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Debt | 12 Months Ended
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Dec. 31, 2018
Debt Disclosure [Abstract] |
Debt | Debt The components of long-term debt at December 31, 2018 and 2017, were as follows:
| Weighted Average Interest Rate |  | 2018 |  | 2017
Master note and security agreement | 7.36 | % |  | $ | 96.2 |  |  | $ | 123.6 |
Term loan A—$375.0 million maturing January 2021 | 3.78 | % |  | 281.3 |  |  | 281.3 |
Term loan B—$300.0 million maturing April 2021 | 5.24 | % |  | 279.5 |  |  | 279.1 |
Revolving credit facility—$725.0 million maturing January 2021 | 3.91 | % |  | — |  |  | — |
Senior unsecured notes—$300.0 million maturing May 2022 | 7.00 | % |  | 243.5 |  |  | 243.5 |
International term loans—$28.0 million | 1.82 | % |  | 17.8 |  |  | 14.9 |
International revolving credit facilities—$16.0 million | 2.25 | % |  | 11.8 |  |  | 9.8 |
Other | 10.24 | % |  | 2.6 |  |  | 3.6 |
Debt issuance costs |  |  | (7.2 | ) |  | (10.3 | )
Total debt |  |  | $ | 925.5 |  |  | $ | 945.5 |
Less: short-term debt and current portion of long-term debt |  |  | (42.9 | ) |  | (42.0 | )
Long-term debt |  |  | $ | 882.6 |  |  | $ | 903.5 |
Description of Debt Obligations Master Note and Security Agreement On September 1, 1995, and as last amended on November 24, 2014, Quad entered into its Master Note and Security Agreement. As of December 31, 2018, the borrowings outstanding under the Master Note and Security Agreement were $96.2 million. The senior notes under the Master Note and Security Agreement had a weighted average interest rate of 7.36% at December 31, 2018, 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 $60.1 million of its senior notes under the Master Note and Security Agreement, resulting in a net loss on debt extinguishment of $0.2 million, during the year ended December 31, 2016. All tendered senior notes under the Master Note and Security Agreement were canceled. The Company used cash flows from operating activities and borrowings under its revolving credit facility to fund the tender. The tender was primarily completed to reallocate debt to the lower interest rate revolving credit facility and thereby reduce interest expense based on current LIBOR rates. Senior Secured Credit Facility On April 28, 2014 the Company entered into its Senior Secured Credit Facility, which includes a revolving credit facility, Term Loan A and Term Loan B. The Senior Secured Credit Facility was originally entered into to extend and stagger the Company’s debt maturity profile, to further diversify its capital structure and to provide more borrowing capacity to better position the Company to execute on its strategic goals. The proceeds from the Senior Secured Credit Facility were used to repay the Company’s previous debt financing arrangements and to fund acquisitions, as well as other general corporate purposes. The Company completed the second amendment to the Company’s Senior Secured Credit Facility on February 10, 2017. This second amendment was completed to reduce the size of the revolving credit facility and Term Loan A and to extend the Company’s debt maturity profile while maintaining the Company’s current cost of borrowing and covenant structure. The revolving credit facility was lowered to a maximum borrowing amount of $725.0 million from $850.0 million, and the Term Loan A was lowered to an aggregate amount of $375.0 million from $450.0 million. This amendment to the Senior Secured Credit Facility did not have an impact on the Company’s quarterly financial covenant requirements and resulted in a loss on debt extinguishment of $2.6 million during the year ended December 31, 2017. The Senior Secured Credit Facility consists of three different loan facilities. The first facility is a revolving credit facility in the amount of $725.0 million with a term of just under four years, maturing on January 4, 2021. The second facility is a Term Loan A in the aggregate amount of $375.0 million with a term of just under four years, maturing on January 4, 2021, 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, 2018, the Company had no outstanding borrowings on the revolving credit facility, and had $34.1 million of issued letters of credit, leaving $690.9 million available for future borrowings. Borrowings under the revolving credit facility and Term Loan A made under the Senior Secured Credit Facility at December 31, 2018, bear interest at 2.00% in excess of reserve adjusted LIBOR, or 1.00% in excess of an alternate base rate, and borrowings under the Term Loan B at December 31, 2018, 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. On January 31, 2019, the Company completed the third amendment to the Senior Secured Credit Facility. See Note 24, “Subsequent Events,” for further detail on this item. Senior Unsecured Notes The Company completed the issuance of $300.0 million aggregate principal amount of its Senior Unsecured Notes due May 1, 2022, on April 28, 2014. The Senior Unsecured Notes bear interest at 7.00%, and interest is payable semi-annually. The Senior Unsecured Notes were issued 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 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 proceeds from the Senior Unsecured Notes were used for the same purposes detailed in the April 28, 2014 Senior Secured Credit Facility above. The Company repurchased $56.5 million of its Senior Unsecured Notes in the open market, resulting in a net gain on debt extinguishment of $14.3 million, during the year ended December 31, 2016. 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 primarily completed to efficiently reduce debt balances and interest expense based on current LIBOR rates. 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 Guarantor Subsidiaries are 100% owned by the Company. Guarantor Subsidiaries will be automatically released from these guarantees upon the occurrence of certain events. See Note 22, “Separate Financial Information of Subsidiary Guarantors of Indebtedness,” for further details on the Guarantor Subsidiaries. International Debt Obligations The Company has two fixed rate, Euro denominated, international term loans for purposes of financing certain capital expenditures and general business needs. The first international term loan in the amount of $20.4 million was entered into on December 28, 2015, was fully funded during 2016 and has a term of six years, maturing December 28, 2021. As of December 31, 2018, $10.2 million remained outstanding on the first international term loan at a weighted average interest rate of 1.72%. The second international term loan in the amount of $7.6 million was entered into on December 21, 2018, bears interest at 1.96% and has a term of five years, maturing on December 31, 2023. The Company has two multicurrency international revolving credit facilities that are used for financing working capital and general business needs. The Company had $11.8 million of borrowings outstanding at a weighted average interest rate of 2.25% on the international revolving credit facilities as of December 31, 2018, leaving $4.2 million available for future borrowing. The terms of the international revolving credit facilities includes certain financial covenants, a guarantee of the international revolving credit facilities by the Company and a security agreement that includes collateralizing substantially all of the Quad Europe Sp. z.o.o. assets. The first multicurrency international revolving credit facility expires on October 31, 2019, and bears interest at the aggregate of the Warsaw Interbank Offered Rate (“WIBOR”) plus 0.90% for any Polish Zloty denominated borrowings, the aggregate of Euro Interbank Offered Rate (“EURIBOR”) plus 0.95% for any Euro denominated borrowings or the aggregate of British pound sterling LIBOR plus 0.95% for any British pound sterling denominate borrowings. The second multicurrency international revolving credit facility expires on November 20, 2020, and bears interest at the aggregate of WIBOR plus 0.70% for any Polish Zloty denominated borrowings or the aggregate of EURIBOR plus 0.70% for any Euro denominated borrowings. 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 $0.9 billion and $1.0 billion at December 31, 2018 and 2017, respectively. The fair value determination of the Company’s total debt was categorized as Level 2 in the fair value hierarchy (see Note 14, “Financial Instruments and Fair Value Measurements,” for the definition of Level 2 inputs). As of December 31, 2018, approximately $2.2 billion of the Company’s assets were pledged as security under various loans and other agreements. Debt Issuance Costs and Original Issue Discount Activity impacting the Company’s capitalized debt issuance costs for the years ended December 31, 2018 and 2017, was as follows:
| Capitalized Debt Issuance Costs
Balance at January 1, 2017 | $ | 11.3 |
Debt issuance costs from February 10, 2017 debt financing amendment | 3.2 |
Write off of debt issuance costs from April 28, 2014 debt financing agreement | (1.1 | )
Amortization of debt issuance costs | (3.1 | )
Balance at December 31, 2017 | 10.3 |
Amortization of debt issuance costs | (3.1 | )
Balance at December 31, 2018 | $ | 7.2 |
Activity impacting the Company’s original issue discount for the years ended December 31, 2018 and 2017, was as follows:
| Original Issue Discount
Balance at January 1, 2017 | $ | 1.8 |
Amortization of original issue discount | (0.4 | )
Balance at December 31, 2017 | 1.4 |
Amortization of original issue discount | (0.4 | )
Balance at December 31, 2018 | $ | 1.0 |
Amortization expense for debt issuance costs was $3.1 million, $3.1 million and $3.8 million for the years ended December 31, 2018, 2017 and 2016, respectively. Amortization expense for original issue discount was $0.4 million for the each of the years ended December 31, 2018, 2017 and 2016. The debt issuance costs and original issue discount are being amortized on a straight-line basis over the four, seven and eight year lives of the related debt instruments. Loss (Gain) on Debt Extinguishment 2017 Loss on Debt Extinguishment The Company incurred $4.7 million in debt issuance costs in conjunction with the second amendment to the Company’s Senior Secured Credit Facility. In accordance with the accounting guidance for the treatment of debt issuance costs in a debt extinguishment, of the $4.7 million in new debt issuance costs, $3.2 million is classified as a reduction of long-term debt in the consolidated balance sheets and $1.5 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, 2017, was comprised of the following:
| Loss on Debt Extinguishment
Debt issuance costs from April 28, 2014 debt financing arrangement | $ | 1.1 |
Debt issuance costs from February 10, 2017 debt financing arrangement | 1.5 |
Total | $ | 2.6 |
2016 Gain on Debt Extinguishment The Company recorded a net gain on debt extinguishment of $14.1 million during the year ended December 31, 2016. The $14.1 million was comprised of a $14.3 million gain incurred in conjunction with the repurchase of $56.5 million of the Company’s Senior Unsecured Notes, offset by a net loss on debt extinguishment of $0.2 million resulting from the redemption of $60.1 million of the Company’s senior notes under the Master Note and Security Agreement. The gain on debt extinguishment recorded in the consolidated statements of operations for the year ended December 31, 2016, was comprised of the following:
| Master Note and Security Agreement |  | Senior Unsecured Notes |  | Total
Principal amount repurchased | $ | 60.1 |  |  | $ | 56.5 |  |  | $ | 116.6 |
Repurchase price | 61.2 |  |  | 42.5 |  |  | 103.7 |
Less: accrued interest paid | (1.2 | ) |  | (1.1 | ) |  | (2.3 | )
Net repurchase price | 60.0 |  |  | 41.4 |  |  | 101.4 |
Debt financing fees expensed | (0.1 | ) |  | — |  |  | (0.1 | )
Debt issuance costs expensed | (0.2 | ) |  | (0.8 | ) |  | (1.0 | )
Gain (loss) on debt extinguishment | $ | (0.2 | ) |  | $ | 14.3 |  |  | $ | 14.1 |
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, 2018:
• | 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, 2018, the Company’s total leverage ratio was 2.19 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, 2018, the Company’s senior secured leverage ratio was 1.63 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, 2018, the Company’s minimum interest coverage ratio was 6.23 to 1.00).
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. 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 the following:
• | 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.
Estimated Principal Payments The approximate annual principal amounts due on long-term debt, excluding $7.2 million for future amortization of debt issuance costs and $1.0 million for future amortization of original issue discount, at December 31, 2018, were as follows:
| Principal Payments
2019 | $ | 41.3 |
2020 | 69.2 |
2021 | 548.2 |
2022 | 251.4 |
2023 | 6.7 |
2024 – 2028 | 13.9 |
2029 – 2031 | 3.0 |
Total | $ | 933.7 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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