Discontinued Operations (Notes)

9 Months Ended

Sep. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

During the third quarter of 2019, the Company made a decision to sell its United States Book business as a part of an ongoing process to review its business portfolio and divest assets not core to the Quad 3.0 transformation. Accordingly, the Company has classified the Book business as a discontinued operation, as required by ASC 205-20 — Discontinued Operations. The Book business primarily consists of three facilities: Versailles, Kentucky; Fairfield, Pennsylvania; and Martinsburg, West Virginia. The Company’s Book business has historically been included within the United States Print and Related Services segment and the Core Print and Related Services reporting unit.

On July 1, 2020, the Company completed the sale of its Versailles, Kentucky book manufacturing plant to CJK Group, Inc., which serves book, magazine, catalog and journal publishers, for $7.0 million in cash and the assumption of approximately $3.0 million in finance lease obligations. Working capital was finalized during the third quarter of 2020. The Company used the proceeds from the sale to reduce debt.

The following table summarizes the results of operations of the Company’s United States Book business, which are included in the loss from discontinued operations in the condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Total net sales	$	13.0	$	57.0	$	74.6	$	155.5
Total cost of sales, excluding depreciation and amortization	12.5		60.4		75.6		166.5
Selling, general and administrative expenses	0.9		3.2		3.9		9.8
Depreciation and amortization	—		4.3		—		13.6
Restructuring, impairment and transaction-related charges (1)	—		90.6		12.5		90.6
Goodwill impairment (2)	—		10.1		—		10.1
Other expenses, net	0.1		—		0.2		0.1
Loss from discontinued operations before income taxes	(0.5)		(111.6)		(17.6)		(135.2)
Income tax expense (benefit)	0.6		(32.2)		(4.0)		(34.1)
Loss from discontinued operations, net of tax	$	(1.1)	$	(79.4)	$	(13.6)	$	(101.1)

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(1)The Company recognized $11.5 million of impairment charges for tangible property, plant and equipment during the nine months ended September 30, 2020, to reduce the carrying value of the Book business to its fair value, and recognized $1.0 million in employee termination charges during the nine months ended September 30, 2020. Impairment charges recognized to reduce the carrying value of the Book business to its fair value during the three and nine months ended September 30, 2019, included $85.0 million of impairment charges for tangible property, plant and equipment and $5.6 million of impairment charges for contract assets.

(2)The Book business was included in the Core Print and Related Services reporting unit prior to the decision to sell the Book business. The amount of goodwill allocated to the Book business was determined based on the relative fair value of the Book business and the portion of the reporting unit that would be retained. Due to the decision to sell the Book business, the Company must determine whether any of the assets of the Book business were impaired. Therefore, management performed an interim goodwill test during the third quarter of 2019. Due to the carrying value of the Book business net assets exceeding the estimated fair value, the Company recorded a $10.1 million goodwill impairment charge during the three and nine months ended September 30, 2019.

The condensed consolidated statements of cash flows for all periods have not been adjusted to separately disclose cash flows related to discontinued operations. Cash flows related to the Book business during the nine months ended September 30, 2020 and 2019, were as follows:


	Nine Months Ended September 30,
	2020		2019
Cash flows used in operating activities	$	—	$	(8.7)
Cash flows provided by (used in) investing activities	5.4		(15.7)

The following table summarizes the current and long-term assets and liabilities of the discontinued United States Book business that were classified as held for sale in the condensed consolidated balance sheets at September 30, 2020, and December 31, 2019:


	September 30, 2020		December 31, 2019
Receivables—net	$	5.2	$	19.6
Inventories	2.5		14.0
Prepaid expenses and other current assets	13.1		23.0
Current assets of discontinued operations	20.8		56.6

Property, plant and equipment—net	—		—
Operating lease right-of-use assets—net	—		0.2

Other long-term assets	—		0.3
Long-term assets of discontinued operations	—		0.5

Accounts payable	2.1		7.0
Other current liabilities	3.3		8.5
Current portion of finance lease obligations	—		0.1
Current portion of operating lease obligations	—		0.2
Current liabilities of discontinued operations	5.4		15.8

Finance lease obligations	—		—


Other long-term liabilities	0.6		0.6
Long-term liabilities of discontinued operations	0.6		0.6