Restructuring, Impairment and Transaction-Related Charges

9 Months Ended

Sep. 30, 2020

Restructuring and Related Activities [Abstract]

Restructuring, Impairment and Transaction-Related Charges

The Company recorded restructuring, impairment and transaction-related charges for the three and nine months ended September 30, 2020 and 2019, as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Employee termination charges	$	3.3	$	12.3	$	25.4	$	19.9
Impairment charges	—		1.5		4.2		3.6
Transaction-related charges	0.9		46.9		1.7		51.1
Integration costs	0.2		0.5		1.3		2.1
Other restructuring charges (income)	5.4		(4.5)		16.4		(3.0)
Total	$	9.8	$	56.7	$	49.0	$	73.7

The costs related to these activities have been recorded in the condensed consolidated statements of operations as restructuring, impairment and transaction-related charges. See Note 20, “Segment Information,” for restructuring, impairment and transaction-related charges by segment.

Restructuring Charges

The Company began a restructuring program in 2010 related to eliminating excess manufacturing capacity and properly aligning its cost structure and has since announced a total of 47 plant closures through September 30, 2020, including the announced closures of the Charlotte, North Carolina facility during the first quarter of 2020 and the Taunton, Massachusetts retail facility during the second quarter of 2020. The Company classifies the following charges as restructuring:

•Employee termination charges are incurred when the Company reduces its workforce through separation programs and facility consolidations.

•Integration costs are incurred primarily for the integration of acquired companies (see Note 3, “Acquisitions and Strategic Investments,” for descriptions of the Company’s recent acquisitions and strategic investments).

•Other restructuring charges (income) are presented net of the gains on the sale of facilities and businesses, including a gain on the sale of the Midland, Michigan facility during the third quarter of 2020, a gain on the sale of the Shakopee, Minnesota facility during the first quarter of 2020, a gain on the sale of the Franklin, Kentucky facility during the second quarter of 2019 and a gain on the sale of the Hazleton, Pennsylvania facility during the first quarter of 2019. The Company also recognized a $2.9 million loss on the sale of a business during the first quarter of 2020, an $8.6 million gain on the sale of a business during the third quarter of 2019, as well as $2.3 million in charges related to a value-added tax assessment for a closed facility during the second quarter of 2019, which are included within other restructuring activities below. The components of other restructuring charges (income) consisted of the following during 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
Vacant facility carrying costs and lease exit charges	$	2.5	$	2.1	$	7.6	$	5.3
Equipment and infrastructure removal costs	0.1		0.1		1.1		0.2
Gains on the sale of facilities	(0.8)		(0.1)		(1.6)		(6.1)
Other restructuring activities	3.6		(6.6)		9.3		(2.4)
Other restructuring charges (income)	$	5.4	$	(4.5)	$	16.4	$	(3.0)

The restructuring charges recorded were based on plans that have been committed to by management and were, in part, based upon management’s best estimates of future events. Changes to the estimates may require future restructuring charges and adjustments to the restructuring liabilities. The Company expects to incur additional restructuring charges related to these and other initiatives.

Impairment Charges

The Company recognized impairment charges of $4.2 million during the nine months ended September 30, 2020, for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction restructuring activities. There were no impairment charges recognized during the three months ended September 30, 2020.

The Company recognized impairment charges of $1.5 million and $3.6 million during the three and nine months ended September 30, 2019, respectively, which consisted of $1.2 million and $3.3 million, respectively, for machinery and equipment no longer being utilized in production as a result of facility consolidations, as well as other capacity reduction restructuring activities; and $0.3 million of land and building impairment charges during the three and nine months ended September 30, 2019.

The fair values of the impaired assets were determined by the Company to be Level 3 under the fair value hierarchy (see Note 13, “Financial Instruments and Fair Value Measurements,” for the definition of Level 3 inputs) and were estimated based on broker quotes, internal expertise related to current marketplace conditions and estimated future discounted cash flows. These assets were adjusted to their estimated fair values at the time of impairment. If estimated fair values subsequently decline, the carrying values of the assets are adjusted accordingly.

Transaction-Related Charges

The Company incurs transaction-related charges primarily consisting of professional service fees related to business acquisition and divestiture activities. Transaction-related charges of $0.9 million and $1.7 million were recorded during the three and nine months ended September 30, 2020, respectively, and $46.9 million and $51.1 million were recorded during the three and nine months ended September 30, 2019, respectively. Transaction related charges included a $45.0 million reverse termination fee paid during the three and nine months ended September 30, 2019, in connection with the termination of the definitive agreement pursuant to which Quad would have acquired LSC Communications, Inc. (“LSC”). The transaction-related charges were expense as incurred in accordance with the applicable accounting guidance on business combinations.

Restructuring Reserves

Activity impacting the Company’s restructuring reserves for the nine months ended September 30, 2020, was as follows:


	Employee Termination Charges		Impairment Charges		Transaction-Related Charges		Integration Costs		Other Restructuring Charges		Total
Balance at December 31, 2019	$	9.9	$	—	$	0.8	$	0.2	$	13.6	$	24.5
Expense, net	25.4		4.2		1.7		1.3		16.4		49.0
Cash payments, net	(25.4)		—		(1.4)		(1.5)		(9.1)		(37.4)
Non-cash adjustments/reclassifications and translation	(0.2)		(4.2)		—		—		(1.6)		(6.0)
Balance at September 30, 2020	$	9.7	$	—	$	1.1	$	—	$	19.3	$	30.1

The Company’s restructuring reserves at September 30, 2020, included a short-term and a long-term component. The short-term portion included $22.1 million in other current liabilities (see Note 14, “Other Current and Long-Term Liabilities”) and $1.3 million in accounts payable in the condensed consolidated balance sheets as the Company expects these reserves to be paid within the next twelve months. The long-term portion of $6.7 million is included in other long-term liabilities (see Note 14, “Other Current and Long-Term Liabilities”) in the condensed consolidated balance sheets.