Debt

Long-term debt consisted of the following as of December 31, 2014 and 2013:



	Weighted Average Interest Rate		2014			2013
Master note and security agreement⁽¹⁾	7.55	%	$	316.6		$	490.2
Term loan A—$450.0 million due April 2019⁽²⁾	2.32	%	438.8			—
Term loan A—$450.0 million due July 2017⁽³⁾			—			416.3
Term loan B—$300.0 million due April 2021⁽²⁾	4.25	%	295.8			—
Term loan B—$200.0 million due July 2018⁽³⁾			—			194.8
Revolving credit facility—$850.0 million due April 2019⁽²⁾	2.30	%	43.9			—
Revolving credit facility—$850.0 million due July 2017⁽³⁾			—			209.8
Senior unsecured notes—$300.0 million due May 2022⁽²⁾	7.00	%	300.0			—
International term loan—$68.9 million⁽⁴⁾			—			58.2
International revolving credit facility—$14.3 million⁽⁴⁾	2.65	%	0.2			2.3
Equipment term loans⁽⁵⁾	4.75	%	13.3			16.4
Other	20.41	%	3.1			5.3
Total debt			$	1,411.7		$	1,393.3
Less: short-term debt and current portion of long-term debt			(92.0		)	(127.6		)
Long-term debt			$	1,319.7		$	1,265.7

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(1)	These senior notes have a weighted-average interest rate of 7.55%, which is fixed to maturity, with interest payable semiannually. Principal payments commenced September 1997 and extend through April 2031 in various tranches. The notes are collateralized by certain United States land, buildings and press and finishing equipment under the terms of the master note and security agreement.

The Company redeemed $108.8 million of its senior notes under the master note and security agreement for $109.6 million on October 10, 2014, resulting in a $0.8 million loss plus applicable transaction fees of $0.2 million for a total of $1.0 million included in loss on debt extinguishment in the consolidated statements of operations. The Company used its revolving credit facility to effect the redemption. This redemption was primarily completed to reduce interest expense based on the then current London Interbank Offered Rate ("LIBOR") rates.

The Company and certain of its subsidiaries entered into a fourth amendment to the master note and security agreement on November 24, 2014. The amendment, among other things, amended the financial covenants by removing the consolidated net worth requirement (removed for all periods after December 31, 2014) and the fixed charge coverage ratio, as well as adding a minimum interest coverage ratio, a maximum total leverage ratio and a maximum senior secured leverage ratio. These amendments align the financial covenants in the master note and security agreement more closely with the financial covenants in the Senior Secured Credit Facility discussed in further detail in (2).

(2)

The Company completed its $1.9 billion debt financing arrangements on April 28, 2014, which included refinancing, extending and expanding its existing revolving credit facility, Term Loan A and Term Loan B with a $1.6 billion senior secured credit facility (the "Senior Secured Credit Facility") and the issuance of $300.0 million aggregate principal amount of its unsecured 7.0% senior notes due May 1, 2022 (the "Senior Unsecured Notes"). The Senior Secured Credit Facility and the Senior Unsecured Notes were entered into to extend and stagger the Company's debt maturity profile, further diversify its capital structure and provide more borrowing capacity to better position the Company to execute on its strategic goals. The proceeds from the Senior Secured Credit Facility and Senior Unsecured Notes were used to: (a) repay the Company's previous revolving credit facility, Term Loan A, Term Loan B and the international term loan, (b) fund the acquisition of Brown Printing and (c) for general corporate purposes.

The Senior Secured Credit Facility consists of three different loan facilities. The first facility is a revolving credit facility in the amount of $850.0 million with a term of five years maturing on April 27, 2019. The second facility is a Term Loan A in the aggregate amount of $450.0 million with a term of five years maturing on April 27, 2019, subject to certain required amortization. The third facility is a Term Loan B in the amount of $300.0 million with a term of seven years maturing on April 27, 2021, subject to certain required amortization. At December 31, 2014, the Company had borrowings of $43.9 million on the revolving credit facility, as well as $52.0 million of issued letters of credit, leaving $754.1 million available for future borrowings.

Borrowings under the revolving credit facility and Term Loan A loans made under the Senior Secured Credit Facility will initially bear interest at 2.00% in excess of reserve adjusted LIBOR, or 1.00% in excess of an alternate base rate, and Term Loan B loans will bear interest at 3.25% in excess of reserve adjusted LIBOR, with a LIBOR floor of 1.00%, or 2.25% in excess of an alternative base rate at the Company's option. 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.

The Company entered into an amendment to the Senior Secured Credit Facility on December 18, 2014, which eliminated the "net debt" concept from the calculation of the total leverage ratio and the senior secured leverage ratio and provides for the elimination of the consolidated net worth covenant (removed for all periods after December 31, 2014).

The Company received $294.8 million in net proceeds from the sale of the Senior Unsecured Notes, after deducting the initial purchasers' discounts and commissions. The Senior Unsecured Notes bear interest at 7.0% and interest is payable semi-annually. The Senior Unsecured Notes are due May 1, 2022. Each of the Company's existing and future domestic subsidiaries that is a borrower or guarantees indebtedness under the Company's Senior Secured Credit Facility or that guarantees certain of the Company's other indebtedness or indebtedness of the Company's restricted subsidiaries (other than intercompany indebtedness) fully and unconditionally guarantee or, in the case of future subsidiaries, will guarantee, on a joint and several basis, the Senior Unsecured Notes (the "Guarantor Subsidiaries"). All of the current Guarantor Subsidiaries are 100% owned by the Company. Guarantor Subsidiaries will be automatically released from these guarantees upon the occurrence of certain events, including (a) the designation of any of the Guarantor Subsidiaries as an unrestricted subsidiary; (b) the release or discharge of any guarantee or indebtedness that resulted in the creation of the guarantee of the Senior Unsecured Notes by any of the Guarantor Subsidiaries; or (c) the sale or disposition, including the sale of substantially all the assets, of any of the Guarantor Subsidiaries.


(3)	The Company's former $1.5 billion debt financing agreement (which included the revolving credit facility in the amount of $850.0 million, the Term Loan A in the aggregate amount of $450.0 million, and the Term Loan B in the amount of $200.0 million) was replaced with the Senior Secured Credit Facility discussed in further detail in (2).

(4)

Debt related to the Company's international operations was refinanced on December 16, 2008 by entering into a secured credit agreement ("Facilities Agreement"). The Facilities Agreement includes a Euro denominated term loan and a multicurrency revolving credit facility. The Euro denominated term loan was repaid as part of the $1.9 billion debt financing arrangements discussed in further detail in (2). The multicurrency revolving credit facility used for financing working capital and general business needs, was renewed in 2014 and will expire on September 30, 2015. At December 31, 2014, the Company's international operations had borrowings of $0.2 million under the multicurrency revolving credit facility, leaving $14.1 million available for future borrowing. The terms of the Facilities Agreement include certain financial covenants, a guarantee of the Facilities Agreement by the Company and a security agreement that includes collateralizing substantially all of the Quad/Winkowski assets. The facilities bear interest at the aggregate of the Warsaw Interbank Offered Rate ("WIBOR") or the Euro Interbank Offered Rate ("EURIBOR") and margin.

(5)

The Company refinanced certain equipment leases during 2013 with $17.1 million in equipment term loans secured by the formerly leased equipment. The equipment term loans bear interest at a fixed rate of 4.75%, require quarterly payments and have five year terms expiring during 2018. The purchase of these assets resulted in $12.8 million of non-cash investing and financing activities, which represents the $17.1 million in equipment term loans net of $4.3 million of eliminated capital lease obligations (see Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" for the required supplemental cash flow information).

Fair Value of Debt

Based upon the interest rates available to the Company for borrowings with similar terms and maturities, the fair value of the Company's total debt was approximately $1.3 billion and $1.4 billion at December 31, 2014 and 2013, respectively. The fair value determination of the Company's total debt was categorized as Level 2 in the fair value hierarchy (see Note 16, "Financial Instruments and Fair Value Measurements," for the definition of Level 2 inputs). As of December 31, 2014, approximately $3.0 billion of the Company's assets were pledged as security under various loans and other agreements.

Debt Issuance Costs and Original Issue Discount

The Company incurred $14.3 million in debt issuance costs in conjunction with the $1.9 billion debt financing arrangement completed on April 28, 2014. In accordance with the accounting guidance for the treatment of debt issuance costs in a debt extinguishment, of the $14.3 million in new debt issuance costs, $11.0 million was capitalized and is classified as other long-term assets in the consolidated balance sheets and $3.3 million was expensed and is classified as loss on debt extinguishment in the consolidated statements of operations. In addition, a new original issue discount of $3.0 million related to Term Loan B of the Senior Secured Credit Facility was classified as a reduction of long-term debt in the consolidated balance sheets.

The Company incurred $1.0 million in debt issuance costs in conjunction with the redemption of $108.8 million of its senior notes under the master note and security agreement on October 10, 2014. In accordance with the accounting guidance for the treatment of debt issuance costs in a debt extinguishment, the $1.0 million was expensed and is classified as loss on debt extinguishment in the consolidated statements of operations.

The Company incurred $1.2 million in debt issuance costs in conjunction with the amendment to the master note and security agreement on November 24, 2014. In accordance with the accounting guidance for the treatment of debt issuance costs in a debt extinguishment, of the $1.2 million in new debt issuance costs, $1.0 million was capitalized and is classified as other long-term assets in the consolidated balance sheets and $0.2 million was expensed and is classified as loss on debt extinguishment in the consolidated statements of operations.

The loss on debt extinguishment recorded in the consolidated statements of operations for the year ended December 31, 2014, was comprised of the following:



	Loss on Debt Extinguishment
Debt issuance costs:
Loss on debt extinguishment from July 26, 2011 $1.5 billion debt financing arrangement fees that were previously capitalized	$	2.1
Debt issuance costs from April 28, 2014 $1.9 billion debt financing arrangement	3.3
Loss on debt extinguishment from October 10, 2014 partial redemption of senior notes under master note and security agreement	1.0
Loss on debt extinguishment from November 24, 2014 amendment to master note and security agreement	0.2
Original issue discount:
Original issue discount from July 26, 2011 $1.5 billion debt financing arrangement	0.6
Total	$	7.2

Activity impacting the Company's capitalized debt issuance costs for the years ended December 31, 2014 and 2013, was as follows:



	Capitalized Debt Issuance Costs
Balance at January 1, 2013	$	17.9
Amortization	(4.0		)
Balance at December 31, 2013	$	13.9
Capitalized debt issuance costs from April 28, 2014 $1.9 billion debt financing arrangement	11.0
Loss on debt extinguishment from July 26, 2011 $1.5 billion debt financing arrangement fees that were previously capitalized	(2.1		)
Capitalized debt issuance costs from November 24, 2014 amendment to master note and security agreement	1.0
Amortization of debt issuance costs	(3.8		)
Balance at December 31, 2014	$	20.0

Activity impacting the Company's original issue discount for the years ended December 31, 2014 and 2013, was as follows:



	Original Issue Discount
Balance at January 1, 2013	$	0.8
Amortization	(0.1		)
Balance at December 31, 2013	$	0.7
Original issue discount from April 28, 2014 $1.9 billion debt financing arrangement	3.0
Loss on debt extinguishment from July 26, 2011 $1.5 billion debt financing arrangement	(0.6		)
Amortization of original issue discount	(0.4		)
Balance at December 31, 2014	$	2.7

Amortization expense for debt issuance costs was $3.8 million, $4.0 million and $4.4 million for the years ended December 31, 2014, 2013 and 2012, respectively. Amortization expense for original issue discount was $0.4 million, $0.1 million and $0.1 million for the three years ended December 31, 2014, 2013 and 2012, respectively. The debt issuance costs and original issue discount are being amortized on a straight-line basis over the five, seven and eight year lives of the related debt instruments.

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, 2014:


•	Total Leverage Ratio. On a rolling twelve-month basis, the total leverage ratio, defined as total consolidated debt to consolidated EBITDA, shall not exceed 3.75 to 1.00 (for the twelve months ended December 31, 2014, the Company's total leverage ratio was 2.57 to 1.00).


•	Senior Secured Leverage Ratio. On a rolling twelve-month basis, the senior secured leverage ratio, defined as senior secured debt to consolidated EBITDA, shall not exceed 3.50 to 1.00 (for the twelve months ended December 31, 2014, the Company's senior secured leverage ratio was 2.04 to 1.00).


•	Minimum Interest Coverage Ratio. On a rolling twelve-month basis, the minimum interest coverage ratio, defined as consolidated EBITDA to consolidated cash interest expense, shall not be less than 3.50 to 1.00 (for the twelve months ended December 31, 2014, the Company's minimum interest coverage ratio was 5.89 to 1.00).


•	Consolidated Net Worth. As of December 31, 2014, the Company's consolidated net worth must be at least $802.4 million (as of December 31, 2014, the Company's consolidated net worth under the most restrictive covenant per the various debt agreements was $1.08 billion). This covenant will be removed for all periods after December 31, 2014, due to the recent debt agreement amendments.

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


•	If the Company's total leverage ratio is greater than 3.00 to 1.00 (as defined in the Senior Secured Credit Facility), the Company is prohibited from making greater than $120.0 million of annual dividend payments, capital stock repurchases and certain other payments. If the total leverage ratio is less than 3.00 to 1.00, there are no such restrictions.

•

If the Company's senior secured leverage ratio is greater than 3.00 to 1.00 or the Company's total leverage ratio is greater than 3.50 to 1.00 (these ratios as defined in the Senior Secured Credit Facility), the Company is prohibited from voluntarily prepaying any of the Senior Unsecured Notes and from voluntarily prepaying any other unsecured or subordinated indebtedness, with certain exceptions (including any mandatory prepayments on the Senior Unsecured Notes or any other unsecured or subordinated debt). If the senior secured leverage ratio is less than 3.00 to 1.00 and the total leverage ratio is less than 3.50 to 1.00, there are no such restrictions.

The indenture underlying the Senior Unsecured Notes contains various covenants, including, but not limited to, covenants that, subject to certain exceptions, limit the Company's and its restricted subsidiaries' ability to: incur and/or guarantee additional debt; pay dividends, repurchase stock or make certain other restricted payments; enter into agreements limiting dividends and certain other restricted payments; prepay, redeem or repurchase subordinated debt; grant liens on assets; enter into sale and leaseback transactions; merge, consolidate, transfer or dispose of substantially all of the Company's consolidated assets; sell, transfer or otherwise dispose of property and assets; and engage in transactions with affiliates.

Estimated Principal Payments

Approximate annual principal amounts due on long-term debt are as follows during the years ending December 31:



2015	$	92.0
2016	94.6
2017	82.1
2018	89.4
2019	364.6
2020	34.4
2021 – 2025	634.8
2026 – 2030	18.8
2031	1.0
Total	$	1,411.7