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What changed in Quad/Graphics, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Quad/Graphics, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+383 added−469 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-27)

Top changes in Quad/Graphics, Inc.'s 2023 10-K

383 paragraphs added · 469 removed · 270 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

77 edited+85 added−133 removed20 unchanged
Biggest changeAccordingly, the Company heavily invests in efforts to attract, develop and retain employees, and in tools, technologies, processes, training and education to increase engagement, and drive productivity enhancements and efficiencies across the entire organization. 13 Table o f Contents As of December 31, 2022, the Company had approximately 15,300 full-time equivalent (“FTE”) employees in the following geographies: Geographic Region Number of FTE Employees North America (Includes Mexico, Central America and the Caribbean) 12,700 Europe, Middle East and Africa 1,800 South America 700 Asia 100 The ways in which Quad attracts, develops and retains highly qualified talent to accelerate the Company’s growth as a marketing experience company include the following: • Embracing forward-thinking workplace practices, such as flexible work models; implementing innovative talent acquisition strategies to meet labor and business needs; and providing training and reward programs. • Creating jobs with competitive pay and innovative benefits that support families, strengthen communities and provide long-term career growth opportunities.
Biggest changeAttracting, Developing and Retaining Highly Qualified Talent Given Quad’s belief that its talent stands as a major differentiator among its competition, the Company invests heavily in efforts to attract, develop and retain employees, and in tools, technologies, processes, training and education to increase engagement, and drive productivity enhancements and efficiencies across the entire organization. 9 Table of Contents As of December 31, 2023, the Company had approximately 13,150 full-time equivalent (“FTE”) employees in the following geographies: Geographic Region Number of FTE Employees North America (Includes Mexico, Central America and the Caribbean) 10,800 Europe, Middle East and Africa 1,575 South America 750 Asia 25 Quad focuses on the following key areas to attract, develop and retain highly qualified talent: • Competitive Pay and Innovative Benefits: Employees are hired into jobs with competitive wages and innovative benefits.
The fourth quarter is typically the highest seasonal quarter for cash flows from operating activities and Free Cash Flow due to the reduction of working capital requirements that reach peak levels during the third quarter. Seasonality is driven by increased retail inserts and catalogs primarily due to back-to-school and holiday-related advertising and promotions.
The fourth quarter is typically the highest seasonal quarter for cash flows from operating activities and Free Cash Flow due to the reduction of working capital requirements that reach peak levels during the third quarter. Seasonality is driven by increased catalogs and retail inserts primarily due to back-to-school and holiday-related advertising and promotions.
Honan served as Vice President, General Manager and Chief Financial Officer of Journal Community Publishing Group, a subsidiary of diversified media company Journal Communications Inc., for five years, and executive-level roles in investor relations and corporate development at Newell Rubbermaid, a global marketer of consumer and commercial products. Prior thereto, Mr.
Honan served as Vice President, General Manager and Chief Financial Officer of Journal Community Publishing Group, a subsidiary of diversified media company Journal Communications Inc., for five years, and held executive-level roles in investor relations and corporate development at Newell Rubbermaid, a global marketer of consumer and commercial products. Prior thereto, Mr.
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.
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 point in time.
Golden served as Vice President, Global Digital Marketing of Xerox from March 2015 to June 2016; as Chief Marketing Officer of Story Worldwide from September 2011 to March 2015; as Chief Digital Officer of Grey Group from September 2010 to September 2011; as Managing Director, Digital of Havas from December 2007 to September 2010; as Group Director of Digital Marketing of NBC Universal from January 2006 to December 2007; and as Head of Digital Division at Young & Rubicam from November 2000 to January 2006.
Golden served as Vice President, Global Digital Marketing for Xerox from March 2015 to June 2016; as Chief Marketing Officer of Story Worldwide from September 2011 to March 2015; as Chief Digital Officer of Grey Group from September 2010 to September 2011; as Managing Director, Digital of Havas from December 2007 to September 2010; as Group Director of Digital Marketing for NBC Universal from January 2006 to December 2007; and as Head of Digital at Young & Rubicam from November 2000 to January 2006.
Ms. Currie serves on the board of Boys & Girls Club of Lake County, Illinois. Mr. Golden has served as Chief Marketing Officer since joining Quad in July 2021. Prior to joining Quad, Mr. Golden was the President & Publisher of Ad Age from 2016 to 2021. Prior thereto, Mr.
Ms. Currie serves on the board of directors of the Boys & Girls Club of Lake County, Illinois. Mr. Golden has served as Chief Marketing Officer since July 2021. Prior to joining Quad, Mr. Golden was the President & Publisher of Ad Age from 2016 to 2021. Prior thereto, Mr.
Quadracci received a B.A. in Philosophy from Skidmore College in 1991. Mr. Quadracci is the brother of Kathryn Quadracci Flores, M.D., a director of Quad and President of QuadMed, the brother-in-law of Christopher B. Harned, a director of Quad, and the first cousin of Robert Quadracci, Chief Human Resources Officer. Quad believes that Mr.
Quadracci received a B.A. in Philosophy from Skidmore College in 1991. Mr. Quadracci is the brother of Kathryn Quadracci Flores, M.D., a director of Quad and President of QuadMed, the brother-in-law of Christopher B. Harned, a director of Quad, and the first cousin of Robert Quadracci, Chief Human Resources Officer. Mr.
Bauer held various accounting positions at Journal Communications, Inc., during her 18 years there, including Vice President and Controller from June 2000 until September 2011. Ms. Currie has served as Executive Vice President and Chief Revenue Officer since November 2020. She previously served as Executive Consultant of FCM, LLC from 2019 to 2020. Prior thereto, Ms.
Bauer held various accounting positions at Journal Communications, Inc., during her 18 years there, including Vice President and Controller from June 2000 until September 2011. 16 Table of Contents Ms. Currie has served as Executive Vice President and Chief Revenue Officer since November 2020. She previously served as Executive Consultant of FCM, LLC from 2019 to 2020. Prior thereto, Ms.
For example, the Company has its own prepress/pre-media services, paper procurement, ink manufacturing (through subsidiary Chemical Research/Technology), and logistics and transportation services (through its in-house Quad Transportation Services division and Duplainville Transport trucking division), which the Company leverages to lower costs and enhance customer service for its clients while providing Quad with substantial control over critical links in the overall print supply chain.
For example, the Company has its own prepress/premedia services, paper procurement, ink manufacturing (through its subsidiary Chemical Research/Technology), and logistics and transportation services (through its in-house Quad Transportation Services division and Duplainville Transport trucking division), which it leverages to lower costs and enhance customer service for its clients while providing Quad with substantial control over critical links in the overall print supply chain.
Staniak 50 Chief Financial Officer Kelly A. Vanderboom 48 Executive Vice President and Treasurer; Head of Agency Operations and Logistics Mr. J. Joel Quadracci has been a director of Quad since 2003, its President since January 2005, its President and Chief Executive Officer since July 2006 and its Chairman, President and Chief Executive Officer since January 2010. Mr.
Staniak 51 Chief Financial Officer Kelly A. Vanderboom 49 Executive Vice President and Treasurer; Head of Agency Operations and Logistics Mr. J. Joel Quadracci has been a director of Quad since 2003, its President since January 2005, its President and Chief Executive Officer since July 2006 and its Chairman, President and Chief Executive Officer since January 2010. Mr.
Corporate Governance Effective corporate governance has been a part of Quad since its founding and is informed by the Company’s Values, especially Do the Right Thing, which strengthens partnerships, reduces risk and creates sustainable value for the long term.
Corporate Governance Effective corporate governance has been a part of Quad since its founding and is informed by the Company’s Values, especially “do the right thing,” which strengthens partnerships, reduces risk and creates sustainable value for the Company long term.
Raw materials for the ink manufacturing process are purchased externally from a variety of vendors. 18 Table o f Contents The Company 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.
Raw materials for the ink manufacturing process are purchased externally from a variety of vendors. The Company 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.
Ashworth is a board member of Uniting Voices Chicago (formerly Chicago Children’s Choir) and The BrandLab, a nonprofit organization that works to increase diversity in the marketing industry. 19 Table o f Contents Ms. Bauer has served as Vice President since January 2022 and Chief Accounting Officer since March 2017.
Ashworth is a board member of Uniting Voices Chicago (formerly Chicago Children’s Choir) and The BrandLab, a nonprofit organization that works to increase diversity in the marketing industry. Ms. Bauer has served as Vice President since January 2022 and Chief Accounting Officer since March 2017.
Seasonality Quad is subject to seasonality in its quarterly results as net sales and operating income are higher in the third and fourth quarters of the calendar year as compared to the first and second quarters.
Seasonality Quad is subject to seasonality in its quarterly results as net sales and operating income are higher in the second half of the calendar year as compared to the first half of the calendar year.
Quad believes it will be able to maintain its leading competitive position through its consistent long-term business strategy driven by dedicated and passionate employees, and by providing stability and innovative solutions for clients into the future. More information regarding Quad is available on the Company’s website at QUAD.com .
Quad believes it will be able to maintain a leading competitive position through its consistent long-term business 2 Table of Contents strategy, which is driven by dedicated, passionate and highly skilled employees, and by providing stability and innovative solutions for clients into the future. More information regarding Quad is available on the Company’s website at quad.com .
Quadracci worked at Edison International from 1992 to 1999 as a Project Manager, Workforce Management and Corporate Redeployment. Mr. Quadracci is the first cousin of J. Joel Quadracci, Chairman, President and Chief Executive Officer of Quad, and Kathryn Quadracci, M.D., a director of Quad and President of QuadMed. Mr.
Quadracci worked at Edison International as a Project Manager, Workforce Management and Corporate Redeployment from 1992 to 1999. Mr. Quadracci is the first cousin of J. Joel Quadracci, Chairman, President and Chief Executive Officer of Quad, and Kathryn Quadracci Flores, M.D., a director of Quad and President of QuadMed. Mr. Staniak has served as Chief Financial Officer since January 2022.
Competition in the commercial printing industry is based on the total price of printing, materials and distribution; availability of materials, including paper, which may be more limited in the future as a number of mills reduce graphic paper production capacity in favor of other product lines, such as packaging; quality; distribution capabilities; customer service; access to a highly skilled workforce; availability of labor; availability to schedule work on appropriate equipment; on-time production and delivery; and state-of-the-art technology to meet a client’s business objectives.
Commercial Printing The commercial printing industry also remains highly fragmented, with competition based on pricing; availability of materials, including paper (which may be more limited in the future as a number of mills reduce graphic paper production capacity in favor of other product lines, such as packaging); quality; distribution capabilities; customer service; access to labor, especially highly skilled labor; availability to schedule work on appropriate equipment; on-time production and delivery; and ability to maintain and adopt state-of-the-art technology to meet a client’s business objectives.
McKenna worked at J.S. Eliezer Associates, a print consulting firm in Stamford, Conn., beginning in 1998 and was named President of the firm in 2004, the leadership role he maintained until joining Quad in 2010. Mr. Robert Quadracci has served as Quad’s Chief Human Resources Officer since 2023.
Eliezer Associates, a print consulting firm in Stamford, Conn., beginning in 1998 and was named President of the firm in 2004, the leadership role he maintained until joining Quad in 2010. 17 Table of Contents Mr. Robert Quadracci has served as Quad’s Chief Human Resources Officer since February 2023.
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 synergies by centralizing and consolidating print manufacturing volumes, and eliminating redundancies in its administrative and corporate operations.
These same methodologies are applied to its selling, general and administrative functions. The Company continually works to lower its cost structure by consolidating manufacturing operations into its most efficient facilities, as well as realizing purchasing, mailing and logistics synergies by centralizing and consolidating print manufacturing volumes, and eliminating redundancies in its administrative and corporate operations.
Historically, compliance with these laws and regulations has not had a material adverse effect on the Company’s results of operations, financial position or cash flows. Compliance with existing or new environmental laws and regulations may require the Company to make future expenditures. Human Capital Management The Company continually invests in and supports its employees.
Historically, compliance with these laws and regulations has not had a material adverse effect on the Company’s results of operations, financial position or cash flows. Compliance with existing or new environmental laws and regulations may require the Company to make future expenditures.
Mr. Staniak is a member of the Wisconsin Institute of Certified Public Accountants and the Board of Directors for the Zoological Society of Milwaukee. Mr. Vanderboom has served as Executive Vice President since 2018, Treasurer and President of Logistics since March 2014 and Head of Agency Operations since February 2023.
Staniak is a member of the Wisconsin Institute of Certified Public Accountants and is a member of the board of directors for the Zoological Society of Milwaukee and for the Volunteer Center of Washington County. Mr. Vanderboom has served as Executive Vice President and Treasurer since 2018 and Head of Quad Agency Solutions Operations since March 2023. Mr.
Golden 51 Chief Marketing Officer Dana B. Gruen 49 General Counsel and Corporate Secretary David J. Honan 54 Executive Vice President and Chief Operating Officer Steven D. Jaeger 58 Vice President and Chief Information Officer Donald M. McKenna 50 Executive Vice President and Chief Administrative Officer Robert H. Quadracci 55 Chief Human Resources Officer Anthony C.
Gruen 49 General Counsel, Corporate Secretary and Chief Risk & Compliance Officer David J. Honan 55 Executive Vice President and Chief Operating Officer Steven D. Jaeger 59 Vice President and Chief Information Officer Donald M. McKenna 51 Executive Vice President and Chief Administrative Officer Robert H. Quadracci 56 Chief Human Resources Officer Anthony C.
He previously served as Executive Vice President and Chief Financial Officer from January 2015 to December 2021; Vice President and Chief Financial Officer from March 2014 to January 2015; Vice President and Chief Accounting Officer from July 2010 to March 2014; Vice President and Corporate Controller from December 2009 to July 2010; and Corporate Controller from when he joined Quad in May 2009 until December 2009.
His previous roles at Quad were Executive Vice President and Chief Financial Officer from January 2015 to December 2021; Vice President and Chief Financial Officer from March 2014 to January 2015; Vice President and Chief Accounting Officer from July 2010 to March 2014; Vice President and Corporate Controller from December 2009 to July 2010; and Corporate Controller from when he joined Quad in May 2009 to December 2009.
Quad seeks to become an invaluable strategic marketing partner by helping its clients successfully navigate today’s constantly evolving media landscape through innovative, data-driven solutions that are produced and deployed efficiently and at scale, across offline and online media channels.
Quad seeks to become an invaluable strategic marketing partner by helping its clients successfully navigate today’s constantly evolving media landscape through innovative, data-driven omnichannel solutions that are scalable and efficiently produced and deployed — from household to in-store to online.
McKenna has served as Executive Vice President and Chief Administrative Officer of Quad since January 2022. He previously served as Senior Vice President of Sales Administration from August 2018 to January 2022; Vice President of Sales Administration from June 2013 to August 2018; and Product Planning Manager from March 2010 to June 2013. Prior to joining Quad, Mr.
He previously served as Senior Vice President of Sales Administration from August 2018 to January 2022; Vice President of Sales Administration from June 2013 to August 2018; and Product Planning Manager from March 2010 to June 2013. Prior to joining Quad, Mr. McKenna worked at J.S.
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 reduction.
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 reduction. The Company’s disciplined financial approach also allows it to maintain sufficient liquidity and to reduce refinancing risk.
Vanderboom serves on the advisory board at Rise Interactive, a Quad company. Executive officers of Quad are elected by and serve at the discretion of Quad’s Board of Directors. Other than described above, there are no family relationships between any directors or executive officers of Quad.
Executive officers of Quad are elected by and serve at the discretion of Quad’s Board of Directors. Other than described above, there are no family relationships between any directors or executive officers of Quad. 18 Table of Contents
Currie served as Senior Vice President of Global Retail Product Leadership from 2016 to 2019; as Senior Vice President, Global Loyalty Commercial Director from 2012 to 2016; as Senior Vice President, Global Business Services North America from 2008 to 2012; as Vice President, National Accounts Group Client Director from 2003 to 2007; and as Vice President, Group Client Director from 2001 to 2003 of The Nielsen Company.
Currie served in multiple senior leadership roles at Nielsen, a global leader in audience measurement, data and analytics, including as Senior Vice President, Global Retail Product Leadership from 2016 to 2019; as Senior Vice President, Global Loyalty Commercial Director from 2012 to 2016; as Senior Vice President, Global Business Services North America from 2008 to 2012; as Vice President, National Accounts Group Client Director from 2003 to 2007; and as Vice President, Group Client Director from 2001 to 2003.
Prior thereto, Mr. Jaeger served as Quad’s Vice President of Information Systems from 1998 to 2006 and worked in various other capacities since he joined Quad in 1994. Prior to joining Quad, Mr. Jaeger worked for Andersen Consulting for eight years. 20 Table o f Contents Mr.
Prior thereto, Mr. Jaeger served as Quad’s Vice President of Information Systems from 1998 to 2006 and worked in various other capacities since he joined the company in 1994. Prior to joining Quad, Mr. Jaeger worked for Andersen Consulting for eight years. Mr. McKenna has served as Executive Vice President and Chief Administrative Officer since January 2022.
Another key aspect of the Company’s manufacturing capabilities is the operation of very large facilities (greater than one million square feet) that produce multiple product lines under one roof to maximize utilization of equipment and labor resources, while also driving savings in certain product lines (such as publications and catalogs) due to economies of scale.
Within its manufacturing operations, the Company benefits from managing several very large facilities (greater than one million square feet) that produce multiple product lines under one roof, which maximizes utilization of equipment and labor resources while also driving savings in certain product lines (such as publications and catalogs) due to economies of scale.
Quad’s print division leverages its own Smartools® proprietary enterprise resource planning system to provide seamless, real-time information flow across all facets of print manufacturing and deployment — from print sales and estimating to production planning, scheduling, manufacturing, warehousing, logistics, invoicing, reporting and customer service.
For example, the Company’s manufacturing operations leverage a proprietary enterprise resource planning system (known as Smartools®) to provide real-time information flow across all facets of print production and deployment — from print sales and estimating to production planning, scheduling, manufacturing, warehousing, logistics, invoicing, reporting and customer service.
The Company believes that its large and diverse client base, broad geographic coverage and extensive range of marketing capabilities are competitive strengths. Patents, Trademarks and Trade Names Quad operates research and development facilities that support the development of new equipment, process improvements, raw materials and content management, and distribution technologies to better meet client needs and improve operating efficiencies.
Patents, Trademarks and Trade Names Quad operates research and development facilities that support the development of new equipment, process improvements, raw materials and content management, and distribution technologies to better meet client needs and improve operating efficiencies.
Staniak was subsequently named Director of Internal Audit in 2011; Executive Director – Financial Controller in 2013; Chief Accounting Officer in 2014; and Vice President and Chief Accounting Officer in 2015. Prior to joining Quad, Mr. Staniak was Chief Financial Officer of data consulting firm Sagence, Inc. He began his career at the accounting firm Arthur Andersen LLP in 1995.
Prior to joining Quad, Mr. Staniak was Chief Financial Officer of data consulting firm Sagence, Inc. He began his career at the accounting firm Arthur Andersen LLP in 1995. Mr.
Quadracci’s experience in the printing industry and in leadership positions within Quad qualify him for service as a director of Quad. Mr. Ashworth has served as Executive Vice President of Product and Market Strategy since joining Quad in 2015 and President of Quad Agency Solutions since April 2016. Prior to joining Quad, Mr. Ashworth was President of SGK, Inc.
Ashworth has served as Executive Vice President of Product and Market Strategy since joining Quad in 2015 and as President of Quad Agency Solutions since April 2016. Prior to joining Quad, Mr. Ashworth was President of SGK, Inc.
Name Age Position J. Joel Quadracci 54 Chairman, President and Chief Executive Officer Eric N. Ashworth 57 Executive Vice President of Product and Market Strategy, and President of Quad Agency Solutions Anne M. Bauer 58 Vice President and Chief Accounting Officer Julie A. Currie 60 Executive Vice President and Chief Revenue Officer Joshua J.
Joel Quadracci 55 Chairman, President and Chief Executive Officer Eric N. Ashworth 58 Executive Vice President of Product and Market Strategy Anne M. Bauer 59 Vice President and Chief Accounting Officer Julie A. Currie 60 Executive Vice President and Chief Revenue Officer Joshua J. Golden 52 Chief Marketing Officer Dana B.
This approach has been a hallmark of the Company’s culture for more than 50 years and has inspired creativity in how it addresses environmental, social and governance (ESG) matters and contributed to good corporate citizenship.
This approach has been a hallmark of the Company’s culture since its founding and has inspired creativity in how it addresses environmental issues, social issues and corporate governance, and contributes to good corporate citizenship.
The Company mitigates its risk through natural gas hedges when appropriate. In its logistic operations, however, the Company is able to pass a substantial portion of any increase in fuel prices directly to its clients. Information About Our Executive Officers The following table sets forth the names, ages (as of February 16, 2023) and positions of Quad’s executive officers.
In its logistic operations, however, the Company is able to pass a substantial portion of any increase in fuel prices directly to its clients. 15 Table of Contents Information About Our Executive Officers The following table sets forth the names, ages (as of January 31, 2024) and positions of Quad’s executive officers. Name Age Position J.
Governance starts at the highest level of the Company with oversight by the Board of Directors, which is responsible for minimizing risk while maximizing the effectiveness of Quad’s business strategy.
Governance starts at the highest level of the Company with oversight by the Board of Directors, which is responsible for minimizing risk while maximizing the effectiveness of Quad’s business strategy. Key tenets of Quad’s governance strategy include: • Family Leadership: As of January 31, 2024, the Quadracci family, through the Quad/Graphics, Inc.
Staniak has served as Chief Financial Officer of Quad since January 2022. Previously, he served as Vice President of Finance from March 2017 until January 2022. Joining the company in 2009 as Director of External Reporting, Mr.
Previously, he served as Vice President of Finance from March 2017 until January 2022. Joining the company in 2009 as Director of External Reporting, Mr. Staniak was subsequently named Director of Internal Audit in 2011; Executive Director – Financial Controller in 2013; Chief Accounting Officer in 2014; and Vice President and Chief Accounting Officer in 2015.
Gruen became Vice President, Chief Compliance and Risk Officer & Deputy General Counsel, and in 2022 was promoted to Senior Vice President, Chief Risk & Compliance Officer and Deputy General Counsel. Prior to joining Quad, Ms. Gruen was an associate attorney at Foley & Lardner, Sonnenschein Nath & Rosenthal (now part of Dentons), and Seyfarth Shaw. Mr.
Prior to joining Quad, Ms. Gruen was an associate at Foley & Lardner, Sonnenschein Nath & Rosenthal (now part of Dentons), and Seyfarth Shaw. Mr. Honan has served as Executive Vice President and Chief Operating Officer since January 2022.
Employees are encouraged to take advantage of the Company’s focus on employee growth 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 growth.
External services include on-site, near-site and virtual health delivery of comprehensive primary and preventive care, condition management, wellness programs and coaching, physical therapy, behavioral health, pharmacy services, occupational health and more. 10 Table of Contents • Career Training and Growth: Employees are encouraged to take advantage of the Company’s focus on employee growth 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 growth.
For additional information, see “Compensation and Benefits” below. • Offering career development paths for accelerated responsibility and pay, including Accelerated Career Training , which provides a fast-track for career advancement in manufacturing positions; People Leading People , which focuses on best-in-class manager behaviors; Corporate Trainee Program , which develops skills and leadership abilities through a series of agency and corporate rotations; and hands-on, mentor-led manufacturing apprenticeship programs. • Creating a unique career development program focused on the specific needs of Milwaukee’s central city.
Multiple programs offer employees accelerated responsibility and pay, including Accelerated Career Training, which provides a fast-track for career advancement in manufacturing positions; Leading Within Quad , which focuses on best-in-class managerial behaviors; Corporate Trainee Program , which develops skills and leadership abilities through a series of agency and corporate administration rotations; and hands-on, mentor-led manufacturing apprenticeship programs.
Since joining Quad in 1993, he has served in various leadership capacities, including Controller of Parcel Direct, a freight expediting subsidiary sold to FedEx in 2004; Controller of Quad’s Distribution and Facilities departments from 2004 until 2006; Director of Treasury, Risk & Planning, beginning in 2007; and Vice President, beginning in 2008. Mr.
Since joining Quad in 1993, he has served in various leadership capacities, including Controller of Parcel Direct, a freight expediting subsidiary sold to FedEx in 2004; Treasurer, beginning in 2007; Vice President, beginning in 2008; Vice President of the Program Management Office (PMO) from 2012 to 2014 and 2019 to 2023; and President of Logistics from 2014 to 2023.
This excess capacity has allowed certain larger competitors like Quad, with economies of scale, strong balance sheets and access to capital markets, the ability to invest in automation and more efficient equipment, take advantage of consolidating acquisition opportunities to remove excess, inefficient and/or underutilized capacity, and reduce overall costs. 4 Table o f Contents Like the advertising and marketing services industry, the printing industry is affected by real gross domestic product growth and in times of economic prosperity, advertisers may increase spending to build brand awareness and to drive sales.
This excess capacity has allowed certain larger competitors like Quad, with economies of scale, strong balance sheets and access to capital markets, the ability to invest in automation and more efficient equipment; take advantage of consolidating acquisition opportunities to remove excess, inefficient and/or underutilized capacity; and reduce overall costs.
In 2022, the Company delivered strong financial results while navigating multiple challenges, including an uncertain economic environment, paper and supply chain disruptions, inflationary cost pressures, rising interest rates and labor shortages. Despite these challenges, Quad worked thoughtfully and diligently to mitigate these impacts on the business and proactively manage client expectations.
In 2023, the Company focused on delivering strong financial results while navigating multiple issues in the macroeconomic environment, including an uncertain economy, postage cost increases on print mailings, inflationary cost pressures and rising interest rates. Despite these challenges, Quad worked to mitigate impacts on its business while proactively managing client expectations.
In addition, the Company intends to continue making long-term investments in its talent, such as hiring business professionals with client-side marketing 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.
These investments take many forms, including new equipment, technology and service capabilities. The Company also makes investments in its talent, such as hiring business professionals with transformation, innovation, and client-side marketing and consulting expertise to enhance its position as an MX company, as well as investments to attract new employees and increase existing employee engagement, retention and productivity.
Those priorities currently include using its Free Cash Flow to continue reducing debt while investing in scaling the business as a marketing experience company to fuel net sales growth; driving profitability through sales growth; and pursuing opportunities to return capital to shareholders through stock buybacks or dividends over the long term.
These priorities currently include using Free Cash Flow and cash proceeds from any asset sales to continue reducing debt while investing in scaling the business as a marketing experience company to fuel net sales growth; driving profitability through sales growth; and pursuing opportunities to return capital to shareholders through stock buybacks or dividends. 14 Table of Contents To provide ongoing improvement in productivity and, ultimately, maximize operating margins, the Company applies holistic continuous improvement and lean enterprise methodologies to further streamline its processes and maximize operating margins.
Managed Services: Quad leverages its deep expertise and expansive network to help clients manage their operations the way it runs its own — with diligence toward efficiency and cost-savings.
Quad complements its production capabilities through its managed services offering. Leveraging its deep industry knowledge, expansive network and substantial purchasing power, Quad helps clients manage their operations the way it runs its own – with diligence, efficiency and cost-savings.
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 broader environmental, social and governance objectives.
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 business objectives. To serve clients’ disparate needs, Quad continues to make disciplined and compelling investments across its integrated marketing platform.
Quad’s on-site and near-site teams also offer seamless access to additional integrated services and subject matter experts at the Company, removing handoffs and associated friction in the client’s marketing process.
Quad’s on-site and near-site teams also offer seamless access to additional services and subject matter experts across the Company, removing handoffs and associated friction in the client’s marketing process. Quad’s dedicated team model simplifies marketing for clients and enables them to focus on what they do best: selling more products, services and/or content.
For clients with their own creative content operations, the Company offers strategic process design services to identify and address process gaps that slow production, create inconsistent brand assets, and/or lead to time-consuming and costly rework.
For clients with their own creative content operations, the Company offers strategic process design services to identify and address process gaps, helping increase production efficiency, ensure consistent brand assets, and avoid time-consuming and costly rework. Production Quad offers a wide range of production capabilities for deploying content to offline and online channels.
The Company regularly evaluates its pay practices and structures to ensure that Quad is competitive in the markets where it operates, and equitable based on employees’ experience, job responsibilities, performance and business results. • Offering a Total Rewards package centered on inclusive programs tailored to the unique needs of the whole person and with a continued priority focus on employee total well-being.
The Company regularly evaluates its pay practices and structures to ensure it is competitive in the markets where it operates, and equitable based on employees’ experience, job responsibilities, performance and business results.
The Company details its progress on driving positive, sustainable change annually in its ESG report, which includes advancements on environmental and social commitments, several of which were achieved in 2022. Further, the Company believes that its distinct corporate culture, which evolved from a core set of Values conceived by the Company’s late founder Harry V.
Further, the Company believes that its distinct corporate culture, which evolved from a core set of Values conceived by the Company’s late founder, Harry V.
The commercial printing industry has moved toward a demand for shorter print runs, faster product turnaround and increased production efficiency of products with lower page counts and increased complexity.
The commercial printing industry has 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 postage and paper costs as well as marketers’ increasing use of online marketing and communication channels — has led to excess manufacturing capacity.
Through this innovative approach, Quad removes friction in the process, offering clients its network of in-house experts and capabilities for marketing and production outsourcing; sourcing and procurement of goods and services; and print and paper management.
The Company streamlines the marketing process for clients through its network of in-house experts and capabilities for marketing and production outsourcing, sourcing and procurement of goods and services, and print and paper management. As a result, Quad’s clients can focus on other critical aspects of their business.
Ms. Gruen has served as Quad’s General Counsel and Corporate Secretary since 2023. Ms. Gruen joined Quad’s legal team in 2007 as Employment Counsel, and became Assistant General Counsel in 2014. She became Deputy General Counsel and Chief Compliance Officer in 2015, and was promoted to Vice President in this role in 2016. In 2020, Ms.
Joining Quad’s legal department in 2007 as Employment Counsel, she advanced to Assistant General Counsel in 2014; Deputy General Counsel and Chief Compliance Officer in 2015; Vice President, Deputy General Counsel and Chief Compliance Officer in 2016; Vice President, Deputy General Counsel and Chief Compliance and Risk Officer in 2020; Senior Vice President, Deputy General Counsel and Chief Risk & Compliance Officer in 2022.
Quad is proud of its strong and trusted banking relationships, which provide the Company with increased financial flexibility to make strategic investments to accelerate its growth and drive profitability as a marketing experience company. 7 Table o f Contents Competitive Advantages Quad’s strategic priorities are powered by its commitment to three key competitive advantages that the Company believes distinguish it from its competitors: integrated marketing platform excellence, ongoing innovation, and culture and social purpose.
Quad is proud of its strong and trusted banking relationships, which provide the Company with increased financial flexibility to make strategic investments to accelerate its growth and drive profitability as a marketing experience company.
Competition in the advertising and marketing services industry is based on access to talent, pricing, adapting quickly to new advertising platforms and technology, creating unique and effective multichannel marketing campaigns, and offering superior customer service. Commercial Printing The commercial printing industry is also highly fragmented and highly competitive. According to the July 2022 Printing in the U.S.
Advertising and Marketing Services The advertising and marketing services industry is highly fragmented, and competition is based on adapting quickly to new advertising platforms and technology, developing comprehensive proposals to secure client contracts, creating unique and effective multichannel marketing campaigns, demonstrating spend effectiveness by monitoring and reporting on clients’ marketing campaign results, providing favorable pricing, accessing talent and offering superior customer service.
Commitment to Integrated Marketing Platform Excellence Quad’s integrated marketing platform gives brands a more streamlined, flexible and frictionless way to go to market and reach consumers. Its platform encompasses the resources brands need to plan, create, deploy, measure and optimize their marketing efforts across all media channels, both offline and online — a key differentiator for the Company.
Integrated Marketing Platform Excellence Quad’s integrated marketing platform encompasses all the resources brands and marketers need to plan, create, deploy, measure and optimize their marketing efforts across all media channels — from household to in-store to online.
Traditional agencies or agency holding companies develop creative and then outsource production, while traditional consulting firms provide strategy and then outsource implementation.
Traditional agencies or agency holding companies develop creative and then outsource production while traditional consulting firms provide strategy and then outsource implementation. Quad, however, is able to strategize, create and execute all campaign elements across all channels using its own internal resources.
Quad focuses on solving problems, and removing pain points and sources of friction wherever a client experiences it in the marketing process.
Growth Strategy As an MX company, Quad intends to expand its capabilities and develop its platform through executing on the three pillars of its growth strategy: Deliver Integrated Service Excellence Quad focuses on solving problems, and removing pain points and sources of friction wherever a client experiences them in the marketing process.
The Company’s long-standing focus on “creating a better way” is a reflection of its “maker” culture where employees not only envision solutions, but actually create and execute them.
Culture and Sustainable Impact For more than 52 years, Quad has operated as a company with a soul, believing it can do good in the world while doing well as a business. The Company’s long-standing focus on “creating a better way” reflects its “maker” culture where employees not only envision solutions, but actually create and execute them.
Postal rates are a significant component of many clients’ cost structures, and Quad believes that postal costs directly influence clients’ print and mail quantities. Therefore, the Company has invested significantly in its mailing and distribution platform to mitigate increasing postage costs, and to help clients successfully navigate the ever-changing postal environment.
In addition to the scale of its manufacturing operations and ongoing investments in technology, Quad’s ability to address postage rate increases sets the Company apart from its competition. Postage rates are a significant component of many clients’ cost structures, and Quad believes that postal costs directly influence clients’ print and mail quantities.
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.
As a result, advertising and marketing services providers must expand their capabilities to create effective multichannel campaigns for their clients, and providers face increased client demand to offer integrated, end-to-end marketing services (i.e., from strategy and creative through execution).
Within the commercial printing industry, Quad provides targeted print products that are customized to consumers such as catalogs, direct mail, in-store signage and packaging as well as large-scale print products, such as magazines, retail inserts and directories.
The Company can produce large-scale print products, such as magazines, retail inserts and directories, as well as targeted print products, such as catalogs, direct mail, in-store signage and displays, and high-end packaging. Quad also has vertically integrated print and non-print capabilities that help improve the quality, cost and availability of key inputs in the printing and distribution processes.
The program includes ongoing employee education to ensure physical and digital workspaces remain secure, valuable data remains private, potential phishing and malware threats are spotted, and risky behaviors are avoided. • Maintaining a Supplier Code of Conduct to ensure suppliers, vendors, contractors, consultants, agents and other providers of goods and services follow the Company’s policies related to business integrity, ethical labor and human rights practices, associate health and safety, and environmental management.
Employees can discreetly report violations to the Code of Conduct through multiple easy-to-use channels, including a 24/7 anonymous Ethics and Compliance Hotline. • Supplier Code of Conduct: The Company maintains a Supplier Code of Conduct to ensure suppliers, vendors, contractors, consultants, agents and other providers of goods and services follow the Company’s policies related to business integrity, ethical labor and human rights practices, associate health and safety, and environmental management.
Throughout its more than 50-year heritage, the Company has led the industry in printing and print distribution capabilities — the most capital-intensive part of Quad’s integrated marketing platform, but also a key point of differentiation from consulting firms, traditional creative agencies or agency holding companies.
Accordingly, the Company can guide clients through every effort intended to drive an action, from consumer awareness and trust, to brand preference and purchase. Print and Distribution Capabilities While Quad’s manufacturing operations are the most capital-intensive part of its integrated marketing platform, they constitute a key point of differentiation from consulting firms, traditional creative agencies and agency holding companies.
Walk in the Shoes of Clients 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 at every touchpoint.
Core aspects of its unique culture are: • Walk in the shoes of clients: Quad delivers service excellence by encouraging all employees, regardless of job title, to prioritize listening to clients’ needs and challenges, and do what they can to make it easy to work with Quad at every touchpoint. • Empower employees: Quad continues to position itself as the workplace for the marketing industry’s best talent, and empowers its employees to think like owners and take responsibility for how they can help propel the business forward.
These channels include InsideQuad, the employee intranet; executive blogs and video logs (vlogs); executive town halls; department meetings; email; text messaging; in-plant electronic and print signage; and in-home mailings. Quad’s CEO hosts regular town halls for all employees, accessible online, and also posts video and written messages.
Communication channels include InsideQuad, the employee intranet; executive blogs and video logs (vlogs); executive town halls; department meetings; “lunch and learn” events; email; in-plant electronic and print signage; and in-home mailings. Financial Objectives Quad follows a disciplined approach to maintaining and enhancing financial strength to create shareholder value.
These teams serve as an extension of a client’s internal marketing department, fulfilling traditional agency executional roles while also providing production efficiencies at scale for content creation, creative production and marketing deployment.
These teams serve as an extension of a client’s internal marketing department, fulfilling critical execution roles ranging from content creation and creative production to marketing deployment in all channels. All of this is executed to maximize production efficiencies, creating content that is adaptive across channels and easily templated and automated and, therefore, scalable.
Quadracci, drives thoughtful decision-making, especially around its disciplined approach to managing operations and innovating solutions for clients, better positioning the Company to succeed and grow in a dynamic marketplace.
Quadracci, drives thoughtful decision making, especially around its disciplined approach to managing operations and innovating solutions for clients, better positioning the Company to succeed and grow in a dynamic marketplace. *Quad is not including the information contained on or available through its website as part of, or incorporating such information by reference into, this Annual Report on Form 10-K. 8 Table of Contents Environmental Quad seeks to operate in an environmentally responsible manner that better serves the environment and reflects the values of its clients and their customers.
The Company’s relationships with its largest clients average over 19 years in duration. In 2022, Quad served approximately 2,900 clients, and its ten largest clients accounted for approximately 19% of consolidated sales, with none representing more than 5% individually.
In 2023, its 10 largest clients accounted for approximately 19% of consolidated sales, with none representing more than 5% individually. Quad was founded in Pewaukee, Wisconsin, as a Wisconsin corporation, in 1971 by the late Harry V. Quadracci. For many years, the Company operated as Quad/Graphics and focused on commercial printing.
Today, QuadMed provides worksite health care solutions nationally for approximately 30 employers of all sizes and across all industries, including private and public sector employers. These solutions include on-site, near-site and virtual health delivery of comprehensive primary and preventive care, condition management, wellness programs and coaching, physical therapy, behavioral health, pharmacy services, occupational health and more.
Beyond Quad itself, QuadMed provides worksite healthcare solutions nationally for approximately 30 employers of all sizes and across multiple industries, including private and public sector employers.
Building Strong Communities The Company believes in the power of building strong communities, and understands that its reputation for doing good continues to make Quad the kind of company people choose to work for, do business with, invest in and call a true neighbor.
Quad regularly reviews its policies and aims to ensure all Company procedures, processes and distribution of resources create equal opportunities among its employees and fair and just outcomes. 11 Table of Contents Building Strong Communities The Company believes partnering with local communities creates a catalyst for movement and change, which benefits those outside of Quad’s walls while helping the Company maintain a positive reputation as the kind of business people choose to work for, do business with, invest in and call a true neighbor.
Quad provides access to such materials through its website as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the SEC. Industry and Competition Quad competes in both the advertising and marketing services industry, and the commercial printing industry. Additional details about the industry landscape and competitive environment in which Quad operates are described below.
Quad provides access to such materials through its website as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the SEC. Principal Capabilities The Company’s suite of flexible, scalable and connected solutions addresses the pain points brands and marketers experience most frequently when creating and deploying content and campaigns.
These investments include leading-edge digital press technology to enhance targeted print product features as well as advanced equipment and automation, including automated guided vehicles, robotic palletizers and wide-web presses to maximize labor productivity, increase throughput and reduce labor costs, all of which has enabled Quad to remain a high-quality, low-cost producer.
The Company continually strengthens its manufacturing operations through leading-edge technologies such as digital presses that enhance targeted print products and wide-web presses that maximize labor productivity; advanced equipment and automation, including automated guided vehicles and robotic palletizers that support high-quality, low-cost production; and its own global production resources that provide around-the-clock service for tasks like page assembly, retouching, color correction and design to reduce print job turnaround times.
Amended and Restated Voting Trust Agreement (“Quad Voting Trust”), has voting control of approximately 72%, which the Company believes provides it with continued stability and flexibility as Quad works to achieve its long-term strategic vision.
Amended and Restated Voting Trust Agreement (“Quad Voting Trust”), has voting control of approximately 73% of the Company’s outstanding shares.
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Item 1. Business Overview Quad is a global marketing experience company that gives brands a more streamlined, impactful, flexible and frictionless way to go to market and reach consumers.
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Item 1. Business Overview Quad is a global marketing experience (MX) company that helps brands make direct consumer connections, from household to in-store to online. The Company is focused on providing a better marketing experience for its clients, so they can focus on delivering the best customer experience to theirs.
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The Company leverages its three key competitive advantages — integrated marketing platform excellence, ongoing innovation, and culture and social purpose — to create a better way for its clients, employees and communities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe United States federal and state healthcare laws and regulations that impact the QuadMed subsidiary business include, among others, those: (a) regarding privacy, security and transmission of individually identifiable health information; (b) prohibiting, among other things, soliciting, receiving or providing remuneration to induce the referral of an individual for an item or service or the purchasing or ordering of an item or service for which payment may be made under healthcare programs; (c) prohibiting, among other things, knowingly presenting or causing to be presented claims for payment from third-party payors that are false or fraudulent; and (d) prohibiting the corporate practice of medicine. 33 Table o f Contents Risks Relating to Quad’s Common Stock Holders of class A common stock are not able to independently elect directors of the Company or control any of the Company’s management policies or business decisions because the holders of class A common stock have substantially less voting power than the holders of the Company’s class B common stock, all of which is owned by certain members of the Quadracci family or trusts for their benefit, whose interests may be different from the holders of class A common stock.
Biggest changeThe United States federal and state healthcare laws and regulations that impact the QuadMed subsidiary business include, among others, those: (a) regarding privacy, security and transmission of individually identifiable health information; (b) prohibiting, among other things, soliciting, receiving or providing remuneration to induce the referral of an individual for an item or service or the purchasing or ordering of an item or service for which payment may be made under healthcare programs; (c) prohibiting, among other things, knowingly presenting or causing to be presented claims for payment from third-party payors that are false or fraudulent; and (d) prohibiting the corporate practice of medicine.
The nature of the Company’s business includes the receipt and storage of information about the Company’s clients, vendors and the end-users of the Company’s products and services. The Company and its clients are subject to various United States and foreign consumer protection, information security, data privacy and “do not mail” requirements at the federal, states, provincial and local levels.
The nature of the Company’s business includes the receipt and storage of information about the Company’s clients, vendors and the end-users of the Company’s products and services. The Company and its clients are subject to various United States and foreign consumer protection, information security, data privacy and “do not mail” requirements at the federal, state, provincial and local 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.
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, digital and mobile channels and other alternative media channels, in order to ensure that they stay within their expected postage budgets.
While the Company believes its employee relations are good and that the Company maintains an employee-centric culture, and there has not been any material disruption in operations resulting from labor disputes, a strike or other forms of labor protest affecting the Company’s United States or international plants, distribution centers or other facilities in the future could materially disrupt the Company’s operations and result in an adverse impact on its financial condition, results of operations and cash flows, which could force the Company to reassess its strategic alternatives involving certain of its operations.
While the Company believes its employee relations are good and that the Company maintains an employee-centric culture, any material disruption in operations resulting from labor disputes, a strike or other forms of labor protest affecting the Company’s United States or international plants, distribution centers or other facilities in the future could materially disrupt the Company’s operations and result in an adverse impact on its financial condition, results of operations and cash flows, which could force the Company to reassess its strategic alternatives involving certain of its operations.
Changes in interest rates, investment returns or the regulatory environment may impact the amounts the Company will be required to contribute to the pension plans that it sponsors and may affect the solvency of these pension plans.
Changes in interest rates, investment returns or the regulatory environment have and may continue to impact the amounts the Company will be required to contribute to the pension plans that it sponsors and may affect the solvency of these pension plans.
If the Company does not successfully manage the increased workflow, necessary increases in paper and ink inventory, production capacity flows and other business elements during these high seasons of activity, this seasonality could adversely affect the Company’s cash flows and results of operations. 30 Table o f Contents An other than temporary decline in operating results and enterprise value could lead to non-cash impairment charges due to the impairment of property, plant and equipment, goodwill and other intangible assets.
If the Company does not successfully manage the increased workflow, necessary increases in paper and ink inventory, production capacity flows and other business elements during these high seasons of activity, this seasonality could adversely affect the Company’s cash flows and results of operations. 27 Table of Contents An other than temporary decline in operating results and enterprise value could lead to non-cash impairment charges due to the impairment of property, plant and equipment, goodwill and other intangible assets.
The Company expects inflationary cost pressures and certain supply chain shortages and distribution challenges to potentially continue through 2023 and the Company may not be able to fully mitigate the impact of the rising inflationary cost pressures through price increases.
The Company expects inflationary cost pressures and certain supply chain shortages and distribution challenges to potentially continue through 2024 and the Company may not be able to fully mitigate the impact of the rising inflationary cost pressures through price increases.
The Company and its clients are subject to various United States and foreign cyber-security laws, which require the Company to maintain adequate protections for electronically held information. The Company may not be able to anticipate techniques used to gain access to the Company’s systems or facilities, the systems of the Company’s clients or vendors, or implement adequate prevention measures.
The Company and its clients are subject to various United States and foreign cybersecurity laws, which require the Company to maintain adequate protections for electronically held information. The Company may not be able to anticipate techniques used to gain access to the Company’s systems or facilities, the systems of the Company’s clients or vendors, or implement adequate prevention measures.
If the Company is unable to continue to pass along increases in the cost of paper to its clients, future increases in paper costs would adversely affect its margins and profits. Due to the significance of paper in the Company’s print business, it is dependent on the availability of paper.
If the Company is unable to continue to pass along increases in the cost of paper to its clients, future increases in paper costs would adversely affect its margins and profits. 20 Table of Contents Due to the significance of paper in the Company’s print business, it is dependent on the availability of paper.
Postal rate changes and USPS regulations that result in higher overall costs can influence the volume that these clients will be willing to print and ultimately send through the USPS. 24 Table o f Contents Integrated distribution with the USPS is an important component of the Company’s business.
Postal rate changes and USPS regulations that result in higher overall costs can influence the volume that these clients will be willing to print and ultimately send through the USPS. 19 Table of Contents Integrated distribution with the USPS is an important component of the Company’s business.
The Company’s future success also depends on its continuing ability to identify, hire, develop, and retain its executive management team, including its Chief Executive Officer, and other personnel for all areas of the organization. 25 Table o f Contents Approximately 1,400 of the Company’s United States and international employees are covered by an industry wide agreement, a collective bargaining agreement or through a works council or similar arrangement.
The Company’s future success also depends on its continuing ability to identify, hire, develop, and retain its executive management team, including its Chief Executive Officer, and other personnel for all areas of the organization. 23 Table of Contents Approximately 1,000 of the Company’s United States and international employees are covered by an industry wide agreement, a collective bargaining agreement or through a works council or similar arrangement.
On April 28, 2014, and as last amended on January 24, 2023, the Company entered into a senior secured credit facility (the “Senior Secured Credit Facility,”) which includes two different loan facilities: a $825.0 million Term Loan A and a $432.5 million revolving credit facility.
On April 28, 2014, and as last amended on January 4, 2024, the Company entered into a senior secured credit facility (the “Senior Secured Credit Facility,”) which includes two different loan facilities: a $825.0 million Term Loan A and a $432.5 million revolving credit facility.
As of January 31, 2023, the class B stock constitutes approximately 78% of the Company’s total voting power.
As of January 31, 2024, the class B stock constitutes approximately 78% of the Company’s total voting power.
As of January 31, 2023, approximately 93% of the outstanding class B stock was held of record by the Quad Voting Trust, and that constitutes approximately 72% of the Company’s total voting power. The trustees of the Quad Voting Trust have the authority to vote the stock held by the Quad Voting Trust.
As of January 31, 2024, approximately 93% of the outstanding class B stock was held of record by the Quad Voting Trust, and that constitutes approximately 73% of the Company’s total voting power. The trustees of the Quad Voting Trust have the authority to vote the stock held by the Quad Voting Trust.
Any future increases in the supply of printing services or decreases in demand could cause prices to continue to decline, and 21 Table o f Contents prolonged periods of low prices, weak demand and/or excess supply could have a material adverse effect on the Company’s business growth, results of operations and liquidity.
Any future increases in the supply of printing services or decreases in demand could cause prices to continue to decline, and prolonged periods of low prices, weak demand and/or excess supply could have a material adverse effect on the Company’s business growth, results of operations and liquidity.
The interest rate collars convert the notional value of the Company’s variable rate debt based on one-month term Secured Overnight Financing Rate (“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 interest rate collars 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.
As of December 31, 2022, these assets represented approximately 47% of the Company’s total assets. The Company assesses impairment of property, plant and equipment, goodwill and other intangible assets based upon the expected future cash flows of the respective assets.
As of December 31, 2023, these assets represented approximately 49% of the Company’s total assets. The Company assesses impairment of property, plant and equipment, goodwill and other intangible assets based upon the expected future cash flows of the respective assets.
For instance, the Company was negatively impacted in 2022 by rising interest rates and the increasing cost and availability of raw materials, such as paper, ink, supplies, parts for equipment, distribution and labor.
For instance, the Company was negatively impacted in 2023 by rising interest rates and the increasing cost and availability of raw materials (such as paper, ink and supplies), distribution and labor.
Net sales from the Company’s wholly-owned subsidiaries outside of the United States accounted for approximately 13% and 11% of its consolidated net sales for the years ended December 31, 2022 and 2021, respectively .
Net sales from the Company’s wholly-owned subsidiaries outside of the United States accounted for approximately 14% and 13% of its consolidated net sales for the years ended December 31, 2023 and 2022, respectively .
If the Company is unable to hire and train sufficient numbers of personnel, the Company’s business would be adversely affected. The nationwide shortage of available production personnel may also 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.
If the Company is unable to hire and train sufficient numbers of personnel, the Company’s business would be adversely affected. The nationwide shortage of available production personnel may also put a strain on the Company’s ability to accept new work from client requests, including during the Company’s seasonally higher second half of the calendar year.
The Company’s business is seasonal, with the Company recognizing the majority of its operating income in the third and fourth quarters of the financial year, primarily as a result of the increased magazine advertising page counts and retail inserts and catalogs from back-to-school and holiday-related advertising and promotions.
The Company’s business is seasonal, with the Company recognizing the majority of its operating income in the second half of the calendar year, primarily as a result of the increased magazine advertising page counts and retail inserts and catalogs from back-to-school and holiday-related advertising and promotions.
The Company and the overall printing industry continues to experience a reduction in demand for printed materials and overcapacity due to various factors including the sustained and increasing shift of digital substitution by marketers and advertisers (to both replace and augment campaigns that were historically focused on print), which was exacerbated by the COVID-19 pandemic, as well as the current macroeconomic conditions and prior recessions (which have severely impacted print volumes and further accelerated the impact of media disruption).
The Company and the overall printing industry continues to experience a reduction in demand for printed materials and overcapacity due to various factors including the sustained and increasing shift of digital substitution by marketers and advertisers (to both replace and augment campaigns that were historically focused on print), as well as macroeconomic conditions and recessions (which severely impact print volumes and further accelerate the impact of media disruption).
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.
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 has used these additional rate authorities to implement twice a year increases and are expected to continue to do so in the future.
The Company is scheduled to make payments to the GCIU and GCC until April 2032 and February 2024, respectively. 31 Table o f Contents The Company may not be able to utilize deferred tax assets to offset future taxable income. As of December 31, 2022, the Company had deferred tax assets, net of valuation allowances, of $95.1 million.
The Company is scheduled to make payments to the GCIU and GCC until April 2032 and February 2024, respectively. 28 Table of Contents The Company may not be able to utilize deferred tax assets to offset future taxable income. As of December 31, 2023, the Company had deferred tax assets, net of valuation allowances, of $86.6 million.
Risks Relating to Quad’s Business, Operations and Industry Decreases in demand for printing services caused by factors outside of the Company’s control, including the substitution of printed products with digital content, prior and any future recessions, nationwide supply chain disruption, as well as significant downward pricing pressure, may continue to adversely affect the Company.
Risks Relating to Quad’s Business, Operations and Industry Decreases in demand for printing services caused by factors outside of the Company’s control, including the substitution of printed products with digital content, recessions and other macroeconomic conditions, as well as significant downward pricing pressure, may continue to adversely affect the Company.
As of December 31, 2022, the Company has recorded in its financial statements a pre-tax withdrawal liability for all United States MEPPs of $28.3 million in the aggregate.
As of December 31, 2023, the Company has recorded in its financial statements a pre-tax withdrawal liability for all United States MEPPs of $24.0 million in the aggregate.
As of December 31, 2022, the Company had the following long-lived assets on its consolidated balance sheet included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K: (a) property, plant and equipment of $672.1 million; (b) goodwill of $86.4 million; and (c) other intangible assets, primarily representing the value of customer relationships acquired, of $46.9 million.
As of December 31, 2023, the Company had the following long-lived assets on its consolidated balance sheet included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K: (a) property, plant and equipment of $620.6 million; (b) goodwill of $103.0 million; and (c) other intangible assets, primarily representing the value of customer relationships acquired, of $21.8 million.
The Company cannot predict the extent to which investor interest in the Company will lead to the development of a more active trading market for its class A common stock on the NYSE or how liquid that market will become.
However, there is still a limited active market for the class A common shares. The Company cannot predict the extent to which investor interest in the Company will lead to the development of a more active trading market for its class A common stock on the NYSE or how liquid that market will be.
The majority of the plans’ assets are held in North American and global equity securities and debt securities. The asset allocation as of December 31, 2022, was approximately 23% equity securities and 77% debt securities. As of December 31, 2022, the Company had underfunded pension liabilities of $36.3 million for single employer defined benefit plans in the United States.
The majority of the plans’ assets are held in North American and global equity securities and debt securities. The asset allocation as of December 31, 2023, was approximately 21% equity securities and 79% debt securities. As of December 31, 2023, the Company had underfunded pension liabilities of $39.4 million for single employer defined benefit plans in the United States.
As the Company expands its integrated marketing platform, the overall complexity of the Company’s business increases at an accelerated rate and the Company becomes subject to different market dynamics. The new markets into which the Company is expanding, or may expand, may have different characteristics from the markets in which the Company historically competed.
As the Company continues to expand its integrated marketing platform, the overall complexity of the Company’s business continues to increase and the Company continues to become subject to different market dynamics. The new markets into which the Company is expanding, or may expand, may have different characteristics from the markets in which the Company historically competed.
As a result, the Company is subject to the risks inherent in conducting business outside of the United States, including, but not limited to: the impact of economic and political instability; fluctuations in currency values, foreign-currency exchange rates, devaluation and conversion restrictions; exchange control regulations and other limits on the Company’s ability to import raw materials or finished product; tariffs and other trade barriers; trade restrictions and economic embargoes by the United States or other countries; health concerns regarding infectious diseases (such as COVID-19); adverse weather or natural disasters; social unrest, acts of terrorism, force majeure, war or other armed conflicts; inflation and fluctuations in interest rates; language barriers; difficulties in staffing, training, employee retention and managing international operations; logistical and communications challenges; differing local business practices and cultural consideration; restrictions on the ability to repatriate funds; foreign ownership restrictions and the potential for nationalization or expropriation of property or other resources; longer accounts receivable payment cycles; potential adverse tax consequences and being subject to different legal and regulatory regimes that may preclude or make more costly certain initiatives or the implementation of certain elements of its business strategy. 27 Table o f Contents The COVID-19 pandemic continues to negatively affect the Company’s business, financial conditions, cash flows, results of operations, supply chain and raw materials availability, as well as client demand.
As a result, the Company is subject to the risks inherent in conducting business outside of the United States, including, but not limited to: the impact of economic and political instability; fluctuations in currency values, foreign-currency exchange rates, devaluation and conversion restrictions; exchange control regulations and other limits on the Company’s ability to import raw materials or finished product; tariffs and other trade barriers; trade restrictions and economic embargoes by the United States or other countries; health concerns regarding infectious diseases; adverse weather or natural disasters; social unrest, acts of terrorism, force majeure, war or other armed conflicts; inflation and fluctuations in interest rates; language barriers; difficulties in staffing, training, employee retention and managing international operations; logistical and communications challenges; differing local business practices and cultural considerations; restrictions on the ability to repatriate funds; foreign ownership restrictions and the potential for nationalization or expropriation of property or other resources; longer accounts receivable payment cycles; potential adverse tax consequences and being subject to different legal and regulatory regimes that may preclude or make more costly certain initiatives or the implementation of certain elements of its business strategy. 24 Table of Contents If the Company fails to identify, manage, complete and integrate acquisitions, investment opportunities or other significant transactions, as well as identify and execute strategic divestitures, it may adversely affect the Company’s future results and ability to implement its business strategy.
There can be no assurance that all of the Company’s employees, contractors or agents, including those representing the Company in countries where practices which violate anti-corruption laws may be customary, will not take actions that violate the Company’s policies and procedures. The failure to comply with the laws governing international business practices may result in substantial penalties and fines.
There can be no assurance that all of the Company’s employees, contractors or agents, including those representing the Company in countries where practices which violate anti-corruption laws may be customary, will not take actions that violate the Company’s policies and procedures.
The Company may suffer a data-breach of sensitive information, ransomware attack or other cyber incident. If the Company’s efforts to protect the security of information or systems are unsuccessful, any such failure may result in costly government enforcement actions and/or private litigation, and the Company’s business and reputation could suffer.
If the Company’s efforts to protect the security of information or systems are unsuccessful, any such failure may result in costly government enforcement actions and/or private litigation, and the Company’s business and reputation could suffer.
As of December 31, 2022, the borrowings outstanding under the Master Note and Security Agreement were $4.4 million.
As of December 31, 2023, the borrowings outstanding under the Master Note and Security Agreement were $2.5 million.
The Company believes that there is significant competition for production personnel with the skills and technical knowledge that the Company requires, especially in light of the labor shortages which initially resulted from the COVID-19 pandemic.
The Company believes that there is significant competition for production personnel with the skills and technical knowledge that the Company requires, especially in light of continuing labor shortages.
Macroeconomic conditions, including inflation, rising interest rates and recessionary concerns, as well as ongoing supply chain challenges, labor availability and cost pressures, distribution challenges and the COVID-19 pandemic, have had, and may continue to have, a negative impact on the Company’s business, financial condition, cash flows and results of operations.
Macroeconomic conditions, including inflation, high interest rates and recessionary concerns, cost and labor pressures, distribution challenges and the price and availability of paper, have had, and may continue to have, a negative impact on the Company’s business, financial condition, cash flows and results of operations.
If QuadMed, a wholly-owned subsidiary of the Company, fails to comply with applicable healthcare laws and regulations, the Company could face substantial penalties, and its business, reputation, operations, prospects and financial condition of the Company’s subsidiary could be adversely affected.
The impacts of such proposals could have a material adverse impact on the Company’s financial condition and results of operations. 30 Table of Contents If QuadMed, a wholly-owned subsidiary of the Company, fails to comply with applicable healthcare laws and regulations, the Company could face substantial penalties, and its business, reputation, operations, prospects and financial condition of the Company’s subsidiary could be adversely affected.
The swaps convert the notional value of the Company’s variable rate debt based on one-month London Interbank Offered Rate (“LIBOR”) to a fixed rate, including a spread on underlying debt, and a monthly reset in the variable interest rate. The Company has also entered into two interest rate collar contracts, both effective February 1, 2023.
The swap converts the notional value of the Company’s variable rate debt based on one-month Secured Overnight Finance Rate (“SOFR”) to a fixed rate, including a spread on underlying debt, and a monthly reset in the variable interest rate. The Company has entered into two interest rate collar contracts, both effective February 1, 2023.
The Company operates in a highly competitive environment. The advertising and marketing services industries are highly competitive and are expected to remain so.
The advertising and marketing services industries are highly competitive and are expected to remain so.
The purpose of entering into these contracts was to reduce the variability of cash flows from interest payments related to a portion of the Company’s variable-rate debt.
The Company currently holds one interest rate swap contract. The purpose of entering into this contract was to reduce the variability of cash flows from interest payments related to a portion of the Company’s variable-rate debt.
The price and availability of paper may also be adversely affected by paper mills’ permanent or temporary closures, and mills’ access to raw materials, conversion to produce other types of paper, and ability to transport paper produced. The price and availability of ink and ink components may be adversely affected by the availability of component raw materials, labor and transportation.
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 (which a number of paper mills have done or are doing), and ability to transport paper produced.
The Company is a controlled company within the meaning of the rules of the New York Stock Exchange (“ NYSE ”) and, as a result, it relies on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.
If these restrictions increase or these guidelines are followed, they may impact who buys and holds the Company’s stock. 31 Table of Contents The Company is a controlled company within the meaning of the rules of the New York Stock Exchange (“ NYSE ”) and, as a result, it relies on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.
Labor represents a significant component of the cost structure of the Company. Increases in wages, salaries and the cost of medical, dental, pension and other post-retirement benefits may impact the Company’s financial performance.
Increases in wages, salaries and the cost of medical, dental, pension and other post-retirement benefits have in the past and may continue to impact the Company’s financial performance.
Changes in laws, regulations or governmental policy and the related interpretations may alter the environment in which the Company does business, and therefore, may impact its results or increase its costs or liabilities. 32 Table o f Contents In addition, the Company and its subsidiaries are party to a variety of legal and environmental remediation obligations arising in the normal course of business, as well as environmental remediation and related indemnification proceedings in connection with certain historical activities, former facilities and contractual obligations of acquired businesses.
In addition, the Company and its subsidiaries are party to a variety of legal and environmental remediation obligations arising in the normal course of business, as well as environmental remediation and related indemnification proceedings in connection with certain historical activities, former facilities and contractual obligations of acquired businesses.
Any contract non-renewals, renewals on different terms and conditions or decline in the Company’s client retention or expansion could materially adversely affect the Company’s results of operations, financial condition and cash flows. The Company has historically derived a significant portion of its revenue from long-term contracts with significant clients.
The Company’s business depends substantially on client contract renewals and/or client retention. Any contract non-renewals, renewals on different terms and conditions or decline in the Company’s client retention or expansion could materially adversely affect the Company’s results of operations, financial condition and cash flows.
In addition in 2022, the Company experienced certain distribution challenges, including, but not limited to, delivery delays at the USPS and recent volume restrictions at the United Parcel Service, Federal Express and certain local couriers, which negatively impacted the Company.
In addition in 2023, the Company experienced certain distribution challenges, including, but not limited to, delivery delays at the USPS and recent volume restrictions at the United Parcel Service, Federal Express and certain local couriers, which negatively impacted the Company. 21 Table of Contents Demand for the Company’s products and services, in general, is highly related to general economic conditions in the markets the Company’s clients serve.
Proposals under consideration include limitations on the amount of greenhouse gas that can be emitted (so-called “caps”) together with systems of trading allowed emissions capacities. The impacts of such proposals could have a material adverse impact on the Company’s financial condition and results of operations.
Proposals under consideration include requiring climate- and emissions-related disclosures and limitations on the amount of greenhouse gas that can be emitted (so-called “caps”) together with systems of trading allowed emissions capacities.
In addition, the acceleration of the Company’s transformation to a marketing solutions partner is partially dependent upon the Company’s continued ability to identify and execute strategic divestiture opportunities to generate cash and related benefits.
In addition, the Company’s transformation to a marketing experience company is partially dependent upon the Company’s continued ability to identify and execute strategic divestiture opportunities to generate cash and related benefits. There can be no assurance whether the strategic benefits and expected financial impact of any divestitures will be achieved.
Changes in the legal and regulatory environment could limit the Company’s business activities, increase its operating costs, reduce demand for its products or result in litigation.
Complying with these various laws could cause the Company to incur substantial costs or require changes to the Company’s business practices in a manner adverse to the Company’s business. Changes in the legal and regulatory environment or reporting requirements could limit the Company’s business activities, increase its operating costs, reduce demand for its products or result in litigation.
Accordingly, for so long as the Company is a controlled company, holders of class A stock may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE. 34 Table o f Contents Currently, there is a limited active market for Quad’s class A common stock and, as a result, shareholders may be unable to sell their class A common stock without losing a significant portion of their investment.
Accordingly, for so long as the Company is a controlled company, holders of class A stock may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE.
The Company’s class A stock has been traded on the NYSE under the symbol “QUAD” since July 6, 2010. However, there is currently a limited active market for the class A common shares.
Currently, there is a limited active market for Quad’s class A common stock and, as a result, shareholders may be unable to sell their class A common stock without losing a significant portion of their investment. The Company’s class A stock has been traded on the NYSE under the symbol “QUAD” since July 6, 2010.
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.
As of December 31, 2023, the Company was in compliance with all financial covenants in its debt agreements. While the Company currently expects to be in compliance in future periods with all of the financial covenants, there can be no assurance that these covenants will continue to be met.
The Company and its facilities are subject to various consumer protection and privacy laws and regulations, and will become subject to additional laws and regulations in the future.
The failure to comply with the laws governing international business practices may result in substantial penalties and fines. 29 Table of Contents The Company and its facilities are subject to various consumer protection and privacy laws and regulations, and will become subject to additional laws and regulations in the future.
Postal costs are a significant component of the cost structures of many of the Company’s clients and potential clients.
Changes in postal rates, postal regulations and postal services may adversely impact clients’ demand for print products and services. Postal costs are a significant component of the cost structures of many of the Company’s clients and potential clients.
Approximately half of the paper used by the Company is supplied directly by its clients. For those clients that do not directly supply their own paper, the Company generally includes price adjustment clauses in sales contracts for paper and other critical raw materials in the printing process.
For those clients that do not directly supply their own paper, 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 may have an impact on client demand for printed products.
Continuing or worsening inflation, recessionary concerns and/or supply chain and distribution challenges may have a material adverse impact on the Company’s business, financial condition, cash flows and/or results of operations. 23 Table o f Contents The Company’s transformation to a marketing experience company increases the complexity of the Company’s business, and if the Company is unable to successfully adapt its marketing offerings and business processes as required by these new markets, the Company will be at a competitive disadvantage and its ability to grow will be adversely affected.
The Company’s transformation to a marketing experience company increases the complexity of the Company’s business, and if the Company is unable to successfully adapt its marketing offerings and business processes as required by new markets and technologies, such as artificial intelligence, the Company will be at a competitive disadvantage and its ability to grow will be adversely affected.
Under current market conditions, it is possible that one or more of the Company’s vendors will be unable to fulfill their operating obligations due to financial hardships, liquidity issues or other reasons. 22 Table o f Contents The Company 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.
Under current market conditions, it is possible that one or more of the Company’s vendors will be unable to fulfill their operating obligations due to financial hardships, liquidity issues or other reasons.
There can be no assurance whether the strategic benefits and expected financial impact of any divestitures will be achieved. 28 Table o f Contents Financial Risks The Company may be required to make investments, including capital expenditures and in the development and implementation of new systems, client technology, product technology, marketing and talent to sustain and grow its platforms and processes, in part to keep pace with industry developments and client expectations, and to remain technologically and economically competitive, which may increase its costs, reduce its profits, disrupt its operations or adversely affect its ability to implement its business strategy.
The harm may be immediate without affording the Company an opportunity for redress or correction. 25 Table of Contents Financial Risks The Company may be required to make capital expenditures to sustain and grow its platforms and processes, as well as make investments in the development and implementation of new systems, client technology, product technology, marketing and talent in order to keep pace with industry developments, client expectations, and to remain technologically and economically competitive.
Borrowing from lenders who elected to not extend the maturity date will mature on January 31, 2024, whereas borrowing from lenders who elected to extend the maturity date will now mature on November 2, 2026. As of December 31, 2022, the borrowings outstanding under the Senior Secured Credit Facility were $556.7 million.
Borrowing from lenders who elected to not extend the maturity date matured on January 31, 2024, whereas borrowing from lenders who elected to extend the maturity date matures on November 2, 2026.
In addition, the need to reduce ongoing operating costs have and, in the future, may continue to result in significant up-front costs to reduce workforce, close or consolidate facilities, or upgrade equipment and technology. Changes in postal rates, postal regulations and postal services may adversely impact clients’ demand for print products and services.
In addition, the need to reduce ongoing operating costs have and, in the future, may continue to result in significant up-front costs to reduce workforce, close or consolidate facilities, or upgrade equipment and technology. 22 Table of Contents The Company may suffer a data-breach of sensitive information, ransomware attack or other cyber incident.
In addition to the financial covenants, the debt facilities also include certain limitations on acquisitions, indebtedness, liens, dividends and repurchases of capital stock. As of December 31, 2022, the Company was in compliance with all financial covenants in its debt agreements.
As of December 31, 2023, the borrowings outstanding under the Senior Secured Credit Facility were $511.1 million. 26 Table of Contents The Company’s various lending arrangements include certain financial covenants. In addition to the financial covenants, the debt facilities also include certain limitations on acquisitions, indebtedness, liens, dividends and repurchases of capital stock.
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. Failure to attract and retain qualified talent across the enterprise could materially adversely affect the Company’s business, competitive position, financial condition and results of operations.
Failure to attract and retain qualified talent across the enterprise could materially adversely affect the Company’s business, competitive position, financial condition and results of operations.
Such default could cause the outstanding indebtedness to become immediately due and payable, by virtue of cross-acceleration or cross-default provisions. The Company may be adversely affected by interest rates, particularly floating interest rates, and foreign exchange rates. As of December 31, 2022, 75% of the Company’s borrowings were subject to variable interest rates.
The Company may be adversely affected by interest rates, particularly floating interest rates, and foreign exchange rates. As of December 31, 2023, 44% of the Company’s borrowings were subject to variable interest rates. As a result, the Company is exposed to market risks associated with fluctuations in interest rates, and increases in interest rates could adversely affect the Company.
Removed
Although these clauses generally mitigate paper price risk, higher paper prices and tight paper supplies may have an impact on client demand for printed products.
Added
In addition, with rapid changes in technology affecting the marketing and advertising industry, including generative artificial intelligence, the Company may not accurately predict trends, identify use cases, or make the technological adaptations or investments necessary to stay competitive in these new markets.
Removed
Demand for the Company’s products and services, in general, is highly related to general economic conditions in the markets the Company’s clients serve.
Added
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 PRC has committed to reviewing the 5-year structure in 2024, but resulting rate reductions may take years to finalize.
Removed
As the USPS reacts to its financial difficulties, it often revises design standards for mail entering its system. These design standards often increase costs for clients and, in turn, decrease the value of the cost reductions that the Company’s co-mailing services provide.
Added
The price and availability of ink and ink components may be adversely affected by the availability of component raw materials, labor and transportation. Approximately half of the paper used by the Company is supplied directly by its clients.
Removed
The harm may be immediate without affording the Company an opportunity for redress or correction. 26 Table o f Contents The Company’s business depends substantially on client contract renewals and/or client retention.
Added
The Company 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. Labor represents a significant component of the cost structure of the Company.
Removed
Since the first quarter of 2020, there has been a worldwide impact from the COVID-19 pandemic.
Added
This, or uncertainty or disruptions in global credit and banking markets, might cause the Company to not be able to continue to have access to preferred sources of liquidity when needed or on terms the Company finds acceptable, and the Company’s borrowing costs could increase.
Removed
Quad has significant operations in the United States and printing operations or investments in printing operations in England, France, Germany, Poland, Colombia, Mexico, Peru and India, and each of these countries has been affected by the pandemic and taken measures to try to contain the virus, such as limiting or closing business activities, transportation and person-to-person interactions, resulting in disruptions at some of the Company’s printing facilities and support operations, as well as the operations of the Company’s clients and suppliers.
Added
Continuing or worsening inflation, recessionary concerns, supply chain and distribution challenges and/or uncertainty or disruptions in global credit and banking markets may have a material adverse impact on the Company’s business, financial condition, cash flows and/or results of operations. The Company operates in a highly competitive environment.
Removed
In some cases, the relaxation of such trends has been followed by actual or contemplated returns to stringent restrictions on commerce or gatherings, including in parts of the United States and the rest of the world.
Added
The Company has historically derived a significant portion of its revenue from long-term contracts with significant clients.
Removed
Global trade conditions and client trends that originated during the pandemic continue to persist and may also have a long-lasting adverse impact on the Company independently of the progress on the pandemic.
Added
The cash or financing required for these capital expenditures and investments may not be sufficient or available on terms acceptable to the Company. In addition, these capital expenditures and investments may increase the Company’s costs, reduce its profits, disrupt its operations or adversely affect its ability to implement its business strategy.
Removed
For example, the COVID-19 pandemic weakened demand for the Company’s products and services, disrupted the Company’s supply chain and resulted in rising inflationary cost and labor pressures, distribution challenges, recessionary concerns and other evolving macroeconomic conditions.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table lists the Company’s operating locations with manufacturing facilities totaling over 500,000 square feet as of December 31, 2022: Locations Square Feet Property Type Segment Lomira, Wisconsin, United States 2,174,000 Owned United States Print and Related Services Sussex, Wisconsin, United States 1,971,000 Owned United States Print and Related Services Martinsburg, West Virginia, United States 1,740,000 Owned United States Print and Related Services Hartford, Wisconsin, United States 1,682,000 Owned United States Print and Related Services Saratoga Springs, New York, United States 1,034,000 Owned United States Print and Related Services West Allis, Wisconsin, United States 913,000 Leased United States Print and Related Services The Rock, Georgia, United States 797,000 Owned United States Print and Related Services Wyszkow, Poland 709,000 Owned International Effingham, Illinois, United States 564,000 Owned United States Print and Related Services Merced, California, United States 539,000 Owned United States Print and Related Services
Biggest changeThe following table lists the Company’s operating locations with manufacturing facilities totaling over 500,000 square feet as of December 31, 2023: Locations Square Feet Property Type Segment Lomira, Wisconsin, United States 2,174,000 Owned United States Print and Related Services Sussex, Wisconsin, United States 1,971,000 Owned United States Print and Related Services Martinsburg, West Virginia, United States 1,740,000 Owned United States Print and Related Services Hartford, Wisconsin, United States 1,682,000 Owned United States Print and Related Services Saratoga Springs, New York, United States (1) 1,034,000 Owned United States Print and Related Services West Allis, Wisconsin, United States 913,000 Leased United States Print and Related Services The Rock, Georgia, United States 797,000 Owned United States Print and Related Services Wyszkow, Poland 709,000 Owned International Effingham, Illinois, United States (1) 564,000 Owned United States Print and Related Services ______________________________ (1) The Effingham, Illinois facility was announced for closure on October 24, 2023, and the Saratoga Springs, New York facility was announced for closure on January 19, 2024.
Item 2. Properties Quad’s corporate office is located in Sussex, Wisconsin. The Company owned or leased 104 facilities located in 14 countries including manufacturing operations, warehouses and office space totaling approximately 18,530,000 square feet, of which approximately 13,149,000 is owned space and approximately 5,381,000 is leased space as of December 31, 2022.
Item 2. Properties Quad’s corporate office is located in Sussex, Wisconsin. The Company owned or leased 96 facilities located in 14 countries including manufacturing operations, warehouses and office space totaling approximately 17,580,000 square feet, of which approximately 12,610,000 is owned space and approximately 4,970,000 is leased space as of December 31, 2023.
Within the International segment, the Company operated 8 owned or leased manufacturing facilities, encompassing approximately 1,735,000 square feet as of December 31, 2022.
Within the United States Print and Related Services segment, the Company operated 34 owned or leased manufacturing facilities, encompassing approximately 14,556,000 square feet as of December 31, 2023. Within the International segment, the Company operated 9 owned or leased manufacturing facilities, encompassing approximately 1,739,000 square feet as of December 31, 2023.
Removed
In addition to these owned and leased facilities, the Company has more than 80 client-based marketing on-site locations, as well as investments in printing operations located in India. Within the United States Print and Related Services segment, the Company operated 37 owned or leased manufacturing facilities, encompassing approximately 15,241,000 square feet as of December 31, 2022.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeFor additional information, see Note 9, “Commitments and Contingencies — Litigation,” to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
Biggest changeFor additional information, see Note 9, “Commitments and Contingencies — Litigation,” to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 35 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+0 added−2 removed5 unchanged
Biggest changeInformation about the Company’s repurchases of its class A common stock during the three months ended December 31, 2022, 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 (2) October 1, 2022 to October 31, 2022 — — — $ 90,061,874 November 1, 2022 to November 30, 2022 — — — 90,061,874 December 1, 2022 to December 31, 2022 — — — 90,061,874 Total — — ______________________________ (1) Represents shares of the Company’s class A common stock.
Biggest changeInformation about the Company’s repurchases of its class A common stock during the three months ended December 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 (2) October 1, 2023 to October 31, 2023 354,682 4.83 354,682 $ 78,116,172 November 1, 2023 to November 30, 2023 137,714 4.42 137,714 77,507,158 December 1, 2023 to December 31, 2023 — — — 77,507,158 Total 492,396 492,396 ______________________________ (1) Represents shares of the Company’s class A common stock. 36 Table of Contents (2) On July 30, 2018, the Company’s Board of Directors authorized a share repurchase program of up to $100.0 million of the Company’s outstanding class A common stock.
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 3,093,662 shares of the Company’s class A stock repurchased during the year ended December 31, 2022.
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 2,852,501 and 3,093,662 shares of the Company’s class A stock repurchased during the years ended December 31, 2023 and 2022, respectively.
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 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 of January 31, 2023, there were 2,081 record holders of the class A stock and 21 record holders of the class B stock. The Company’s class A stock is listed on the NYSE under the symbol “QUAD”. The class A stock is entitled to one vote per share.
As of January 31, 2024, there were 2,031 record holders of the class A stock and 22 record holders of the class B stock. The Company’s class A stock is listed on the NYSE under the symbol “QUAD”. The class A stock is entitled to one vote per share.
The Company’s outstanding capital stock as of December 31, 2022, consisted of 39.2 million shares of class A stock, 13.5 million shares of class B stock and no shares of class C common stock or preferred stock.
The Company’s outstanding capital stock as of December 31, 2023, consisted of 37.4 million shares of class A stock, 13.6 million shares of class B stock and no shares of class C common stock or preferred stock.
Pursuant to the Company’s debt facilities, the Company is subject to limitations on dividends and repurchases of capital stock. If the Company’s Total Leverage Ratio is greater than 2.75 to 1.00, as defined in the Company’s Senior Secured Credit Facility, last amended on January 24, 2023, (see Note 10.
If the Company’s Total Leverage Ratio is greater than 2.75 to 1.00, as defined in the Company’s Senior Secured Credit Facility, last amended on January 4, 2024, (see Note 10.
If the Total Leverage Ratio is less than 2.50 to 1.00, there are no such restrictions. 36 Table o f Contents Securities Authorized For Issuance Under Equity Compensation Plans See Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this Annual Report on Form 10-K for certain information regarding the Company’s equity compensation plans.
Securities Authorized For Issuance Under Equity Compensation Plans See Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this Annual Report on Form 10-K for certain information regarding the Company’s equity compensation plans.
There were no shares repurchased during the year ended December 31, 2021. As of December 31, 2022, there were $90.1 million of authorized repurchases remaining under the program. 37 Table o f Contents
As of December 31, 2023, there were $77.5 million of authorized repurchases remaining under the program. 37 Table of Contents
However, the Company remains committed to paying a dividend over the long term and will seek to resume a dividend following the stabilization of its operating environment. Pursuant to the Company’s Articles of Incorporation, each outstanding class of common stock has equal rights with respect to cash dividends.
Pursuant to the Company’s Articles of Incorporation, each outstanding class of common stock has equal rights with respect to cash dividends. Pursuant to the Company’s debt facilities, the Company is subject to limitations on dividends and repurchases of capital stock.
Removed
The Company paid a dividend for each class of common stock then outstanding during the first quarter of 2020. Due to uncertainty in client demand as a result of the COVID-19 pandemic, the Company’s Board of Directors proactively suspended the Company’s quarterly dividends beginning in the second quarter of 2020.
Removed
(2) On July 30, 2018, the Company’s Board of Directors authorized a share repurchase program of up to $100.0 million of the Company’s outstanding class A common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

101 edited+16 added−42 removed81 unchanged
Biggest changeIn January 2022, the Company sold its investment in Plural. 44 Table o f Contents Operating Results The following table sets forth certain information from the Company’s consolidated statements of operations on an absolute dollar basis and as a relative percentage of total net sales for each noted period, together with the relative percentage change in such information between the periods set forth below: Year Ended December 31, 2022 % of Net Sales 2021 % of Net Sales $ Change % Change (dollars in millions) Net sales: Products $ 2,528.3 78.6 % $ 2,247.1 75.9 % $ 281.2 12.5 % Services 688.7 21.4 % 713.3 24.1 % (24.6) (3.4) % Total net sales 3,217.0 100.0 % 2,960.4 100.0 % 256.6 8.7 % Cost of sales: Products 2,156.2 67.0 % 1,861.0 62.9 % 295.2 15.9 % Services 462.6 14.4 % 528.9 17.9 % (66.3) (12.5) % Total cost of sales 2,618.8 81.4 % 2,389.9 80.8 % 228.9 9.6 % Selling, general & administrative expenses 358.6 11.1 % 326.0 11.0 % 32.6 10.0 % Gains from sale and leaseback — — % (24.5) (0.8) % 24.5 nm Depreciation and amortization 141.3 4.4 % 157.3 5.3 % (16.0) (10.2) % Restructuring, impairment and transaction-related charges 44.8 1.4 % 18.9 0.6 % 25.9 137.0 % Total operating expenses 3,163.5 98.3 % 2,867.6 96.9 % 295.9 10.3 % Operating income $ 53.5 1.7 % $ 92.8 3.1 % $ (39.3) (42.3) % Net Sales Product sales increased $281.2 million, or 12.5%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to a $191.2 million increase from paper sales and a $110.1 million increase in sales in the Company’s print product lines, primarily due to increased print pricing and volume, partially offset by $20.1 million in unfavorable foreign exchange impacts.
Biggest changeYear Ended December 31, 2023 2022 $ Change (dollars in millions) Earnings (loss) before income taxes $ (42.6) $ 17.7 $ (60.3) Normalized tax rate 25.0 % 25.0 % Income tax expense (benefit) at normalized tax rate (10.7) 4.4 (15.1) Less: Income tax expense from the consolidated statements of operations 12.8 8.4 4.4 Impact of income taxes $ 23.5 $ 4.0 $ 19.5 Operating Results The following table sets forth certain information from the Company’s consolidated statements of operations on an absolute dollar basis and as a relative percentage of total net sales for each noted period, together with the relative percentage change in such information between the periods set forth below: Year Ended December 31, 2023 % of Net Sales 2022 % of Net Sales $ Change % Change (dollars in millions) Net sales: Products $ 2,334.1 78.9 % $ 2,528.3 78.6 % $ (194.2) (7.7) % Services 623.6 21.1 % 688.7 21.4 % (65.1) (9.5) % Total net sales 2,957.7 100.0 % 3,217.0 100.0 % (259.3) (8.1) % Cost of sales: Products 1,984.7 67.1 % 2,156.2 67.0 % (171.5) (8.0) % Services 396.5 13.4 % 462.6 14.4 % (66.1) (14.3) % Total cost of sales 2,381.2 80.5 % 2,618.8 81.4 % (237.6) (9.1) % Selling, general & administrative expenses 344.5 11.6 % 358.6 11.1 % (14.1) (3.9) % Depreciation and amortization 128.8 4.4 % 141.3 4.4 % (12.5) (8.8) % Restructuring, impairment and transaction-related charges 77.5 2.6 % 44.8 1.4 % 32.7 73.0 % Total operating expenses 2,932.0 99.1 % 3,163.5 98.3 % (231.5) (7.3) % Operating income $ 25.7 0.9 % $ 53.5 1.7 % $ (27.8) (52.0) % 44 Table of Contents Net Sales Product sales decreased $194.2 million, or 7.7%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to the following: (1) a $117.3 million decrease from paper sales; (2) a $65.4 million decrease in sales in the Company’s print product lines, mainly due to decreased print volumes; and (3) a $26.4 million decrease in net sales (which includes $8.3 million in paper sales) due to the divestiture of the Company’s print operations in Argentina, partially offset by $14.9 million in favorable foreign exchange impacts.
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 as a measure of operating performance, or to cash flows provided by operating activities as a measure of liquidity.
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.
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 to EBITDA in the “Results of Operations” section below, and see the definitions of Free Cash Flow and Debt Leverage Ratio, the reconciliation of net cash provided by operating activities to Free Cash Flow, and the calculation of Debt Leverage Ratio in the “Liquidity and Capital Resources” section below).
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 net cash provided by operating activities to Free Cash Flow, and the calculation of Debt Leverage Ratio in the “Liquidity and Capital Resources” section below).
EBITDA and EBITDA Margin—Consolidated EBITDA is defined as net earnings, 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.
EBITDA and EBITDA Margin—Consolidated EBITDA is defined as net earnings (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.
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. 39 Table o f 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.
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. 39 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 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 Company is also 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.
This fair value determination was categorized as Level 3 in the fair value hierarchy (see Note 13, “Financial Instruments and Fair Value Measurements,” to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K for the definition of Level 3 inputs). 59 Table o f Contents The Company classifies long-lived assets to be sold as held for sale in the period in which: (i) there is an approved plan to sell the asset and the Company is committed to that plan, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
This fair value determination was categorized as Level 3 in the fair value hierarchy (see Note 13, “Financial Instruments and Fair Value Measurements,” to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K for the definition of Level 3 inputs). 57 Table of Contents The Company classifies long-lived assets to be sold as held for sale in the period in which: (i) there is an approved plan to sell the asset and the Company is committed to that plan, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Following discussion of the financial condition and results of operations of Quad should be read together with Quad’s audited consolidated financial statements for each of the two years in the period ended December 31, 2022, including the notes thereto, included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
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 Quad’s audited consolidated financial statements for each of the two years in the period ended December 31, 2023, including the notes thereto, included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
Impairment of Property, Plant and Equipment and Finite-lived Intangible Assets The Company performs impairment evaluations of its long-lived assets whenever business conditions, events or circumstances indicate that those assets may be impaired, including whether the estimated useful life of such long-lived assets may warrant revision or whether the remaining balance of an asset may not be recoverable.
Impairment of Property, Plant and Equipment, Right-of-Use Assets and Finite-lived Intangible Assets The Company performs impairment evaluations of its long-lived assets whenever business conditions, events or circumstances indicate that those assets may be impaired, including whether the estimated useful life of such long-lived assets may warrant revision or whether the remaining balance of an asset may not be recoverable.
On a rolling twelve-month basis, the Total Leverage Ratio, defined as consolidated total indebtedness to consolidated EBITDA, shall not exce ed 3.75 to 1.00 (for the twelve months ended December 31, 2022, the Company’s Total Leverage Ratio was 2.22 to 1.00). • Liquidity, defined as unrestricted cash and permitted investments of the Company and its subsidiaries (subject to certain conditions) plus the aggregate amount of the unused revolving credit facility commitments, shall not be less than $181.6 million at any time during the period commencing December 15, 2023 and ending when all obligations owed under the Senio r 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: ◦ Se nior Secured Leverage Ratio.
On a rolling twelve-month basis, the Total Leverage Ratio, defined as consolidated total indebtedness to consolidated EBITDA, shall not exce ed 3.75 to 1.00 (for the twelve months ended December 31, 2023, the Company’s Total Leverage Ratio was 2.18 t o 1.00). • Liquidity, defined as unrestricted cash and permitted investments of the Company and its subsidiaries (subject to certain conditions) plus the aggregate amount of the unused revolving credit facility commitments, shall not be less than $181.6 million at any time during the period commencing December 15, 2023 and ending when all obligations owed under the Senio r 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: ◦ Se nior Secured Leverage Ratio.
The Total Leverage Ratio included in the Company’s debt covenants includes interest rate swap 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.
The Total Leverage Ratio included in the Company’s debt covenants includes interest rate 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.
Borrowings under the revolving credit facility and Term Loan A made under the Senior Secured Credit Facility bear interest at 2.75% in excess of reserve adjusted LIBOR, or 1.75% in excess of an alternate base rate with a LIBOR floor of 0.75% for the extended tranche and bear interest at 2.50% in excess of reserve adjusted LIBOR, or 1.50% in excess of an alternate base rate with a LIBOR floor of 0.75% for the non-extending tranche.
Borrowings under the revolving credit facility and Term Loan A made under the Senior Secured Credit Facility bear interest at 2.75% in excess of reserve adjusted SOFR, or 1.75% in excess of an alternate base rate with a SOFR floor of 0.75% for the extended tranche and bear interest at 2.50% in excess of reserve adjusted SOFR, or 1.50% in excess of an alternate base rate with a SOFR floor of 0.75% for the non-extending tranche.
The Company’s operating and reportable segments, including 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.
The Company’s operating and reportable segments, including their product and service offerings, and a “Corporate” category, are summarized below. The United States Print and Related Services segment is predominantly comprised of the Company’s United States printing operations and is managed as one integrated platform.
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. 41 Table o f Contents Federal statute requires the PRC to conduct reviews of the overall rate-making structure for the USPS to ensure funding stability.
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, digital and mobile channels and other alternative media channels, in order to ensure that they stay within their expected postage budgets. 41 Table of Contents Federal statute requires the PRC to conduct reviews of the overall rate-making structure for the USPS to ensure funding stability.
The Company continues to focus on reducing pension obligations through cash contributions to the plans, lump-sum settlements and plan design changes. Share Repurchase Program On July 30, 2018, the Company’s Board of Directors authorized a share repurchase program of up to $100.0 million of the Company’s outstanding class A common stock.
The Company continues to focus on reducing pension obligations through cash contributions to the plans, lump-sum settlements and plan design changes. 54 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.
On a rolling four-quarter basis, the Senior Secured Leverage Ratio, defined as the ratio of consolidated senior secured net indebtedness to consolidated EBITDA, shall not exceed (a) 3.50 to 1.00 for any fiscal quarter ending prior to December 31, 2023, and (b) 3.25 to 1.00 for any fiscal quarter ending on or after December 31, 2023 (other than, in the case of this clause (b), any fiscal quarter ending September 30 of any year, each of which shall be subject to a maximum Senior Secured Leverage Ratio not to exceed 3.50 to 1.00) (for the twelve months ended December 31, 2022, the Company’s Senior Secured Leverage Ratio was 2.13 to 1.00). • Interest Coverage Ratio.
On a rolling four-quarter basis, the Senior Secured Leverage Ratio, defined as the ratio of consolidated senior secured net indebtedness to consolidated EBITDA, shall not exceed (a) 3.50 to 1.00 for any fiscal quarter ending prior to December 31, 2023, and (b) 3.25 to 1.00 for any fiscal quarter ending on or after December 31, 2023 (other than, in the case of this clause (b), any fiscal quarter ending September 30 of any year, each of which shall be subject to a maximum Senior Secured Leverage Ratio not to exceed 3.50 to 1.00) (for the twelve months ended December 31, 2023, the Company’s Senior Secured Leverage Ratio was 1.99 t o 1.00). ◦ Interest Coverage Ratio.
In these situations, the Company may receive warehouse management fees for the services it provides. 58 Table o f Contents Certain revenues earned by the Company require judgment to determine if revenue should be recorded gross as principal or net of related costs as an agent.
In these situations, the Company may receive warehouse management fees for the services it provides. 56 Table of Contents Certain revenues earned by the Company require judgment to determine if revenue should be recorded gross as principal or net of related costs as an agent.
The operating margin for the United States Print and Related Services segment decreased to 3.9% for the year ended December 31, 2022, from 6.2% for the year ended December 31, 2021, primarily due to the reasons provided above.
The operating margin for the United States Print and Related Services segment decreased to 2.2% for the year ended December 31, 2023, from 3.9% for the year ended December 31, 2022, primarily due to the reasons provided above.
This includes print execution and logistics for retail inserts, catalogs, long-run publications, 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, along with global paper procurement, and marketing and other complementary services, such as data and analytics, technology solutions, media services, creative and content solutions, managed services and execution in non-print channels (e.g., digital and broadcast).
This includes print execution and logistics for retail inserts, catalogs, long-run publications, 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, along with global paper procurement, and marketing and other complementary services, such as data intelligence and analytics, technology solutions, media planning, placement and optimization, creative strategy and content creation, as well as execution in non-print channels (e.g., digital and broadcast).
This segment also includes the manufacture of ink. The United States Print and Related Services segment accounted for approximately 87% and 89% of the Company’s consolidated net sales during the years ended December 31, 2022 and 2021, respectively.
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 years ended December 31, 2023 and 2022, respectively.
Factors that could cause or contribute to these differences include, but are not limited to, those discussed in “Forward-Looking Statements” and Part I, Item 1A, “Risk Factors,” included earlier within this Annual Report on Form 10-K.
Factors that could cause or contribute to these differences include, but are not limited to, those discussed in “Cautionary Statement Regarding Forward-Looking Statements” and Part I, Item 1A, “Risk Factors,” included earlier within this Annual Report on Form 10-K.
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. This segment provides printed products and marketing and other complementary services consistent with the United States Print and Related Services segment.
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. This segment provides printed products and marketing and other complementary services consistent with the United States Print and Related Services segment.
The Senior Secured Credit Facility was amended to (a) reduce the aggregate amount of the existing revolving credit facility from $500.0 million to $432.5 million, and extend the maturity of a portion of the revolving credit facility such that $90.0 million under the revolving credit facility is due on the existing maturity date of January 31, 2024 (the “Existing Maturity Date”) and $342.5 million under the revolving credit facility is due on November 2, 2026 (the “Extended Maturity Date”); (b) extend the maturity of a portion of the existing term loan facility such that $91.5 million of such term loan facility is due on the Existing Maturity Date and $483.9 million is due on the Extended Maturity Date; (c) make certain adjustments to pricing, including an increase of 0.50% to the interest rate margin applicable to the loans maturing on the Extended Maturity Date; (d) modify certain financial and operational covenants; and (e) modify the interest rate provisions relating to the phase-out of LIBOR as a reference rate.
The Senior Secured Credit Facility was amended to (a) reduce the aggregate amount of the existing revolving credit facility from $500.0 million to $432.5 million, and extend the maturity of a portion of the revolving credit facility such that $90.0 million under the revolving credit facility is due on the existing maturity date of January 31, 2024 (the “Existing Maturity Date”) and $342.5 million under the revolving credit facility is due on November 2, 2026 (the “Extended Maturity Date”); (b) extend the maturity of a portion of the existing term loan facility such that $91.5 million (of which a principal payment of $87.7 million was due upon maturity on January 31, 2024) of such term loan facility is due on the Existing Maturity Date and $483.9 million is due on the Extended Maturity Date; (c) make certain adjustments to pricing, including an increase of 0.50% to the interest rate margin applicable to the loans maturing on the Extended Maturity Date; (d) modify certain financial and operational covenants; and (e) modify the interest rate provisions relating to the phase-out of London Interbank Offered Rate (“LIBOR”) as a reference rate.
The Company’s most significant long-lived assets are property, plant and equipment and customer relationship intangible assets recorded in conjunction with an acquisition.
The Company’s most significant long-lived assets are property, plant and equipment, right-of-use assets and customer relationship intangible assets recorded in conjunction with an acquisition.
As the Company’s Total Leverage Ratio as of December 31, 2022, was 2.22 to 1.00, the limitations described above are not applicable at this time. 55 Table o f Contents • 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 the Senior Unsecured Notes or any other unsecured or subordinated debt).
As the Company’s Total Leverage Ratio as of December 31, 2023, was 2.18 t o 1.00, the limitations described above are not applicable at this time. • 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 the Senior Unsecured Notes or any other unsecured or subordinated debt).
Selling, general and administrative expenses as a percentage of net sales increased from 11.0% for the year ended December 31, 2021, to 11.1% for the year ended December 31, 2022.
Selling, general and administrative expenses as a percentage of net sales increased from 11.1% for the year ended December 31, 2022, to 11.6% for the year ended December 31, 2023.
The International segment accounted for approximately 13% and 11% of the Company’s consolidated net sales during the years ended December 31, 2022 and 2021, respectively.
The International segment accounted for approximately 14% and 13% of the Company’s consolidated net sales during the years ended December 31, 2023 and 2022, respectively.
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.
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 has used these additional rate authorities to implement twice a year increases and are expected to continue to do so in the future.
The increase was primarily due to a $24.4 million increase in cash from earnings, offset by a $6.3 million decrease in cash flows provided by changes in operating assets and liabilities.
The decrease was primarily due to a $92.6 million decrease in cash from earnings, offset by a $85.6 million increase in cash flows provided by changes in operating assets and liabilities.
The Company’s consolidated debt and finance lease obligations decreased by $234 million during the year ended December 31, 2022, primarily due to the use of cash and cash equivalents and cash provided by operating activities. 40 Table o f 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.
The Company’s consolidated debt and finance lease obligations decreased by $47.5 million during the year ended December 31, 2023, primarily due to the use of cash and cash equivalents, cash provided by operating activities and proceeds from the sale of property, plant and equipment. 40 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.
All repurchased Senior Unsecured Notes were canceled. The Company used cash flows from operating activities and borrowings under its revolving credit facility to fund the repurchases. These repurchases were completed primarily to reduce interest expense.
The Company used cash flows from operating activities and borrowings under its revolving credit facility to fund the repurchases. These repurchases were completed primarily to reduce interest expense.
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.
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.
As of December 31, 2022, the Company has net reserves for workers’ compensation of $29.9 million, of which $6.6 million was recorded in other current liabilities and $34.5 million was recorded in other long-term liabilities in the consolidated balance sheets (see Note 8, “Other Current and Long-Term Liabilities”).
As of December 31, 2023, the Company has net reserves for workers’ compensation of $28.7 million, of which $6.7 million was recorded in other current liabilities and $31.0 million was recorded in other long-term liabilities in the consolidated balance sheets (see Note 8, “Other Current and Long-Term Liabilities”).
Restructuring, Impairment and Transaction-Related Charges Restructuring, impairment and transaction-related charges for the International segment decreased $0.6 million, or 1.9%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following: Year Ended December 31, 2022 2021 $ Change (dollars in millions) Employee termination charges $ 3.2 $ 1.2 $ 2.0 Impairment charges (a) 1.1 32.1 (31.0) Transaction-related charges 0.1 — 0.1 Integration costs 0.7 — 0.7 Other restructuring charges (income) (b) 25.6 (2.0) 27.6 Total restructuring, impairment and transaction-related charges $ 30.7 $ 31.3 $ (0.6) ______________________________ (a) Includes $1.1 million of impairment charges for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction and strategic divestiture activities during the year ended December 31, 2022 and includes $32.1 million of impairment charges related to the Company’s decision to sell the investment in Plural during the year ended December 31, 2021.
Restructuring, Impairment and Transaction-Related Charges Restructuring, impairment and transaction-related charges for the International segment decreased $21.1 million, or 68.7%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to the following: Year Ended December 31, 2023 2022 $ Change (dollars in millions) Employee termination charges $ 0.5 $ 3.2 $ (2.7) Impairment charges (a) 2.0 1.1 0.9 Transaction-related charges 2.7 0.1 2.6 Integration costs 1.0 0.7 0.3 Other restructuring charges (b) 3.4 25.6 (22.2) Total restructuring, impairment and transaction-related charges $ 9.6 $ 30.7 $ (21.1) ______________________________ (a) Includes $2.0 million and $1.1 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 activities, during the years ended December 31, 2023 and 2022, respectively.
Free Cash Flow for the years ended December 31, 2022 and 2021, was as follows: Year Ended December 31, 2022 2021 (dollars in millions) Net cash provided by operating activities $ 154.6 $ 136.5 Less: purchases of property, plant and equipment (60.3) (50.0) Free Cash Flow (non-GAAP) $ 94.3 $ 86.5 Free Cash Flow increased $7.8 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to an $18.1 million increase in net cash provided by operating activities, partially offset by a $10.3 million increase in capital expenditures.
Free Cash Flow for the years ended December 31, 2023 and 2022, was as follows: Year Ended December 31, 2023 2022 (dollars in millions) Net cash provided by operating activities $ 147.6 $ 154.6 Less: purchases of property, plant and equipment 70.8 60.3 Free Cash Flow (non-GAAP) $ 76.8 $ 94.3 Free Cash Flow decreased $17.5 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to a $10.5 million increase in capital expenditures and a $7.0 million decrease in net cash provided by operating activities.
Total liquidity is reduced to $398.0 million under the Company’s most restrictive debt covenants, and consists of $25.2 million in cash and cash equivalents and $372.8 million available under its revolving credit arrangement. There were no borrowings under the $432.5 million revolving credit facility as of December 31, 2022.
Total liquidity is reduced to $406.7 million under the Company’s most restrictive debt covenants, and consists of $353.8 million available under its revolving credit arrangement and $52.9 million in cash and cash equivalents. There were no borrowings under the $432.5 million revolving credit facility as of December 31, 2023.
Net Pension Obligations The net underfunded pension and MEPPs obligations increased by $13.2 million during the year ended December 31, 2022, from $51.4 million at December 31, 2021, to $64.6 million at December 31, 2022.
Net Pension Obligations The net underfunded pension and MEPPs obligations decreased by $1.2 million during the year ended December 31, 2023, from $64.6 million at December 31, 2022, to $63.4 million at December 31, 2023.
A reconciliation of EBITDA to net earnings for the years ended December 31, 2022 and 2021, was as follows: Year Ended December 31, 2022 2021 (dollars in millions) Net earnings (1) $ 9.3 $ 37.8 Interest expense 48.4 59.6 Income tax expense 8.4 9.5 Depreciation and amortization 141.3 157.3 EBITDA (non-GAAP) $ 207.4 $ 264.2 ______________________________ (1) Net earnings included the following: a.
A reconciliation of EBITDA to net earnings (loss) for the years ended December 31, 2023 and 2022, was as follows: Year Ended December 31, 2023 2022 (dollars in millions) Net earnings (loss) (1) $ (55.4) $ 9.3 Interest expense 70.0 48.4 Income tax expense 12.8 8.4 Depreciation and amortization 128.8 141.3 EBITDA (non-GAAP) $ 156.2 $ 207.4 ______________________________ (1) Net earnings (loss) included the following: a.
Corporate The following table summarizes unallocated operating expenses presented as Corporate: Year Ended December 31, 2022 2021 $ Change % Change (dollars in millions) Operating expenses (including restructuring, impairment and transaction-related charges) $ 50.3 $ 54.2 $ (3.9) (7.2) % Restructuring, impairment and transaction-related charges 2.0 2.1 (0.1) (4.8) % Operating Expenses Corporate operating expenses decreased $3.9 million, or 7.2%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following: (1) a $2.0 million decrease in employee-related costs; (2) a $1.6 million decrease in professional fees; and (3) a $0.1 million decrease in restructuring, impairment and transaction-related charges. 49 Table o f Contents Restructuring, Impairment and Transaction-Related Charges Corporate restructuring, impairment and transaction-related charges decreased $0.1 million, or 4.8%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following: Year Ended December 31, 2022 2021 $ Change (dollars in millions) Employee termination charges $ — $ 0.5 $ (0.5) Transaction-related charges 1.9 0.6 1.3 Other restructuring charges 0.1 1.0 (0.9) Total restructuring, impairment and transaction-related charges $ 2.0 $ 2.1 $ (0.1) 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.
Restructuring, Impairment and Transaction-Related Charges Corporate restructuring, impairment and transaction-related charges decreased $0.4 million, or 20.0%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to the following: Year Ended December 31, 2023 2022 $ Change (dollars in millions) Employee termination charges $ 0.3 $ — $ 0.3 Transaction-related charges 1.5 1.9 (0.4) Other restructuring charges (income) (0.2) 0.1 (0.3) Total restructuring, impairment and transaction-related charges $ 1.6 $ 2.0 $ (0.4) 48 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 limitations described above are currently not applicable, as the Company’s Senior Secured Leverage Ratio was 2.13 to 1.00 and Total Net Leverage Ratio was 2.14 to 1.00, as of December 31, 2022 .
The limitations described above are currently not applicable, as the Company’s Senior Secured Leverage Ratio w as 1.99 to 1.00 and Total Net Leverage Ratio wa s 1.99 to 1.00, as of December 31, 2023 .
Depreciation and Amortization Depreciation and amortization decreased $16.0 million, or 10.2%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, due to a $15.4 million decrease in depreciation expense, primarily from property, plant and equipment becoming fully depreciated over the past year, a decrease in purchases of property, plant and equipment and a $0.6 million decrease in amortization expense. 46 Table o f Contents Restructuring, Impairment and Transaction-Related Charges Restructuring, impairment and transaction-related charges increased $25.9 million, or 137.0%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following: Year Ended December 31, 2022 2021 $ Change (dollars in millions) Employee termination charges $ 7.3 $ 9.9 $ (2.6) Impairment charges (a) 2.2 34.9 (32.7) Transaction-related charges 2.0 0.6 1.4 Integration costs 0.7 — 0.7 Other restructuring charges (income) Vacant facility carrying costs and lease exit charges 5.4 19.8 (14.4) Equipment and infrastructure removal costs 0.7 1.6 (0.9) Gains on the sale of facilities (b) — (24.8) 24.8 Other restructuring activities (c) 26.5 (23.1) 49.6 Other restructuring charges (income) 32.6 (26.5) 59.1 Total restructuring, impairment and transaction-related charges $ 44.8 $ 18.9 $ 25.9 ______________________________ (a) Includes $2.2 million and $2.8 million of impairment charges for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction and strategic divestiture activities during the years ended December 31, 2022 and 2021, respectively.
Depreciation and Amortization Depreciation and amortization decreased $12.5 million, or 8.8%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, due to a $9.5 million decrease in depreciation expense, primarily from property, plant and equipment becoming fully depreciated over the past year, a decrease in purchases of property, plant and equipment and a $3.0 million decrease in amortization expense. 45 Table of Contents Restructuring, Impairment and Transaction-Related Charges Restructuring, impairment and transaction-related charges increased $32.7 million, or 73.0%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to the following: Year Ended December 31, 2023 2022 $ Change (dollars in millions) Employee termination charges $ 35.1 $ 7.3 $ 27.8 Impairment charges (a) 25.2 2.2 23.0 Transaction-related charges 4.2 2.0 2.2 Integration costs 1.0 0.7 0.3 Other restructuring charges Vacant facility carrying costs and lease exit charges 16.6 5.4 11.2 Equipment and infrastructure removal costs 0.9 0.7 0.2 Gain on the sale of a facility (b) (9.2) — (9.2) Other restructuring activities (c) 3.7 26.5 (22.8) Other restructuring charges 12.0 32.6 (20.6) Total restructuring, impairment and transaction-related charges $ 77.5 $ 44.8 $ 32.7 ______________________________ (a) Includes $25.2 million and $2.2 million of impairment charges during the years ended December 31, 2023 and 2022, respectively, which consisted of the following: (1) $17.5 million and $2.2 million, respectively, for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction activities; (2) $4.1 million for software licensing and related implementation costs from a terminated project in 2023; and (3) $3.6 million for right-of-use assets in 2023.
In addition, all of the Company’s significant accounting policies, including critical accounting policies, are summarized in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K. 38 Table o f Contents Overview Business Overview Quad is a global marketing experience company that gives brands a more streamlined, impactful, flexible and frictionless way to go to market and reach consumers.
In addition, all of the Company’s significant accounting policies, including critical accounting policies, are summarized in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K. 38 Table of Contents Overview Business Overview Quad is a global marketing experience (MX) company that helps brands make direct consumer connections, from household to in-store to online.
A $0.7 million increase in integration-related charges from zero during the year ended December 31, 2021, to $0.7 million during the year ended December 31, 2022; and e.
A $2.2 million increase in transaction-related charges from $2.0 million during the year ended December 31, 2022, to $4.2 million during the year ended December 31, 2023; d. A $0.3 million increase in integration-related charges from $0.7 million during the year ended December 31, 2022, to $1.0 million during the year ended December 31, 2023; and e.
Also includes $1.8 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 years ended December 31, 2022 and 2021, respectively. The Company has considered the economy in Argentina to be highly inflationary since June 30, 2018.
(c) Includes a $23.1 million loss on the sale of its Argentina print business and $1.8 million in charges from foreign currency losses as a result of the economy in Argentina being classified as highly inflationary during the year ended December 31, 2022. The Company considered the economy in Argentina to be highly inflationary since June 30, 2018.
As of December 31, 2022, there were $90.1 million of authorized repurchases remaining under the program.
As of December 31, 2023, there were $77.5 million of authorized repurchases remaining under the program.
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: Year Ended December 31, 2022 2021 $ Change % Change (dollars in millions) Net sales: Products $ 2,126.6 $ 1,935.8 $ 190.8 9.9 % Services 668.1 692.8 (24.7) (3.6) % Operating income (including restructuring, impairment and transaction-related charges) 108.3 163.1 (54.8) (33.6) % Operating margin 3.9 % 6.2 % N/A N/A Restructuring, impairment and transaction-related charges $ 12.1 $ (14.5) $ 26.6 nm Net Sales Product sales for the United States Print and Related Services segment increased $190.8 million, or 9.9%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to a $128.7 million increase from paper sales and a $62.1 million increase in sales in the Company’s print product lines, primarily due to increased print pricing and volume.
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: Year Ended December 31, 2023 2022 $ Change % Change (dollars in millions) Net sales: Products $ 1,949.7 $ 2,126.6 $ (176.9) (8.3) % Services 604.6 668.1 (63.5) (9.5) % Operating income (including restructuring, impairment and transaction-related charges) 56.6 108.3 (51.7) (47.7) % Operating margin 2.2 % 3.9 % N/A N/A Restructuring, impairment and transaction-related charges $ 66.3 $ 12.1 $ 54.2 nm Net Sales Product sales for the United States Print and Related Services segment decreased $176.9 million, or 8.3%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to an $89.3 million decrease from paper sales and an $87.6 million decrease in sales in the Company’s print product lines, primarily due to decreased volumes.
Restructuring, Impairment and Transaction-Related Charges Restructuring, impairment and transaction-related charges for the United States Print and Related Services segment increased $26.6 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following: Year Ended December 31, 2022 2021 $ Change (dollars in millions) Employee termination charges $ 4.1 $ 8.2 $ (4.1) Impairment charges (a) 1.1 2.8 (1.7) Transaction-related charges — — — Integration costs — — — Other restructuring charges (income) Vacant facility carrying costs and lease exit charges 5.4 19.8 (14.4) Equipment and infrastructure removal costs 0.7 1.6 (0.9) Gains on the sale of facilities (b) — (24.8) 24.8 Other restructuring activities (c) 0.8 (22.1) 22.9 Other restructuring charges (income) 6.9 (25.5) 32.4 Total restructuring, impairment and transaction-related charges $ 12.1 $ (14.5) $ 26.6 ______________________________ (a) Includes $1.1 million and $2.8 million of impairment charges for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction and strategic divestiture activities during the years ended December 31, 2022 and 2021, respectively.
Restructuring, Impairment and Transaction-Related Charges Restructuring, impairment and transaction-related charges for the United States Print and Related Services segment increased $54.2 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to the following: Year Ended December 31, 2023 2022 $ Change (dollars in millions) Employee termination charges $ 34.3 $ 4.1 $ 30.2 Impairment charges (a) 23.2 1.1 22.1 Other restructuring charges Vacant facility carrying costs and lease exit charges 16.6 5.4 11.2 Equipment and infrastructure removal costs 0.9 0.7 0.2 Gain on the sale of a facility (b) (9.2) — (9.2) Other restructuring activities 0.5 0.8 (0.3) Other restructuring charges 8.8 6.9 1.9 Total restructuring, impairment and transaction-related charges $ 66.3 $ 12.1 $ 54.2 ______________________________ (a) Includes $23.2 million and $1.1 million of impairment charges during the years ended December 31, 2023 and 2022, respectively, which consisted of the following: (1) $15.5 million and $1.1 million, respectively, for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction; (2) $4.1 million for software licensing and related implementation costs from a terminated project in 2023; and (3) $3.6 million for right-of-use assets in 2023.
Net Cash Provided by Operating Activities Year Ended December 31, 2022, Compared to Year Ended December 31, 2021 Net cash provided by operating activities was $154.6 million for the year ended December 31, 2022, compared to $136.5 million for the year ended December 31, 2021, resulting in a $18.1 million increase in cash provided by operating activities.
Net Cash Provided by Operating Activities Year Ended December 31, 2023, Compared to Year Ended December 31, 2022 Net cash provided by operating activities was $147.6 million for the year ended December 31, 2023, compared to $154.6 million for the year ended December 31, 2022, resulting in a $7.0 million decrease in cash provided by operating activities.
The increase was primarily due to the following: (1) a $121.7 million decrease in proceeds from the sale of property, plant and equipment; (2) a $39.7 million decrease in proceeds from the sale of a business; (3) a $15.0 million decrease in proceeds from a property insurance claim; (4) a $10.3 million increase in purchases of property, plant and equipment; (5) a $2.6 million increase in cash used in the acquisition of a business; and (6) a $1.9 million increase in cost investment in unconsolidated entities.
The decrease was primarily due to the following: (1) a $27.1 million increase in proceeds from the sale of property, plant and equipment; (2) a $2.6 million decrease in cost investment in unconsolidated entities; and (3) a $1.1 million decrease in cash used in acquisition of businesses.
The Debt Leverage Ratio is a non-GAAP measure, and should not be considered an alternative to cash flows provided by operating activities as a measure of liquidity. Quad’s calculation of the Debt Leverage Ratio may be different from similar calculations used by other companies and, therefore, comparability may be limited.
The Debt Leverage Ratio is a non-GAAP measure, and should not be considered an alternative to cash flows provided by operating activities as a measure of liquidity.
Net Cash (Used in) Provided by Investing Activities Year Ended December 31, 2022, Compared to Year Ended December 31, 2021 Net cash used in investing activities was $60.5 million for the year ended December 31, 2022, compared to $129.4 million cash provided by investing activities for the year ended December 31, 2021, resulting in a $189.9 million increase in cash used in investing activities.
Net Cash Used in Investing Activities Year Ended December 31, 2023, Compared to Year Ended December 31, 2022 Net cash used in investing activities was $46.4 million for the year ended December 31, 2023, compared to $60.5 million for the year ended December 31, 2022, resulting in a $14.1 million decrease in cash used in investing activities.
The Company had total liquidity of $425.0 million as of December 31, 2022, which consisted of up to $399.8 million of unused capacity under its revolving credit arrangement, which was net of $32.7 million of issued letters of credit, and cash and cash equivalents of $25.2 million.
The Company had total liquidity of $454.3 million as of December 31, 2023, which consisted of up to $401.4 million of unused capacity under its revolving credit arrangement, which was net of $31.1 million of issued letters of credit, and cash and cash equivalents of $52.9 million.
(c) Includes a $20.9 million gain on the sale of a business during the year ended December 31, 2021. 48 Table o f Contents International The following table summarizes net sales, operating income, operating margin, certain items impacting comparability and equity in loss of unconsolidated entities within the International segment: Year Ended December 31, 2022 2021 $ Change % Change (dollars in millions) Net sales: Products $ 401.7 $ 311.3 $ 90.4 29.0 % Services 20.6 20.5 0.1 0.5 % Operating loss (including restructuring, impairment and transaction-related charges) (4.5) (16.1) 11.6 (72.0) % Operating margin (1.1) % (4.9) % N/A N/A Restructuring, impairment and transaction-related charges $ 30.7 $ 31.3 $ (0.6) (1.9) % Equity in earnings — (0.3) 0.3 100.0 % Net Sales Product sales for the International segment increased $90.4 million, or 29.0%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to a $62.5 million increase in paper sales and a $48.0 million increase in print pricing and volume, primarily in Mexico and Colombia, partially offset by $20.1 million in unfavorable foreign exchange impacts, primarily in Europe, Argentina and Colombia.
(b) Includes a $9.2 million gain on the sale of the Merced, California facility during the year ended December 31, 2023. 47 Table of Contents International The following table summarizes net sales, operating income (loss), operating margin, and certain items impacting comparability within the International segment: Year Ended December 31, 2023 2022 $ Change % Change (dollars in millions) Net sales: Products $ 384.4 $ 401.7 $ (17.3) (4.3) % Services 19.0 20.6 (1.6) (7.8) % Operating income (loss) (including restructuring, impairment and transaction-related charges) 18.3 (4.5) 22.8 nm Operating margin 4.5 % (1.1) % N/A N/A Restructuring, impairment and transaction-related charges $ 9.6 $ 30.7 $ (21.1) (68.7) % Net Sales Product sales for the International segment decreased $17.3 million, or 4.3%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to a $28.0 million decrease in paper sales and a $26.4 million decrease in net sales (which includes $8.3 million of paper sales) due to the divestiture of the Company’s print operations in Argentina, partially offset by a $22.2 million increase in print pricing and volume, primarily in Mexico, Peru and Colombia, and $14.9 million in favorable foreign exchange impacts, primarily in Mexico.
This change was due to a $9.3 million decrease in interest expense related to the interest rate swaps and lower average debt levels, partially offset by a higher weighted average interest rate on borrowings during the year ended December 31, 2022, as compared to the year ended December 31, 2021.
This change was due to higher weighted average interest rates on borrowings and a $6.1 million increase in interest expense related to the interest rate swaps, partially offset by lower average debt levels during the year ended December 31, 2023, as compared to the year ended December 31, 2022. 43 Table of Contents (4) Net pension income decreased $10.9 million ($8.2 million, net of tax) during the year ended December 31, 2023, to $1.7 million.
The results of operations of the divestiture are included in the Company’s consolidated results until the date of disposition. 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 contains an analysis of the Company’s results of operations by comparing the results for the year ended December 31, 2023, to the year ended December 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.
The Debt Leverage Ratio calculated below differs from the Total Leverage Ratio, the Total Net Leverage Ratio and Senior Secured Leverage Ratio included in the Company’s debt covenant calculations (see “Covenants and Compliance” section below for further information on debt covenants).
Quad’s calculation of the Debt Leverage Ratio may be different from similar calculations used by other companies and, therefore, comparability may be limited. 50 Table of Contents The Debt Leverage Ratio calculated below differs from the Total Leverage Ratio, the Total Net Leverage Ratio and Senior Secured Leverage Ratio included in the Company’s debt covenant calculations (see “Covenants and Compliance” section below for further information on debt covenants).
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.
Postal rate increases, along with the previously described industry challenges, have led to reduced demand for printed products and has caused clients to move more aggressively into other delivery methods, such as the many digital and mobile options now available to consumers.
The increase was primarily due to the following: (1) a $112.2 million increase in net payments of debt and lease obligations in 2022 compared to 2021; (2) a $10.0 million increase in purchases of treasury stock; and (3) a $1.4 million increase in equity awards redeemed to pay employees’ tax obligations.
The decrease was primarily due to the following: (1) a $175.6 million decrease in net payments of debt and lease obligations in 2023 compared to 2022; (2) a $1.3 million decrease in payment of accrued dividends from vested equity awards; and (3) a $0.8 million decrease in equity awards redeemed to pay employees’ tax obligations.
The Company is unable to predict the future impact of 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. 42 Table o f Contents Results of Operations for the Year Ended December 31, 2022, Compared to the Year Ended December 31, 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 year ended December 31, 2022, changed from the year ended December 31, 2021, as follows (dollars in millions, except per share data): Operating Income Operating Margin Net Earnings Diluted Earnings Per Share For the year ended December 31, 2021 $ 92.8 3.1 % $ 37.8 $ 0.71 Gains from sale and leaseback (1) (24.5) (0.8) % (18.4) (0.35) Restructuring, impairment and transaction-related charges (2) (25.9) (0.8) % (19.4) (0.35) Other operating income elements (3) 11.1 0.2 % 8.3 0.17 Operating Income 53.5 1.7 % 8.3 0.18 Interest expense (4) N/A N/A 8.4 0.15 Net pension income (5) N/A N/A (1.4) (0.03) Loss on debt extinguishment (6) N/A N/A 0.5 0.01 Income taxes (7) N/A N/A (6.2) (0.12) Investments in unconsolidated entity, net of tax (8) N/A N/A (0.3) (0.01) For the year ended December 31, 2022 $ 53.5 1.7 % $ 9.3 $ 0.18 ______________________________ (1) The Company executed sale and leaseback transactions of its Chalfont, Pennsylvania and West Allis, Wisconsin facilities resulting in $24.5 million ($18.4 million, net of tax) in gains during the year ended December 31, 2021.
The Company is unable to predict the full future impact these challenges will have on its business, financial condition, cash flows and results of operations, but expects them to continue into 2024. 42 Table of Contents Results of Operations for the Year Ended December 31, 2023, Compared to the Year Ended December 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 year ended December 31, 2023, changed from the year ended December 31, 2022, as follows (dollars in millions, except per share data): Operating Income Operating Margin Net Earnings (Loss) Diluted Earnings (Loss) Per Share For the year ended December 31, 2022 $ 53.5 1.7 % $ 9.3 $ 0.18 Restructuring, impairment and transaction-related charges (1) (32.7) (1.2) % (24.5) (0.56) Other operating income elements (2) 4.9 0.4 % 3.7 0.20 Operating Income 25.7 0.9 % (11.5) (0.18) Interest expense (3) N/A N/A (16.2) (0.40) Net pension income (4) N/A N/A (8.2) (0.15) Income taxes (5) N/A N/A (19.5) (0.41) For the year ended December 31, 2023 $ 25.7 0.9 % $ (55.4) $ (1.14) ______________________________ (1) Restructuring, impairment and transaction-related charges increased $32.7 million ($24.5 million, net of tax), to $77.5 million during the year ended December 31, 2023, and included the following: a.
Based on the assessments completed during the years ended December 31, 2022, and 2021, the Company recognized property, plant and equipment impairment charges of $2.2 million and $2.8 million, respectively, primarily related to facility consolidations, as well as other capacity reduction and strategic divestiture activities.
Based on the assessments completed during the years ended December 31, 2023, and 2022, the Company recognized property, plant and equipment and right-of-use assets impairment charges of $21.1 million and $2.2 million, respectively, primarily related to facility consolidations and other capacity reduction. There were no finite-lived intangible asset impairment charges recorded during the years ended December 31, 2023 and 2022.
On a rolling twelve-month basis, the Interest Coverage Ratio, defined as consolidated EBITDA to cash consolidated interest expense, shall not be less than 3.00 to 1.00 (for the twelve months ended December 31, 2022, the Company’s Interest Coverage Ratio was 6.39 to 1.00).
On a rolling twelve-month basis, the Interest Coverage Ratio, defined as consolidated EBITDA to cash consolidated interest expense, shall not be less than 3.00 to 1.00 (for the twelve months ended December 31, 2023, the Company’s Interest Coverage Ratio was 4.10 to 1.00). 53 Table of Contents The Company wa s in compliance with all financial covenants in its debt agreements as of December 31, 2023.
This was due to a $1.9 million decrease from the expected long-term return on pension plan assets and a $0.9 million increase from interest cost on pension plan liabilities, partially offset by a $0.9 million decrease in a non-cash settlement charge in 2021 that did not repeat in 2022.
This was due to the following: (1) a $7.9 million increase from interest cost on pension plan liabilities; (2) a $2.4 million decrease from the expected long-term return on pension plan assets; and (3) amortization of actuarial loss of $0.6 million in 2023 that did not occur in 2022.
(b) Includes a $23.1 million loss on the sale of its Argentina print business during the year ended December 31, 2022.
(b) Includes a $23.1 million loss on the sale of its Argentina print business and $1.8 million in charges from foreign currency losses as result of the economy in Argentina being classified as highly inflationary during the year ended December 31, 2022.
The commercial printing industry has moved toward a demand for shorter print runs, faster product turnaround and increased production efficiencies of products with lower page counts and increased complexity.
The commercial printing industry has 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 postage and paper costs as well as marketers’ increasing use of online marketing and communication channels — has led to excess manufacturing capacity.
A $59.1 million increase in various other restructuring charges from $26.5 million of income during the year ended December 31, 2021, to $32.6 million of expense during the year ended December 31, 2022.
A $20.6 million decrease in various other restructuring charges from $32.6 million during the year ended December 31, 2022, to $12.0 million during the year ended December 31, 2023.
Operating Loss Operating loss for the International segment decreased $11.6 million, or 72.0%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to an $11.0 million increase in operating income from increased print pricing and volume and a $0.6 million decrease in restructuring, impairment and transaction-related charges.
Operating Income (Loss) Operating income (loss) for the International segment increased $22.8 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to a $21.1 million decrease in restructuring, impairment and transaction-related charges and a $1.3 million decrease in depreciation and amortization.
The Company was in compliance with all financial covenants in its debt agreements as of December 31, 2022. 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.
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.
(3) Other operating income elements increased $11.1 million ($8.3 million, net of tax) primarily due to the following: (1) higher print pricing and volume; (2) a $16.0 million decrease in depreciation and amortization expense; and (3) savings from other cost reduction initiatives.
(2) Other operating income elements increased $4.9 million ($3.7 million, net of tax) primarily due to the following: (1) the impact from print product pricing; (2) a $14.1 million decrease in selling, general and administrative expenses; (3) a $12.5 million decrease in depreciation and amortization expense; (4) impacts from improved manufacturing productivity; and (5) savings from other cost reduction initiatives, partially offset by print volume decreases.
The Debt Leverage Ratio as of December 31, 2022 and 2021, was as follows: December 31, 2022 December 31, 2021 (dollars in millions) Total debt and finance lease obligations on the consolidated balance sheets $ 570.2 $ 803.7 Less: Cash and cash equivalents 25.2 179.9 Net Debt (non-GAAP) $ 545.0 $ 623.8 Divided by: Adjusted EBITDA for the year ended (non-GAAP) $ 252.2 $ 260.5 Debt Leverage Ratio (non-GAAP) 2.16 x 2.39 x 52 Table o f Contents The calculation of Adjusted EBITDA for the years ended December 31, 2022 and 2021, was as follows: Year Ended December 31, 2022 2021 (dollars in millions) Net earnings $ 9.3 $ 37.8 Interest expense 48.4 59.6 Income tax expense 8.4 9.5 Depreciation and amortization 141.3 157.3 EBITDA (non-GAAP) $ 207.4 $ 264.2 Restructuring, impairment and transaction-related charges 44.8 18.9 Gains from sale and leaseback — (24.5) Loss on debt extinguishment — 0.7 Other (1) — 1.2 Adjusted EBITDA (non-GAAP) (2) $ 252.2 $ 260.5 ______________________________ (1) Other is comprised of equity in earnings of unconsolidated entity and Adjusted EBITDA for unconsolidated equity method investments.
The Debt Leverage Ratio as of December 31, 2023 and 2022, was as follows: December 31, 2023 December 31, 2022 (dollars in millions) Total debt and finance lease obligations on the consolidated balance sheets $ 522.7 $ 570.2 Less: Cash and cash equivalents 52.9 25.2 Net Debt (non-GAAP) $ 469.8 $ 545.0 Divided by: Adjusted EBITDA for the year ended (non-GAAP) $ 233.7 $ 252.2 Debt Leverage Ratio (non-GAAP) 2.01 x 2.16 x The calculation of Adjusted EBITDA for the years ended December 31, 2023 and 2022, was as follows: Year Ended December 31, 2023 2022 (dollars in millions) Net earnings (loss) $ (55.4) $ 9.3 Interest expense 70.0 48.4 Income tax expense 12.8 8.4 Depreciation and amortization 128.8 141.3 EBITDA (non-GAAP) $ 156.2 $ 207.4 Restructuring, impairment and transaction-related charges 77.5 44.8 Adjusted EBITDA (non-GAAP) $ 233.7 $ 252.2 The Debt Leverage Ratio, at December 31, 2023, decreased 0.15x to 2.01x compared to December 31, 2022, primarily due to a $75.2 million decrease in net debt, partially offset by an $18.5 million decrease in Adjusted EBITDA.
Service sales for the International segment increased $0.1 million, or 0.5%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to an increase in marketing services in Europe.
Service sales for the International segment decreased $1.6 million, or 7.8%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to a $2.8 million decrease in logistics sales, partially offset by a $1.2 million increase in marketing services sales.
(7) The $6.2 million increase in income tax expense as calculated in the following table is primarily due to a $22.3 million increase from valuation allowance reserves, partially offset by the following: (1) a $6.2 million decrease from impairment charges related to foreign investments in 2021; (2) a $5.1 million decrease from loss on the sale of its Argentina print business in 2022; (3) a $2.6 million decrease from income in foreign branches; and (4) a $1.6 million decrease from equity award activity and executive compensation limitation.
(5) The $19.5 million increase in income tax expense as calculated in the following table is primarily due to the following: (1) a $10.7 million increase in the Company’s liability for audit assessments and unrecognized tax benefits; (2) a $5.1 million increase from the loss on the sale of its Argentina print business in 2022; and (3) a $1.3 million increase from valuation allowance reserves.
Free Cash Flow Free Cash Flow is defined as net cash provided by operating activities less purchases of property, plant and equipment.
These decreases were partially offset by a $2.6 million increase in purchases of treasury stock. 49 Table of Contents Free Cash Flow Free Cash Flow is defined as net cash provided by operating activities less purchases of property, plant and equipment.
The senior notes under the Master Note and Security Agreement had a weighted average interest rate of 7.92% at December 31, 2022, which is fixed to maturity, with interest payable semiannually. Principal payments commenced September 1997 and extend through 2026 in various tranches.
As of December 31, 2023, the borrowings outstanding under the Master Note and Security Agreement were $2.5 million. The senior notes under the Master Note and Security Agreement had a weighted average interest rate of 8.09% at December 31, 2023, which is fixed to maturity, with interest payable semiannually.
Service sales for the United States Print and Related Services segment decreased $24.7 million, or 3.6%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to a $58.0 million decrease in sales due to the divestiture of the Company’s third-party logistics business, partially offset by a $22.6 million increase in logistics sales and a $10.7 million increase in marketing services and medical services.
Service sales for the United States Print and Related Services segment decreased $63.5 million, or 9.5%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to a $56.4 million decrease in logistics sales from lower print volumes and a $7.1 million decrease in marketing services and medical services.
These reserves are net of $11.2 million recorded in other long-term assets in the consolidated balance sheets for claims covered by purchased insurance. New Accounting Pronouncements See Note 21, “New Accounting Pronouncements,” to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
These reserves are net of $9.0 million recorded in other long-term assets in the consolidated balance sheets for claims covered by purchased insurance. New Accounting Pronouncements As of December 31, 2023, there have been no new accounting pronouncements requiring disclosure within the consolidated financial statements of this Annual Report on Form 10-K. 58 Table of Contents
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.
Such default could cause the outstanding indebtedness to become immediately due and payable, by virtue of cross-acceleration or cross-default provisions.
This trend greatly influences Quad’s ongoing efforts to help brands reduce the complexities of working with multiple agency partners and vendors, increase marketing process efficiency and maximize marketing effectiveness.
These trends greatly influence Quad’s ongoing efforts to help brands reduce the complexities of working with multiple agency partners and vendors, increase marketing process efficiency and maximize marketing effectiveness. Competition in the commercial printing industry remains highly fragmented, and the Company believes that there are indicators of heightened competitive pressures.
A $32.7 million decrease in impairment charges from $34.9 million during the year ended December 31, 2021, to $2.2 million during the year ended December 31, 2022; c. A $1.4 million increase in transaction-related charges from $0.6 million during the year ended December 31, 2021, to $2.0 million during the year ended December 31, 2022; d.
A $27.8 million increase in employee termination charges from $7.3 million during the year ended December 31, 2022, to $35.1 million during the year ended December 31, 2023; b. A $23.0 million increase in impairment charges from $2.2 million during the year ended December 31, 2022, to $25.2 million during the year ended December 31, 2023; c.
This decrease in plan assets was partially offset by a decrease in overall pension obligations, primarily due to a 269 basis point increase in the pension discount rate from 2.77% at December 31, 2021 to 5.46% at December 31, 2022, payments totaling $6.2 million made to the MEPPs and $1.0 million in pension benefit payments during the year ended December 31, 2022.
The decrease in plan assets was partially offset by a decrease in overall pension obligations of $6.6 million from $36.6 million in benefits paid, offset by a $17.6 million increase in interest cost due to a 35 basis point decrease in the pension discount rate from 5.46% at December 31, 2022, to 5.11% at December 31, 2023 and $12.4 million from an actuarial loss.
Service sales, which primarily consist of logistics, distribution, marketing services, imaging and medical services, decreased $24.6 million, or 3.4%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to a $58.0 million decrease in sales due to the divestiture of the Company’s third-party logistics business, partially offset by a $22.4 million increase in logistics sales and an $11.0 million increase in marketing services and medical services.
Service sales, which primarily consist of logistics, distribution, marketing services, imaging and medical services, decreased $65.1 million, or 9.5%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to a $59.2 million decrease in logistics sales from lower print volumes and a $5.9 million decrease in marketing services and medical services.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

16 edited+1 added−5 removed14 unchanged
Biggest changeAt 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.
Biggest changeThe 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.
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 December 31, 2022 by approximately $0.1 million.
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 December 31, 2023 by approximately $0.1 million.
During the year ended December 31, 2022, 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.
During the year ended December 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.
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. 63 Table o f Contents
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. 60 Table of Contents
The Company’s working capital requirements, including the impact of seasonality, are partially mitigated through the direct purchasing of paper by its clients. 62 Table o f Contents The Company produces the majority of ink used in its print production, allowing it to control the quality, cost and supply of key inputs.
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.
Based on those client account reviews and the continued uncertainty of the global economy, the Company has established an allowance for credit losses of $26.4 million as of December 31, 2022. The Company has a large, diverse client base and does not have a high degree of concentration with any single client account.
Based on those client account reviews and the continued uncertainty of the global economy, the Company has established an allowance for credit losses of $25.7 million as of December 31, 2023. The Company has a large, diverse client base and does not have a high degree of concentration with any single client account.
As of December 31, 2022, the Company’s foreign subsidiaries had net current assets (defined as current assets less current liabilities) subject to foreign currency translation risk of $77.5 million. The potential decrease in net current assets as of December 31, 2022, from a hypothetical 10% adverse change in quoted foreign currency exchange rates would be approximately $7.7 million.
As of December 31, 2023, the Company’s foreign subsidiaries had net current assets (defined as current assets less current liabilities) subject to foreign currency translation risk of $88.7 million. The potential decrease in net current assets as of December 31, 2023, from a hypothetical 10% adverse change in quoted foreign currency exchange rates would be approximately $8.9 million.
Any increase in nonpayment or nonperformance by clients could adversely impact the Company’s results of operations and financial condition. Economic disruptions could result in significant future charges. Commodity Risk The primary raw materials that the Company uses in its print business are paper, ink and energy.
Any increase in nonpayment or nonperformance by clients could adversely impact the Company’s results of operations and financial condition. Economic disruptions could result in significant future charges. 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.
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 has classified $130.0 million of the Company’s variable rate debt as fixed rate debt.
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 $130.0 million interest rate swap in March 2019, and 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.
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 ri sks.
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 ri sks.
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.
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.
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.
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.
Including the impact of the $130.0 million interest rate swap of variable rate to fixed rate debt, Quad had variable rate debt outstanding of $428.2 million at a current weighted average interest rate of 6.3% and fixed rate debt and finance leases outstanding of $142.0 million at a current weighted average interest rate of 5.1% as of December 31, 2022.
Including the impact of the $280.0 million interest rate hedges of variable rate to fixed rate debt, Quad had variable rate debt outstanding of $229.9 million at a current weighted average interest rate of 7.5% and fixed rate debt and finance leases outstanding of $292.8 million at a current weighted average interest rate of 6.3% as of December 31, 2023.
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.
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.
The variable rate debt outstanding at December 31, 2022, was primarily comprised of $556.7 million outstanding on the Term Loan A. As of December 31, 2022, there was no outstanding balance on the revolving credit facility.
As of December 31, 2023, there was no outstanding balance on the revolving credit facility.
Accordingly, future results could be adversely impacted by changes in these or other factors. 61 Table o f Contents The Company has considered the economy in Argentina to be highly inflationary, effective June 30, 2018.
Accordingly, future results could be adversely impacted by changes in these or other factors. 59 Table of Contents Credit Risk Credit risk is the possibility of loss from a client’s failure to make payments according to contract terms.
Removed
These risk management strategies may not fully insulate the Company from adverse impacts due to market risks. 60 Table o f Contents 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.
Added
Interest Rate Risk The Company is exposed to interest rate risk on variable rate debt obligations and price risk on fixed rate debt and finance leases. The variable rate debt outstanding at December 31, 2023, was primarily comprised of $511.1 million outstanding on the Term Loan A.
Removed
In accordance with Accounting Standards Codification (“ASC”) 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.
Removed
As a result of this classification, the functional currency of the Company's Argentina subsidiaries was changed from the local currency to the U.S. Dollar, beginning July 1, 2018, and impacts from the change in the value of the local currency for monetary assets and liabilities is now reflected in the consolidated statements of operations.
Removed
Due to the Argentina economy classification as highly inflationary, the impact from foreign currency losses was $1.8 million and $0.6 million during the years ended December 31, 2022 and 2021, respectively, and was recorded in restructuring, impairment and transaction-related charges in the consolidated statements of operations.
Removed
As of December 31, 2022, there were no assets from the operations in Argentina in the total consolidated assets. For the year ended December 31, 2022, there was less than 1.0% of total consolidated net sales from the operations in Argentina.

Other QUAD 10-K year-over-year comparisons