creating, deploying, measuring and optimizing marketing efforts, Quad guides brands through every effort intended to drive an action, from consumer awareness and trust, to brand preference and purchase. Quad uses a disciplined return on capital framework to make regular, strategic investments in ~~this~~its marketing platform, resulting in what it believes is the most integrated, automated, efficient, innovative and ~~modern marketing~~advanced platform of its kind. The ~~Company’s~~Company believes its long-standing ~~disciplined~~ culture of ~~holistic~~universal Continuous Improvement and commitment to Lean Enterprise methodologies, ~~along~~combined with ongoing, strategic investments in talent, technology, products and services, will continue to accelerate its position as a marketing experience ~~company.~~company and drive growth.

To strengthen its solutions offering, the Company continually seeks to enhance its product and services portfolio, especially in the data collection and deployment, direct marketing, in-store and packaging spaces, with innovations that support its clients’ ability to stand out in a consumer’s mailbox or front doorstep, or on the store shelf. These innovations include proprietary solutions unavailable anywhere else in the advertising and marketing ~~communications~~services or printing industries.

Additionally, as Quad ~~has chosen~~accelerated its transformation as a marketing experience company over the last several years, it chose to strategically divest of those businesses that ~~cannot~~could not be easily leveraged as part of its greater integrated marketing ~~platform, such as the QuadExpress third-party logistics business Quad sold in 2021.~~platform. Through these types of optimization efforts, Quad ~~maintains~~has been able to maintain a superior, unparalleled marketing platform that delivers value to clients and, ultimately, their customers.

Empower Employees

~~Quad’s~~Quad views its corporate culture as a strategic competitive advantage. The Company’s priority to empower employees throughout their career journey builds on ~~the key aspects~~a foundation of ~~the Company’s distinct corporate culture, which the Company views as a competitive advantage. These aspects include the Company’s~~Quad’s enduring ~~values,~~Values, which are centered on trust, innovation, growth, believing in people and doing the right thing. The Company understands that its employees perform better at work when they can simply be themselves – confident in their ~~abilities,~~abilities; comfortable sharing their ideas, opinions and ~~beliefs,~~beliefs; and able to bring their truest and best selves to the workplace – all of which leads to a more inclusive environment and better engagement, decision-making and business outcomes.

The Company embraces forward-thinking workplace practices, such as flexible work ~~models for the long-term future of work;~~models; implements innovative talent acquisition strategies to meet its labor and business needs; and provides training and reward programs to engage, develop and retain its employees. Employees are encouraged to take advantage of the Company’s ~~continuous~~focus on employee growth ~~environment,~~and development, which not only teaches critical on-the-job and leadership skills, but also helps them respond to rapid change, cultivate effective networks, and create high-quality relationships necessary for personal, professional and ~~company~~Company growth.

The Company believes its approach to continuous growth for ~~each~~every employee ~~is advantageously distinct~~distinguishes it from other employers. With the Company’s encouragement to do things differently, to be something greater and to create a better way, employees are more fully engaged in their day-to-day activities, producing better results for clients and advancing the Company’s strategic priorities.

Additionally, the Company ~~engages employees and~~ fosters corporate pride and employee engagement by supporting community activities, initiatives and organizations that improve the quality of life of residents near Quad’s operations.

Table of Contents

Enhance Financial Strength and Create Shareholder Value

Quad follows a disciplined approach to maintaining and enhancing financial strength to create shareholder ~~value, which is essential given ongoing media disruption, including printing industry challenges.~~value. This strategy is centered on the Company’s ability to drive profitable growth, and maximize net earnings, Free Cash Flow and operating margins; maintain consistent financial policies to ensure a strong balance sheet, liquidity level and access to capital; and retain the financial flexibility needed to strategically allocate and deploy capital as circumstances change. The priorities for capital allocation and deployment are balanced according to prevailing circumstances and what the Company thinks is best for shareholder value creation at any particular point in time. Those priorities currently ~~include: deleveraging~~include using its Free Cash Flow to continue reducing debt while investing in scaling the ~~Company’s balance sheet~~business as a marketing experience company to fuel net sales growth; driving profitability through ~~debt~~sales growth; and pension liability reductions; making compelling investments that drive profitable organic growth and productivity in the Company’s print manufacturing and distribution operations, as well as expansion into higher-growth marketing services; and payingpursuing opportunities to return capital to shareholders through share repurchases or dividends ~~and stock buybacks~~ over the long term.

~~Table of Contents~~

To provide ongoing improvement in ~~manufacturing~~ productivity and, ultimately, maximize operating margins, the Company applies holistic Continuous Improvement and Lean Enterprise methodologies to simplify and streamline processes. These same methodologies are applied to its selling, general and administrative functions to create a truly Lean Enterprise. The Company continually works to lower its cost structure by consolidating its manufacturing operations into its most efficient facilities, as well as realizing purchasing, mailing and logistics ~~efficiencies~~synergies by centralizing and consolidating print manufacturing volumes, and eliminating redundancies in its administrative and corporate operations. Quad believes that its focused efforts to be the high-quality, low-cost producer generates increased Free Cash Flow and allows the Company to maintain a strong balance sheet through debt ~~and pension liability~~ reduction. The Company’s disciplined financial approach also allows it to maintain sufficient liquidity and to reduce refinancing risk, with the nearest significant debt maturity of $87.7 million occurring in January ~~2024.~~2024, and $229.8 million of debt maturities not due until November 2026. The Company had total liquidity of ~~$298.3~~$330.1 million as of ~~June 30, 2022,~~March 31, 2023, which consisted of up to ~~$286.5~~$321.4 million of unused capacity under its revolving credit arrangement, which was net of ~~$34.9~~$32.7 million of issued letters of credit, and cash and cash equivalents of ~~$11.8~~$8.7 million. On May 2, 2022, the Company used liquidity available under its revolving credit facility and available cash on hand to fund the repayment on maturity of all $209.1 million aggregate principal amount of its Senior Unsecured Notes. In addition, the Company completed the amendment of its $1 billion bank debt agreement during the fourth quarter of 2021, extending the maturity to November 2026. Quad is proud of its strong and trusted banking relationships, which provide the Company with increased financial flexibility to ~~continue to pay down debt and to~~ make strategic investments to accelerate its ~~position~~growth and drive profitability as a marketing experience company.

Segments

The Company’s operating and reportable segments are aligned with how the chief operating ~~decision maker~~decision-maker of the Company currently manages the business. The Company’s operating and reportable segments, including ~~their~~its product and service offerings, and a “Corporate” category, are summarized below.

•The United States Print and Related Services segment is predominantly comprised of the Company’s United States printing operations and is managed as one integrated platform. This includes print execution and logistics for retail inserts, catalogs, long-run publications, ~~catalogs,~~ special interest publications, journals, direct mail, directories, in-store marketing and promotion, packaging, newspapers, custom print products, as well as other commercial and specialty printed products, ~~and~~along with global paper procurement, ~~together with~~and marketing and other complementary services, ~~including consumer insights, audience targeting, personalization,~~such as data and analytics, technology solutions, media ~~planning~~services, creative and ~~placement, process optimization, campaign planning~~content solutions, managed services and ~~creation, pre-media production, videography, photography,~~execution in non-print channels (e.g., digital ~~execution, print execution~~ and ~~logistics.~~broadcast). This segment also includes the manufacture of ink. The United States Print and Related Services segment accounted for approximately 86% ~~and 87%~~ of the Company’s consolidated net sales during the three ~~and six~~ months ended ~~June 30, 2022, respectively.~~March 31, 2023.

•The International segment consists of the Company’s printing operations in Europe and Latin America, including operations in England, France, Germany, Poland, ~~Argentina,~~ Colombia, Mexico and Peru, as well as investments in printing operations in India. The International segment included printing operations in Argentina until the business was sold in December 2022. This segment provides printed products and marketing and other complementary services consistent with the United States Print and Related Services segment. The International segment accounted for approximately 14% ~~and 13%~~ of the Company’s consolidated net sales during the three ~~and six~~ months ended ~~June 30, 2022, respectively.~~March 31, 2023.

•Corporate consists of unallocated general and administrative activities and associated expenses including, in part, executive, legal and finance, as well as certain expenses and income from frozen employee retirement plans, such as pension benefit plans.

Table of Contents

Key Performance Metrics Overview

The Company’s management believes the ability to generate net sales growth, profit increases and positive cash flow, while maintaining the appropriate level of debt, are key indicators of the successful execution of the Company’s business strategy and will increase shareholder value. The Company uses period-over-period net sales growth, EBITDA, EBITDA margin, net cash provided by (used in) operating activities, Free Cash Flow and Debt Leverage Ratio as metrics to measure operating performance, financial condition and liquidity. EBITDA, EBITDA margin, Free Cash Flow and Debt Leverage Ratio are non-GAAP financial measures (see the definitions of EBITDA, EBITDA margin and the reconciliation of net earnings ~~(loss)~~ to EBITDA in the “Results of Operations” section below, and see the definitions of Free Cash Flow and Debt Leverage Ratio, the reconciliation of

~~Table of Contents~~

net cash ~~provided by (used in)~~used in operating activities to Free Cash Flow, and the calculation of Debt Leverage Ratio in the “Liquidity and Capital Resources” section below).

Net sales growth. The Company uses period-over-period net sales growth as a key performance metric. The Company’s management assesses net sales growth based on the ability to generate increased net sales through increased sales to existing clients, sales to new clients, sales of new or expanded solutions to existing and new clients and opportunities to expand sales through strategic investments, including acquisitions.

EBITDA and EBITDA margin. The Company uses EBITDA and EBITDA margin as metrics to assess operating performance. The Company’s management assesses EBITDA and EBITDA margin based on the ability to increase revenues while controlling variable expense growth.

Net cash provided by (used in) operating activities. The Company uses net cash provided by (used in) operating activities as a metric to assess liquidity. The Company’s management assesses net cash provided by (used in) operating activities based on the ability to meet recurring cash obligations while increasing available cash to fund debt service requirements, capital expenditures, ~~acquisitions and other investments in future growth,~~ cash restructuring requirements related to cost reduction activities, World Color Press single employer pension plan contributions, World Color Press MEPPs withdrawal liabilities, acquisitions and other investments in future growth, shareholder dividends and share repurchases. Net cash provided by (used in) operating activities can be significantly impacted by the timing of non-recurring or infrequent receipts or expenditures.

Free Cash Flow. The Company uses Free Cash Flow as a metric to assess liquidity and capital deployment. The Company’s management assesses Free Cash Flow as a measure to quantify cash available for strengthening the balance sheet (debt and pension liability reduction), for strategic capital allocation and deployment through investments in the business (acquisitions and strategic investments) and for returning capital to the shareholders (dividends and share repurchases). The Company’s priorities for capital allocation and deployment will change as circumstances dictate for the business, and Free Cash Flow can be significantly impacted by the Company’s restructuring activities and other unusual items.

Debt Leverage Ratio. The Company uses the Debt Leverage Ratio as a metric to assess liquidity and the flexibility of its balance sheet. Consistent with other liquidity metrics, the Company monitors the Debt Leverage Ratio as a measure to determine the appropriate level of debt the Company believes is optimal to operate its business, and accordingly, to quantify debt capacity available for strengthening the balance sheet (debt and pension liability reduction), for strategic capital allocation and deployment through investments in the business (capital expenditures, acquisitions and strategic investments), and for returning capital to the shareholders (dividends and share repurchases). The Company’s priorities for capital allocation and deployment will change as circumstances dictate for the business, and the Debt Leverage Ratio can be significantly impacted by the amount and timing of large expenditures requiring debt financing, as well as changes in profitability.

The Company remains disciplined with its debt leverage. The Company’s consolidated debt and finance lease obligations ~~decreased~~increased by ~~$108~~$70 million during the ~~six~~three months ended ~~June 30, 2022. Since the Company completed the World Color Press acquisition~~March 31, 2023, primarily due to $50.6 million in July 2010, the Company has reduced debt and finance lease obligations by $1,043 million and has reduced the obligations for pension, postretirement and MEPPs by $519 million, for a total obligation reduction since July of 2010 of $1.6 billion.

~~The Company is subject to seasonality~~cash used in its quarterly results as net sales and operating income are typically higher in the third and fourth quarters of the calendar year as compared to the first and second quarters. The fourth quarter is typically the highest seasonal quarter for cash flows provided by operating activities and ~~Free Cash Flow due to the reduction~~a $9.6 million increase in purchases of ~~working capital requirements that reach peak levels during the third quarter. Seasonality is driven by increased retail inserts~~property, plant and catalogs primarily due to back-to-school and holiday-related advertising and promotions. Due to the impacts from supply chain disruptions and the Company’s proactive decisions to increase inventory levels to prepare for the seasonally higher production period in 2022, the Company has experienced higher than typical levels of working capital requirements during the first and second quarters. The Company expects seasonality impacts to continue in future years.equipment.

3129

Table of Contents

Overview of Trends Affecting Quad

As consumer media consumption habits change, advertising and marketing services providers face increased demand to offer end-to-end marketing services, from strategy and creative through ~~execution, across all channels, traditional and digital.~~execution. As new marketing ~~and advertising~~ channels emerge, ~~marketing services~~these providers must expand their services beyond traditional channels, such as for television, newspapers, print publications and radio, to digital channels, such as mobile, internet search, internet display and video, to create effective multichannel campaigns for their clients. This trend greatly influences Quad’s ongoing efforts to ~~redefine~~help brands reduce the ~~future~~complexities of ~~integrated~~working with multiple agency partners and vendors, increase marketing process efficiency and ~~create greater value for its clients who are looking for less complexity, greater transparency and accountability from their business partners.~~maximize marketing effectiveness.

The Company leverages its data-driven print expertise as part of an integrated marketing platform that helps its clients not only plan and produce marketing programs, but also deploy, manage and measure them across all media channels. Competition in the commercial printing industry remains highly fragmented and intense, and the Company believes that there are indicators of heightened competitive pressures. The commercial printing industry has ~~excess manufacturing capacity created by continued declines~~moved toward a demand for shorter print runs, faster product turnaround and increased production efficiencies of products with lower page counts and increased complexity. This — combined with increases in ~~industry volumes, compounded~~postage expenses and marketers’ increasing use of online marketing and communication channels (exacerbated by the COVID-19 pandemic, ~~which, in turn, have created accelerated downward pricing pressures. The Company faces competition due~~as well as the current macroeconomic conditions) — has led to the increased accessibility and quality of digital alternatives to traditional delivery of printed documents through the online distribution and hosting of media content, and the digital distribution of documents and data. The Company faces competition from print management and marketing consulting firms that look to streamline processes and reduce the overall print spend of the Company’s clients.excess manufacturing capacity.

The Company believes that a disciplined approach for capital management and a strong balance sheet are critical to be able to invest in profitable growth opportunities and technological advances, thereby providing the highest return for shareholders. Management balances the use of cash between deleveraging the Company’s balance sheet (through reduction in debt and pension obligations), compelling investment opportunities (through capital expenditures, acquisitions and strategic investments) and returns to shareholders (through dividends and share repurchases).

The Company continues to make progress on integrating and streamlining all aspects of its business, thereby lowering its cost structure by consolidating its manufacturing platform into its most efficient facilities, as well as realizing purchasing, mailing and logistics efficiencies by centralizing and consolidating print manufacturing volumes and eliminating redundancies in its administrative and corporate operations. The Company has continued to evolve its manufacturing platform, equipping facilities to be ~~product line~~product-line agnostic, which enables the Company to maximize equipment utilization. Quad believes that the large plant size ~~of certain~~ of its key printing facilities allows the Company to drive savings in certain product lines (such as publications and catalogs) due to economies of scale and from investments in automation and technology. The Company continues to focus on proactively aligning its cost structure to the realities of the top-line pressures it faces in the printing industry through Lean Manufacturing and sustainable continuous improvement programs.

The Company believes it will continue to drive productivity improvements and sustainable cost reduction initiatives into the future through an engaged workforce and ongoing adoption of the latest manufacturing automation and technology. Through this strategy, the Company believes it can maintain the strongest, most efficient print manufacturing platform to remain a high-quality, low-cost producer.

Integrated distribution with the United States Postal Service (“USPS”) is an important component of the Company’s business. Any material change in the current service levels provided by the postal service could impact the demand that clients have for print services. The USPS continues to experience financial problems. The passing of the Postal Service Reform Act of 2022, signed in April 2022, ~~gives~~gave the USPS considerable financial relief as well as significant ~~cost~~ relief over the next ten years. While the legislative postal reform helps considerably, without decreased operational cost structures, increased efficiencies or increased volumes and revenues, these losses will potentially continue into the future. As a result of these financial difficulties, the USPS has continued to adjust its postal rates and service levels. Additional price increases may result in clients reducing mail volumes and exploring the use of alternative methods for delivering a larger portion of their products, such as continued diversion to the internet and other alternative media channels, in order to ensure that they stay within their expected postage budgets.

3230

Table of Contents

Federal statute requires the Postal Regulatory Commission (“PRC”) to conduct reviews of the overall rate-making structure for the USPS to ensure funding stability. As a result of those reviews, the PRC authorized a five year rate-making structure that provides the USPS with additional pricing flexibility over the Consumer Price Index cap, which may result in a substantially altered rate structure for mailers. The revised rate authority that is effective as a result of the rules issued by the PRC includes a higher overall rate cap on the USPS’ ability to increase rates from year to year. The USPS is expected to use these additional rate authorities to implement twice a year increases in the future. This has led to price spikes for mailers and may also reduce the incentive for the USPS to continue to take out costs and instead continue to rely on postage to cover the costs of an outdated postal service that does not reflect the industry’s ability or willingness to pay. The uncertainty as to how much of the authority the USPS will use on any specific rate increase also creates potential volume declines as rate predictability with respect to cost is no longer known for mailers. The result may be reduced demand for printed products as clients may move more aggressively into other delivery methods, such as the many digital and mobile options now available to consumers.

The Company has invested significantly in its mail preparation and distribution capabilities to mitigate the impact of increases in postage costs, and to help clients successfully navigate the ever-changing postal environment. Through its data analytics, unique software to merge mail streams on a large scale, advanced finishing capabilities and technology, and in-house transportation and logistics operations, the Company manages the mail preparation and distribution of most of its clients’ products to maximize efficiency, to enable on-time and consistent delivery and to partially reduce these costs; however, the net impact of increasing postal costs may create a decrease in client demand for print and mail products.

~~The Company’s results of operations~~Macroeconomic conditions have ~~been adversely impacted as a result of the COVID-19 pandemic and the emergence of new variants. Through~~weakened demand for the Company’s ~~Crisis Management Team, including executive~~products and ~~operations leadership,~~services, disrupted the ~~Company has been executing business continuity plans focused on protecting the health~~Company’s supply chain and ~~well-being of our employees, while also continuing to service clients,~~resulted in rising inflationary cost and protect the long-term financial health of the Company as the COVID-19 pandemic continues. With ongoing advancements against the COVID-19 pandemic, the effects on the Company have lessened from previous periods.labor pressures, distribution challenges, recessionary concerns and other evolving macroeconomic conditions. The Company ~~is continuing~~continues to evaluate the ~~impact~~current economic environment and may implement additional cost reduction measures as necessary. The ultimate impact of COVID-19 on the Company’s business, financial condition, cash flows, results of operations and supply chain will depend on future developments, including the continuing duration of the pandemic and the related length of its impact on the global economy, all of which are still uncertain.

Additionally, rising interest rates, ~~along with~~and the increasing cost and availability of raw materials, such as paper, ink, supplies, distribution and labor, have been and are expected to continue to adversely impact the Company’s results of ~~operations.~~operation. The Company is dependent on its production personnel to print the Company’s products in a cost-effective and efficient manner that allows the Company to obtain new clients and to drive sales from existing clients. The nationwide shortage of available production personnel may put a strain on the Company’s ability to accept new work from client requests, including during the Company’s seasonally higher third and fourth quarters. The ongoing labor shortage is also placing upward price pressure on freight, as the number of available drivers have been reduced, and may have an adverse effect on our operations. Due to the reduced number of freight drivers available, the Company may not be able to meet rising customer demand and could fail to meet our clients’ expectations.

The Company has also experienced and anticipates it will continue to experience certain distribution challenges, including, but not limited to, ~~the above-noted~~ delivery delays at the USPS and recent volume restrictions at the United Parcel Service, Federal Express and certain local couriers. As the ~~labor shortages,~~ supply chain and distribution challenges continue to evolve, the Company is unable to predict the duration of the shortages and challenges and the extent of the impact on the Company’s business, financial condition, cash flows and results of operations. As a result of the rising inflationary cost pressures within ~~our~~its raw materials, distribution and labor, the Company has and will continue to pass along price increases to ~~our~~its clients. The Company expects inflationary cost pressures and certain supply chain shortages to potentially continue through fiscal year ~~2022.~~2023. The Company is unable to predict the future impact of the labor and supply chain shortages as well as cost inflation, and the resulting impact on the Company’s business, financial condition, cash flows and results of operations.

3331

Table of Contents

Results of Operations for the Three Months Ended ~~June 30, 2022,~~March 31, 2023, Compared to the Three Months Ended ~~June 30, 2021~~March 31, 2022

Summary Results

The Company’s operating income, operating margin, net ~~earnings~~loss (computed using a 25% normalized tax rate for all items subject to tax) and diluted ~~earnings~~loss per share for the three months ended ~~June 30, 2022,~~March 31, 2023, changed from the three months ended ~~June 30, 2021,~~March 31, 2022, as follows (dollars in millions, except margin and per share data):


		Operating Income		Operating Margin		Net Earnings		Diluted Earnings Per Share			Operating Income		Operating Margin		Net Loss		Diluted Loss Per Share
For the Three Months Ended June 30, 2021		$	48.0	6.9	%	$	34.4	$	0.66
Gain from sale and leaseback (1)		(13.7)		(2.0)	%	(10.3)		(0.20)
For the three months ended March 31, 2022										For the three months ended March 31, 2022	$	5.4	0.7	%	$	(1.0)	$	(0.02)

Restructuring, impairment and transaction-related charges ~~(2)~~(1)	Restructuring, impairment and transaction-related charges ~~(2)~~(1)	(16.6)		(2.3)	%	(12.4)		(0.23)		Restructuring, impairment and transaction-related charges ~~(2)~~(1)	(22.4)		(2.9)	%	(16.8)		(0.35)
Other operating income elements ~~(3)~~(2)	Other operating income elements ~~(3)~~(2)	(3.5)		(0.7)	%	(2.6)		(0.06)		Other operating income elements ~~(3)~~(2)	17.1		2.2	%	12.9		0.27
Operating Income	Operating Income	14.2		1.9	%	9.1		0.17		Operating Income	0.1		—	%	(4.9)		(0.10)
Interest expense ~~(4)~~(3)	Interest expense ~~(4)~~(3)	N/A		N/A		3.5		0.07		Interest expense ~~(4)~~(3)	N/A		N/A		(5.3)		(0.11)
Net pension income ~~(5)~~(4)	Net pension income ~~(5)~~(4)	N/A		N/A		(0.3)		(0.01)		Net pension income ~~(5)~~(4)	N/A		N/A		(2.1)		(0.04)

Income taxes (6)		N/A		N/A		(7.2)		(0.13)

Investments in unconsolidated entity, net of tax (7)		N/A		N/A		0.2		—
Income taxes (5)										Income taxes (5)	N/A		N/A		(12.3)		(0.25)

For the Three Months Ended June 30, 2022		$	14.2	1.9	%	$	5.3	$	0.10

For the three months ended March 31, 2023										For the three months ended March 31, 2023	$	0.1	—	%	$	(24.6)	$	(0.50)

(1)~~The Company executed a sale and leaseback of its Chalfont, Pennsylvania facility resulting in a $13.7 million ($10.3 million, net of tax) gain during the three months ended June 30, 2021.~~

~~(2)~~Restructuring, impairment and transaction-related charges increased ~~$16.6~~$22.4 million ($~~12.4~~16.8 million, net of tax), to ~~$3.2~~$26.0 million during the three months ended ~~June 30, 2022,~~March 31, 2023, and included the following:

a.A ~~$2.3~~$12.0 million ~~decrease~~increase in employee termination charges from ~~$2.8~~$1.1 million during the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~$0.5~~$13.1 million during the three months ended ~~June 30, 2022;~~March 31, 2023;

b.A ~~$0.9~~$9.4 million ~~decrease~~increase in impairment charges from ~~$0.9~~$0.1 million during the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~zero~~$9.5 million during the three months ended ~~June 30, 2022;~~March 31, 2023;

c.A ~~$0.1~~$0.4 million increase in transaction-related charges from $0.2 million during the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~$0.3~~$0.6 million during the three months ended ~~June 30, 2022;~~March 31, 2023;

d.A ~~$19.7~~$0.5 million increase in integration costs from zero during the three months ended March 31, 2022, to $0.5 million during the three months ended March 31, 2023;

e.A $0.1 million increase in various other restructuring charges from ~~$17.3~~$2.2 million ~~of income~~ during the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~$2.4~~$2.3 million ~~of expense~~ during the three months ended ~~June 30, 2022.~~March 31, 2023.

The Company expects to incur additional restructuring and integration costs in future reporting periods in connection with eliminating excess manufacturing capacity and properly aligning its cost structure in conjunction with the Company’s acquisitions and strategic investments, and other cost reduction programs.

~~(3)~~(2)Other operating income elements ~~decreased $3.5~~increased $17.1 million ($~~2.6~~12.9 million, net of ~~tax)~~tax impact) during the three months ended March 31, 2023, primarily due to net cost increases from supply chain disruptions, cost inflation in materials and freight and labor shortages. These cost increases were partially offset by the following: (1) a $6.7 million increase in paper byproduct recoveries; (2) an increase in print product pricing and volume, ~~and pricing; (3)~~ a ~~$3.4~~$2.8 million decrease in depreciation and amortization ~~expense;~~expense and ~~(4)~~ savings from other cost reduction ~~initiatives.~~initiatives, partially offset by a $10.1 million increase in selling, general and administrative expenses.

~~(4)~~(3)Interest expense ~~decreased $4.7~~increased $7.0 million ($~~3.5~~5.3 million, net of tax) during the three months ended ~~June 30, 2022,~~March 31, 2023, to ~~$10.9~~$16.3 million. This ~~change~~ was primarily due to higher weighted average interest rates on borrowings and a ~~$2.5~~$3.1 million ~~decrease~~increase in interest expense related to the interest rate swaps, ~~a lower weighted average interest rate on borrowings and~~partially offset by lower average debt levels in the three months ended ~~June 30, 2022,~~March 31, 2023, as compared to the three months ended ~~June 30, 2021.~~March 31, 2022.

~~Table of Contents~~

~~(5)~~(4)Net pension income decreased ~~$0.4~~$2.8 million ($~~0.3~~2.1 million, net of tax) during the three months ended ~~June 30, 2022,~~March 31, 2023, to ~~$3.1~~$0.4 million. This was due to a ~~$0.7~~$2.0 million increase from interest cost on pension plan liabilities, a $0.6 million decrease from the expected long-term return on pension plan assets and ~~a $0.3 million increase from interest cost on pension plan liabilities, partially offset by a non-cash settlement charge~~amortization of ~~$0.6~~actuarial loss of $0.2 million during the three months ended ~~June 30, 2021~~March 31, 2023 that did not occur ~~during the three months ended June 30,~~in 2022.

~~(6)~~Table of Contents

(5)The ~~$7.2~~$12.3 million ~~decrease~~increase in income tax ~~benefit~~expense as calculated in the following table is primarily due to the impact allocable to the first quarter from: (1) a ~~$8.3~~$7.2 million ~~decrease~~increase from estimated non-deductible expenses; (2) a $3.7 million increase from income from foreign branches; and (3) a $1.5 million increase from valuation allowance ~~reserves and a $0.9 million decrease from the Company’s liability for unrecognized tax benefits, partially offset by a $1.9 million increase in income tax benefit from non-deductible expenses.~~reserves.
Three Months Ended June 30,
2022 2021 $ Change
Earnings before income taxes and equity in loss of unconsolidated entity $ 6.4 $ 35.9 $ (29.5)
Normalized tax rate 25.0 % 25.0 %
Income tax expense at normalized tax rate 1.6 9.0 (7.4)
Income tax expense from the condensed consolidated statements of operations 1.1 1.3 (0.2)
Impact of income taxes $ 0.5 $ 7.7 $ (7.2)

~~(7)~~The increase from investments in unconsolidated entity, net of tax, of $0.2 million during the three months ended June 30, 2022, was due to the equity in loss of unconsolidated entity of $0.2 million for the three months ended June 30, 2021 at the Company’s investment in Plural Industria Grafica Ltda., the Company’s Brazilian joint venture. In January 2022, the Company sold its investment in Plural.


	Three Months Ended March 31,
	2023			2022			$ Change
	(dollars in millions)
Loss before income taxes	$	(15.8)		$	(0.7)		$	(15.1)
Normalized tax rate	25.0		%	25.0		%
Income tax benefit at normalized tax rate	(4.0)			(0.2)			(3.8)

Income tax expense from the condensed consolidated statements of operations	8.8			0.3			8.5

Impact of income taxes	$	12.8		$	0.5		$	12.3

Operating Results


		Three Months Ended June 30,
		2022				2021									Three Months Ended March 31,
		(dollars in millions)													2023		% of Sales		2022		% of Sales		$ Change		% Change
		Amount		% of Sales		Amount		% of Sales		$ Change		% Change			(dollars in millions)
Net sales:	Net sales:													Net sales:
Products	Products	$	593.9	78.4	%	$	511.6	73.7	%	$	82.3	16.1	%	Products	$	607.9	79.3	%	$	580.9	78.1	%	$	27.0	4.6	%
Services	Services	163.8		21.6	%	182.3		26.3	%	(18.5)		(10.1)	%	Services	158.6		20.7	%	163.3		21.9	%	(4.7)		(2.9)	%
Total net sales	Total net sales	757.7		100.0	%	693.9		100.0	%	63.8		9.2	%	Total net sales	766.5		100.0	%	744.2		100.0	%	22.3		3.0	%
Cost of sales:	Cost of sales:													Cost of sales:
Products	Products	503.8		66.5	%	413.7		59.6	%	90.1		21.8	%	Products	516.1		67.3	%	503.1		67.6	%	13.0		2.6	%
Services	Services	114.3		15.1	%	140.5		20.2	%	(26.2)		(18.6)	%	Services	101.4		13.2	%	116.5		15.7	%	(15.1)		(13.0)	%
Total cost of sales	Total cost of sales	618.1		81.6	%	554.2		79.8	%	63.9		11.5	%	Total cost of sales	617.5		80.5	%	619.6		83.3	%	(2.1)		(0.3)	%
Selling, general & administrative expenses	Selling, general & administrative expenses	86.9		11.5	%	80.1		11.6	%	6.8		8.5	%	Selling, general & administrative expenses	89.2		11.6	%	79.1		10.6	%	10.1		12.8	%
Gain from sale and leaseback		—		—	%	(13.7)		(2.0)	%	13.7		100.0	%

Depreciation and amortization	Depreciation and amortization	35.3		4.6	%	38.7		5.6	%	(3.4)		(8.8)	%	Depreciation and amortization	33.7		4.4	%	36.5		4.9	%	(2.8)		(7.7)	%
Restructuring, impairment and transaction-related charges	Restructuring, impairment and transaction-related charges	3.2		0.4	%	(13.4)		(1.9)	%	16.6		(123.9)	%	Restructuring, impairment and transaction-related charges	26.0		3.5	%	3.6		0.5	%	22.4		nm
Total operating expenses	Total operating expenses	743.5		98.1	%	645.9		93.1	%	97.6		15.1	%	Total operating expenses	766.4		100.0	%	738.8		99.3	%	27.6		3.7	%
Operating income	Operating income	$	14.2	1.9	%	$	48.0	6.9	%	$	(33.8)	N/A		Operating income	$	0.1	—	%	$	5.4	0.7	%	$	(5.3)	(98.1)	%

~~Table of Contents~~

Net Sales

Product sales increased ~~$82.3~~$27.0 million, or ~~16.1%~~4.6%, for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to a ~~$54.3 million increase from pass-through paper sales and a $32.7~~$20.1 million increase in sales in the Company’s print product lines, ~~mainly~~primarily due to increased print pricing and volume, an $11.3 million increase from paper sales and ~~pricing,~~$1.2 million in favorable foreign exchange impacts, partially offset by ~~$4.7~~a $5.6 million decrease in net sales (which includes $1.7 million in ~~unfavorable foreign exchange impacts.~~paper sales) due to the divestiture of the Company’s print operations in Argentina.

Service sales, which primarily consist of logistics, distribution, marketing services, imaging and medical services, decreased ~~$18.5~~$4.7 million, or ~~10.1%~~2.9%, for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to a ~~$30.3~~$6.8 million decrease in logistics sales ~~due to the divestiture of the Company’s third-party logistics business,~~from lower volumes, partially offset by a ~~$9.1 million increase in logistics sales and a $2.7~~$2.1 million increase in marketing services and medical services.

Table of Contents

Cost of Sales

Cost of product sales increased ~~$90.1~~$13.0 million, or ~~21.8%~~2.6%, for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to ~~the following: (1)~~ an increase in ~~pass-through~~ paper ~~costs; (2) the impacts from rising~~ costs ~~of materials, labor~~ and ~~other costs of production; and (3)~~ higher print ~~volume. These increases were~~volumes, partially offset by ~~a $6.7 million increase~~the impact from the divestiture of the Company’s print operations in ~~paper byproduct recoveries~~Argentina and other cost reduction initiatives.

Cost of service sales decreased ~~$26.2~~$15.1 million, or ~~18.6%~~13.0%, for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to ~~the impact from the divestiture of the Company’s third-party logistics business, partially offset by increased~~decreased freight ~~costs.~~costs and other cost reduction initiatives.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased ~~$6.8~~$10.1 million, or ~~8.5%~~12.8%, for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to ~~the following: (1)~~ a ~~$3.4~~$7.4 million increase in employee-related ~~costs; (2) a $1.0 million~~costs and an increase in selling and marketing expenses; (3) a $0.8 million increase in technology expenses; (4) a $0.7 million increase from foreign translation impacts; and (5) a $0.6 million increase in credit loss expense.selling-related costs. Selling, general and administrative expenses as a percentage of net sales ~~decreased to 11.5% for the three months ended June 30, 2022, compared~~increased to 11.6% for the three months ended ~~June 30, 2021.~~

~~Gain from sale and leaseback~~

~~The Company executed a sale and leaseback of its Chalfont, Pennsylvania facility resulting in a $13.7 million ($10.3 million, net of tax) gain during~~March 31, 2023, compared to 10.6% for the three months ended ~~June 30, 2021.~~March 31, 2022.

Depreciation and Amortization

Depreciation and amortization decreased ~~$3.4~~$2.8 million, or ~~8.8%~~7.7%, for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, due to a ~~$3.5~~$2.6 million decrease in depreciation expense, primarily ~~related to~~from property, plant and equipment becoming fully depreciated over the past year, and a ~~decrease in purchases in property, plant and equipment, partially offset by a $0.1~~$0.2 million ~~increase~~decrease in amortization expense.

~~Table of Contents~~

Restructuring, Impairment and Transaction-Related Charges

Restructuring, impairment and transaction-related charges increased ~~$16.6~~$22.4 million for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to the following:


									Three Months Ended March 31,
		Three Months Ended June 30,							2023	2022		$ Change
		2022		2021		$ Change
Employee termination charges	Employee termination charges	$	0.5	$	2.8	$	(2.3)	Employee termination charges		$	13.1	$	1.1	$	12.0
Impairment charges (a)	Impairment charges (a)	—		0.9		(0.9)		Impairment charges (a)		9.5		0.1		9.4
Transaction-related charges	Transaction-related charges	0.3		0.2		0.1		Transaction-related charges		0.6		0.2		0.4

Other restructuring charges (income)
Integration costs								Integration costs		0.5		—		0.5
Other restructuring charges								Other restructuring charges
Vacant facility carrying costs and lease exit charges	Vacant facility carrying costs and lease exit charges	1.1		6.3		(5.2)		Vacant facility carrying costs and lease exit charges		1.9		1.0		0.9
Equipment and infrastructure removal costs	Equipment and infrastructure removal costs	—		0.2		(0.2)		Equipment and infrastructure removal costs		0.3		—		0.3
Gains on the sale of facilities (b)		—		(2.3)		2.3
Other restructuring activities (c)		1.3		(21.5)		22.8
Other restructuring charges (income)		2.4		(17.3)		19.7

Other restructuring activities (b)								Other restructuring activities (b)		0.1		1.2		(1.1)
Other restructuring charges								Other restructuring charges		2.3		2.2		0.1
Total restructuring, impairment and transaction-related charges	Total restructuring, impairment and transaction-related charges	$	3.2	$	(13.4)	$	16.6	Total restructuring, impairment and transaction-related charges		$	26.0	$	3.6	$	22.4

(a)Includes ~~$0.9~~$9.5 million and $0.1 million of impairment charges for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction ~~and strategic divestiture~~ activities, during the three months ended ~~June 30, 2021. There were no impairment charges recognized during the three months ended June 30, 2022.~~March 31, 2023 and 2022, respectively.

(b)Includes ~~$2.1 million of gains on the sale of other facilities during the three months ended June 30, 2021.~~

~~(c)Includes $0.9 million and $0.6~~$0.8 million in charges from foreign currency losses as a result of the economy in Argentina being classified as highly inflationary during the three months ended June 30, 2022 and 2021, respectively. The Company has considered the economy in Argentina to be highly inflationary since June 30, 2018. Also includes a $20.9 million gain on the sale of a business during the three months ended June 30, 2021.

~~EBITDA and EBITDA Margin—Consolidated~~

~~EBITDA and EBITDA margin for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, were as follows:~~
Three Months Ended June 30,
2022 2021
Amount % of Net Sales Amount % of Net Sales
(dollars in millions)
EBITDA and EBITDA margin (non-GAAP) $ 52.6 6.9 % $ 90.0 13.0 %

EBITDA decreased $37.4 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to the following: (1) $16.6 million of increased restructuring, impairment and transaction-related charges; (2) a $13.7 million gain from sale and leaseback in 2021 that did not repeat in 2022; and (3) net cost increases from supply chain disruptions, cost inflation in materials and freight and labor shortages. The EBITDA decreases were partially offset by the following: (1) a $6.7 million increase in paper byproduct recoveries; (2) an increase in print product volume and pricing; and (3) savings from other cost reduction initiatives.

EBITDA is defined as net earnings (loss), excluding (1) interest expense, (2) income tax expense (benefit), and (3) depreciation and amortization. EBITDA margin represents EBITDA as a percentage of net sales. EBITDA and EBITDA margin are presented to provide additional information regarding Quad’s performance. Both are important measures by which Quad gauges the profitability and assesses the performance of its business. EBITDA and EBITDA margin are non-GAAP financial measures and should not be considered alternatives to net earnings (loss) as a measure of operating performance, or to cash flows provided by operating activities as a measure of liquidity. Quad’s calculation of EBITDA and EBITDA margin may be different from the calculations used by other companies, and therefore, comparability may be limited.

~~Table of Contents~~

~~A reconciliation of EBITDA to net earnings for the three months ended June 30, 2022 and 2021, was as follows:~~
Three Months Ended June 30,
2022 2021
(dollars in millions)
Net earnings (1)
$ 5.3 $ 34.4
Interest expense 10.9 15.6
Income tax expense 1.1 1.3
Depreciation and amortization 35.3 38.7
EBITDA (non-GAAP) $ 52.6 $ 90.0

~~(1)Net earnings included the following:~~

a.~~Restructuring, impairment and transaction-related charges of $3.2 million and income of $13.4 million for the three months ended June 30, 2022 and 2021, respectively;~~

b.~~Gain from sale and leaseback of $13.7 million for the three months ended June 30, 2021; and~~

c.~~Equity in loss of unconsolidated entity of $0.2 million for the three months ended June 30, 2021.~~

~~United States Print and Related Services~~

~~The following table summarizes net sales, operating income, operating margin and certain items impacting comparability within the United States Print and Related Services segment:~~
Three Months Ended June 30,
2022 2021
(dollars in millions)
Amount Amount $ Change % Change
Net sales:
Products $ 490.6 $ 433.3 $ 57.3 13.2 %
Services 158.8 177.6 (18.8) (10.6) %
Operating income (including restructuring, impairment and transaction-related charges) 19.9 55.8 (35.9) (64.3) %
Operating margin 3.1 % 9.1 % N/A N/A
Restructuring, impairment and transaction-related charges $ 1.6 $ (14.5) $ 16.1 (111.0) %

~~Net Sales~~

Product sales for the United States Print and Related Services segment increased $57.3 million, or 13.2%, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to a $34.0 million increase from pass-through paper sales and a $23.3 million increase in sales in the Company’s print product lines due to increased print volume and pricing.

Service sales for the United States Print and Related Services segment decreased $18.8 million, or 10.6%, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to a $30.3 million decrease in sales due to the divestiture of the Company’s third-party logistics business, partially offset by an $8.6 million increase in logistics sales and a $2.9 million increase in marketing services and medical services.

~~Table of Contents~~

~~Operating Income~~

Operating income for the United States Print and Related Services segment decreased $35.9 million, or 64.3%, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to the following: (1) net cost increases in from supply chain disruptions, cost inflation in materials and freight and labor shortages; (2) a $16.1 million increase in restructuring, impairment and transaction-related charges; and (3) a $13.7 million gain from sale and leaseback in 2021 that did not repeat inMarch 31, 2022. The decreases were partially offset by the following: (1) a $6.7 million increase in paper byproduct recoveries; (2) an increase in print volume and pricing; (3) a $2.8 million decrease in depreciation and amortization expense; and (4) savings from other cost reduction initiatives.

Operating margin for the United States Print and Related Services segment decreased to 3.1% for the three months ended June 30, 2022, from 9.1% for the three months ended June 30, 2021, primarily due to the reasons provided above.

~~Restructuring, Impairment and Transaction-Related Charges~~

Restructuring, impairment and transaction-related charges for the United States Print and Related Services segment increased $16.1 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to the following:
Three Months Ended June 30,
2022 2021 $ Change
Employee termination charges $ 0.3 $ 2.9 $ (2.6)
Impairment charges (a)
— 0.9 (0.9)
Other restructuring charges (income) (b)
1.3 (18.3) 19.6
Total restructuring, impairment and transaction-related charges $ 1.6 $ (14.5) $ 16.1

~~(a)~~Includes $0.9 million of impairment charges for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction and strategic divestiture activities, during the three months ended June 30, 2021. There were no impairment charges recognized during the three months ended June 30, 2022.

~~(b)Includes a $20.9 million gain on the sale of a business during the three months ended June 30, 2021.~~

~~International~~

~~The following table summarizes net sales, operating income, operating margin, certain items impacting comparability and equity in loss of unconsolidated entity within the International segment:~~
Three Months Ended June 30,
2022 2021
(dollars in millions)
Amount Amount $ Change % Change
Net sales:
Products $ 103.3 $ 78.3 $ 25.0 31.9 %
Services 5.0 4.7 0.3 6.4 %
Operating income (including restructuring, impairment and transaction-related charges) 6.2 3.0 3.2 106.7 %
Operating margin 5.7 % 3.6 % N/A N/A
Restructuring, impairment and transaction-related charges $ 1.3 $ 0.9 $ 0.4 44.4 %
Equity in loss of unconsolidated entity — 0.2 (0.2) nm

~~Net Sales~~

Product sales for the International segment increased $25.0 million, or 31.9%, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to a $20.3 million increase in pass-through paper sales and a $4.7 million increase in print volume, mainly in Mexico.

~~Table of Contents~~

Service sales for the International segment increased $0.3 million, or 6.4%, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to an increase in logistics sales, partially offset by a decrease in marketing services in Europe.

~~Operating Income~~

Operating income for the International segment increased $3.2 million, or 106.7%, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to a $3.6 million increase in operating income, mainly in Mexico and Peru, partially offset by a $0.4 million increase in restructuring, impairment and transaction-related charges.

~~Restructuring, Impairment and Transaction-Related Charges~~

Restructuring, impairment and transaction-related charges for the International segment increased $0.4 million, or 44.4%, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to the following:
Three Months Ended June 30,
2022 2021 $ Change
Employee termination charges $ 0.2 $ (0.1) $ 0.3
Other restructuring charges (a)
1.1 1.0 0.1
Total restructuring, impairment and transaction-related charges $ 1.3 $ 0.9 $ 0.4

~~(a)~~Includes $0.9 million and $0.6 million in charges from foreign currency losses as a result of the economy in Argentina being classified as highly inflationary during the three months ended June 30, 2022 and 2021, respectively. The Company has considered the economy in Argentina to be highly inflationary since June 30, 2018.

~~Equity in Loss of Unconsolidated Entity~~

Investments in entities where Quad has the ability to exert significant influence, but not control, are accounted for using the equity method of accounting. The Company held a 49% ownership interest in Plural Industria Gráfica Ltda., a commercial printer based in São Paulo, Brazil until the investment was sold in January 2022. The equity in loss of unconsolidated entity in the International segment was $0.2 million for the three months ended June 30, 2021.

~~Corporate~~

~~The following table summarizes unallocated operating expenses presented as Corporate:~~
Three Months Ended June 30,
2022 2021
(dollars in millions)
Amount Amount $ Change % Change
Operating expenses (including restructuring, impairment and transaction-related charges) $ 11.9 $ 10.8 $ 1.1 10.2 %
Restructuring, impairment and transaction-related charges 0.3 0.2 0.1 50.0 %

~~Operating Expenses~~

Corporate operating expenses increased $1.1 million, or 10.2%, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to a $0.8 million increase in employee-related costs.

~~Restructuring, Impairment and Transaction-Related Charges~~

~~Corporate restructuring, impairment and transaction-related charges were $0.3 million and $0.2 million for the three months ended June 30, 2022 and 2021, respectively.~~

4034

Table of Contents

~~Results of Operations for the Six Months Ended June 30, 2022, Compared to the Six Months Ended June 30, 2021~~

~~Summary Results~~

The Company’s operating income, operating margin, net earnings (computed using a 25% normalized tax rate for all items subject to tax) and diluted earnings per share for the six months ended June 30, 2022, changed from the six months ended June 30, 2021, as follows (dollars in millions, except margin and per share data):
Operating
Income Operating Margin Net Earnings Diluted Earnings Per Share
For the six months ended June 30, 2021 $ 69.0 4.9 % $ 44.6 $ 0.85
Gain from sale and leaseback (1)
(13.7) (1.0) % (10.3) (0.20)
Restructuring, impairment and transaction-related charges (2)
(17.6) (1.3) % (13.2) (0.24)
Other operating income elements (3)
(18.1) (1.3) % (13.6) (0.28)
Operating Income 19.6 1.3 % 7.5 0.13
Interest expense (4)
N/A N/A 7.5 0.15
Net pension income (5)
N/A N/A (1.0) (0.02)
Income taxes (6)
N/A N/A (9.8) (0.18)
Investments in unconsolidated entity, net of tax (7)
N/A N/A 0.1 —
For the six months ended June 30, 2022 $ 19.6 1.3 % $ 4.3 $ 0.08

~~(1)The Company executed a sale and leaseback of its Chalfont, Pennsylvania facility resulting in a $13.7 million ($10.3 million, net of tax) gain during the six months ended June 30, 2021.~~

~~(2)~~Restructuring, impairment and transaction-related charges increased $17.6 million ($13.2 million, net of tax), to $6.8 million during the six months ended June 30, 2022, and included the following:

a.~~A $5.9 million decrease in employee termination charges from $7.5 million during the six months ended June 30, 2021, to $1.6 million during the six months ended June 30, 2022;~~

b.~~A $1.6 million decrease in impairment charges from $1.7 million during the six months ended June 30, 2021, to $0.1 million during the six months ended June 30, 2022;~~

c.~~A $0.1 million increase in transaction-related charges from $0.4 million during the six months ended June 30, 2021, to $0.5 million during the six months ended June 30, 2022; and~~

d.A $25.0 million increase in various other restructuring charges from $20.4 million of income during the six months ended June 30, 2021, to $4.6 million of expense during the six months ended June 30, 2022.

The Company expects to incur additional restructuring costs in future reporting periods in connection with eliminating excess manufacturing capacity and properly aligning its cost structure in conjunction with the Company’s acquisitions and strategic investments, and other cost reduction programs.

~~(3)~~Other operating income elements decreased $18.1 million ($13.6 million, net of tax impact) during the six months ended June 30, 2022, primarily due to net cost increases from supply chain disruptions, cost inflation in materials and freight and labor shortages. These cost increases were partially offset by the following: (1) a $15.2 million increase in paper byproduct recoveries; (2) an $8.8 million decrease in depreciation and amortization expense; (3) an increase in print product volume and pricing; and (4) savings from other cost reduction initiatives.

~~(4)~~Interest expense decreased $9.9 million ($7.5 million, net of tax) during the six months ended June 30, 2022, to $20.2 million. This change was due to a $5.5 million decrease in interest expense related to the interest rate swaps, lower average debt levels and a lower weighted average interest rate on borrowings in the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

~~(5)~~Net pension income decreased $1.3 million ($1.0 million, net of tax) during the six months ended June 30, 2022, to $6.3 million. This was due to a $1.3 million decrease from the expected long-term return on pension plan assets and a $0.6 million increase from interest cost on pension plan liabilities. These were offset by a non-cash settlement charge of $0.6 million during the six months ended June 30, 2021 that did not repeat during the six months ended June 30, 2022.

~~Table of Contents~~

~~(6)~~The $9.8 million decrease in income tax benefit as calculated in the following table is primarily due to an $11.1 million decrease from valuation allowance reserves and a $0.9 million decrease from the Company’s liability for unrecognized tax benefits, partially offset by a $2.1 million increase in income tax benefit from non-deductible expenses.
Six Months Ended June 30,
2022 2021 $ Change
Earnings before income taxes and equity in loss of unconsolidated entity $ 5.7 $ 46.5 $ (40.8)
Normalized tax rate 25.0 % 25.0 %
Income tax expense at normalized tax rate 1.4 11.6 (10.2)
Income tax expense from the condensed consolidated statements of operations 1.4 1.8 (0.4)
Impact of income taxes $ — $ 9.8 $ (9.8)

~~(7)~~The increase in investments in unconsolidated entity, net of tax, of $0.1 million during the six months ended June 30, 2022, was due to the equity in loss of unconsolidated entity of $0.1 million for the six months ended June 30, 2021 at the Company’s investment in Plural Industria Grafica Ltda., the Company’s Brazilian joint venture. In January 2022, the Company sold its investment in Plural.

~~Operating Results~~

The following table sets forth certain information from the Company’s condensed consolidated statements of operations on an absolute dollar basis and as a relative percentage of total net sales for each noted period, together with the relative percentage change in such information between the periods set forth below:
Six Months Ended June 30,
2022 2021
(dollars in millions)
Amount % of
Sales Amount % of
Sales $ Change %
Change
Net sales:
Products $ 1,174.8 78.2 % $ 1,037.6 74.1 % $ 137.2 13.2 %
Services 327.1 21.8 % 362.1 25.9 % (35.0) (9.7) %
Total net sales 1,501.9 100.0 % 1,399.7 100.0 % 102.2 7.3 %
Cost of sales:
Products 1,006.9 67.0 % 842.0 60.2 % 164.9 19.6 %
Services 230.8 15.4 % 272.0 19.4 % (41.2) (15.1) %
Total cost of sales 1,237.7 82.4 % 1,114.0 79.6 % 123.7 11.1 %
Selling, general & administrative expenses 166.0 11.1 % 160.6 11.5 % 5.4 3.4 %
Gain from sale and leaseback — — % (13.7) (1.0) % 13.7 (100.0) %
Depreciation and amortization 71.8 4.8 % 80.6 5.8 % (8.8) (10.9) %
Restructuring, impairment and transaction-related charges 6.8 0.4 % (10.8) (0.8) % 17.6 (163.0) %
Total operating expenses 1,482.3 98.7 % 1,330.7 95.1 % 151.6 11.4 %
Operating income $ 19.6 1.3 % $ 69.0 4.9 % $ (49.4) (71.6) %

~~Net Sales~~

Product sales increased $137.2 million, or 13.2%, for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to a $101.8 million increase from pass-through paper sales and a $43.3 million increase in sales in the Company’s print product lines, primarily due to increased print volume and pricing. These increases were partially offset by $7.9 million in unfavorable foreign exchange impacts.

~~Table of Contents~~

Service sales, which primarily consist of logistics, distribution, marketing services, imaging and medical services, decreased $35.0 million, or 9.7%, for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to a $58.4 million decrease in sales due to the divestiture of the Company’s third-party logistics business, partially offset by a $15.7 million increase in logistics sales and a $7.7 million increase in marketing services and medical services.

~~Cost of Sales~~

Cost of product sales increased $164.9 million, or 19.6%, for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to the following: (1) an increase in pass-through paper costs; (2) the impacts from rising costs of materials, labor and other costs of production; and (3) higher print volumes. These increases were partially offset by a $15.2 million increase in paper byproduct recoveries and other cost reduction initiatives.

Cost of service sales decreased $41.2 million, or 15.1%, for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to the impact from the divestiture of the Company’s third-party logistics business, partially offset by increased freight costs.

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses increased $5.4 million, or 3.4%, for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to the following: (1) a $2.4 million increase in employee-related costs; (2) a $2.2 million increase in legal-related adjustments; and (3) a $1.3 million increase in selling and marketing expenses, partially offset by a $1.4 million decrease from foreign translations impacts. Selling, general and administrative expenses as a percentage of net sales decreased to 11.1% for the six months ended June 30, 2022, compared to 11.5% for the six months ended June 30, 2021.

~~Gain from sale and leaseback~~

~~The Company executed a sale and leaseback of its Chalfont, Pennsylvania facility resulting in a $13.7 million ($10.3 million, net of tax) gain during the six months ended June 30, 2021.~~

~~Depreciation and Amortization~~

Depreciation and amortization decreased $8.8 million, or 10.9%, for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, due to a $7.4 million decrease in depreciation expense, primarily from property, plant and equipment becoming fully depreciated over the past year and a decrease in purchases of property, plant and equipment, and a $1.4 million decrease in amortization expense.

~~Table of Contents~~

~~Restructuring, Impairment and Transaction-Related Charges~~

Restructuring, impairment and transaction-related charges increased $17.6 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to the following:
Six Months Ended June 30,
2022 2021 $ Change
Employee termination charges $ 1.6 $ 7.5 $ (5.9)
Impairment charges (a)
0.1 1.7 (1.6)
Transaction-related charges 0.5 0.4 0.1
Other restructuring charges (income)
Vacant facility carrying costs and lease exit charges 2.1 10.2 (8.1)
Equipment and infrastructure removal costs — 1.0 (1.0)
Gains on the sale of facilities (b)
— (10.1) 10.1
Other restructuring activities (c)
2.5 (21.5) 24.0
Other restructuring charges (income) 4.6 (20.4) 25.0
Total restructuring, impairment and transaction-related charges $ 6.8 $ (10.8) $ 17.6

~~(a)~~Includes $0.1 million and $1.7 million of impairment charges for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction and strategic divestiture activities, during the six months ended June 30, 2022 and 2021, respectively.

~~(b)Includes $9.7 million of gains on the sale of Riverside, California and other facilities during the six months ended June 30, 2021.~~

~~(c)~~Includes $1.7 million and $0.9 million in charges from foreign currency losses as a result of the economy in Argentina being classified as highly inflationary during the six months ended June 30, 2022 and 2021, respectively. The Company has considered the economy in Argentina to be highly inflationary since June 30, 2018. Also includes a $20.9 million gain on the sale of a business during the six months ended June 30, 2021.

EBITDA and EBITDA Margin—Consolidated

~~EBITDA and EBITDA margin for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, were as follows:~~
Six Months Ended June 30,
2022 2021
Amount % of Net Sales Amount % of Net Sales
(dollars in millions)
EBITDA and EBITDA margin (non-GAAP) $ 97.7 6.5 % $ 157.1 11.2 %

EBITDA decreased $59.4 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to net cost increases from supply chain disruptions, cost inflation in materials and freight and labor shortages and $17.6 million of increased restructuring, impairment and transaction-related charges. These cost increases were partially offset by a $15.2 million increase in paper byproduct recoveries, an increase in print product volume and pricing, and savings from other cost reduction initiatives.

EBITDA is defined as net ~~earnings (loss),~~loss, excluding (1) interest expense, (2) income tax expense and (3) depreciation and amortization. EBITDA margin represents EBITDA as a percentage of net sales. EBITDA and EBITDA margin are presented to provide additional information regarding Quad’s performance. Both are important measures by which Quad gauges the profitability and assesses the performance of its business. EBITDA and EBITDA margin are non-GAAP financial measures and should not be considered alternatives to net earnings (loss) as a measure of operating performance, or to cash flows ~~provided~~provide by (used in) operating activities as a measure of liquidity. Quad’s calculation of EBITDA and EBITDA margin may be different from the calculations used by other companies, and therefore, comparability may be limited.

EBITDA and EBITDA margin for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, were as follows:


	Three Months Ended March 31,
	2023				2022
	Amount		% of Net Sales		Amount		% of Net Sales
	(dollars in millions)
EBITDA and EBITDA margin (non-GAAP)	$	34.2	4.5	%	$	45.1	6.1	%

44EBITDA decreased $10.9 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily due to $22.4 million of increased restructuring, impairment and transaction-related charges, partially offset by an increase in print product pricing and volume and savings from other cost reduction initiatives.

~~Table of Contents~~

A reconciliation of EBITDA to net earnings for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ was as follows:


		Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022
		(dollars in millions)					(dollars in millions)
Net earnings (1)		$	4.3	$	44.6
Net loss (1)						Net loss (1)	$	(24.6)	$	(1.0)
Interest expense	Interest expense	20.2		30.1		Interest expense	16.3		9.3
Income tax expense	Income tax expense	1.4		1.8		Income tax expense	8.8		0.3
Depreciation and amortization	Depreciation and amortization	71.8		80.6		Depreciation and amortization	33.7		36.5
EBITDA (non-GAAP)	EBITDA (non-GAAP)	$	97.7	$	157.1	EBITDA (non-GAAP)	$	34.2	$	45.1

(1)Net ~~earnings~~loss included the following:

a.Restructuring, impairment and transaction-related charges of ~~$6.8~~$26.0 million and ~~income of $10.8~~$3.6 million for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively;~~

b.~~Gain from sale and leaseback of $13.7 million for the six months ended June 30, 2021; and~~

c.~~Equity in loss of unconsolidated entity of $0.1 million for the six months ended June 30, 2021.~~respectively.

Table of Contents

United States Print and Related Services

The following table summarizes net sales, operating income, operating margin and certain items impacting comparability within the United States Print and Related Services segment:


		Six Months Ended June 30,
		2022			2021								Three Months Ended March 31,
		(dollars in millions)											2023			2022			$ Change		% Change
		Amount			Amount			$ Change		% Change			(dollars in millions)
Net sales:	Net sales:											Net sales:
Products	Products	$	983.9		$	893.2		$	90.7	10.2	%	Products	$	504.5		$	493.3		$	11.2	2.3	%
Services	Services	316.6			352.3			(35.7)		(10.1)	%	Services	153.1			157.8			(4.7)		(3.0)	%
Operating income (including restructuring, impairment and transaction-related charges)	Operating income (including restructuring, impairment and transaction-related charges)	31.7			88.3			(56.6)		(64.1)	%	Operating income (including restructuring, impairment and transaction-related charges)	7.3			11.8			(4.5)		(38.1)	%
Operating margin	Operating margin	2.4		%	7.1		%	N/A		N/A		Operating margin	1.1		%	1.8		%	N/A		N/A
Restructuring, impairment and transaction-related charges	Restructuring, impairment and transaction-related charges	$	3.3		$	(13.4)		$	16.7	(124.6)	%	Restructuring, impairment and transaction-related charges	$	22.5		$	1.7		$	20.8	nm

Net Sales

Product sales for the United States Print and Related Services segment increased ~~$90.7~~$11.2 million, or ~~10.2%~~2.3%, for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to a ~~$68.0 million increase from pass-through paper sales and a $22.7~~$11.3 million increase in sales in the Company’s print product lines, primarily due to increased print ~~volume~~pricing and ~~pricing.~~volume.

Service sales for the United States Print and Related Services segment decreased ~~$35.7~~$4.7 million, or ~~10.1%~~3.0%, for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to a ~~$58.4~~$6.6 million decrease in logistics sales ~~due to the divestiture of the Company’s third-party logistics business,~~from lower volumes, partially offset by a ~~$15.0 million increase in logistics sales and a $7.7~~$1.9 million increase in marketing services and medical services.

~~Table of Contents~~

Operating Income

Operating income for the United States Print and Related Services segment decreased ~~$56.6~~$4.5 million, or ~~64.1%~~38.1%, for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to ~~net cost increases from supply chain disruptions, cost inflation in materials and freight and labor shortages and~~ a ~~$16.7~~$20.8 million increase in restructuring, impairment and transaction-related ~~charges. These cost increases were~~charges, partially offset by ~~the following: (1) a $15.2 million increase in paper byproduct recoveries; (2) a $7.6~~an $2.3 million decrease in depreciation and amortization ~~expense; (3)~~expense, the impact from an increase in print product pricing and volume and ~~pricing; and (4)~~ savings from other cost reduction initiatives.

~~Operating~~The operating margin for the United States Print and Related Services segment decreased to ~~2.4%~~1.1% for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~7.1%~~1.8% for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to the reasons provided above.

Table of Contents

Restructuring, Impairment and Transaction-Related Charges

Restructuring, impairment and transaction-related charges for the United States Print and Related Services segment increased ~~$16.7~~$20.8 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to the following:


										Three Months Ended March 31,
		Six Months Ended June 30,								2023	2022		$ Change
			2022		2021		$ Change				(dollars in millions)
Employee termination charges	Employee termination charges		$	0.8	$	6.6	$	(5.8)	Employee termination charges		$	12.8	$	0.5	$	12.3
Impairment charges (a)	Impairment charges (a)		0.1		1.7		(1.6)		Impairment charges (a)		7.5		0.1		7.4

Other restructuring charges (income) (b)			2.4		(21.7)		24.1
Other restructuring charges									Other restructuring charges		2.2		1.1		1.1
Total restructuring, impairment and transaction-related charges	Total restructuring, impairment and transaction-related charges		$	3.3	$	(13.4)	$	16.7	Total restructuring, impairment and transaction-related charges		$	22.5	$	1.7	$	20.8

(a)Includes ~~$0.1~~$7.5 million and ~~$1.7~~$0.1 million of impairment charges for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction ~~and strategic divestiture~~ activities, during the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

~~(b)Includes a $20.9 million gain on the sale of a business and $9.7 million of gains on the sale of Riverside, California and other facilities during the six months ended June 30, 2021.~~

International

The following table summarizes net sales, operating income, operating margin, certain items impacting comparability ~~and equity in loss of unconsolidated entity~~ within the International segment:


		Six Months Ended June 30,
		2022			2021								Three Months Ended March 31,
		(dollars in millions)											2023			2022			$ Change		% Change
		Amount			Amount			$ Change		% Change			(dollars in millions)
Net sales:	Net sales:											Net sales:
Products	Products	$	190.9		$	144.4		$	46.5	32.2	%	Products	$	103.4		$	87.6		$	15.8	18.0	%
Services	Services	10.5			9.8			0.7		7.1	%	Services	5.5			5.5			—		—	%
Operating income (including restructuring, impairment and transaction-related charges)	Operating income (including restructuring, impairment and transaction-related charges)	9.9			4.5			5.4		120.0	%	Operating income (including restructuring, impairment and transaction-related charges)	7.7			3.7			4.0		108.1	%
Operating margin	Operating margin	4.9		%	2.9		%	N/A		N/A		Operating margin	7.1		%	4.0		%	N/A		N/A
Restructuring, impairment and transaction-related charges	Restructuring, impairment and transaction-related charges	$	2.9		$	1.7		$	1.2	70.6	%	Restructuring, impairment and transaction-related charges	$	2.6		$	1.6		$	1.0	62.5	%
Equity in loss of unconsolidated entity		—			0.1			0.1		nm

~~Table of Contents~~

Net Sales

Product sales for the International segment increased ~~$46.5~~$15.8 million, or ~~32.2%~~18.0%, for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, due to a ~~$33.8~~$13.1 million increase in ~~pass-through~~ paper sales, ~~and~~ a ~~$20.6~~$7.1 million increase in print volume, primarily in Mexico and ~~Europe, partially offset by $7.9~~Peru, and $1.2 million in ~~unfavorable~~favorable foreign exchange impacts, primarily in ~~Europe and~~Mexico, partially offset by a $5.6 million decrease in net sales (which includes $1.7 million of paper sales) due to the divestiture of the Company’s print operations in Argentina.

Service sales for the International segment ~~increased $0.7 million, or 7.1%,~~ for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, were flat when compared to the ~~six~~three months ended ~~June 30, 2021, primarily due to an increase in logistics sales in Europe.~~March 31, 2022.

Operating Income

Operating income for the International segment increased ~~$5.4~~$4.0 million, or ~~120.0%~~108.1%, for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to a ~~$6.6~~$5.0 million increase in operating income from increased print volume and pricing and cost saving initiatives, primarily in Mexico, partially offset by a ~~$1.2~~$1.0 million increase in restructuring, impairment and transaction-related charges.

Table of Contents

Restructuring, Impairment and Transaction-Related Charges

Restructuring, impairment and transaction-related charges for the International segment increased ~~$1.2~~$1.0 million, or ~~70.6%~~62.5%, for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to the following:


										Three Months Ended March 31,
		Six Months Ended June 30,								2023	2022		$ Change
			2022		2021		$ Change				(dollars in millions)
Employee termination charges	Employee termination charges		$	0.8	$	0.4	$	0.4	Employee termination charges		$	—	$	0.6	$	(0.6)
Impairment charges (a)									Impairment charges (a)		2.0		—		2.0

Integration costs									Integration costs		0.5		—		0.5

Other restructuring charges (a)			2.1		1.3		0.8
Other restructuring charges (b)									Other restructuring charges (b)		0.1		1.0		(0.9)
Total restructuring, impairment and transaction-related charges	Total restructuring, impairment and transaction-related charges		$	2.9	$	1.7	$	1.2	Total restructuring, impairment and transaction-related charges		$	2.6	$	1.6	$	1.0

(a)Includes ~~$1.7~~$2.0 million of impairment charges for machinery and ~~$0.9~~equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction activities, during the three months ended March 31, 2023.

(b)Includes $0.8 million in charges from foreign currency losses as a result of the economy in Argentina being classified as highly inflationary during the ~~six~~three months ended ~~June 30, 2022 and 2021, respectively.~~March 31, 2022. The Company has considered the economy in Argentina to be highly inflationary since June 30, 2018.

~~Equity in Loss of Unconsolidated Entity~~

Corporate

The following table summarizes unallocated operating expenses presented as Corporate:


		Six Months Ended June 30,
		2022		2021							Three Months Ended March 31,
		(dollars in millions)									2023		2022		$ Change		% Change
		Amount		Amount		$ Change		% Change			(dollars in millions)
Operating expenses (including restructuring, impairment and transaction-related charges)	Operating expenses (including restructuring, impairment and transaction-related charges)	$	22.0	$	23.8	$	(1.8)	(7.6)	%	Operating expenses (including restructuring, impairment and transaction-related charges)	$	14.9	$	10.1	$	4.8	47.5	%
Restructuring, impairment and transaction-related charges	Restructuring, impairment and transaction-related charges	0.6		0.9		(0.3)		(33.3)	%	Restructuring, impairment and transaction-related charges	0.9		0.3		0.6		200.0	%

~~Table of Contents~~

Operating Expenses

Corporate operating expenses ~~decreased $1.8~~increased $4.8 million, or ~~7.6%~~47.5%, for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to ~~the following: (1)~~ a ~~$1.0~~$3.2 million ~~decrease~~increase in employee-related ~~costs; (2)~~costs and a ~~$0.5~~$0.6 million ~~decrease in depreciation and amortization expense; and (3) a $0.3 million decrease~~increase in restructuring, impairment and transaction-related charges.

Restructuring, Impairment and Transaction-Related Charges

Corporate restructuring, impairment and transaction-related charges ~~were~~increased $0.6 million, ~~and $0.9 million~~or 200.0%, for the ~~six~~three months ended ~~June 30,~~March 31, 2023, compared to the three months ended March 31, 2022, ~~and 2021, respectively.~~primarily due to the following:


		Six Months Ended June 30,								Three Months Ended March 31,
			2022		2021		$ Change				2023		2022		$ Change
Employee termination charges	Employee termination charges		$	—	$	0.5	$	(0.5)	Employee termination charges		$	0.3	$	—	$	0.3

Transaction-related charges	Transaction-related charges		0.5		0.4		0.1		Transaction-related charges		0.6		0.2		0.4

Other restructuring charges	Other restructuring charges		0.1		—		0.1		Other restructuring charges		—		0.1		(0.1)
Total restructuring, impairment and transaction-related charges	Total restructuring, impairment and transaction-related charges		$	0.6	$	0.9	$	(0.3)	Total restructuring, impairment and transaction-related charges		$	0.9	$	0.3	$	0.6

Table of Contents

Liquidity and Capital Resources

The Company utilizes cash flows from operating activities and borrowings under its credit facilities to satisfy its liquidity and capital requirements. The Company had total liquidity of ~~$298.3~~$330.1 million as of ~~June 30, 2022,~~March 31, 2023, which consisted of up to ~~$286.5~~$321.4 million of unused capacity under its revolving credit ~~arrangement,~~agreement, which was net of ~~$34.9~~$32.7 million of issued letters of credit, and cash and cash equivalents of $11.8 million. Total liquidity is reduced to $183.2 million under the Company’s most restrictive debt covenants, and consists of $171.4 million available under its revolving credit arrangement and $11.8$8.7 million in cash and cash equivalents. This is under the most restrictive liquidity measure currently applicable under the credit agreement. There were ~~$111.1~~$78.4 million of borrowings under the $432.5 million revolving credit facility as of ~~June 30, 2022.~~March 31, 2023.

The Company believes its expected future cash flows from operating activities and its current liquidity and capital resources, are sufficient to fund ongoing operating requirements and service debt and pension ~~requirements.~~requirements for both the next 12 months and beyond.

Net Cash ~~Provided by (Used in)~~Used in Operating Activities

~~Six~~Three Months Ended ~~June 30, 2022,~~March 31, 2023, Compared to ~~Six~~Three Months Ended ~~June 30, 2021~~March 31, 2022

Net cash used in operating activities increased ~~$112.4~~$33.7 million, from ~~$88.9~~$16.9 million ~~provided by operating activities~~ for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, to ~~$23.5~~$50.6 million ~~used in operating activities~~ for the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023. This increase was due to a ~~$101.9~~$25.9 million increase in cash flows used in changes in operating assets and liabilities ~~primarily due to the strategic decision to carry higher inventory levels to serve clients, higher receivables due to higher net sales and the payment of other current liabilities,~~ and a ~~$10.5~~$7.8 million decrease in cash from earnings.

Net Cash ~~Provided by (Used in)~~Used in Investing Activities

~~Six~~Three Months Ended ~~June 30, 2022,~~March 31, 2023, Compared to ~~Six~~Three Months Ended ~~June 30, 2021~~March 31, 2022

Net cash used in investing activities increased ~~$77.1~~$7.7 million, from ~~$45.9~~$18.7 million for the three months ended March 31, 2022, to $26.4 million for the three months ended March 31, 2023. The increase was primarily due to a $9.6 million increase in purchases of property, plant and equipment and a $6.3 million increase in cash used in other investing activities. These increases were partially offset by a $6.6 million increase in proceeds from the sale of property, plant, and equipment and a $1.6 million decrease in cost investment in unconsolidated entities.

Net Cash Provided by (Used in) Financing Activities

Three Months Ended March 31, 2023, Compared to Three Months Ended March 31, 2022

Net cash provided by financing activities increased $66.4 million, from $6.1 million used in financing activities for the three months ended March 31, 2022, to $60.3 million provided by ~~investing~~financing activities for the ~~six~~three months ended ~~June 30, 2021, to $31.2 million used in investing activities for the six months ended June 30, 2022.~~March 31, 2023. The increase was primarily due to the following: (1) a $39.0 million decrease in proceeds from the sale of a business; (2) a $31.8 million decrease in proceeds from the sale of property, plant, and equipment; (3) a $6.3 million increase in purchases of property, plant and equipment; and (4) a $2.0 million increase in cost investment in unconsolidated entities. These increases were partially offset by a $2.0 million increase in cash provided by other investing activities.

~~Table of Contents~~

~~Net Cash Used in Financing Activities~~

~~Six Months Ended June 30, 2022, Compared to Six Months Ended June 30, 2021~~

Net cash used in financing activities increased $21.7 million, from $91.5 million for the six months ended June 30, 2021, to $113.2 million for the six months ended June 30, 2022. The increase was primarily due to (1) a $29.1$64.7 million increase in net ~~payments~~borrowings of debt and lease obligations; (2) a ~~$1.4~~$1.3 million ~~increase~~decrease in the payment of accrued cash dividends from vested equity awards; and (3) a $0.8 million decrease in equity awards redeemed to pay employees’ tax ~~obligations; and (3)~~obligations. These increases were partially offset by a ~~$0.9~~$0.3 million increase in the purchase of treasury ~~stock. These increases were partially offset by~~stock and a ~~$7.8~~$0.1 million ~~decrease~~increase in cash used in other financing ~~activities and a $1.9 million decrease in changes in ownership of noncontrolling interests.~~activities.

Free Cash Flow

Free Cash Flow is defined as net cash provided by (used in) operating activities less purchases of property, plant and equipment.

The Company’s management assesses Free Cash Flow as a measure to quantify cash available for (1) strengthening the balance sheet (debt reduction), (2) strategic capital allocation and deployment through investments in the business (acquisitions and strategic investments) and (3) returning capital to the shareholders (dividends and share repurchases). The priorities for capital allocation and deployment will change as circumstances dictate for the business, and Free Cash Flow can be significantly impacted by the Company’s restructuring activities and other unusual items.

Free Cash Flow is a non-GAAP financial measure and should not be considered an alternative to cash flows provided by (used in) operating activities as a measure of liquidity. Quad’s calculation of Free Cash Flow may be different from similar calculations used by other companies, and therefore, comparability may be limited.

Table of Contents

Free Cash Flow for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, was as follows:
Six Months Ended June 30,
2022 2021
(dollars in millions)
Net cash provided by (used in) operating activities $ (23.5) $ 88.9
Less: purchases of property, plant and equipment (33.5) (27.2)
Free Cash Flow (Non-GAAP) $ (57.0) $ 61.7


	Three Months Ended March 31,
	2023		2022
	(dollars in millions)
Net cash used in operating activities	$	(50.6)	$	(16.9)

Less: purchases of property, plant and equipment	28.7		19.1


Free Cash Flow (non-GAAP)	$	(79.3)	$	(36.0)

Free Cash Flow decreased ~~$118.7~~$43.3 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to a ~~$112.4~~$33.7 million increase in net cash used in operating activities and a ~~$6.3~~$9.6 million increase in capital expenditures. See the “Net Cash ~~Provided by (Used in)~~Used in Operating Activities” section above for further explanations of the change in operating cash flows and the “Net Cash ~~Provided by (Used in)~~Used in Investing Activities” section above for further explanations of the changes in purchases of property, plant and equipment.

Debt Leverage Ratio

The Debt Leverage Ratio is defined as total debt and finance lease obligations less cash and cash equivalents (Net Debt) divided by the trailing twelve months Adjusted EBITDA, comprised of the sum of the ~~following: (1) the~~ last twelve months of EBITDA (see the definition of EBITDA and the reconciliation of net earnings ~~(loss)~~ to EBITDA in the “Results of Operations” section above)~~; (2)~~ and restructuring, impairment and transaction-related charges; (3) gain from sale and leaseback; (4) loss on debt extinguishment; (5) equity in (earnings) loss of unconsolidated entity; and (6) Adjusted EBITDA for unconsolidated equity method investments (calculated in a consistent manner with the calculation for Quad).charges.

~~Table of Contents~~

The Company uses the Debt Leverage Ratio as a metric to assess liquidity and the flexibility of its balance sheet. Consistent with other liquidity metrics, the Company monitors the Debt Leverage Ratio as a measure to determine the appropriate level of debt the Company believes is optimal to operate its business, and accordingly, to quantify debt capacity available for strengthening the balance sheet through debt and pension liability reduction, for strategic capital allocation and deployment through investments in the business, and for returning capital to ~~the~~ shareholders. The priorities for capital allocation and deployment will change as circumstances dictate for the business, and the Debt Leverage Ratio can be significantly impacted by the amount and timing of large expenditures requiring debt financing, as well as changes in profitability.

The Debt Leverage Ratio is a non-GAAP measure and should not be considered an alternative to cash flows provided by (used in) operating activities as a measure of liquidity. Quad’s calculation of the Debt Leverage Ratio may be different from similar calculations used by other companies and, therefore, comparability may be limited.

The Debt Leverage Ratio calculated below differs from the Total Leverage Ratio, the Total Net Leverage Ratio and ~~the~~ Senior Secured Leverage Ratio included in the Company’s debt covenant calculations (see “Covenants and Compliance” section below for further information on debt covenants). The Total Leverage Ratio included in the Company’s debt covenants includes interest rate ~~swap~~derivative liabilities, letters of credit and surety bonds as debt and excludes non-cash stock-based compensation expense from EBITDA. The Total Net Leverage Ratio includes and excludes the same adjustments as the Total Leverage Ratio, in addition to netting domestic unrestricted cash with debt. Similarly, the Senior Secured Leverage Ratio includes and excludes the same adjustments as the Total Leverage Ratio, in addition to the exclusion of the outstanding balance of the surety bonds from debt and netting domestic unrestricted cash with debt.

~~The Debt Leverage Ratio at June 30, 2022, and December 31, 2021, was as follows:~~
June 30,
2022 December 31,
2021
(dollars in millions)
Total debt and finance lease obligations on the condensed consolidated balance sheets $ 695.9 $ 803.7
Less: Cash and cash equivalents 11.8 179.9
Net Debt (Non-GAAP) $ 684.1 $ 623.8
Divided by: Adjusted EBITDA (Non-GAAP) $ 231.9 $ 260.5
Debt Leverage Ratio—Net Debt (Non-GAAP) 2.95 x 2.39 x

5040

Table of Contents

The Debt Leverage Ratio at March 31, 2023, and December 31, 2022, was as follows:


	March 31, 2023			December 31, 2022
	(dollars in millions)
Total debt and finance lease obligations on the condensed consolidated balance sheets	$	640.2		$	570.2
Less: Cash and cash equivalents	8.7			25.2
Net Debt (non-GAAP)	$	631.5		$	545.0

Divided by: Adjusted EBITDA (non-GAAP)	$	263.7		$	252.2

Debt Leverage Ratio—Net Debt (non-GAAP)	2.39		x	2.16		x

The calculation of Adjusted EBITDA for the trailing twelve months ended ~~June 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, was as follows:


				Add		Subtract		Trailing Twelve Months Ended					Add		Subtract		Trailing Twelve Months Ended
		Year Ended		Six Months Ended							Year Ended		Three Months Ended
		December 31, 2021 (1)		June 30, 2022		June 30, 2021		June 30, 2022			December 31, 2022 (1)		March 31, 2023		March 31, 2022		March 31, 2023
Net earnings (loss)	Net earnings (loss)	$	37.8	$	4.3	$	44.6	$	(2.5)	Net earnings (loss)	$	9.3	$	(24.6)	$	(1.0)	$	(14.3)
Interest expense	Interest expense	59.6		20.2		30.1		49.7		Interest expense	48.4		16.3		9.3		55.4
Income tax expense	Income tax expense	9.5		1.4		1.8		9.1		Income tax expense	8.4		8.8		0.3		16.9
Depreciation and amortization	Depreciation and amortization	157.3		71.8		80.6		148.5		Depreciation and amortization	141.3		33.7		36.5		138.5
EBITDA (Non-GAAP)		$	264.2	$	97.7	$	157.1	$	204.8
EBITDA (non-GAAP)										EBITDA (non-GAAP)	$	207.4	$	34.2	$	45.1	$	196.5
Restructuring, impairment and transaction-related charges	Restructuring, impairment and transaction-related charges	18.9		6.8		(10.8)		36.5		Restructuring, impairment and transaction-related charges	44.8		26.0		3.6		67.2

Gains from sale and leaseback		(24.5)		—		(13.7)		(10.8)
Loss on debt extinguishment		0.7		—		—		0.7
Other (2)		1.2		—		0.5		0.7
Adjusted EBITDA (Non-GAAP) (3)		$	260.5	$	104.5	$	133.1	$	231.9

Adjusted EBITDA (non-GAAP)										Adjusted EBITDA (non-GAAP)	$	252.2	$	60.2	$	48.7	$	263.7

(1)Financial information for the year ended December 31, ~~2021,~~2022, is included as reported in the Company’s ~~2021~~2022 Annual Report on Form 10-K filed with the SEC on February ~~23, 2022.~~

~~(2)Other is comprised of equity in loss of unconsolidated entity and Adjusted EBITDA for unconsolidated equity method investments.~~

~~(3)The Company made a change in its definition of Adjusted EBITDA to include net pension income. This change is reflected in both periods presented.~~27, 2023.

The Debt Leverage Ratio at ~~June 30, 2022,~~March 31, 2023, increased ~~0.56x,~~0.23x, compared to December 31, ~~2021,~~2022, primarily due to a ~~$60.3~~$86.5 million increase in Net Debt, ~~and a $28.6~~partially offset by an $11.5 million ~~reduction~~increase in trailing twelve months Adjusted ~~EBITDA.~~EBITDA. The Debt Leverage Ratio at ~~June 30, 2022,~~March 31, 2023, is ~~above~~within management’s desired target Debt Leverage Ratio range of 2.0x to 2.5x; however, the Company ~~expects to operate above the Debt Leverage Ratio target range due to the impacts from supply chain disruptions, cost inflation and labor shortages. The Company~~ will ~~also~~ operate at times above the Debt Leverage Ratio target range depending on the timing of compelling strategic investment opportunities, as well as seasonal working capital needs.

Debt Obligations

As of ~~June 30, 2022,~~March 31, 2023, the Company utilized a combination of debt instruments to fund cash requirements, including the following:

•Senior Secured Credit Facility:

◦Revolving credit facility ($~~111.1~~78.4 million outstanding as of ~~June 30, 2022)~~March 31, 2023); and

◦Term Loan A ($~~569.4~~549.9 million outstanding as of ~~June 30, 2022)~~March 31, 2023);

•Master Note and Security Agreement ($~~4.4~~3.9 million outstanding as of ~~June 30, 2022)~~March 31, 2023).

Table of Contents

Covenants and Compliance

The Company’s various lending arrangements include certain financial covenants (all financial terms, numbers and ratios are as defined in the Company’s debt ~~agreements, as amended to date)~~agreements). Among these covenants, the Company was required to maintain the following as of ~~June 30, 2022:~~March 31, 2023:

•Total Leverage Ratio. On a rolling twelve-month basis, the Total Leverage Ratio, defined as consolidated total indebtedness to consolidated EBITDA, shall not exceed 3.75 to 1.00 (for the twelve months ended ~~June 30, 2022,~~March 31, 2023, the Company’s Total Leverage Ratio was ~~2.95~~2.39 to 1.00).

~~Table of Contents~~

•Liquidity, defined as unrestricted cash and permitted investments of the Company and its subsidiaries (subject to certain conditions) plus the aggregate amount of the unused revolving credit facility commitments, shall not be less than $181.6 million at any time during the period commencing December 15, 2023 and ending when all obligations owed under the Senior Secured Credit Facility to lenders that are not extending lenders are paid in full.

•If there is any amount outstanding on the Revolving Credit Facility or Term Loan A, or if any lender has any revolving credit exposure or Term Loan A credit exposure, the Company is required to maintain the following:

◦Senior Secured Leverage Ratio. On a rolling four-quarter basis, the Senior Secured Leverage Ratio, defined as the ratio of consolidated senior secured net indebtedness to consolidated EBITDA, shall not exceed (a) 3.50 to 1.00 for any fiscal quarter ending prior to December 31, 2023, and (b) 3.25 to 1.00 for any fiscal quarter ending on or after December 31, 2023 (other than, in the case of this clause (b), any fiscal quarter ending September 30 of any year, each of which shall be subject to a maximum Senior Secured Leverage Ratio not to exceed 3.50 to 1.00) (for the twelve months ended ~~June 30, 2022,~~March 31, 2023, the Company’s Senior Secured Leverage Ratio was ~~2.94~~2.37 to 1.00).

◦Interest Coverage Ratio. On a rolling twelve-month basis, the Interest Coverage Ratio, defined as consolidated EBITDA to cash consolidated interest expense, shall not be less than 3.00 to 1.00 (for the twelve months ended ~~June 30, 2022,~~March 31, 2023, the Company’s Interest Coverage Ratio was ~~5.69~~5.33 to 1.00).

The Company was in compliance with all financial covenants in its debt agreements as of ~~June 30, 2022.~~March 31, 2023. While the Company currently expects to be in compliance in future periods with all of the financial covenants, there can be no assurance that these covenants will continue to be met. The Company’s failure to maintain compliance with the covenants could prevent the Company from borrowing additional amounts and could result in a default under any of the debt agreements. Such default could cause the outstanding indebtedness to become immediately due and payable, by virtue of cross-acceleration or cross-default provisions.

In addition to those covenants, the Senior Secured Credit Facility also includes certain limitations on acquisitions, indebtedness, liens, dividends and repurchases of capital stock.

•If the Company’s Total Leverage Ratio is greater than 2.75 to 1.00, the Company is prohibited from making greater than $60.0 million of dividend payments, capital stock repurchases and certain other payments, over the course of the agreement. If the Company’s Total Leverage Ratio is above 2.50 to 1.00 but below 2.75 to 1.00, the Company is prohibited from making greater than $100.0 million of dividend payments, capital stock repurchases and certain other payments, over the course of the agreement. If the Total Leverage Ratio is less than 2.50 to 1.00, there are no such restrictions. As the Company’s Total Leverage Ratio as of ~~June 30, 2022,~~March 31, 2023, was ~~2.95~~2.39 to 1.00, the limitations described above are not currently applicable.

•If the Company’s Senior Secured Leverage Ratio is greater than 3.00 to 1.00 or the Company’s Total Net Leverage Ratio which, on a rolling twelve-month basis, is defined as consolidated net indebtedness to consolidated EBITDA, is greater than 3.50 to 1.00, the Company is prohibited from voluntarily prepaying any unsecured or subordinated indebtedness, with certain exceptions (including any mandatory prepayments on any unsecured or subordinated debt). If the Senior Secured Leverage Ratio is less than 3.00 to 1.00 and the Total Net Leverage Ratio is less than 3.50 to 1.00, there are no such restrictions. The limitations described above are not currently ~~not~~ applicable, as the Company’s Senior Secured Leverage Ratio was ~~2.94~~2.37 to 1.00 and the Total Net Leverage Ratio was ~~2.95~~2.38 to 1.00, as of ~~June 30, 2022.~~March 31, 2023.

Table of Contents

Share Repurchase Program

On July 30, 2018, the Company’s Board of Directors authorized a share repurchase program of up to $100.0 million of the Company’s outstanding class A common stock. Under the authorization, share repurchases may be made at the Company’s discretion, from time to time, in the open market and/or in privately negotiated transactions as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchase will depend on economic and market conditions, share price, trading volume, applicable legal requirements and other factors. The program may be suspended or discontinued at any time.

~~Table of Contents~~

During the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, the Company repurchased ~~290,123~~64,271 shares of its Class A common stock at a weighted average price of ~~$3.05~~$3.98 per share for a total purchase price of ~~$0.9~~$0.3 million. There were no shares repurchased during the three ~~and six~~ months ended ~~June 30, 2021.~~March 31, 2022. As of ~~June 30, 2022,~~March 31, 2023, there were ~~$99.1~~$89.8 million of authorized repurchases remaining under the program.

Risk Management

For a discussion of the Company’s exposure to market risks and management of those market risks, see Item 3, “Quantitative and Qualitative Disclosures About Market Risk,” of this Quarterly Report on Form 10-Q.

Contractual Obligations

As of ~~June 30, 2022,~~March 31, 2023, the Company’s contractual obligations have not changed materially from that listed in the “Contractual Obligations and Other Commitments” table and related notes to the table listed in the Company’s Annual Report on Form 10-K filed on February ~~23, 2022.~~27, 2023.

New Accounting Pronouncements

~~See Note 16, “New Accounting Pronouncements,” to~~As of March 31, 2023, there have been no new accounting pronouncements requiring disclosure within the condensed consolidated financial statements ~~in Item 1, “Condensed Consolidated Financial Statements (Unaudited),”~~ of this Quarterly Report on Form 10-Q.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to a variety of market risks which may adversely impact the Company’s results of operations and financial condition, including changes in interest and foreign currency exchange rates, changes in the economic environment that would impact credit positions and changes in the prices of certain commodities. The Company’s management takes an active role in the risk management process and has developed policies and procedures that require specific administrative and business functions to assist in the identification, assessment and control of various risks. These risk management strategies may not fully insulate the Company from adverse impacts due to market risks.

Interest Rate Risk

The Company is exposed to interest rate risk on variable rate debt obligations and price risk on fixed rate debt and finance leases. The variable rate debt outstanding at ~~June 30, 2022,~~March 31, 2023, was primarily comprised of ~~$569.4~~$549.9 million outstanding on the Term Loan A. As of March 31, 2023, there was also $78.4 million outstanding on the revolving credit facility. In order to reduce the variability of cash flows from interest payments related to a portion of Quad’s variable-rate debt, the Company entered into a ~~$250.0 million interest rate swap in February 2017 (which terminated on February 28, 2022) and a~~ $130.0 million interest rate swap in March 2019, and ~~considers $130.0~~two $75.0 million interest rate collars in February 2023, and has classified $280.0 million of the Company’s variable rate debt as fixed rate debt. Including the impact of the ~~$130.0~~$280.0 million interest rate ~~swap~~hedges of variable rate to fixed rate debt, Quad had variable rate debt outstanding of ~~$555.7~~$342.2 million at a current weighted average interest rate of ~~3.5%~~7.1% and fixed rate debt and finance leases outstanding of ~~$140.2~~$298.1 million at a current weighted average interest rate of ~~4.9%~~6.1% as of ~~June 30, 2022.~~March 31, 2023. A hypothetical 10% increase in the market interest rates impacting the Company’s current weighted average interest rate on variable rate debt obligations would not have a material impact on the Company’s interest expense. In addition, a hypothetical 10% change in market interest rates would change the fair value of fixed rate debt at ~~June 30, 2022,~~March 31, 2023, by approximately $0.1 million.

Table of Contents

Foreign Currency Risk and Translation Exposure

The Company is exposed to the impact of foreign currency fluctuations in certain countries in which it operates. The exposure to foreign currency movements is limited in most countries because the operating revenues and expenses of its various subsidiaries and business units are substantially in the local currency of the country in which they operate. To the extent revenues and expenses are not in the applicable local currency, the Company may enter into foreign exchange forward contracts to hedge the currency risk.

~~Table of Contents~~

Although operating in local currencies may limit the impact of currency rate fluctuations on the results of operations of the Company’s non-United States subsidiaries and business units, rate fluctuations may impact the consolidated financial position as the assets and liabilities of its foreign operations are translated into ~~United States~~U.S. dollars in preparing the Company’s condensed consolidated balance sheets. As of ~~June 30, 2022,~~March 31, 2023, the Company’s foreign subsidiaries ~~(excluding Argentina due to the economy’s status as highly inflationary)~~ had net current assets (defined as current assets less current liabilities) subject to foreign currency translation risk of ~~$63.0~~$104.4 million. The potential decrease in net current assets as of ~~June 30, 2022,~~March 31, 2023, from a hypothetical 10% adverse change in quoted foreign currency exchange rates, would be approximately ~~$6.3~~$10.4 million. This sensitivity analysis assumes a parallel shift in all major foreign currency exchange rates versus the ~~United States~~U.S. dollar. Exchange rates rarely move in the same direction relative to the ~~United States~~U.S. dollar due to positive and negative correlations of the various global currencies. This assumption may overstate or understate the impact of changing exchange rates on individual assets and liabilities denominated in a foreign currency.

The Company’s hedging operations have historically not been material, and gains or losses from these operations have not been material to the Company’s results of operations, financial position or cash flows. The Company does not use derivative financial instruments for trading or speculative purposes.

These international operations are subject to risks typical of international operations, including, but not limited to, differing economic conditions, changes in political climate, potential restrictions on the movement of funds, differing tax structures, and other regulations and restrictions. Accordingly, future results could be adversely impacted by changes in these or other factors.

~~The Company has considered the economy in Argentina to be highly inflationary, effective June 30, 2018. In accordance with Accounting Standards Codification 830 —~~ ~~Foreign Currency Matters~~, a highly inflationary economy is one that has experienced cumulative inflation of approximately 100 percent or more over a three-year period. An entity is required to apply the revised accounting guidance in the reporting period following when the economy was deemed to be highly inflationary. As a result of this classification, the functional currency of the Company’s Argentina subsidiaries was changed from the local currency to the United States Dollar, beginning July 1, 2018, and impacts from the change in the value of the local currency for monetary assets and liabilities is now reflected in the condensed consolidated statements of operations. The total impact from foreign currency losses was $0.9 million and $1.7 million during the three and six months ended June 30, 2022, respectively. The Company’s operations in Argentina represented less than 1.0% of total consolidated assets as of June 30, 2022, and less than 1.0% of total consolidated net sales for the three and six months ended June 30, 2022.

Credit Risk

Credit risk is the possibility of loss from a client’s failure to make payments according to contract terms. Prior to granting credit, each client is evaluated in an underwriting process, taking into consideration the prospective client’s financial condition, past payment experience, credit bureau information and other financial and qualitative factors that may affect the client’s ability to pay. Specific credit reviews and standard industry credit scoring models are used in performing this evaluation. Clients’ financial condition is continuously monitored as part of the normal course of business. Some of the Company’s clients are highly leveraged or otherwise subject to their own operating and regulatory risks. Based on those client account reviews and the continued uncertainty of the global economy, the Company has established an allowance for credit losses of ~~$29.1~~$26.8 million as of ~~June 30, 2022,~~March 31, 2023, and ~~$28.2~~$26.4 million as of December 31, ~~2021.~~2022.

The Company has a large, diverse client base and does not have a high degree of concentration with any single client account. During the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, the Company’s largest client accounted for less than 5% of the Company’s net sales. Even if the Company’s credit review and analysis mechanisms work properly, the Company may experience financial losses in its dealings with clients and other parties. Any increase in nonpayment or nonperformance by clients could adversely impact the Company’s results of operations and financial condition. Economic disruptions ~~including the impacts from the supply chain shortages, higher than expected inflation, the COVID-19 pandemic, and direct and indirect impacts from the war in Ukraine~~ could result in significant future charges. ~~The Company is continuing to actively monitor these situation and related risks.~~

5444

Table of Contents

Commodity Risk

The primary raw materials that the Company uses in its print business are paper, ink and energy. At this time, the Company’s supply of raw materials are available from numerous vendors; however, based on market conditions, the current supply is under pressure due to supply chain shortages and higher than expected inflation. The Company generally buys these raw materials based upon market prices that are established with the vendor as part of the procurement process. The price of such raw materials has fluctuated over time and has caused fluctuations in the Company’s net sales and cost of sales. This volatility may continue and the Company may experience increases in the costs of its raw materials in the future as prices in the overall paper, ink and energy markets are expected to remain beyond its control. The price and availability of paper may also be adversely affected by paper mills’ permanent or temporary closures, and mills’ access to raw materials, conversion to produce other types of paper, and ability to transport paper produced.

Approximately half of the paper used by the Company is supplied directly by its clients. For those clients that do not directly supply their own paper, the Company makes use of its purchasing efficiencies to supply paper by negotiating with leading paper vendors, uses a wide variety of paper grades, weights and sizes, and does not rely on any one vendor. In addition, the Company generally includes price adjustment clauses in sales contracts for paper and other critical raw materials in the printing process. Although these clauses generally mitigate paper price risk, higher paper prices and tight paper supplies, as well as changes in the United States import or trade regulations may have an impact on client demand for printed products. The Company’s working capital requirements, including the impact of seasonality, are partially mitigated through the direct purchasing of paper by its clients.

The Company produces the majority of ink used in its print production, allowing it to control the quality, cost and supply of key inputs. Raw materials for the ink manufacturing process are purchased externally from a variety of vendors. The price and availability of ink and ink components may be adversely affected by the availability of component raw materials, labor and transportation.

The Company ~~generally cannot~~may not be able to fully pass on to clients the impact of higher electric and natural gas energy prices on its manufacturing costs, and increases in energy prices result in higher manufacturing costs for certain of its operations. The Company mitigates its risk through natural gas hedges when appropriate. In its logistics operations, however, the Company is able to pass a substantial portion of any increase in fuel prices directly to its clients.

To the extent the cost of other raw materials increase and the Company is not able to increase selling prices of its products, then the Company may experience margin declines.

As a result, management believes a hypothetical 10% change in the price of paper and other raw materials would not have a significant direct impact on the Company’s consolidated annual results of operations or cash flows; however, significant increases in commodity pricing or tight supply could influence future client demand for printed products.

ITEM 4. Controls and Procedures

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report and has concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the fiscal quarter ended ~~June 30, 2022,~~March 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

5545

Table of Contents

PART II — OTHER INFORMATION

ITEM 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, which was filed with the SEC on February ~~23, 2022.~~27, 2023.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)None.

(b)Not applicable.

(c)Information about the Company’s repurchases of its class A common stock in the quarter ended ~~June 30, 2022,~~March 31, 2023, was as follows:

Issuer Purchases of Equity Securities
Period
Total Number of Shares Purchased(1)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)
Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(3)
April 1, 2022 to April 30, 2022 6,240 (2) — — $ 100,000,000
May 1, 2022 to May 31, 2022 — — — 100,000,000
June 1, 2022 to June 30, 2022 290,123 3.05 290,123 99,115,065
Total 296,363 290,123


	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased(1)		Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2)
January 1, 2023 to January 31, 2023	—		—	—	90,061,874
February 1, 2023 to February 28, 2023	—		—	—	90,061,874
March 1, 2023 to March 31, 2023	403,844	(3)	3.98	64,271	89,805,953
Total	403,844			64,271

_____________________________

(1)Represents shares of the Company’s class A common stock.

(2)Represents 6,240 shares of class A common stock transferred from employees to the Company to satisfy tax withholding requirements in connection with the vesting of restricted stock under the Company’s Omnibus Incentive Plans during the month of April 2022.

~~(3)~~On July 30, 2018, the Company’s Board of Directors authorized a share repurchase program of up to $100.0 million of the Company’s outstanding class A common stock. Under the authorization, share repurchases may be made at the Company’s discretion, from time to time, in the open market and/or in privately negotiated transactions as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchase will depend on economic and market conditions, share price, trading volume, applicable legal requirements and other factors. The program may be suspended or discontinued at any time. There were ~~290,123~~64,271 shares repurchased during the three months ended ~~June 30, 2022.~~March 31, 2023. As of ~~June 30, 2022,~~March 31, 2023, there were ~~$99.1~~$89.8 million of authorized repurchases remaining under the program.

(3)Includes 339,573 shares of class A common stock transferred from employees to the Company to satisfy tax withholding requirements in connection with the vesting of restricted stock under the Company’s Omnibus Incentive Plans during the month of March 2023.

See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Covenants and Compliance,” of this Quarterly Report on Form 10-Q, for a discussion of covenants under the Company’s debt agreements that may restrict the Company’s ability to pay dividends.

5646

Table of Contents

ITEM 6. Exhibits

The exhibits listed in the exhibit index below are filed as part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX


Exhibit Number						Exhibit Description





(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 ~~June 30, 2022~~March 31, 2023 formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) the Condensed Consolidated Statements of Operations (Unaudited), (ii) the Condensed Consolidated Statements of Comprehensive Income (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.

(104)						Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101).

5747

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

QUAD/GRAPHICS, INC.

Date:

~~August~~May 3, ~~2022~~2023

By:

/s/ J. Joel Quadracci

J. Joel Quadracci

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

Date:

~~August~~May 3, ~~2022~~2023

By:

/s/ Anthony C. Staniak

Anthony C. Staniak

Chief Financial Officer

(Principal Financial Officer)

5848


			Page No.

PART I	FINANCIAL INFORMATION		3

	ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	3

		Condensed Consolidated Statements of Operations (Unaudited)	3

		Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	4

		Condensed Consolidated Balance Sheets (Unaudited)	5

		Condensed Consolidated Statements of Cash Flows (Unaudited)	6

		Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)	7

		Notes to Condensed Consolidated Financial Statements (Unaudited)	8

	ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2523

	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	5343

	ITEM 4.	Controls and Procedures	5545

PART II	OTHER INFORMATION		5546



	ITEM 1A.	Risk Factors	5646

	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5646

	ITEM 6.	Exhibits	5747

	Signatures		5848


	Translation Adjustments		Interest Rate Swap Adjustments		Pension Benefit Plan Adjustments		Total
Balance at December 31, 2021	$	(143.1)	$	(6.7)	$	(11.4)	$	(161.2)
Other comprehensive income (loss) before reclassifications	(5.2)		—		—		(5.2)
Amounts reclassified from accumulated other comprehensive loss to net earnings	—		1.7		—		1.7
Net other comprehensive income (loss)	(5.2)		1.7		—		(3.5)
Balance at June 30, 2022	$	(148.3)	$	(5.0)	$	(11.4)	$	(164.7)