Quad/Graphics, Inc 10-Q for FY2021 Q1

Quad/Graphics, Inc. (QUAD)

10-Q 2021-05-05 For: 2021-03-31

Added on April 06, 2026

About this 10-Q

Quad/Graphics, Inc filed this 10-Q on May 5, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $705.8M; down 14.2% from $822.5M a year earlier
Net income: $10.2M; compared with a net loss of $12.4M a year earlier
Diluted EPS: $0.19; compared with -$0.25 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


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


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


Class						Outstanding as of April 30, 2021
Class A Common Stock						41,123,548
Class B Common Stock						13,556,858
Class C Common Stock						—


			Page No.

PART I	FINANCIAL INFORMATION		3

	ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	3

		Condensed Consolidated Statements of Operations (Unaudited)	3

		Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	5

		Condensed Consolidated Balance Sheets (Unaudited)	6

		Condensed Consolidated Statements of Cash Flows (Unaudited)	7

		Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)	8

		Notes to Condensed Consolidated Financial Statements (Unaudited)	9

	ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33

	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	56

	ITEM 4.	Controls and Procedures	58

PART II	OTHER INFORMATION		58



	ITEM 1A.	Risk Factors	59

	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59

	ITEM 6.	Exhibits	60

	Signatures		61


	Three Months Ended March 31,
		2021		2020
Net sales
Products		$	526.0	$	645.0
Services		179.8		177.5
Total net sales		705.8		822.5
Cost of sales
Products		428.3		523.7
Services		131.5		124.0
Total cost of sales		559.8		647.7
Operating expenses
Selling, general and administrative expenses		80.5		99.6
Depreciation and amortization		41.9		47.4
Restructuring, impairment and transaction-related charges		2.6		22.8

Total operating expenses		684.8		817.5
Operating income from continuing operations		21.0		5.0
Interest expense		14.5		18.1
Net pension income		(4.1)		(2.7)
Gain on debt extinguishment		—		(0.6)
Earnings (loss) from continuing operations before income taxes and equity in earnings of unconsolidated entity		10.6		(9.8)
Income tax expense (benefit)		0.5		(1.2)
Earnings (loss) from continuing operations before equity in earnings of unconsolidated entity		10.1		(8.6)
Equity in earnings of unconsolidated entity		(0.1)		—
Net earnings (loss) from continuing operations		10.2		(8.6)
Loss from discontinued operations, net of tax		—		(3.8)
Net earnings (loss)		10.2		(12.4)
Less: net earnings (loss) attributable to noncontrolling interests		—		—
Net earnings (loss) attributable to Quad common shareholders		$	10.2	$	(12.4)


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


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


	March 31, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	80.6	$	55.2
Receivables, less allowance for credit losses of $33.3 million at March 31, 2021, and $33.8 million at December 31, 2020	340.3		399.1
Inventories	162.0		170.2
Prepaid expenses and other current assets	50.8		54.7

Total current assets	633.7		679.2

Property, plant and equipment—net	850.7		884.2
Operating lease right-of-use assets—net	78.7		81.0
Goodwill	103.0		103.0
Other intangible assets—net	95.9		104.3
Equity method investment in unconsolidated entity	2.5		2.6
Other long-term assets	72.7		73.4

Total assets	$	1,837.2	$	1,927.7


LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	330.0	$	320.0
Other current liabilities	251.5		310.8
Short-term debt and current portion of long-term debt	16.8		20.7
Current portion of finance lease obligations	2.7		2.8
Current portion of operating lease obligations	27.7		28.4

Total current liabilities	628.7		682.7

Long-term debt	871.3		902.7
Finance lease obligations	1.8		2.0
Operating lease obligations	53.0		54.5
Deferred income taxes	5.1		4.2
Other long-term liabilities	184.2		196.8

Total liabilities	1,744.1		1,842.9

Commitments and contingencies (Note 10)

Shareholders’ equity
Preferred stock	—		—
Common stock, Class A	1.0		1.0
Common stock, Class B	0.4		0.4
Common stock, Class C	—		—
Additional paid-in capital	835.5		833.1
Treasury stock, at cost	(13.2)		(13.1)
Accumulated deficit	(555.8)		(566.0)
Accumulated other comprehensive loss	(175.5)		(171.3)
Quad’s shareholders’ equity	92.4		84.1
Noncontrolling interests	0.7		0.7
Total shareholders’ equity and noncontrolling interests	93.1		84.8
Total liabilities and shareholders’ equity	$	1,837.2	$	1,927.7


	Common Stock			Additional Paid-in Capital		Treasury Stock			Accumulated Deficit		Accumulated Other Comprehensive Loss		Quad’s Shareholders’ Equity		Noncontrolling Interests
	Shares	Amount				Shares	Amount
Balance at December 31, 2020	54.4	$	1.4	$	833.1	(0.8)	$	(13.1)	$	(566.0)	$	(171.3)	$	84.1	$	0.7


Net earnings	—	—		—		—	—		10.2		—		10.2		—

Foreign currency translation adjustments	—	—		—		—	—		—		(6.0)		(6.0)		—
Interest rate swap adjustments, net of tax	—	—		—		—	—		—		1.8		1.8		—


Stock-based compensation	—	—		3.0		—	—		—		—		3.0		—



Issuance of share-based awards, net of other activity	1.3	—		(0.6)		—	1.0		—		—		0.4		—
Awards redeemed to pay employees’ tax obligations	—	—		—		(0.2)	(1.1)		—		—		(1.1)		—
Balance at March 31, 2021	55.7	$	1.4	$	835.5	(1.0)	$	(13.2)	$	(555.8)	$	(175.5)	$	92.4	$	0.7


	United States Print and Related Services		International		Total
Three months ended March 31, 2021
Catalog, publications, retail inserts, and directories	$	329.7	$	49.0	$	378.7
Direct mail and other printed products	129.0		16.8		145.8
Other	1.2		0.3		1.5
Total products	459.9		66.1		526.0
Logistics services	92.7		5.1		97.8
Imaging, marketing services and other services	82.0		—		82.0
Total services	174.7		5.1		179.8
Total net sales	$	634.6	$	71.2	$	705.8

Three months ended March 31, 2020
Catalog, publications, retail inserts, and directories	$	412.1	$	64.7	$	476.8
Direct mail and other printed products	150.4		16.4		166.8
Other	1.1		0.3		1.4
Total products	563.6		81.4		645.0
Logistics services	90.0		4.4		94.4
Imaging, marketing services and other services	83.0		0.1		83.1
Total services	173.0		4.5		177.5
Total net sales	$	736.6	$	85.9	$	822.5


	Costs to Obtain Contracts
Balance at December 31, 2020	$	8.7
Costs to obtain contracts	—
Amortization of costs to obtain contracts	(0.9)
Balance at March 31, 2021	$	7.8



	Three Months Ended March 31, 2020
Total net sales	$	40.3
Total cost of sales, excluding depreciation and amortization	41.1
Selling, general and administrative expenses	1.9

Restructuring, impairment and transaction-related charges (1)	2.2

Other expenses, net	—
Loss from discontinued operations before income taxes	(4.9)
Income tax benefit	(1.1)
Loss from discontinued operations, net of tax	$	(3.8)



	Three Months Ended March 31, 2020
Cash flows used in operating activities	$	(0.9)
Cash flows used in investing activities	(1.6)


	Employee Termination Charges		Impairment Charges		Transaction-Related Charges		Other Restructuring Charges		Total
Balance at December 31, 2020	$	14.6	$	—	$	0.5	$	25.8	$	40.9
Expense, net	4.7		0.8		0.2		(3.1)		2.6
Cash payments, net	(5.6)		—		(0.3)		6.6		0.7
Non-cash adjustments/reclassifications and translation	(0.4)		(0.8)		—		(4.2)		(5.4)
Balance at March 31, 2021	$	13.3	$	—	$	0.4	$	25.1	$	38.8



	United States Print and Related Services		International		Total
Goodwill	$	881.3	$	30.0	$	911.3
Accumulated goodwill impairment loss	(778.3)		(30.0)		(808.3)
Goodwill, net of accumulated goodwill impairment loss	$	103.0	$	—	$	103.0


	March 31, 2021							December 31, 2020
	Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Trademarks, patents, licenses and agreements	6	$	68.7	$	(46.0)	$	22.7	6	$	69.6	$	(44.3)	25.3
Capitalized software	5	17.5		(12.3)		5.2		5	17.3		(11.7)		5.6
Acquired Technology	5	3.6		(0.7)		2.9		5	3.0		(0.5)		2.5
Customer relationships	6	561.1		(496.0)		65.1		6	561.9		(491.0)		70.9
Total		$	650.9	$	(555.0)	$	95.9		$	651.8	$	(547.5)	$	104.3


	Amortization Expense
Remainder of 2021	$	22.6
2022	29.9
2023	25.7
2024	14.9
2025	2.5
2026	0.3
Total	$	95.9


	March 31, 2021		December 31, 2020
Raw materials and manufacturing supplies	$	89.8	$	90.9
Work in process	30.7		33.4
Finished goods	41.5		45.9
Total	$	162.0	$	170.2


	March 31, 2021		December 31, 2020
Land	$	91.0	$	97.6
Buildings	773.9		780.3
Machinery and equipment	3,076.2		3,094.1
Other(1)	184.8		183.2
Construction in progress	37.1		33.0
Property, plant and equipment—gross	$	4,163.0	$	4,188.2
Less: accumulated depreciation	(3,312.3)		(3,304.0)
Property, plant and equipment—net	$	850.7	$	884.2


	Allowance for Credit Losses


Balance at December 31, 2020	$	33.8
Provisions	0.6
Write-offs	(0.6)

Translation and other	(0.5)
Balance at March 31, 2021	$	33.3


	March 31, 2021		December 31, 2020
Master note and security agreement	$	14.6	$	15.6
Term Loan A	627.0		657.6

Revolving credit facility	—		—
Senior unsecured notes	238.7		238.7
International term loans	8.2		10.7
International revolving credit facilities	3.4		4.9
Other	2.5		2.8
Debt issuance costs	(6.3)		(6.9)
Total debt	$	888.1	$	923.4
Less: short-term debt and current portion of long-term debt	(16.8)		(20.7)
Long-term debt	$	871.3	$	902.7


	Capitalized Debt Issuance Costs
Balance at December 31, 2020	$	6.9
Amortization of debt issuance costs	(0.6)
Balance at March 31, 2021	$	6.3


	2020 Gain on Debt Extinguishment
Loss on debt extinguishment from Master Note and Security Tender	$	0.2
Gain on debt extinguishment from Senior Unsecured Note Repurchases	(0.8)
Total	$	(0.6)


	March 19, 2019 Interest Rate Swap	February 7, 2017 Interest Rate Swap
Effective date	March 29, 2019	February 28, 2017
Termination date	March 28, 2024	February 28, 2022
Term	5 years	5 years
Notional amount	$130.0	$250.0

Fixed swap rate	2.43%	1.89%


	Balance Sheet Location	March 31, 2021		December 31, 2020
Interest rate swap liabilities	Other current liabilites	$	(4.0)	$	—
Interest rate swap liabilities	Other long-term liabilities	$	(7.7)	$	(14.4)


	Shares Under Option	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (millions)
Outstanding at December 31, 2020	514,876	$	27.49	0.5	$	—
Granted	—	—
Exercised	—	—
Canceled/forfeited/expired	(259,914)	41.10
Outstanding and exercisable at March 31, 2021	254,962	$	13.62	0.7	$	—


	Restricted Stock				Restricted Stock Units
	Shares	Weighted- Average Grant Date Fair Value Per Share		Weighted- Average Remaining Contractual Term (years)	Units	Weighted- Average Grant Date Fair Value Per Share		Weighted- Average Remaining Contractual Term (years)
Nonvested at December 31, 2020	2,961,750	$	11.55	1.3	249,538	$	11.70	1.3
Granted	1,124,443	3.90			41,553	3.82
Vested	(576,524)	22.55			(18,586)	22.60
Forfeited	(59,672)	13.14			—	—
Nonvested at March 31, 2021	3,449,997	$	7.19	1.9	272,505	$	9.76	1.4


	Deferred Stock Units
	Units	Weighted-Average Grant Date Fair Value Per Share
Outstanding at December 31, 2020	500,961	$	10.69
Granted	221,616	3.82
Dividend equivalents granted	—	—
Settled	(35,186)	11.53
Outstanding at March 31, 2021	687,391	$	8.36


		Issued Common Stock
	Authorized Shares	Outstanding	Treasury	Total Issued Shares
Class A stock ($0.025 par value)
March 31, 2021	105.0	41.2	0.5	41.7
December 31, 2020	105.0	40.2	0.2	40.4

Class B stock ($0.025 par value)
March 31, 2021	80.0	13.5	—	13.5
December 31, 2020	80.0	13.5	—	13.5

Class C stock ($0.025 par value)
March 31, 2021	20.0	—	0.5	0.5
December 31, 2020	20.0	—	0.5	0.5


	Translation Adjustments		Interest Rate Swap Adjustments		Pension Benefit Plan Adjustments		Total
Balance at December 31, 2020	$	(130.8)	$	(12.3)	$	(28.2)	$	(171.3)
Other comprehensive loss before reclassifications	(6.0)		—		—		(6.0)
Amounts reclassified from accumulated other comprehensive loss to net income	—		1.8		—		1.8
Net other comprehensive income (loss)	(6.0)		1.8		—		(4.2)
Balance at March 31, 2021	$	(136.8)	$	(10.5)	$	(28.2)	$	(175.5)


Details about Accumulated Other Comprehensive Loss Components	Three Months Ended March 31, 2021		Consolidated Statements of Operations Presentation

Amortization of amounts accumulated for interest rate swaps de-designated as cash flow hedges	$	1.8	Interest expense
Impact of income taxes	—
Amortization of amounts accumulated for interest rate swaps de-designated as cash flow hedges, net of tax	$	1.8


	Net Sales				Operating Income (Loss) from Continuing Operations		Restructuring, Impairment and Transaction- Related Charges
	Products		Services














Three months ended March 31, 2021
United States Print and Related Services	$	459.9	$	174.7	$	32.5	$	1.1
International	66.1		5.1		1.5		0.8
Total operating segments	526.0		179.8		34.0		1.9
Corporate	—		—		(13.0)		0.7
Total	$	526.0	$	179.8	$	21.0	$	2.6

Three months ended March 31, 2020
United States Print and Related Services	$	563.6	$	173.0	$	16.3	$	20.8
International	81.4		4.5		0.3		1.3
Total operating segments	645.0		177.5		16.6		22.1
Corporate	—		—		(11.6)		0.7
Total	$	645.0	$	177.5	$	5.0	$	22.8


	Operating Income from Continuing Operations		Operating Margin		Net Earnings (Loss) Attributable to Quad Common Shareholders		Diluted Earnings (Loss) Per Share Attributable to Quad Common Shareholders
For the three months ended March 31, 2020	$	5.0	0.6	%	$	(12.4)	$	(0.25)
Restructuring, impairment and transaction-related charges (1)	20.2		2.4	%	15.1		0.30
Interest expense (2)	N/A		N/A		2.6		0.06
Net pension income (3)	N/A		N/A		1.1		0.02

2020 gain on debt extinguishment (4)	N/A		N/A		(0.5)		(0.02)
Income taxes (5)	N/A		N/A		3.5		0.07
Loss from discontinued operations, net of tax (6)	N/A		N/A		3.8		0.08
Investments in unconsolidated entity and noncontrolling interests, net of tax (7)	N/A		N/A		0.1		—
Operating income from continuing operations (8)	(4.2)		—	%	(3.1)		(0.07)
For the three months ended March 31, 2021	$	21.0	3.0	%	$	10.2	$	0.19


	March 31, 2021			December 31, 2020
	(dollars in millions)
Total debt and finance lease obligations on the condensed consolidated balance sheets	$	892.6		$	928.2
Less: Cash and cash equivalents	80.6			55.2
Net Debt (non-GAAP)	$	812.0		$	873.0

Divided by: Adjusted EBITDA (Non-GAAP)	$	250.8		$	260.4

Debt Leverage Ratio—Debt (Non-GAAP)	3.24		x	3.35		x


			Add		Subtract		Trailing Twelve Months Ended
	Year Ended		Three Months Ended
	December 31, 2020 (1)		March 31, 2021		March 31, 2020		March 31, 2021
Net earnings (loss) attributable to Quad common shareholders	$	(128.3)	$	10.2	$	(12.4)	$	(105.7)
Interest expense	68.8		14.5		18.1		65.2
Income tax expense (benefit)	0.3		0.5		(1.2)		2.0
Depreciation and amortization	181.6		41.9		47.4		176.1
EBITDA (Non-GAAP)	$	122.4	$	67.1	$	51.9	$	137.6
Restructuring, impairment and transaction-related charges	124.1		2.6		22.8		103.9
Loss from discontinued operations, net of tax	21.9		—		3.8		18.1
Net pension income	(10.5)		(4.1)		(2.7)		(11.9)

Loss on debt extinguishment	1.8		—		(0.6)		2.4
Other (2)	0.7		0.2		0.2		0.7
Adjusted EBITDA (Non-GAAP)	$	260.4	$	65.8	$	75.4	$	250.8


	Three Months Ended		Year Ended
Statement of Operations Financial Information	March 31, 2021		December 31, 2020
Net sales	$	641.3	$	2,660.6
Cost of sales	508.5		2,114.4
Gross Profit	132.8		546.2

Net earnings (loss) from continuing operations	7.2		(106.5)
Loss from discontinued operations, net of tax	—		(21.9)
Net earnings (loss)	7.2		(128.4)
Less: net loss attributable to noncontrolling interests	—		(0.2)
Net earnings (loss) attributable to Quad common shareholders	$	7.2	$	(128.2)

Balance Sheet Financial Information	March 31, 2021		December 31, 2020
Total current assets	$	547.0	$	580.0
Total long-term assets	1,516.7		1,555.5
Total current liabilities	561.0		598.1
Total long-term liabilities	1,098.4		1,143.3
Noncontrolling interests	0.7		0.7


	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased(1)		Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2)
January 1, 2021 to January 31, 2021	—		—	—	$	100,000,000
February 1, 2021 to February 28, 2021	—		—	—	100,000,000
March 1, 2021 to March 31, 2021	258,670	(3)	—	—	100,000,000
Total	258,670			—


Exhibit Number						Exhibit Description

(10 )						A lternative Form of 2021 Cash Long-Te rm Incentive Plan Net Lever age Ratio Award Agreement under the Quad/Graphics, Inc. 2020 Om nibus Incentive Pl an

(22)						Guarantor Subsidiaries of Quad/Graphics, Inc.’s Senior Unsecured Notes.

(31.1)						Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934.

(31.2)						Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934.

(32)						Written Statement of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

(101)						Financial statements from the Quarterly Report on Form 10-Q of Quad/Graphics, Inc. for the quarter ended March 31, 2021 formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) the Condensed Consolidated Statements of Operations (Unaudited), (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited), (iii) the Condensed Consolidated Balance Sheets (Unaudited), (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited), (v) the Notes to Condensed Consolidated Financial Statements (Unaudited), and (vi) document and entity information.

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