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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to
Commission File Number 001-34806
QUAD/GRAPHICS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin39-1152983
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
N61 W23044 Harry’s Way, Sussex, Wisconsin 53089-3995
(Address of principal executive offices) (Zip Code)
(414) 566-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of ClassTrading SymbolName of Each Exchange on Which Registered
Class A Common Stock, par value $0.025 per shareQUADThe New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes   No 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No
The aggregate market value of the class A common stock (based on the closing price of $2.75 per share on the New York Stock Exchange) on June 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, held by non-affiliates was $97,681,109. The registrant’s class B common stock is not listed on a national securities exchange or traded in an organized over-the-counter market, but each share of the registrant’s class B common stock is convertible into one share of the registrant’s class A common stock.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
Class Outstanding as of January 31, 2023
Class A Common Stock 39,865,322
Class B Common Stock 13,556,858
Class C Common Stock 
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the registrant’s 2023 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.


QUAD/GRAPHICS, INC.
FORM 10-K INDEX
For the Year Ended December 31, 2022
Page No.
 1

i

Cautionary Statement Regarding Forward-Looking Statements

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

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

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

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

The impact 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, on the Company’s business, financial condition, cash flows and results of operations (including future uncertain impacts);

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

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

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

The failure to attract and retain qualified talent across the enterprise;

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

The fragility and decline in overall distribution channels;

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

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

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

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

The COVID-19 pandemic continues to negatively affect the Company’s business, financial condition, cash flows, results of operations, supply chain and raw materials availability, as well as client demand (including future uncertain impacts);

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

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

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

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

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

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

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

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

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PART I

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. 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. With a marketing platform intentionally built for integrated marketing execution, Quad helps brands reduce the complexity of working with multiple agency partners and vendors; increase marketing process efficiency; and maximize marketing effectiveness. The Company’s holistic, multichannel, through-the-line marketing solutions include strategy and consulting, data and analytics, technology solutions, media services, creative and content solutions, and managed services. With unmatched scale for client-based, on-site services and highly qualified talent with expansive subject matter expertise, the Company has the resources and knowledge to help a wide variety of clients across multiple verticals, including those in industries such as retail, publishing, consumer packaged goods, financial services, healthcare, insurance and direct-to-consumer.

Quad was founded in Pewaukee, Wisconsin, as a Wisconsin corporation, in 1971 by the late Harry V. Quadracci. As of January 31, 2023, the Quadracci family, through the Quad/Graphics, Inc. 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. As of December 31, 2022, the Company had approximately 15,300 full-time equivalent employees in North America (including Mexico and the Dominican Republic), South America, Europe and Asia, and served a diverse base of approximately 2,900 clients. Quad locations span 14 countries, including 45 manufacturing and distribution facilities and more than 80 client-based on-site locations, with additional investments in printing operations in India.

During Quad’s first 40 years, the Company grew rapidly through greenfield growth, built a premier manufacturing and distribution platform equipped with the latest technology, established its reputation as one of the printing industry’s foremost innovators, and created a strong company culture based on enduring values and commitment to social purpose that remains in place today.

Beginning in 2010, Quad strategically expanded its offerings to create enhanced value for its clients. Quad saw an opportunity to participate in industry consolidation in response to economic and industry pressures following the great recession of 2008 and 2009 that severely impacted print volumes and accelerated the impact of media disruption. Through a series of disciplined consolidating acquisitions that included World Color Press, Inc., Vertis Holdings Inc., and Brown Printing Company, the Company added experienced talent, and enhanced and expanded its print-based product and services offerings while removing inefficient and underutilized capacity by transitioning work to more efficient facilities and reducing costs. This period of consolidation established a disciplined cost reduction philosophy while creating the opportunity for additional investments in the highly automated and efficient manufacturing and distribution capabilities the Company operates today.

Beginning in 2018, Quad focused on strategic investments in marketing services, talent and technology to accelerate its eventual transformation as a marketing experience company. During this transformation period, Quad made several growth acquisitions including Ivie & Associates, a premier marketing services provider specializing in customized marketing and business process outsourcing with unmatched scale for client-based, on-site marketing services; Periscope, a top five independent creative agency offering world-class capabilities in strategy, including media buying and analytics, creative and account management, and packaging design and pre-media services; and Rise Interactive, a leading performance marketing agency specializing in digital media, analytics and customer experience. In addition, the Company hired business professionals with client-side marketing experience and consulting expertise to strategically expand its integrated marketing offering, enter new market verticals, and change product-centric conversations with clients to a solutions-based approach. To reflect its transformation, the Company evolved its brand from Quad/Graphics to Quad in 2019.
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Today, Quad provides brands and marketers with a more efficient and effective way to go to market and reach consumers. Through its integrated marketing platform, the Company creates greater value for clients by removing friction in the marketing process and speeding the overall marketing journey by enabling more effectively integrated marketing ecosystems. For Quad clients, this:

Reduces the complexities of working with multiple agency partners and vendors by limiting handoffs that occur in the marketing process.
Increases marketing process efficiency through workflow re-engineering, process optimization and content production at scale.
Maximizes marketing effectiveness through their ability to target and reach the right audiences; get into market faster; scale resources more efficiently; achieve better integration of offline and online channels; optimize media performance; drive consistent consumer experiences; and realize meaningful cost savings.

As a good corporate citizen, Quad also creates societal value through a strong commitment to proactively addressing environmental, social and governance (ESG) matters, as described in its ESG report, available for download at QUAD.com. This dedication to driving positive, sustainable change in its business and in the world aligns with Quad’s long-standing commitment to create a better way — a hallmark of the Company’s culture.

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. The Company continued to expand its marketing solutions with new and existing accounts, providing clients with the simplicity, efficiency and effectiveness of an integrated approach. Quad also grew print segment share because of its dependable performance, operational and financial stability, and ongoing investments in manufacturing automation. Further, Quad continued to create a better way to drive positive change in its business and the world through its environmental, social and governance commitments in key areas integral to its business strategy as a marketing experience company. 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 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. The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports are made available to the public at no charge through a link appearing on the Investor Relations section of the Company’s website. 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.

According to an October 2022 Dun & Bradstreet First Research report, the U.S. advertising and marketing services industry is forecast to grow at an annual compounded rate of 3% between 2022 and 2026. 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 secular decline in the company’s large-scale print segments accelerated due to the COVID-19 pandemic, an uncertain economic environment and the continued migration of advertising dollars from print to digital channels. These industry dynamics support Quad’s transformation as a marketing experience company.


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Advertising and Marketing Services

The advertising and marketing services industry is highly fragmented. According to the October 2022 Dun & Bradstreet First Research report, the top 50 companies in the U.S. advertising and marketing services industry generate approximately 40% of industry revenue. Services in this industry include multiple advertising (30%), media planning and/or buying (10%), advertising creative (10%), full public relations services (10%), and leased display advertising media space (10%). Other services include coordinating the manufacturing and delivery of promotional items, direct mail advertising, and distribution of advertising materials. The U.S. advertising and marketing services industry includes about 38,000 establishments (single-location companies and units of multi-location companies), with combined annual revenue of about $110 billion.

Advertising and marketing services providers face pressure to satisfy major clients’ needs, as the win or loss of a major client account can impact revenue significantly. Additionally, these providers face challenges related to public concern and general annoyance with advertising methods. For example, data collection of personal information for marketing purposes is an issue under continued scrutiny from federal and state legislators, and marketers are facing growing restrictions on certain types of data they collect. In Europe, the European Union continues to enforce data protection through the General Data Protection Regulations.

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 new advertising and marketing channels have emerged, these providers have been required to expand their focus beyond traditional channels, such as television, radio, newspapers and print publications, to digital channels, such as email, paid search, digital display and social, to create effective multichannel marketing campaigns for their clients.

The advertising and marketing services industry is affected by real gross domestic product growth, as economic activity and advertising spending are key drivers of consumer demand. In times of economic prosperity, advertisers may increase spending to build brand awareness and to drive sales. Conversely, in times of global economic uncertainty and budget pressures, advertisers may reduce spending.

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. IBISWorld industry report, the United States commercial printing industry, in the aggregate, generates an estimated $80 billion in annual revenue, employs more than 421,000 people and is comprised of over 48,000 companies. The report also states that no printing company accounts for more than 5% of total commercial print industry annual revenue in the United States.

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. This — combined with increases in postage expenses and marketers’ increasing use of online marketing and communication channels (exacerbated by the COVID-19 pandemic, as well as the current macroeconomic conditions) — has led to excess manufacturing capacity in the printing industry. 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.

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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. Conversely, in times of global economic uncertainty and budget pressures, advertisers may reduce spending or shift their spending to other forms of non-print media. For print specifically, magazine publishers that face diminished advertising pages reduce total page counts and frequency; catalog marketers reduce page counts, circulation or frequency of print campaigns; retailers curb investments in store inventory and cut back on retail insert newspaper circulation and advertising; and other advertisers reduce their direct mail volume. It is possible that these businesses instead decide to move print advertising spend to digital alternatives.

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.

Quad believes that business users of print and print-related services are focused on generating and tracking the highest returns on their marketing investment. While digital advertising is essential in today’s marketing ecosystem, businesses that focus exclusively on online channels at the expense of offline channels may fail to maximize their return on investment (ROI). For example, research released in 2022 by the Association of National Advertisers showed that direct mail generated an average ROI of 112% — topping email (93%), paid search (88%), social media (81%) and digital display (79%).

Quad believes it is well positioned to help brands and marketers achieve the greatest return on their marketing investment when they start with a strong strategy informed by an audience-first approach to get the right message to the right consumer at the right time using the right combination of channels.

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. 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 Company expects seasonality impacts to continue in future years.

Strategic Priorities

Quad delivers its overarching business strategy and singular vision as a marketing experience company by executing the Company’s five consistent strategic priorities, as outlined here.

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. Quad focuses on solving problems, and removing pain points and sources of friction wherever a client experiences it in the marketing process. 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. 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. The Company also delivers proactive thought leadership about key issues facing its clients — including data-driven marketing, mar-tech and postal reform — to help foster loyalty to the Quad brand.

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Grow the Business Profitably

This strategic priority centers on profitably growing Quad as a marketing experience company. Key components of this priority are:

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

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

Make disciplined and compelling investments that take many different forms. The Company intends to continue to pursue growth investments that help expand and strengthen its integrated marketing platform. In addition, the Company intends to continue making long-term investments in its talent, such as hiring business professionals with client-side marketing 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.

Advance One-of-a-Kind Integrated Marketing Platform

The Company operates what it believes to be a truly differentiated integrated marketing platform, intentionally built to remove friction from the marketing process and maximize marketing effectiveness by reducing complexity and increasing efficiency. Through this unique and scalable platform, the Company offers holistic, multichannel, through-the-line marketing solutions. Quad’s solutions include strategy and consulting, data and analytics, technology solutions, media services, creative and content solutions, and managed services, which the Company deploys efficiently across multiple offline and online media channels including digital, direct marketing, in-store, packaging and print. With expertise and resources in planning, creating, deploying, measuring and optimizing marketing efforts, Quad guides brands through every effort intended to drive an action, from consumer awareness and trust, to brand preference and purchase. Quad uses a disciplined return on capital framework to make regular, strategic investments in its marketing platform, resulting in what it believes is the most integrated, automated, efficient, innovative and advanced platform of its kind. The Company believes its long-standing culture of universal Continuous Improvement and commitment to Lean Enterprise methodologies, combined with ongoing, strategic investments in talent, technology, products and services, will continue to accelerate its position as a marketing experience company and drive growth.

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

Additionally, as Quad accelerated its transformation as a marketing experience company over the last several years, it chose to strategically divest of those businesses that could not be easily leveraged as part of its greater integrated marketing platform. Through these types of optimization efforts, Quad has been able to maintain a superior, unparalleled marketing platform that delivers value to clients and, ultimately, their customers.

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Empower Employees

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

The Company embraces forward-thinking workplace practices, such as flexible work models; implements innovative talent acquisition strategies to meet its labor and business needs; and provides training and reward programs to engage, develop and retain its employees. Employees are encouraged to take advantage of the Company’s 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.

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

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

Enhance Financial Strength and Create Shareholder Value

Quad follows a disciplined approach to maintaining and enhancing financial strength to create shareholder value. This strategy is centered on the Company’s ability to drive profitable growth, and maximize net earnings, Free Cash Flow and operating margins; maintain consistent financial policies to ensure a strong balance sheet, liquidity level and access to capital; and retain the financial flexibility needed to strategically allocate and deploy capital as circumstances change. The priorities for capital allocation and deployment are balanced according to prevailing circumstances and what the Company thinks is best for shareholder value creation at any particular point in time. Those priorities currently include 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.

To provide ongoing improvement in productivity and, ultimately, maximize operating margins, the Company applies holistic Continuous Improvement and Lean Enterprise methodologies to simplify and streamline processes. These same methodologies are applied to its selling, general and administrative functions to create a truly Lean Enterprise. The Company continually works to lower its cost structure by consolidating its manufacturing operations into its most efficient facilities, as well as realizing purchasing, mailing and logistics synergies by centralizing and consolidating print manufacturing volumes, and eliminating redundancies in its administrative and corporate operations. Quad believes that its focused efforts to be the high-quality, low-cost producer generates increased Free Cash Flow and allows the Company to maintain a strong balance sheet through debt reduction. The Company’s disciplined financial approach also allows it to maintain sufficient liquidity and to reduce refinancing risk, with the nearest significant debt maturity of $87.7 million occurring in January 2024, and $229.8 million of debt maturities not due until November 2026. 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. 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.

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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.

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. As such, Quad helps its clients:

Reduce the complexities of working with multiple agency partners and vendors by limiting handoffs that occur in the marketing process.
Increase the efficiency of marketing processes by re-engineering workflows, optimizing processes and producing content at scale.
Maximize the effectiveness of their marketing efforts through the Company’s ability to target and reach the right audiences; get into market faster; scale resources more efficiently; achieve better integration of offline and online channels; optimize media performance; drive consistent consumer experiences; and realize meaningful cost savings.

Through its holistic, multichannel, through-the-line marketing solutions, Quad guides brands through every effort intended to drive an action, from consumer awareness and trust, to brand preference and purchase. The Company’s solutions comprise of:

Strategy and Consulting;
Data and Analytics;
Technology Solutions;
Media Services;
Creative and Content Solutions; and
Managed Services

A key aspect of Quad’s integrated marketing platform is dedicated client on-site and near-site teams, including a network of photography and video production studios. 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. 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. Backed by its own global production resources that provide around-the-clock service, Quad believes this model increases process efficiencies and enables clients to focus on what they do best: sell more products, services and/or content. Quad has more than 500 professionals embedded at more than 80 on-site locations including grocery, sporting goods, mass merchandise and publishing clients.

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. Traditional agencies or agency holding companies develop creative and then outsource production, while traditional consulting firms provide strategy and then outsource implementation. Quad, however, prides itself on its “maker” culture, creating all campaign elements and providing seamless execution across all channels, offline and online, using its own internal resources.
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In commercial printing, Quad continues to make investments in what it believes is the most advanced and efficient print manufacturing and distribution capabilities in the industry, averaging 2% of its annual net sales for capital expenditures over the past five years. 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. Through these ongoing investments — along with innovative front-end toolsets and data workflows, and industry-leading back-end logistics and postal optimization — the Company provides marketers and publishers a better way to produce and deliver more relevant content faster and more cost-effectively. These ongoing investments also have enabled Quad to better serve the needs of its clients who prize direct access to consumers’ home mailboxes. Quad carries over its commitment to print to other forms of media, including digital, broadcast, in-store, packaging and out-of-home.

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. The Company continues to strengthen its manufacturing operations by:

Removing excess and/or under-utilized capacity, and by consolidating work into facilities where it can achieve the greatest manufacturing and distribution efficiencies; and

Reconfiguring and re-equipping manufacturing facilities for print growth segments, such as direct mail, in-store and packaging.

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. One of Quad’s postal optimization programs is co-mailing, which involves the sorting and bundling of multiple printed products for mailing to consumers in order to facilitate better integration with the United States Postal Service (“USPS”). In return, the USPS offers significant work-sharing discounts for this sorting, bundling and drop-shipping. Quad’s co-mail program is the largest in the printing industry (based on information published or otherwise made available from competitors). Due to the continuously increasing costs of utilizing the USPS and to help control costs for its clients, Quad continues to expand its alternate delivery service to bring products to consumers’ doorsteps.

Commitment to Ongoing Innovation

Quad has been at the forefront of innovation for more than 50 years, and believes its commitment to ongoing innovation drives its purpose to create a better way for all of its stakeholders. The Company continually innovates marketing solutions and vertically integrated capabilities related to commercial printing, as well as initiatives to support employee health and wellness.

Marketing Solutions

When it comes to marketing solutions, Quad takes a disciplined approach to (1) expand its existing product offerings; (2) develop and commercialize new product offerings; and (3) deliver integrated solutions that solve clients’ marketing and process challenges.

The Company continues to hire talent with client-side marketing experience and consulting expertise to help advance more solutions-based conversations with clients. Quad’s sales team is focused on understanding client pain points, and aims to expand relationships with higher-level executives responsible for corporate strategy, including Chief Executive Officers and Chief Marketing Officers. Through these relationships, the Company is able to gain insights into additional client marketing needs, and then uses a disciplined approach to develop and commercialize solutions that incorporate a broad range of Quad’s products and services, ultimately expanding and deepening those C-suite relationships.
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Among the ways Quad continuously innovates across its holistic, multichannel, through-the-line marketing solutions are:

Strategy and Consulting: Through its premier marketing, advertising and creative talent, Quad creates campaigns that attract attention and activate audiences, while also taking into consideration timely, cost-effective deployment, measurement and optimization. This a key point of differentiation for the Company. Unlike traditional consulting firms that provide strategy and then outsource production and implementation, Quad harnesses the power of its “maker” culture to not only create the strategy behind high-impact marketing efforts, but also produce all the elements and provide seamless execution across all channels.

Data and Analytics: The Company continues to make investments in its market intelligence services to drive stronger results for its clients while saving both the Company and its clients time and money while keeping emerging data privacy principles, laws and regulations top of mind. These services help clients identify both their optimal target audience based on geographics, demographics, psychographics and behaviors, and the best content and mix of channels to reach and engage that audience at the moment they are most receptive. Quad’s data and analytics innovations include:

Audience services including an unparalleled household-first targeting approach made possible by Quad’s own proprietary database of households. This exclusive database of information is augmented with existing third-party data, along with type, category and volume of mail based on what consumers actually received, to create a powerful targeting tool. Further, the Company’s audience services are seamlessly integrated with activation efforts, which yields improved consistency, stronger response and easier measurement.
Virtual creative testing for use in predicting the combination of offer, messaging and imagery across all channels to drive response and engagement. The solution, called Accelerated Marketing Insights, uses a unique combination of high-level mathematics — along with cultural and emotional factors that affect decision-making — to pinpoint how to best motivate a target audience to take a desired action. Marketers who use the platform have experienced lifts in response rates by as much as 10-20%.
Brand packaging performance, consumer attention and shelf impact testing using the latest in biometric technology, such as mobile eye-tracking, facial coding and brain activation, in a simulated shopping environment. The solution, known as Package InSight, provides consumer product goods, brands and marketers with the proprietary data they need to optimize return on investment for brand creative.
Measurement services that help brands understand where to allocate their budget to achieve their business goals. For example, through Connex, the Company’s award-winning media optimization platform, digital marketers can unify marketing data across channels and walled gardens, all in one place. The proprietary technology helps uncover performance trends by audience, creative, product, location and more, eliminating the noise of disparate data sets and identifying the specific value-driving actions they need to take in real time to grow their business.
Data capture services, including approaches that improve the consumer experience. For example, the Company helps brands and marketers plan, create, deploy, measure and optimize campaigns using one-to-one Flowcodes® in creative ways that spark consumer interaction offline to online, delivering first-party user scan data that better identifies audiences and their passions. With this data, clients can create and deploy the most relevant content and offers, driving brand loyalty and sales.

Technology Solutions: Quad has been innovating client-facing technology solutions for more than 20 years. Today, the Company’s next-gen mar-tech platform uniquely connects marketing strategy, global content creation, analytics and personalized communications across offline and online channels, including the in-store consumer experience. Through this holistic approach, Quad ensures marketing efforts are relevant, consistent and scalable, and achieve optimal return on ad spend.


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Additionally, the Company’s platform supports the growing importance of retail media networks — a collection of digital channels offered by retailers that are useful to individual brands for reaching and engaging shoppers. As a result, the Company automates connections between a retailer’s advertising infrastructure (e.g., websites and apps) and brand advertising content.

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. Quad also has applied robotic process automation in various administrative functions to streamline data processing and report generation. Where appropriate, Quad also leverages artificial intelligence in areas such as labor management, scheduling and predictive machine maintenance.

Media Services: The Company, which manages hundreds of millions of dollars of media billings annually, works with a variety of industry-leading clients to deliver a fully integrated and innovative approach to media across all offline and online channels. Quad excels in audience-led campaign development with the diligence required for optimum engagement. Its approach provides clients with deep exploration into audience behavior to reach consumers with targeted messages in the moments they are most receptive and likely to engage — ultimately leading to the performance and growth clients expect from their media agency. The Company continues to innovate in this space to create additional value for its clients. For example, its integrated connections planning process drives client business performance through data-driven orchestration of the right brand actions in the right moments for the right audiences. Through this process, clients better understand who their most important audiences are, and how to connect with them across all channels and touchpoints on the terms they prefer while driving desired behaviors. The connections planning process is also part of — and integrated with — Quad’s creative solutions, outlined below.

Creative and Content Solutions: Clients credit Quad’s creative solutions for providing a more integrated, channel agnostic, content-first approach. Instead of creating content by channels or in silos — wasting resources and time, and creating inconsistencies — the Company’s holistic and strategic approach focuses on what content is needed, creating it well and deploying it.

The Company has the talent and extensive resources to execute marketers’ and publishers’ creative and content needs at scale. These resources include videographers, photographers, copywriters, CGI artists and animation experts, among others, who work from Quad’s own network of client on-site, near-site and standalone studios and agency locations around the globe.

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.

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. 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. By leveraging Quad’s knowledge and purchasing power, clients can focus on other critical aspects of their business.


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Vertically Integrated Capabilities

Quad has vertically integrated print and non-print capabilities that provide a distinct competitive advantage. 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. Through these services, Quad helps improve the quality, cost and availability of key inputs in the printing and distribution processes.

The Company created a health and wellness subsidiary QuadMed, LLC (“QuadMed”) in 1990 to address its own employees’ needs for quality, cost-effective health care. 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. Throughout the COVID-19 pandemic, Quad, its employees and their dependents benefited from guidance and best practices provided by QuadMed, which maintains relationships with leading health care and research organizations across the country.

Commitment to Culture and Social Purpose

Quad believes it can do good in the world while doing well as a business. 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. 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. 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. 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.

In this Annual Report on Form 10-K, the Company reports on its commitment to culture and social purpose through achievements in environmental, social (Human Capital Management) and governance matters as outlined below.

Environmental

Quad seeks to operate in an environmentally responsible manner by challenging itself to create better ways to conduct business that better serve the environment, and reflect the values of its clients and their customers. This approach focuses on conserving raw materials, reducing waste and energy use, recycling and reusing products and materials, and reducing environmental impacts wherever possible across Quad’s integrated marketing platform.

Examples of Quad’s commitment to environmental responsibility and sustainability include:

Aligning the Company’s initiatives with environmentally focused United Nations Sustainable Development Goals (SDG) such as SDG 12: Responsible Consumption and Production and SDG 15: Life on Land.
Partnering with federal, state and local regulatory agencies; educational institutions; industry trade groups; and non-profit organizations to share knowledge and information, best-management practices, development of new tools and metrics, and innovative technology that lead to the reduction or elimination of environmental impacts.
Benchmarking environmental performance to evaluate the effectiveness of current environmental management programs and to identify program areas that need improvement or need to be developed.
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Reclaiming materials and diverting them from the landfill through industrial and office recycling programs.
Mitigating the dangers associated with hazardous waste through comprehensive chemical and hazardous waste management practices, including safe handling practices in our operations and finding ways to reduce the use of chemicals and solvents.
Maintaining chain-of-custody certifications for sourcing materials from responsibly managed forests (Forest Stewardship Council®, Sustainable Forest Initiative, and Program for the Endorsement of Forest Certification) and partnering with clients to increase certified paper usage.
Formulating its own brand of Envirotech™ inks that contain a high percentage of renewable resource (i.e., vegetable) content.
Developing a co-mailing program — now believed to be the largest in the printing industry — that helps consolidate loads of mail and, thereby, reduce greenhouse gas emissions impact by putting fewer trucks on the road.
Becoming a founding partner of the U.S. Department of Energy’s Better Plants Program, a voluntary program to save energy and money, and reduce the Company’s environmental footprint.
Being an active participant in the State of Wisconsin’s Focus on Energy program, an energy efficiency and renewable resource program through which the Company has implemented multiple energy-saving upgrades to its facilities and operations.
Becoming ISO 50001 Ready through the U.S. Department of Energy in the Company’s Hartford, Sussex and West Allis, Wis., and Saratoga Springs, N. Y. facilities, recognizing that these plants have created sound energy policies, established objectives and built structured improvements to generate deep, sustained energy savings.
Helping clients meet their sustainability goals through sourcing sustainable materials and reporting how the Company’s performance affects their carbon footprint.
Continually educating clients, employees and communities on environmental sustainability matters. These include providing access to internal experts for consultations; hosting symposiums and other educational events at which the clients, suppliers and employees learn about the latest challenges and trends in sustainability; and advancing community education initiatives through non-profits such as Pine View Wildlife Rehabilitation and Education Center in southeastern Wisconsin which creates awareness of sustainability’s importance in daily life.

As the owner, lessee or operator of various real properties and facilities, Quad is subject to various federal, state and local environmental laws and regulations, including those relating to air emissions; waste generation, handling, management and disposal; sanitary and storm water discharge; and remediation of contaminated sites. 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. Its people-focused, values-driven culture is a key competitive advantage that the Company believes distinguishes itself from its competitors.

Attracting, Developing and Retaining Highly Qualified Talent

Quad relies on highly qualified, skilled and knowledgeable talent to advance its strategic priorities and maintain its competitive advantage as a marketing experience company. Accordingly, 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.

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As of December 31, 2022, the Company had approximately 15,300 full-time equivalent (“FTE”) employees in the following geographies:
Geographic RegionNumber of FTE Employees
North America (Includes Mexico, Central America and the Caribbean)12,700 
Europe, Middle East and Africa1,800 
South America700 
Asia100 

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. 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. 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. The program, which includes a recruiting and training hub known as Quad MKE, connects people to family sustaining careers at Quad, and provides the tools and training, and free transportation to set up new employees for success.
Listening to employees through annual engagement surveys and open forums at department and company-wide meetings to help better understand what employees like about working for the Company, what it can improve, and what could drive greater job satisfaction, and then acting on that employee feedback.
Fostering pride through employee recognition programs, including an engagement and retention award for manufacturing locations that work to create an engaging workplace; employee and family events; and community outreach activities.
Providing and maintaining a world-class culture and environment for health and safety. The Company strives for zero workplace injuries and illnesses through its Safety Accountability for All Employees (SAFE) policy which states that no department is considered properly managed — regardless of proficiency in other managerial areas — unless it maintains an acceptable level of safety performance. All employees, from entry-level through senior management, are held accountable for adhering to the Company’s safety policies, and are provided with training and other resources.


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Compensation and Benefits

The Company invests in its workforce by offering market competitive compensation, regularly conducting total compensation benchmarking as part of its basic operations, as well as offering a comprehensive benefits package as part of its Total Rewards program. Features of this program include:

Comprehensive medical, prescription, dental and vision coverage to employees, including access to 24/7 telemedicine and virtual care being piloted in certain regions.
On-site and near-site primary and specialty healthcare, pharmacy, dental, vision and physical therapy services and fitness centers at several large-scale employee locations, operated by the Company’s health and wellness subsidiary, QuadMed.
Robust holistic wellness programming for physical, emotional, financial and social well-being through the company’s QLife Wellness program, including a newly launched nationwide behavioral health program in 2022 that provides in-person and virtual counseling through licensed therapists.
401(k) retirement savings program with annual discretionary Company match as well as retirement planning and financial wellness resources and webinars.
Paid vacation time and holidays.
Short- and long-term disability insurance, and employer-paid life insurance.
On-site affordable childcare and summer camps for school-aged children at some of the Company’s largest manufacturing locations.

Diversity, Equity and Inclusion

Diversity, Equity and Inclusion (DEI) is part of Quad’s overall business strategy and a key driver behind specific business outcomes, including attracting and retaining talent, strengthening and protecting its brand reputation, increasing employee productivity, and competing in growth verticals.

Quad’s DEI strategy is focused on (1) achieving a workforce that reflects the communities where employees live and work, as well as the clients who trust Quad with their business; (2) ensuring that procedures, processes and distribution of resources create equal opportunities and fair and just outcomes; and (3) creating a safe and open environment where all Quad employees can bring their truest and best selves to work every day, consistent with the Company’s long-standing Values.

To achieve its stated DEI goals, the Company has:

Launched a DEI Task Force that includes representation from all employee levels, Business Resource Groups (BRGs), and many business areas and Company brands, such a QuadMed, Periscope and Rise Interactive. This team helps promote and foster a culture of inclusion, builds and executes a more comprehensive and sustainable strategy, and develops the metrics that will hold the Company accountable for its DEI commitments.
Strengthened partnerships with nationally recognized DEI experts, consultants, community partners and researchers that include tailored DEI learning and development programs for employees.
Supported employee-led BRGs through a BRG Advancement Program that includes resource guides, training and annual budgets. Quad’s BRGs are designed to cultivate an open company culture for employees who share common interests, providing a way to easily and regularly connect, and encourage each other’s growth and development. The Company currently has six BRGs supporting women, military veterans and their families, the LGBTQIA+ community, Black employees, Hispanic / Latinx employees, and working parents.
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Continued to support the education and advancement of talent from untapped communities in the creative industry through scholarships at institutions committed to diversifying the talent pathway, and through talent development programs, such as The BrandLab, a non-profit focused on changing the face and voice of the marketing industry by exposing young people from diverse ethnic and socioeconomic backgrounds to viable creative careers.
Created and introduced a new DEI performance review competency centered on advancing inclusive behaviors (i.e., behaving in ways that make everyone feel valued, respected and supported). In addition to creating a safe and open environment where all employees can bring their truest and best selves to work every day, the competency directly correlates to improving engagement and retention rates — key business imperatives.
Continued to engage U.S. employees in DEI-related topics through learning programs and I am. We are., an internal education and communication platform.
Continued to grow a more inclusive supplier base by developing mutually beneficial relationships with suppliers representing women-, minority-, LGBTQIA+, veteran- and disability-owned businesses.

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. By investing financial resources and providing in-kind services, including volunteerism by employees, the Company:

Builds economic and social resiliency;
Helps the underserved and under-resourced;
Supports community education, arts and service pillars;
Celebrates with diverse community members; and
Responds in time of crises.

Communications

The Company believes that timely, transparent communication with all employees is an important engagement tool, and uses a variety of channels to inform and educate employees about business operations and matters of personal importance (e.g., total rewards). 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.

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. 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 aspects of Quad’s approach to strong governance practices include:

Maintaining a high standard for corporate compliance and ethical business practices to keep the business healthy and protect the Company and its stakeholders from risk. The Company’s Code of Conduct appears on the employee intranet and corporate website, and explicitly states that Quad is committed to a workplace where every employee, regardless of job title or position, is responsible for doing the right thing.
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Training all employees annually on a suite of ethics and compliance topics, including Code of Conduct, anti-harassment, conflict of interest, C-TPAT, data privacy, HIPAA, information security, physical security, acceptable use policy for technology assets, and anti-bribery and anti-corruption.
Making it safe and easy for employees to report violations of the Code of Conduct through multiple channels, including a 24/7 Ethics and Compliance Hotline or a web-based reporting tool with guidance in multiple languages.
Maintaining consistent, stable leadership that is focused on making decisions in the best long-term interest of the Company. The Quadracci family voting control enables the Company to manage its strategy and disciplined financial policy and helps avoid the pitfalls of short-term decision-making that could potentially jeopardize the stability and long-term growth prospects of the Company.
Retaining an experienced management team with a proven track record that is committed to preserving the Company’s Values-based culture. The senior management team’s combination of entrepreneurially minded leaders with a long tenure at Quad and strategic new-hires is complemented by managers and employees committed to advancing the Company as a marketing experience company.
Sustaining a disciplined approach to managing operations and committing to innovating solutions.
Reducing risk to the business through a formal Enterprise Risk Management program that is managed by an executive risk steering committee that takes a strategic role in risk identification and response planning.
Continually updating and strengthening the Company’s information and data security program to address the fast-changing threat landscape and ensure oversight. 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. This Code also includes anti-corruption and anti-bribery policies.

COVID-19

Since March 2020, Quad’s response to the COVID-19 pandemic was focused on protecting employees’ health and well-being while also protecting the financial health and long-term viability of the Company. The Company’s COVID-19 response has been led by an internal Crisis Management Team consisting of leaders from Risk Management, Human Resources, Legal, Manufacturing, Agency Solutions and Communications, as well as medical professionals from QuadMed, the Company’s health and wellness subsidiary. The Company’s response has been informed by guidance from public health professionals, including the Centers for Disease Control and Prevention (CDC), local health authorities, and direction from federal and state governments, along with best practices and recommendations from QuadMed, which maintains relationships with leading health care organizations and research universities across the country.

During the worst of the pandemic, Quad’s Safe at Work program provided for the health and safety of employees while continuing to meet the needs of clients. This program strongly encouraged all employees and family members to get the COVID-19 vaccine and booster; detailed policies and procedures for mask wearing, social distancing, good hygiene, daily disinfecting and more to protect against COVID-19; featured an internal Rapid Response Team of HR and other professionals to assess COVID-19 cases, perform contact tracing, and support and track employees through their return to our work locations; included a branded communication strategy built on transparent, frequent and consistent communication across multiple channels; and equipped any employee able to perform their duties remotely to work from home to prevent the spread of the virus, especially during times of high transmission rates.

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In fall 2022, as COVID-19 infection rates and cases continued to drop nationwide, the Company transitioned to a Well at Work program that applied important lessons learned from the COVID-19 pandemic. The Well at Work program encourages employees to make the best choices to protect themselves and those around them against all respiratory viruses, including COVID-19, seasonal flu, Respiratory Syncytial Virus (RSV) and colds. Quad uses its QLife Wellness platform (accessible through the employee intranet) to share important communications and resources, including commonsense measures to protect themselves and others. Through this ongoing program, Quad employees are made aware of how their personal choices impact wellness in all aspects of their lives — physical, emotional, financial and social — while also protecting the health of the business.

Clients

Quad enjoys long-standing relationships with a diverse base of clients, which includes both national and regional corporations in North America, South America, Europe and Asia. The Company’s clients include industry-leading blue chip companies that operate in a wide range of industries and serve both businesses and consumers, including retailers, publishers and direct marketers. 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. 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. The Company continues to innovate within the printing and print-related industry and, as a result, has developed what it believes to be one of the most powerful patent portfolios in the print industry.

Quad currently holds or has rights to commercialize a wide variety of worldwide patents and applications relating to its business. The Company intends to continue to file patent applications that it believes will help ensure the continued strength of the Company and its portfolio. Additionally, the Company markets products, services and capabilities under a number of trademarks and trade names. Quad aggressively defends its intellectual property rights and intends to continue to do so in the future.

Raw Materials

The primary raw materials that Quad uses in its print business are paper, ink and energy. At this time, the Company’s supply of raw materials are available from numerous vendors; however, based on market conditions, the current supply is under pressure due to supply chain shortages and higher than expected inflation. The Company generally buys these raw materials based upon market prices that are established with the vendor as part of the procurement process.

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

The Company produces the majority of ink used in its print manufacturing, allowing it to control the quality, cost and supply of key inputs. Raw materials for the ink manufacturing process are purchased externally from a variety of vendors.
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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. 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.
NameAgePosition
J. Joel Quadracci54Chairman, President and Chief Executive Officer
Eric N. Ashworth57Executive Vice President of Product and Market Strategy, and President of Quad Agency Solutions
Anne M. Bauer58Vice President and Chief Accounting Officer
Julie A. Currie60Executive Vice President and Chief Revenue Officer
Joshua J. Golden51Chief Marketing Officer
Dana B. Gruen49General Counsel and Corporate Secretary
David J. Honan54Executive Vice President and Chief Operating Officer
Steven D. Jaeger58Vice President and Chief Information Officer
Donald M. McKenna50Executive Vice President and Chief Administrative Officer
Robert H. Quadracci55Chief Human Resources Officer
Anthony C. Staniak50Chief Financial Officer
Kelly A. Vanderboom48Executive 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. Quadracci joined Quad in 1991 and, prior to becoming President and Chief Executive Officer, served in various capacities, including Sales Manager, Regional Sales Strategy Director, Vice President of Print Sales, Senior Vice President of Sales and Administration, and President and Chief Operating Officer. He serves on the board of directors for Plexus Corp., Pixability, Inc., Road America, Inc., Children’s Hospital of Wisconsin, the National Association of Manufacturers, and the Metropolitan Milwaukee Association of Commerce. He also serves on the board of trustees for the Milwaukee Art Museum and on the advisory council of the Smithsonian National Postal Museum. 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’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. (formerly Schawk, Inc.) from July 2012 to July 2015; Chief Growth and Strategy Officer of SGK from September 2009 to July 2012; and Global Chief Growth Officer of Anthem Worldwide (a division of SGK) from November 2003 to 2010. Prior thereto, Mr. Ashworth was Co-founder and President of BlueMint Associates from June 2002 through November 2003, after serving in various marketing roles at Fitch San Francisco, Addis Interaction, Levi Strauss & Co., Clorox, Colgate-Palmolive and National Semiconductor. Mr. 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.

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Ms. Bauer has served as Vice President since January 2022 and Chief Accounting Officer since March 2017. She previously served as Director - Corporate Controller of Quad from May 2016 until March 2017 and then as Executive Director and Chief Accounting Officer until January 2022. She joined Quad in September 2011, serving as Director of Corporate Accounting until May 2016. Prior to joining Quad, 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.

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. 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. 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. 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.

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. 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. Honan has served as Executive Vice President and Chief Operating Officer since January 2022. 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. Currently, he serves on the advisory board of FM Global. Prior to joining Quad, 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 executive-level roles in investor relations and corporate development at Newell Rubbermaid, a global marketer of consumer and commercial products. Prior thereto, Mr. Honan worked at the accounting firm Arthur Andersen LLP for 11 years.

Mr. Jaeger has served as Vice President and Chief Information Officer since November 2015. He previously served as Executive Vice President, President of Direct Marketing and Chief Information Officer from November 2014 to November 2015; as Executive Vice President, President of Direct Marketing and Media Solutions and Chief Information Officer from March 2014 to November 2014; as Corporate Vice President of Information and Technology since 2013; as Vice President of Information Systems and Infrastructure from 2007 to 2012; and as President of Quad/Direct from August 2007 until 2013. 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.

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Mr. 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. 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. Previously, he was Vice President of Human Resources - Sales, Marketing & Quad Agency Solutions from January 2022 to February 2023; Executive Director – Human Resources from 2014 to 2022; and Human Resources Director from 1999 to 2014. Prior to joining Quad, Mr. 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. 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. 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. 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. He previously served as Vice President of the Program Management Office (PMO) from October 2019 until February 2023 (in which he led Quad’s EBITDA enhancement initiatives). 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. 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.

Item 1A.    Risk Factors

You should carefully consider each of the risks described below, together with all of the other information contained in this Annual Report on Form 10-K, before making an investment decision with respect to Quad’s securities. If any of the following risks develop into actual events, the Company’s business, financial condition or results of operations could be materially and adversely affected, and you may lose all or part of your investment.

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.

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 impacts of overcapacity, as well as intense competition, have led to the Company experiencing significant downward pricing pressures for printing services in recent years and such pricing may continue to decline from current levels. Any future increases in the supply of printing services or decreases in demand could cause prices to continue to decline, and
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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 media landscape is experiencing rapid change due to the impact of digital media and content on printed products. Improvements in the accessibility and quality of digital media through the online distribution and hosting of media content, mobile technologies, e-reader technologies, digital retailing and the digital distribution of documents and data has resulted and may continue to result in increased consumer substitution. Continued consumer acceptance of such digital media, as an alternative to print materials, is uncertain and difficult to predict and may decrease the demand for the Company’s printed products, result in reduced pricing for its printing services and additional excess capacity in the printing industry, and adversely affect the results of the Company’s operations.

The Company may be adversely affected by increases in its operating costs, including the cost and availability of paper, ink components and other raw materials, parts for equipment, labor-related costs, fuel and other energy costs and freight rates.

The primary raw materials that the Company uses in its print business are paper, ink and energy. The price of such raw materials has fluctuated over time and has caused fluctuations in the Company’s net sales and cost of sales. This volatility may continue and the Company may experience increases in the costs of its raw materials in the future as prices in the overall paper, ink and energy markets are expected to remain beyond its control. The price and availability of paper may also be adversely affected by paper mills’ permanent or temporary closures, and mills’ access to raw materials, conversion to produce other types of paper, and ability to transport paper produced. 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. 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. If the Company passes along increases in the cost of paper and the price of the Company’s products and services increases as a result, client demand could be adversely affected, and thereby, negatively impact the Company’s financial performance. 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. In periods of high demand, certain paper grades have been in short supply, including grades used in the Company’s business. In addition, during periods of tight supply, many paper producers allocate shipments of paper based upon historical purchase levels of clients. Additionally, the declining number of paper suppliers has resulted in a contraction in the overall paper manufacturing industry. This contraction of suppliers may cause overall supply issues, may cause certain paper grades to be in short supply or unavailable, and may cause paper prices to substantially increase.

Although historically the Company generally has not experienced significant difficulty in obtaining adequate quantities of paper, continued decline in suppliers, changes in United States import or trade regulations, or other developments in the overall paper markets could result in a decrease in the supply of paper and could adversely affect the Company’s revenues or profits. In addition, the Company may not be able to resell waste paper and other by-products or the prices received for their sale may decline substantially.

The Company is dependent upon the vendors within the Company’s supply chain to maintain a steady supply of inventory, parts for equipment and materials. Many of the Company’s products are dependent upon a limited number of vendors, and significant disruptions could adversely affect operations (including labor pressures, distribution challenges, recessionary concerns and other macroeconomic conditions). 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.

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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. Increases in wages, salaries and the cost of medical, dental, pension and other post-retirement benefits may impact the Company’s financial performance. 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. The Company may be unable to achieve labor productivity targets, to retain employees or labor may not be adequately available in locations in which the Company operates, which could negatively impact the Company’s financial performance.

Freight rates and fuel costs also represent a significant component of the Company’s cost structure. In general, the Company has been able to pass along increases in the cost of freight and fuel to many of its clients. If the Company is not able to pass along a substantial portion of increases in freight rates or in the price of fuel, future increases in these items would adversely impact the Company’s margin and profits. If the Company passes along increases in the cost of freight and fuel and the price of the Company’s products and services increases as a result, client demand could be adversely affected, and thereby, negatively impact the Company’s financial performance.

Macroeconomic conditions could have a material adverse impact on the Company’s business, financial conditions, cash flows and results of operations.

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. 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. 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.

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. Declines in economic conditions in the United States or in other countries in which the Company operates, including as a result of macroeconomic conditions, recessionary concerns and/or geopolitical events, may adversely impact the Company’s financial results, and these impacts may be material. Economic weakness and constrained advertising spending have resulted, and may in the future result, in decreased revenue, operating margin, earnings and growth rates and difficulty in managing inventory levels and collecting accounts receivable. The Company has experienced, and expects to experience in the future, excess capacity and lower demand due to economic factors affecting consumers’ and businesses’ spending behavior, including as a result of macroeconomic conditions, recessionary concerns and/or geopolitical events.

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. 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.


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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.

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. These different characteristics may include, among other things, demand volume requirements, demand seasonality, product generation development rates, client concentrations and performance and compatibility requirements. The Company’s failure to make the necessary adaptations to its business model to address these different characteristics, complexities and new market dynamics could adversely affect the Company’s operating results.

The Company operates in a highly competitive environment.

The advertising and marketing services industries are highly competitive and are expected to remain so. Any failure on the part of the Company to compete effectively in the markets it serves could have a material adverse effect on its results of operations, financial condition or cash flows and could require changes to the way it conducts its business or require it to reassess strategic alternatives involving its operations.

The Company operates primarily in the commercial print portion of the printing industry, which is highly fragmented and competitive in both the United States and internationally. The Company competes for business not only with large and mid-sized printers, but also with smaller regional printers and the growing forms of digital alternatives to print. In certain circumstances, due primarily to factors such as freight rates and client preference for local services, printers with better access to certain regions of a given country may be preferred by clients in such regions.

Some of the industries that the Company services have been subject to consolidation efforts, leading to a smaller number of potential clients. Furthermore, if the smaller clients of the Company are consolidated with larger companies using other printing companies, the Company could lose its clients to competing printing companies.

The Company may not be able to reduce costs and improve its operating efficiency rapidly enough to meet market conditions.

Because the markets in which the Company competes are highly competitive, the Company will need to continue to improve its operating efficiency in order to maintain or improve its profitability. There can be no assurance that the Company’s continuing cost reduction efforts will continue to be beneficial to the extent anticipated, or that the estimated productivity, cost savings or cash flow improvements will be realized as anticipated or at all. If the Company’s efforts are not successful, it could have an adverse effect on the Company’s operations and competitive position. 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.

Postal costs are a significant component of the cost structures of many of the Company’s clients and potential clients. 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.

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

The USPS offers “work-share” discounts that provide incentives to co-mail and place product as far down the mail-stream as possible. Discounts are earned as a result of less handling of the mail, and therefore, lower costs for the USPS. As a result, the Company has made substantial investments in co-mailing technology and equipment to ensure clients benefit from these discounts. 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. If the incentives to co-mail are decreased by USPS regulations, the overall cost to mail printed products will increase and may result in print volumes declining.

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

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.

The Company continues to be substantially 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 the Company’s existing clients. 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’s ability to continue efficient operations, reduce production costs, and consolidate operations will depend, in large part, on the Company’s success in recruiting, training, integrating and retaining sufficient numbers of production personnel to support the Company’s production, cost savings and consolidation targets. New hires require extensive training and it may take significant time before they achieve full productivity. In addition, increases in the wages paid by competing employers, including as a result of current macroeconomic conditions, has resulted, and may continue to result, in increases in the wage rates that the Company must pay. As a result, the Company has and may continue to incur additional costs to attract, train and retain employees, including expenditures related to salaries and benefits, and the Company may lose new, as well as existing, employees to competitors or other companies before the Company realizes the benefit of its investment in recruiting and training them. 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.

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.
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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. 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.

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.

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. Moreover, unauthorized parties may attempt to access the Company’s systems or facilities, or the systems of the Company’s clients or vendors, through fraud or deception. In the event and to the extent that a data breach, ransomware attack or other cyber incident occurs, such breach could have an adverse effect on the Company’s business and results of operations. 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.

The fragility of and decline in overall distribution channels may adversely impact clients’ access to cost effective distribution of their advertising materials, and therefore may adversely impact the Company’s business.

The distribution channels of print products and services, including the newspaper industry, face significant competition from other sources of news, information and entertainment content delivery. If overall distribution channels, including newspaper distribution channels, continue to decline, the Company’s clients may be adversely impacted by the lack of access to cost effective distribution of their advertising materials. In turn, this decline in cost effective distribution channels may force clients to use other avenues of distribution that may be at significantly higher cost, which may decrease demand for the Company’s products and services, and thus adversely affect the Company’s financial condition, results of operations and cash flows.

Negative publicity could have an adverse impact on the Company’s business and brand reputation.

Unfavorable publicity, whether accurate or not, related to the Company or the Company’s executive management team, employees, board of directors, operations, business or prospects, or to the Quadracci family shareholders of the Company, could negatively affect the Company’s reputation, stock price, ability to attract new clients from growth vertical industries, ability to attract and retain high-quality talent, or the performance of the Company’s business.

In addition, there has been a substantial increase in the use of social media platforms, including blogs, social media websites, and other forms of internet-based and mobile communications, which allow individuals access to a broad audience of consumers and other interested persons. Many social media platforms immediately publish the content their subscribers’ and participants’ post, often without filters or checks on accuracy of the content posted. Information or commentary posted on such platforms at any time may be adverse to the Company’s interests or may be inaccurate, each of which may harm the Company’s reputation, business or prospects. The harm may be immediate without affording the Company an opportunity for redress or correction.


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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.

The Company has historically derived a significant portion of its revenue from long-term contracts with significant clients. If the Company loses significant clients (including as a result of reduced demand for a client’s products or services), is unable to renew such contracts on similar terms and conditions, or at all, or is not awarded new long-term contracts with important clients in the future, its results of operations, financial condition and cash flows may be adversely affected.

The Company is exposed to risks of loss in the event of nonperformance by its clients. Some of the Company’s clients are highly leveraged or otherwise subject to their own operating and regulatory risks. Even if the Company’s credit review and analysis mechanisms work properly, the Company may experience financial losses and loss of future business if its clients become bankrupt, insolvent or otherwise are unable to pay the Company for its work performed. Any increase in the nonpayment or nonperformance by clients could adversely affect the Company’s results of operations and financial condition.

Certain industries in which the Company’s clients operate are experiencing consolidation. When client consolidation occurs, it is possible that the volume of work performed by the Company for a client after the consolidation will be less than it was before the consolidation or that the client’s work will be completely moved to competitors. In addition, new and enhanced technologies, including search, web and infrastructure computing services, digital content, and electronic devices, may affect clients. The internet facilitates competitive entry and comparison shopping, and the reliance on digital retailing may reduce clients’ volume. Any such reduction or loss of work could adversely affect the Company’s results of operations and financial condition.

There are additional risks associated with the Company’s operations outside of the United States, including trade restrictions, currency fluctuations, the global economy, and geopolitical events like war and terrorism.

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.

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.


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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.

Since the first quarter of 2020, there has been a worldwide impact from the COVID-19 pandemic. 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. 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.

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. 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. The COVID-19 pandemic has had, and could continue to have, a negative impact on the Company’s business, financial condition, cash flows, results of operations, supply chain and raw materials availability, although the full extent is still uncertain and cannot be predicted.

In addition to the COVID-19 pandemic, future natural disasters, epidemics, other public health crises, conflicts, wars, terrorist attacks, fires or other catastrophic events affecting the Company’s plants, distribution centers or other facilities, could also 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.

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.

The Company may pursue acquisitions of, investment opportunities in, or other significant transactions with, companies that are complementary to the Company’s business, as well as divestitures of businesses, product lines or other assets. In order to pursue this strategy successfully, the Company must identify attractive acquisition or investment opportunities, successfully complete the transaction, some of which may be large and complex, and manage post-closing issues such as integration of the acquired company or employees. The Company may not be able to identify or complete appealing acquisition or investment opportunities given the intense competition for these transactions. Even if the Company identifies and completes suitable corporate transactions, the Company may not be able to successfully address inherent risks in a timely manner, or at all. These inherent risks include, among other things: failure to achieve all or any projected synergies, performance targets or other anticipated benefits of the acquisition, investment or divestiture; failure to successfully integrate the purchased operations, technologies, products or services and maintain uniform standard controls, policies and procedures; substantial unanticipated integration costs; loss of key employees, including those of an acquired business; diversion of management’s attention from other business concerns; failure to retain the clients of the acquired business; additional debt and/or assumption of known or unknown liabilities; potential dilutive issuances of equity securities; and a write-off of goodwill, client lists, other intangibles and amortization of expenses. If the Company fails to successfully integrate an acquisition, the Company may not realize all or any of the anticipated benefits of the acquisition, and the Company’s future results of operations could be adversely affected.

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. There can be no assurance whether the strategic benefits and expected financial impact of any divestitures will be achieved.

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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 printing and advertising and marketing services industries are experiencing rapid change as new digital technologies are developed that offer clients an array of choices for their marketing and publication needs. In order to remain competitive, the Company will need to adapt to future changes, especially with regard to technology and talent, to enhance the Company’s existing offerings and introduce new offerings to address the changing demands of clients. In order to remain technologically and economically competitive, the Company may need to make significant capital expenditures and other investments, including in its talent, as it develops and continues to maintain its platforms and processes, and to develop and integrate new technologies. In order to accomplish this effectively, the Company will need to deploy its resources efficiently, maintain effective cost controls and bear potentially significant market and raw material risks. If the Company’s revenues decline, it may impact the Company’s ability to expend the capital necessary to develop and implement new technology and be economically competitive. Debt or equity financing, or cash generated from operations, may not be available or sufficient for these requirements or for other corporate purposes or, if debt or equity financing is available, it may not be on terms favorable to the Company. In addition, even if capital is available to the Company, there is risk that the Company’s vendors will have discontinued the production of parts needed for repairs, replacements or improvements to the Company’s existing platforms, leading the Company to expend more capital than expected to perform such repairs, replacements or improvements. The Company’s business and operating results may be adversely affected if the Company is unable to keep pace with relevant technological and industry changes or if the technologies or business strategies that the Company adopts or services it promotes do not receive widespread market acceptance.

If the Company is unable to make the capital expenditures and other investments necessary to adapt to industry and technological developments, the Company may experience a decline in demand for its services, be unable to implement its business strategy and its business operating results may be adversely affected. Additionally, if the Company is unable to meet future challenges from competing technologies on a timely basis or at an acceptable cost, the Company could lose clients to competitors. In general, the development of new communication channels inside and outside the printing and media solutions industry requires the Company to anticipate and respond to the varied and continually changing demands of clients. The Company may not be able to accurately predict technological trends or the success of new services in the market.

The Company’s debt facilities include various covenants imposing restrictions that may affect the Company’s ability to operate its business.

On September 1, 1995, and as last amended on November 24, 2014, the Company entered into a senior secured note agreement (the “Master Note and Security Agreement”) pursuant to which the Company has issued over time senior notes in an aggregate principal amount of $1.1 billion in various tranches. As of December 31, 2022, the borrowings outstanding under the Master Note and Security Agreement were $4.4 million. 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. As a result of the November 2, 2021 amendment to the Senior Secured Credit Facility, the Term Loan A and revolving credit facility were both broken into two separate maturity dates. 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. On May 2, 2022, the Company used liquidity available under its revolving credit facility and available cash on hand to fund the repayment on maturity of all $209.1 million aggregate principal amount, outstanding at the time, of its unsecured 7.0% senior notes due May 1, 2022 (“Senior Unsecured Notes”).

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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. As of December 31, 2022, 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’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.

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. 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.

The Company currently holds one active interest rate swap contract. Another previously held interest rate swap, effective on February 28, 2017, terminated on February 28, 2022. The purpose of entering into 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 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 purpose of entering into the contracts is to reduce the variability of cash flows from interest payments related to a portion of the Company’s variable-rate debt. 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.

Because a portion of the Company’s operations are outside of the United States, significant revenues and expenses are denominated in local currencies. Although operating in local currencies may limit the impact of currency rate fluctuations on the results of operations of the Company’s non-United States subsidiaries and business units, fluctuations in such rates may affect the translation of these results into the Company’s consolidated financial statements. To the extent revenues and expenses are not in the applicable local currency, the Company may enter into foreign exchange forward contracts to hedge the currency risk. There can be no assurance, however, that the Company’s efforts at hedging will be successful. There is always a possibility that attempts to hedge currency risks will lead to greater losses than predicted.

The Company’s revenue, operating income and cash flows are subject to cyclical and seasonal variations.

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 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. 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.

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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 has a material amount of property, plant, equipment, goodwill and other intangible assets on its balance sheet, due in part to acquisitions. 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, 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. These valuations include management’s estimates of sales, profitability, cash flow generation, capital structure, cost of debt, interest rates, capital expenditures and other assumptions. A decline in expected profitability, significant negative industry or economic trends, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of the assets or in entity structure, divestitures and discontinued operations may adversely impact the assumptions used in the valuations. As a result, the recoverability of these assets could be called into question, and the Company could be required to write down or write off these assets. Such an occurrence could have a material adverse effect on the Company’s results of operations and financial position.

The Company has liabilities with respect to defined benefit pension plans that could cause the Company to incur additional costs.

As a result of the 2010 acquisition of World Color Press, the Company assumed frozen single employer defined benefit pension plans for certain of its employees 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, 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. Under current United States pension law, pension funding deficits are generally required to be funded over a seven-year period. These pension deficits may increase or decrease depending on changes in the levels of interest rates, pension plan investment performance, pension legislation and other factors. Declines in global debt and equity markets would increase the Company’s potential pension funding obligations. Any significant increase in the Company’s required contributions could have a material adverse impact on its business, financial condition, results of operations and cash flows.

In addition to the single employer defined benefit plans described above, the Company has previously participated in multiemployer pension plans (“MEPPs”) in the United States, including the Graphic Communications International Union - Employer Retirement Fund (“GCIU”) and the Graphic Communications Conference of the International Brotherhood of Teamsters National Pension Fund (“GCC”). Prior to the acquisition of World Color Press by the Company, World Color Press received notice that certain plans in which it participated were in critical status, as defined in Section 432 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). As a result, the Company could have been subject to increased contribution rates associated with these plans or other MEPPs suffering from declines in their funding levels. Due to the significantly underfunded status of the United States multiemployer plans and the potential increased contribution rates, the Company withdrew from participation in these multiemployer plans and has replaced these pension benefits with a Company-sponsored “pay as you go” defined contribution plan, which is historically the form of retirement benefit provided to the Company’s employees. 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. The Company is scheduled to make payments to the GCIU and GCC until April 2032 and February 2024, respectively.

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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 expects to utilize the deferred tax assets to reduce consolidated income tax liabilities in future taxable years. However, the Company may not be able to fully utilize the deferred tax assets if its future taxable income and related income tax liability is insufficient to permit their use. In addition, in the future, the Company may be required to record a valuation allowance against the deferred tax assets if the Company believes it is unable to utilize them, which would have an adverse effect on the Company’s results of operations and financial position.

Legal and Regulatory Risks

Unfavorable outcomes in legal proceedings could result in substantial costs and may harm the Company’s financial condition.

The Company’s financial condition may be affected by the outcome of pending and future litigation, claims, investigations, legal and administrative cases and proceedings, whether civil or criminal, or lawsuits by governmental agencies or private parties. Defending against any such claims, or any legal proceedings to which the Company is subject, can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on the Company’s liquidity and financial condition and/or cause significant reputational harm to the Company’s business.

The Company may incur costs or suffer reputational damage due to improper conduct of its employees, contractors or agents under anti-corruption or other laws governing business practices, including the United States Foreign Corrupt Practices Act.

The Company could be adversely affected by engaging in business practices that are in violation of United States or foreign anti-corruption laws, including the United States Foreign Corrupt Practices Act. The Company operates in parts of the world with developing economies that have experienced governmental corruption to some degree, and in certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices. In certain countries, the Company does substantial business with government entities or instrumentalities, which creates increased risk of a violation of the Foreign Corrupt Practices Act and international laws. 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.

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.

The conduct of the Company’s businesses is subject to various laws and regulations administered by federal, state and local government agencies in the United States, as well as to foreign laws and regulations administered by government entities and agencies in markets in which the Company operates. These laws and regulations and interpretations thereof may change, sometimes dramatically, as a result of political, economic or social events, such as the election of the new administration. Such regulatory environment changes may include changes in taxation requirements, accounting and disclosure standards, immigration laws and policy, environmental laws, and requirements of United States and foreign occupational health and safety laws. 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.

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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. Permits are required for the operation of certain parts of the Company’s business, and these permits are subject to renewal, modification and, in some circumstances, revocation. Due to regulatory complexities, uncertainties inherent in litigation and the risk of unidentified contaminants on current and former properties, the potential exists for remediation, liability and indemnification costs to differ materially from the costs the Company has estimated. The Company cannot assure you that the Company’s costs in relation to these matters will not exceed its established liabilities or otherwise have an adverse effect on its results of operations.

Various laws and regulations addressing climate change are being considered at the federal and state levels. 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.

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. If the Company’s efforts to comply with such laws or protect the security of information are unsuccessful, any failure may subject the Company to material liability, require it to incur material costs or otherwise adversely affect its results of operations as a result of compliance with such laws, costly enforcement actions and private litigation.

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 Company is subject to many legislative and regulatory laws and regulations around the world concerning data protection and privacy. In addition, the interpretation and application of consumer and data protection laws in the United States and elsewhere are often fluid and uncertain. To the extent that the Company or its clients become subject to additional or more stringent requirements or that the Company is not successful in its efforts to comply with existing requirements or protect the security of information, demand for the Company’s services may decrease and the Company’s reputation may suffer, which could adversely affect the Company’s results of operations. In addition, such laws may be interpreted and applied in a manner inconsistent with the Company’s internal policies. If so, the Company could suffer costly enforcement actions (including an order requiring changes to the Company’s data practices) and private litigation, which could have an adverse effect on the Company’s business and results of operations. 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.

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.

QuadMed provides employer-sponsored healthcare solutions in the United States to employers of all sizes, including the Company and other private and public-sector companies. These solutions include, but are not limited to, on-site and near-site healthcare clinics, occupational health services, telemedicine, and health and wellness programs. The healthcare industry is heavily regulated, constantly evolving and subject to significant change and fluctuation. The 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.

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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.

The Company’s outstanding stock is divided into two classes of common stock: class A common stock (“class A stock”) and class B common stock (“class B stock”). The class B stock has ten votes per share on all matters and the class A stock is entitled to one vote per share. As of January 31, 2023, the class B stock constitutes approximately 78% of the Company’s total voting power. As a result, holders of class B stock are able to exercise a controlling influence over the Company’s business, have the power to elect its directors and indirectly control decisions such as whether to issue additional shares, declare and pay dividends or enter into corporate transactions. All of the class B stock is owned by certain members of the Quadracci family or trusts for their benefit, whose interests may differ from the interests of the holders of class A stock.

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. Accordingly, the trustees of the Quad Voting Trust are able to exercise a controlling influence over the Company’s business, have the power to elect its directors and indirectly control decisions such as whether to issue additional shares, declare and pay dividends or enter into corporate transactions.

Furthermore, in response to recent public focus on dual class capital structures, certain stock index providers are implementing limitations on the inclusion of dual class share structures in their indices and certain institutional shareholder advisory firms are updating their voting guidelines to generally withhold support for directors of companies with dual class voting rights. If these restrictions increase or these guidelines are followed, they may impact who buys and holds the Company’s stock.

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.

Since the Quad Voting Trust owns more than 50% of the total voting power of the Company’s stock, the Company is considered a controlled company under the corporate governance listing standards of the NYSE. As a controlled company, an exception under the NYSE listing standards exempts the Company from the obligation to comply with certain of the NYSE’s corporate governance requirements, including the requirements that (a) the Company have a corporate governance and nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and (b) the Company have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

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.


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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. However, there is currently 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 become. If a more active trading market does not develop, shareholders may have difficulty selling any class A stock without negatively affecting the stock price, and thereby, losing a significant portion of their investment.

Item 1B.    Unresolved Staff Comments

The Company has no unresolved staff comments to report pursuant to this item.

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. 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. 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. The following table lists the Company’s operating locations with manufacturing facilities totaling over 500,000 square feet as of December 31, 2022:

LocationsSquare FeetProperty TypeSegment
Lomira, Wisconsin, United States2,174,000 OwnedUnited States Print and Related Services
Sussex, Wisconsin, United States1,971,000 OwnedUnited States Print and Related Services
Martinsburg, West Virginia, United States1,740,000 OwnedUnited States Print and Related Services
Hartford, Wisconsin, United States1,682,000 OwnedUnited States Print and Related Services
Saratoga Springs, New York, United States1,034,000 OwnedUnited States Print and Related Services
West Allis, Wisconsin, United States913,000 LeasedUnited States Print and Related Services
The Rock, Georgia, United States797,000 OwnedUnited States Print and Related Services
Wyszkow, Poland709,000 OwnedInternational
Effingham, Illinois, United States564,000 OwnedUnited States Print and Related Services
Merced, California, United States539,000 OwnedUnited States Print and Related Services

Item 3.    Legal Proceedings

The Company is subject to various legal actions, administrative proceedings and claims arising out of the ordinary course of business. The Company believes that such unresolved legal actions, proceedings and claims will not materially adversely affect its results of operations, financial condition or cash flows. For 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.

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PART II

Item 5.    Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Capital Stock and Dividends

Quad’s authorized capital stock consists of 105.0 million shares of class A stock, 80.0 million shares of class B stock, 20.0 million shares of class C common stock and 0.5 million shares of preferred stock. 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. 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. The Company’s class B stock is held by certain members of the Quadracci family or trusts for their benefit (and can only be voluntarily transferred to the Company or to a member of the Quadracci “family group” as defined in the Company’s Articles of Incorporation; and any transfer in violation of the Company’s Articles of Incorporation results in the automatic conversion of such class B stock into class A stock). The class B stock is entitled to ten votes per share. Each share of class B stock may, at the option of the holder, be converted at any time into one share of class A stock. There is no public trading market for the class B stock.

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. 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 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. “Debt,” for more details on the amendment), the Company is prohibited from making greater than $60.0 million of dividend payments, capital stock repurchases and certain other payments, over the course of the agreement. If the Company’s Total Leverage Ratio is above 2.50 to 1.00, but below 2.75 to 1.00, the Company is prohibited from making greater than $100.0 million of dividend payments, capital stock repurchases, and certain other payments, over the course of the agreement. If the Total Leverage Ratio is less than 2.50 to 1.00, there are no such restrictions.


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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.

Information 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.
(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. Under the authorization, share repurchases may be made at the Company’s discretion, from time to time, in the open market and/or in privately negotiated transactions as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchase will depend on economic and market conditions, share price, trading volume, applicable legal requirements and other factors. The program may be suspended or discontinued at any time. There were 3,093,662 shares of the Company’s class A stock repurchased during the year ended December 31, 2022. 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.

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Item 7.    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. This discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’s actual results could differ materially from those discussed in these forward-looking statements. 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.

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

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

Results of Operations. This section contains an analysis of the Company’s results of operations by comparing the results for the year ended December 31, 2022, to the year ended December 31, 2021. The comparability of the Company’s results of operations between periods was impacted by the divestiture of the Company’s third-party logistics business on June 30, 2021. The results of operations of the divestiture are included in the Company’s 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 also provides a discussion of EBITDA and EBITDA margin, financial measures that the Company uses to assess the performance of its business that are not prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

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

Critical Accounting Policies and Estimates. This section contains a discussion of the accounting policies that the Company’s management believes are important to the Company’s financial condition and results of operations, as well as allowances and reserves that require significant judgment and estimates on the part of the Company’s management. 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.

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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. 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. With a marketing platform intentionally built for integrated marketing execution, Quad helps brands reduce the complexity of working with multiple agency partners and vendors; increase marketing process efficiency; and maximize marketing effectiveness. The Company’s holistic, multichannel, through-the-line marketing solutions include strategy and consulting, data and analytics, technology solutions, media services, creative and content solutions, and managed services. With unmatched scale for client-based, on-site services and highly qualified talent with expansive subject matter expertise, the Company has the resources and knowledge to help a wide variety of clients across multiple verticals, including those in industries such as retail, publishing, consumer packaged goods, financial services, healthcare, insurance and direct-to-consumer.

For a full description of the Company’s business overview, refer to Part I, Item 1, “Business,” of this Annual Report on Form 10-K.

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

The United States Print and Related Services segment is predominantly comprised of the Company’s United States printing operations and is managed as one integrated platform. This includes print execution and logistics for retail inserts, catalogs, long-run publications, 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 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.

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 accounted for approximately 13% and 11% of the Company’s consolidated net sales during the years ended December 31, 2022 and 2021, respectively.

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.

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Key Performance Metrics Overview

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

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

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

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

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

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

The Company remains disciplined with its debt leverage. The Company’s consolidated debt and finance lease obligations decreased 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.

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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. As new marketing channels emerge, these providers must expand their services beyond traditional channels, such as for television, newspapers, print publications and radio, to digital channels, such as mobile, internet search, internet display and video, to create effective multichannel campaigns for their clients. This trend greatly influences Quad’s ongoing efforts to help brands reduce the complexities of working with multiple agency partners and vendors, increase marketing process efficiency and maximize marketing effectiveness.

The Company leverages its data-driven print expertise as part of an integrated marketing platform that helps its clients not only plan and produce marketing programs, but also deploy, manage and measure them across all media channels. Competition in the commercial printing industry remains highly fragmented and intense, and the Company believes that there are indicators of heightened competitive pressures. The commercial printing industry has 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 expenses and marketers’ increasing use of online marketing and communication channels (exacerbated by the COVID-19 pandemic, as well as the current macroeconomic conditions) — has led to excess manufacturing capacity.

For a full description of the Company’s industry and competition overview, refer to Part I, Item 1, “Business,” of this Annual Report on Form 10-K.

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

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

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

Integrated distribution with the USPS is an important component of the Company’s business. Any material change in the current service levels provided by the postal service could impact the demand that clients have for print services. The USPS continues to experience financial problems. The passing of the Postal Service Reform Act of 2022, signed in April 2022, gave the USPS considerable financial relief as well as significant relief over the next ten years. While the legislative postal reform helps considerably, without decreased operational cost structures, increased efficiencies or increased volumes and revenues, these losses will potentially continue into the future. As a result of these financial difficulties, the USPS has continued to adjust its postal rates and service levels. Additional price increases may result in clients reducing mail volumes and exploring the use of alternative methods for delivering a larger portion of their products, such as continued diversion to the internet and other alternative media channels, in order to ensure that they stay within their expected postage budgets.
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Federal statute requires the PRC to conduct reviews of the overall rate-making structure for the USPS to ensure funding stability. As a result of those reviews, the PRC authorized a five year rate-making structure that provides the USPS with additional pricing flexibility over the Consumer Price Index cap, which may result in a substantially altered rate structure for mailers. The revised rate authority that is effective as a result of the rules issued by the PRC includes a higher overall rate cap on the USPS’ ability to increase rates from year to year. The USPS is expected to use these additional rate authorities to implement twice a year increases in the future. This has led to price spikes for mailers and may also reduce the incentive for the USPS to continue to take out costs and instead continue to rely on postage to cover the costs of an outdated postal service that does not reflect the industry’s ability or willingness to pay. The uncertainty as to how much of the authority the USPS will use on any specific rate increase also creates potential volume declines as rate predictability with respect to cost is no longer known for mailers. The result may be reduced demand for printed products as clients may move more aggressively into other delivery methods, such as the many digital and mobile options now available to consumers.

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

The Company’s results of operations have been adversely impacted as a result of the COVID-19 pandemic and the emergence of new variants. Throughout the pandemic, the Company implemented cost reduction and cash conservation initiatives in response to the pandemic’s impact on its business. With ongoing advancements against the COVID-19 pandemic, the effects on the Company have lessened from previous periods, particularly from the heavily impacted year of 2020. 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 and recessionary concerns from evolving macroeconomic conditions. The Company continues to evaluate the current economic environment and may implement additional cost reduction measures as necessary.

Additionally, rising interest rates, the increasing cost and availability of raw materials, such as paper, ink, supplies, distribution and labor, have been and are expected to continue to adversely impact the Company’s results of operation. The Company is dependent on its production personnel to print the Company’s products in a cost-effective and efficient manner that allows the Company to obtain new clients and to drive sales from existing clients. The nationwide shortage of available production personnel may put a strain on the Company’s ability to accept new work from client requests, including during the Company’s seasonally higher third and fourth quarters.

The Company has also experienced and anticipates it will continue to experience 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. As the supply chain and distribution challenges continue to evolve, the Company is unable to predict the duration of the shortages and challenges and the extent of the impact on the Company’s business, financial condition, cash flows and results of operations. As a result of the rising inflationary cost pressures within its raw materials, distribution and labor, the Company has and will continue to pass along price increases to its clients. The Company expects inflationary cost pressures and certain supply chain shortages to potentially continue through fiscal year 2023. 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


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 IncomeOperating Margin Net EarningsDiluted 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 Income53.5 1.7 %8.3 0.18 
Interest expense (4)
N/AN/A8.4 0.15 
Net pension income (5)
N/AN/A(1.4)(0.03)
Loss on debt extinguishment (6)
N/AN/A0.5 0.01 
Income taxes (7)
N/AN/A(6.2)(0.12)
Investments in unconsolidated entity, net of tax (8)
N/AN/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.
(2)Restructuring, impairment and transaction-related charges increased $25.9 million ($19.4 million, net of tax), to $44.8 million during the year ended December 31, 2022, and included the following:

a.A $2.6 million decrease in employee termination charges from $9.9 million during the year ended December 31, 2021, to $7.3 million during the year ended December 31, 2022;

b.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 $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 $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.

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

(3)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. These cost decreases were partially offset by cost increases from supply chain disruptions, cost inflation in materials and freight and labor shortages and a $13.4 million gain from a property insurance claim in 2021 that did not repeat in 2022.
43


(4)Interest expense decreased $11.2 million ($8.4 million, net of tax) during the year ended December 31, 2022, to $48.4 million. 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.

(5)Net pension income decreased $1.9 million ($1.4 million, net of tax) during the year ended December 31, 2022, to $12.6 million. 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.

(6)The $0.7 million ($0.5 million, net of tax) decrease in loss on debt extinguishment relates to a $0.5 million loss on debt extinguishment recorded during the fourth quarter of 2021, primarily related to the repurchase of the Company’s unsecured 7.0% senior notes which were due on May 1, 2022 and a $0.2 million loss on debt extinguishment from the fifth amendment to the Company’s April 28, 2014 Senior Secured Credit Facility, completed on November 2, 2021. There was no loss on debt extinguishment during the year ended December 31, 2022.

(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 $1.6 million decrease from equity award activity and executive compensation limitation.
Year Ended December 31,
20222021$ Change
(dollars in millions)
Earnings before income taxes and equity in earnings of unconsolidated entity$17.7 $47.0 $(29.3)
Normalized tax rate25.0 %25.0 %
Income tax expense at normalized tax rate4.4 11.7 (7.3)
Less: Income tax expense from the consolidated statements of operations8.4 9.5 (1.1)
Impact of income taxes$4.0 $(2.2)$6.2 

(8)The decrease from investments in unconsolidated entity, net of tax, of $0.3 million during the year ended December 31, 2022, was due to the equity in earnings of $0.3 million for the year ended December 31, 2021 at the Company’s investment in Plural Industria Gráfica Ltda. (“Plural”), the Company’s Brazilian joint venture. In January 2022, the Company sold its investment in Plural.


44


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 %
Services688.7 21.4 %713.3 24.1 %(24.6)(3.4)%
Total net sales3,217.0 100.0 %2,960.4 100.0 %256.6 8.7 %
Cost of sales:
Products2,156.2 67.0 %1,861.0 62.9 %295.2 15.9 %
Services462.6 14.4 %528.9 17.9 %(66.3)(12.5)%
Total cost of sales2,618.8 81.4 %2,389.9 80.8 %228.9 9.6 %
Selling, general & administrative expenses358.6 11.1 %326.0 11.0 %32.6 10.0 %
Gains from sale and leaseback— — %(24.5)(0.8)%24.5 nm
Depreciation and amortization141.3 4.4 %157.3 5.3 %(16.0)(10.2)%
Restructuring, impairment and transaction-related charges44.8 1.4 %18.9 0.6 %25.9 137.0 %
Total operating expenses3,163.5 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.

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.

Cost of Sales

Cost of product sales increased $295.2 million, or 15.9%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following: (1) an increase in paper costs; (2) the impacts from rising costs of material, labor and other costs of production; and (3) higher print volumes. These increases were partially offset by savings from other cost reduction initiatives.

Cost of service sales decreased $66.3 million, or 12.5%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the impact from the divestiture of the Company’s third-party logistics business and savings from other cost reduction initiatives.

45


Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $32.6 million, or 10.0%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following: (1) a $14.0 million increase in employee-related costs; (2) a $13.4 million gain from a property insurance claim in 2021 that did not repeat in 2022; and (3) a $2.1 million increase in credit loss expense. 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.

Gains from sale and leaseback

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.

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


Restructuring, Impairment and Transaction-Related Charges

Restructuring, impairment and transaction-related charges increased $25.9 million, or 137.0%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following:
Year Ended December 31,
20222021$ Change
(dollars in millions)
Employee termination charges$7.3 $9.9 $(2.6)
Impairment charges (a)
2.2 34.9 (32.7)
Transaction-related charges2.0 0.6 1.4 
Integration costs0.7 — 0.7 
Other restructuring charges (income)
Vacant facility carrying costs and lease exit charges5.4 19.8 (14.4)
Equipment and infrastructure removal costs0.7 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. Impairment charges related to the Company’s decision to sell the investment in Plural of $32.1 million were recorded during the year ended December 31, 2021.
(b)Includes a $13.8 million gain on the sale of the Oklahoma City, Oklahoma facility, a $7.6 million gain on the sale of the Riverside, California facility, a $1.0 million gain on the sale of the Fernley, Nevada facility and a $2.4 million gain on the sale of other facilities during the year ended December 31, 2021.
(c)Includes a $23.1 million loss on the sale of its Argentina print business during the year ended December 31, 2022; and a $20.9 million gain on the sale of a business and a $2.7 million gain from the reclassification of foreign currency translation adjustments during the year ended December 31, 2021. 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.

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. 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. Quad’s calculation of EBITDA and EBITDA margin may be different from the calculations used by other companies, and therefore, comparability may be limited.

EBITDA and EBITDA margin for the year ended December 31, 2022, compared to the year ended December 31, 2021, were as follows:
Year Ended December 31,
2022% of Net Sales2021% of Net Sales
(dollars in millions)
EBITDA and EBITDA margin (non-GAAP)$207.4 6.4 %$264.2 8.9 %
47


EBITDA decreased $56.8 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following: (1) $25.9 million of increased restructuring, impairment and transaction-related charges; (2) $24.5 million in gains from sale and leaseback transactions in 2021 that did not repeat in 2022; (3) a $13.4 million gain from a property insurance claim in 2021 that did not repeat in 2022; and (4) cost increases from supply chain disruptions, cost inflation in materials and freight and labor shortages. These cost increases were partially offset by an increase in print product pricing and volume and savings from other cost reduction initiatives.

A reconciliation of EBITDA to net earnings for the years ended December 31, 2022 and 2021, was as follows:
Year Ended December 31,
20222021
(dollars in millions)
Net earnings (1)
$9.3 $37.8 
Interest expense48.4 59.6 
Income tax expense8.4 9.5 
Depreciation and amortization141.3 157.3 
EBITDA (non-GAAP)$207.4 $264.2 
______________________________
(1)Net earnings included the following:
a.Restructuring, impairment and transaction-related charges of $44.8 million and $18.9 million for the years ended December 31, 2022 and 2021, respectively;
b.Gains from sale and leaseback of $24.5 million for the year ended December 31, 2021;
c.Loss on debt extinguishment of $0.7 million for the year ended December 31, 2021; and
d.Equity in earnings of unconsolidated entity of $0.3 million for the year ended December 31, 2021.

United States Print and Related Services

The following table summarizes net sales, operating income, operating margin and certain items impacting comparability within the United States Print and Related Services segment:
Year Ended December 31,
20222021$ Change% Change
(dollars in millions)
Net sales:
Products$2,126.6 $1,935.8 $190.8 9.9 %
Services668.1 692.8 (24.7)(3.6)%
Operating income (including restructuring, impairment and transaction-related charges)108.3 163.1 (54.8)(33.6)%
Operating margin3.9 %6.2 %N/AN/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.

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.

Operating Income

Operating income for the United States Print and Related Services segment decreased $54.8 million, or 33.6%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following: (1) a $26.6 million increase in restructuring, impairment and transaction-related charges; (2) $24.5 million in gains from sale and leaseback transactions in 2021 that did not repeat in 2022; (3) a $13.4 million gain from a property insurance claim in 2021 that did not repeat in 2022; and (4) cost increases from supply chain disruptions, cost inflation in materials and freight and labor shortages. These cost increases were partially offset by the following: (1) an increase in print product pricing and volume; (2) a $14.0 million decrease in depreciation and amortization expense; and (3) savings from other cost reduction initiatives.

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.

Restructuring, Impairment and Transaction-Related Charges

Restructuring, impairment and transaction-related charges for the United States Print and Related Services segment increased $26.6 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following:
Year Ended December 31,
20222021$ 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 charges5.4 19.8 (14.4)
Equipment and infrastructure removal costs0.7 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.
(b)Includes a $13.8 million gain on the sale of the Oklahoma City, Oklahoma facility, a $7.6 million gain on the sale of the Riverside, California facility, a $1.0 million gain on the sale of the Fernley, Nevada facility and a $2.4 million gain on the sale of other facilities during the year ended December 31, 2021.
(c)Includes a $20.9 million gain on the sale of a business during the year ended December 31, 2021.

48


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,
20222021$ Change% Change
(dollars in millions)
Net sales:
Products$401.7 $311.3 $90.4 29.0 %
Services20.6 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/AN/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.

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.

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.

Restructuring, Impairment and Transaction-Related Charges

Restructuring, impairment and transaction-related charges for the International segment decreased $0.6 million, or 1.9%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following:
Year Ended December 31,
20222021$ Change
(dollars in millions)
Employee termination charges$3.2 $1.2 $2.0 
Impairment charges (a)
1.1 32.1 (31.0)
Transaction-related charges0.1 — 0.1 
Integration costs0.7 — 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.
(b)Includes a $23.1 million loss on the sale of its Argentina print business during the year ended December 31, 2022. Also includes $1.8 million and $0.6 million in charges from foreign currency losses as result of the economy in Argentina being classified as highly inflationary during the years ended December 31, 2022 and 2021, respectively, and a $2.7 million gain from the reclassification of foreign currency translation adjustments during the year ended December 31, 2021.

Equity in Earnings of Unconsolidated Entities

Investments in entities where Quad has the ability to exert significant influence, but not control, are accounted for using the equity method of accounting. At December 31, 2021, the Company held a 49% ownership interest in Plural, a commercial printer based in São Paulo, Brazil. The equity in earnings of unconsolidated entity in the International segment was $0.3 million for the year ended December 31, 2021. In January 2022, the Company sold its investment in Plural. As a result of the planned sale, the Company recorded a $32.1 million impairment charge during the year ended December 31, 2021.

Corporate

The following table summarizes unallocated operating expenses presented as Corporate:
Year Ended December 31,
20222021$ 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 charges2.0 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


Restructuring, Impairment and Transaction-Related Charges

Corporate restructuring, impairment and transaction-related charges decreased $0.1 million, or 4.8%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the following:
Year Ended December 31,
20222021$ Change
(dollars in millions)
Employee termination charges$— $0.5 $(0.5)
Transaction-related charges1.9 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. 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. 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.

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

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. 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.

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. 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. These increases were partially offset by a $1.3 million increase in cash provided by other investing activities.

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Net Cash Used in Financing Activities

Year Ended December 31, 2022, Compared to Year Ended December 31, 2021

Net cash used in financing activities was $248.7 million for the year ended December 31, 2022, compared to $140.9 million for the year ended December 31, 2021, resulting in a $107.8 million increase in cash used in financing activities. 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. These increases were partially offset by (1) an $8.0 million decrease in cash used in other financing activities; (2) a $5.9 million decrease in payments of debt issuance costs and financing fees; and (3) a $1.9 million decrease in cash used in changes in ownership of noncontrolling interests.

Free Cash Flow

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

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

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

Free Cash Flow for the years ended December 31, 2022 and 2021, was as follows:
Year Ended December 31,
20222021
(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. See the “Net Cash Provided by Operating Activities” section above for further explanations of the change in operating cash flows and the “Net Cash (Used in) Provided by Investing Activities” section above for further explanations of the changes in purchases of property, plant and equipment.

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Debt Leverage Ratio

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

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

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

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

The Debt Leverage Ratio as of December 31, 2022 and 2021, was as follows:
December 31, 2022December 31, 2021
(dollars in millions)
Total debt and finance lease obligations on the consolidated balance sheets$570.2 $803.7 
Less: Cash and cash equivalents25.2 179.9 
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 x2.39 x
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The calculation of Adjusted EBITDA for the years ended December 31, 2022 and 2021, was as follows:
Year Ended December 31,
20222021
(dollars in millions)
Net earnings$9.3 $37.8 
Interest expense48.4 59.6 
Income tax expense8.4 9.5 
Depreciation and amortization141.3 157.3 
EBITDA (non-GAAP)$207.4 $264.2 
Restructuring, impairment and transaction-related charges44.8 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.
(2)The Company made a change in its definition of Adjusted EBITDA to include net pension income. This change is reflected in all periods presented.

The Debt Leverage Ratio, at December 31, 2022, decreased 0.23x to 2.16x compared to December 31, 2021, primarily due to a $78.8 million decrease in debt and finance lease obligations, partially offset by an $8.3 million decrease in Adjusted EBITDA. The Debt Leverage Ratio, at December 31, 2022, is within management’s desired target Debt Leverage Ratio range of 2.0x to 2.5x; however, the Company will operate at times above the Debt Leverage Ratio target range depending on the timing of compelling strategic investment opportunities, as well as seasonal working capital needs.

Description of Significant Outstanding Debt Obligations as of December 31, 2022

As of December 31, 2022, the Company utilized a combination of debt instruments to fund cash requirements, including the following:

Senior Secured Credit Facility:

$432.5 million revolving credit facility (no outstanding balance as of December 31, 2022); and

$825.0 million Term Loan A ($556.7 million outstanding as of December 31, 2022);

Master Note and Security Agreement ($4.4 million outstanding as of December 31, 2022).

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Senior Secured Credit Facility

On April 28, 2014, the Company entered into its Senior Secured Credit Facility, which included a revolving credit facility, Term Loan A and Term Loan B (Term Loan B was retired in July 2019) . The Company completed the fifth amendment to the Senior Secured Credit Facility on November 2, 2021. 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 Company completed the sixth amendment to the Senior Secured Credit Facility on March 25, 2022, which expanded the number of currencies available for letters of credit. The Company completed the seventh amendment to the Senior Secured Credit Facility on January 24, 2023, which transitioned the Company’s reference rate from LIBOR to SOFR effective February 1, 2023. The transition from LIBOR to SOFR does not have a material impact on the consolidated financial statements.

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.

At December 31, 2022, the Company had no outstanding borrowings on the revolving credit facility, and had $32.7 million of issued letters of credit, leaving up to $399.8 million available for future borrowings. The Senior Secured Credit Facility is secured by substantially all of the unencumbered assets of the Company. The Senior Secured Credit Facility also requires the Company to provide additional collateral to the lenders in certain limited circumstances.

Senior Unsecured Notes

The Company issued $300.0 million aggregate principal amount of its Senior Unsecured Notes due May 1, 2022, on April 28, 2014. During the first quarter of 2022, the Company repurchased $2.4 million of its outstanding Senior Unsecured Notes in the open market. During the year ended December 31, 2021, the Company repurchased $27.2 million of its outstanding Senior Unsecured Notes in the open market, resulting in a net loss on debt extinguishment of $0.5 million. 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.

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

Master Note and Security Agreement

On September 1, 1995, and as last amended on November 24, 2014, the Company entered into its Master Note and Security Agreement pursuant to which the Company issued over time senior notes in an aggregate principal amount of $1.1 billion in various tranches, of which $4.4 million was outstanding as of December 31, 2022. 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. The notes are collateralized by certain United States press equipment under the terms of the Master Note and Security Agreement.
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Covenants and Compliance

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

Total Leverage Ratio. On a rolling twelve-month basis, the Total Leverage Ratio, defined as consolidated total indebtedness to consolidated EBITDA, shall not exceed 3.75 to 1.00 (for the twelve months ended 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 Senior Secured Credit Facility to lenders that are not extending lenders are paid in full.

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

Senior Secured Leverage Ratio. On a rolling four-quarter basis, the Senior Secured Leverage Ratio, defined as the ratio of consolidated senior secured net indebtedness to consolidated EBITDA, shall not exceed (a) 3.50 to 1.00 for any fiscal quarter ending prior to December 31, 2023, and (b) 3.25 to 1.00 for any fiscal quarter ending on or after December 31, 2023 (other than, in the case of this clause (b), any fiscal quarter ending September 30 of any year, each of which shall be subject to a maximum Senior Secured Leverage Ratio not to exceed 3.50 to 1.00) (for the twelve months ended December 31, 2022, the Company’s Senior Secured Leverage Ratio was 2.13 to 1.00).

Interest Coverage Ratio. On a rolling twelve-month basis, the Interest Coverage Ratio, defined as consolidated EBITDA to cash consolidated interest expense, shall not be less than 3.00 to 1.00 (for the twelve months ended December 31, 2022, the Company’s Interest Coverage Ratio was 6.39 to 1.00).

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. The Company’s failure to maintain compliance with the covenants could prevent the Company from borrowing additional amounts and could result in a default under any of the debt agreements. Such default could cause the outstanding indebtedness to become immediately due and payable, by virtue of cross-acceleration or cross-default provisions.

In addition to those covenants, the Senior Secured C