Quad/Graphics, Inc. - Annual Report: 2010 (Form 10-K)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number 001-34806

QUAD/GRAPHICS, INC.
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (414) 566-6000

          Securities registered pursuant to Section 12(b) of the Act:

          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 o    No ý

          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 o    No ý

          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 ý    No o

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). [Registrant is not yet required to provide financial disclosure in an Interactive Data File Format.]    Yes o    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ý

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)    Yes o    No ý

          The aggregate market value of the class A common stock held by non-affiliates of the registrant as of June 30, 2010 was $0 (the class A common stock was not publicly-traded until July 2010). Neither of the registrant's class B common stock or class C common stock is 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 and class C 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 registrant's classes of common stock, as of the latest practicable date.

DOCUMENTS INCORPORATED BY REFERENCE

          Portions of the Proxy Statement for the registrant's 2011 Annual Meeting of Shareholders are incorporated by reference into
Part III of this Form 10-K.

Table of Contents

QUAD/GRAPHICS, INC.

FORM 10-K INDEX

For the Year Ended December 31, 2010

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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/Graphics"), 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/Graphics are those described in Item 1A "Risk Factors" of this Annual Report on Form 10-K, as such may be amended or supplemented in Part II, Item 1A of the Company's subsequently filed Quarterly Reports on Form 10-Q, and the following:

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The impact of significant overcapacity in the commercial printing industry, which creates downward pricing pressure and fluctuating demand for printing services;



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The impact of fluctuations in costs and availability of raw materials, energy costs and freight rates;



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Quad/Graphics may be unable to achieve the estimated potential synergies expected from the recently completed acquisition of World Color Press Inc. ("World Color Press" or "WCP") or it may take longer or cost more than expected to achieve those synergy savings;



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Unexpected costs or liabilities related to the acquisition, including the effects of purchase accounting that may be different from Quad/Graphics' preliminary allocations;



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Failure to successfully integrate the operations of Quad/Graphics and World Color Press;



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The impact of electronic media and similar technological changes;



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Changes in macroeconomic or political conditions in the countries where Quad/Graphics operates;



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Regulatory matters and risks;



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Legislative developments or changes in laws;



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The impact of fluctuations in interest rates and foreign exchange rates; and



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The effect of accounting pronouncements issued periodically by standard-setting bodies.

        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, when making decisions with respect to Quad/Graphics. Except to the extent required by the federal securities laws, Quad/Graphics 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/Graphics is a leading global provider of print and related services that are designed to provide complete solutions to a broad base of customers. The Company's print products primarily include catalogs, consumer magazines, special interest publications, direct mail and other commercial specialty printed products, retail inserts, books and directories. Quad/Graphics' print-related services include digital imaging and photography, binding, mailing and distribution, and logistics, data optimization and analytics services. Founded in Pewaukee, Wisconsin as a Wisconsin corporation in 1971 by Harry V. Quadracci, Quad/Graphics has approximately 25,000 employees in the United States, Canada, Latin America, and Europe, serving a diverse base of more than 7,400 customers from 142 facilities located in 21 countries.

        Quad/Graphics has contractual relationships with leading magazine publishers, including Condé Nast, Hearst Magazines, Meredith Corporation, The National Geographic Society, Rodale Inc., The Reader's Digest Association Ltd., Source Interlink Media, LLC, Time Inc., and Wenner Media LLC, and prints well-known magazines such as Allure, Architectural Digest, GQ, InStyle, The Journal of the National Geographic Society, Lucky, Men's Fitness, People, Runner's World, Self, Sports Illustrated, Time, Traditional Home, Veranda, and Vogue. Quad/Graphics prints retail newspaper inserts for The Bon-Ton Stores, Inc., J.C. Penney Company, Inc., Shopko Stores Operating Co., LLC, and Target Corporation; catalogs for industry leading marketers such as Bass Pro Shops, Cabela's Incorporated, Coldwater Creek Inc., J.Crew Group, Inc., L.L. Bean, Limited Brands Inc. (Victoria's Secret), The Orvis Company, Redcats USA, and Williams-Sonoma Inc. and direct mail products for Guthy-Renker LLC, International Masters Publishers Inc., Publishers Clearing House, Inc., and Weight Watchers International, Inc. Quad/Graphics' book publishing customers include Harlequin Enterprises Limited, The McGraw-Hill Companies, Inc., The Reader's Digest Association Ltd., Simon & Schuster, Inc., and Thomas Nelson, Inc.; and directories customers include Dex One Corporation, Yellow Book USA, Inc., and Yellow Pages Group Limited.

        The Company seeks to benefit its clients in two main ways—minimize their total cost of print production and maximize the revenue derived from their print spending. In order to minimize a customer's cost of production, Quad/Graphics continually strives to increase its own productivity and reduce its customers' mailing and distribution costs through the integration of data analytics, finishing technology and logistics operations. The Company also works to help its customers increase their revenue by (1) decreasing manufacturing cycle time, which allows publishing customers additional time to sell more advertising and marketers additional time to adjust product strategy based on competition and consumer demand, and (2) utilizing its digital media, integrated data analytics, finishing technology and logistics operations to create targeted and personalized printed materials, which increase consumer response rates and maximize a customer's return on print spending.

        Over the last 15 years, Quad/Graphics has made substantial investments to create what it believes is one of the most efficient and modern manufacturing platforms in the industry. Quad/Graphics also has made substantial investments in research and development and other technological innovations. The Company has developed multiple manufacturing process improvements, including innovative press and finishing control systems and material-handling equipment for use in Quad/Graphics' own operations as well as for sale to other printers worldwide. Quad/Graphics believes that this continual investment and innovation and its modern manufacturing platform, together with its focus on customer service and its distribution capabilities, have resulted in Quad/Graphics being one of the most profitable commercial printing companies in the industry, as measured by Adjusted EBITDA margin (defined as EBITDA before restructuring, impairment and transaction-related charges as a percentage of net sales). EBITDA is defined as net earnings (loss) attributable to the Company's common

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shareholders plus interest expense, income tax expense and depreciation and amortization. EBITDA is a financial measure not prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") that is reconciled to net earnings (loss) in the Results of Operations for the Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009 and for the Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008 included in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K. EBITDA is an important measure by which the Company gauges the profitability and assesses the performance of its business. It should not be considered an alternative to net earnings as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. See "—Competitive Advantages" below.

        The manufacturing platform and innovative technology that Quad/Graphics enjoys are further reinforced by the qualities of its workforce. The Company believes that its distinct corporate culture encourages an organization-wide entrepreneurial spirit and an opportunistic mentality, where employees embrace responsibility, take ownership of projects and are encouraged to drive results. Quad/Graphics further believes that the ownership and voting control by the Quadracci family has enabled the Company to maintain consistent strategic goals and disciplined strategy deployment, ensure continuity in its management team and enable its distinct corporate culture.

        On July 2, 2010, the Company completed the acquisition of World Color Press, which became a wholly-owned subsidiary of the Company. World Color Press was a provider of comprehensive print, digital and related services to retailers, catalogers, publishers, branded-goods companies and other businesses in North America and Latin American countries. World Color Press' products included advertising inserts, circulars, catalogs, direct mail products, magazines, books, directories, digital pre-media, logistics, and mail list technologies. With the acquisition of World Color Press, the Company has a deeper talent pool, greater geographic reach (including the Canadian marketplace and certain Latin American markets where Quad/Graphics previously did not have a significant presence) and broader product and service offerings (including the printing of books and directories, which Quad/Graphics previously did not print, as well as an increased range of retail and direct mail products). Prior to the acquisition, World Color Press and its predecessors were involved in insolvency proceedings, emerging in July 2009 (for additional information on such proceedings, see Note 13 to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K).

        In connection with the closing of the World Color Press acquisition, the Company registered its class A common stock, par value $0.025 per share ("class A stock"), with the United States Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as amended, and on July 6, 2010, Quad/Graphics' class A stock commenced trading on The New York Stock Exchange, LLC ("NYSE") under the symbol "QUAD".

Industry

        The global printing industry encompasses a wide range of sectors, including general commercial printing, newspapers and newspaper inserts, directories, books, direct mail, packaging, financial printing, business forms, greeting cards, and label and wrapper printing. Printing is one of the largest industries in the United States, with more than 800,000 employees and approximately 29,000 companies generating an estimated $133 billion in annual sales, according to the Printing Industries of America/Graphic Arts Technical Foundation ("PIA/GATF") 2010 Print Market Atlas. Quad/Graphics operates primarily in the commercial print portion of the printing industry. The PIA/GATF defines this portion to include advertising printing such as direct mail, circulars, brochures, displays, inserts and pamphlets; business cards; stationery; catalogs; directories; newspapers; magazines and books. According to the PIA/GATF 2010 Print Market Atlas, the United States commercial printing sector, excluding newspapers, is estimated to generate approximately $66 billion in sales annually. The printing industry is also highly fragmented and competitive, with the largest 400 printers representing less than 40% of

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the overall United States and Canadian market, based on the 2010 Printing Impressions PI400 and PIA/GATF 2010 Print Market Atlas.

        Demand for printed products has generally correlated with real gross domestic product growth, as economic activity and advertising spending are key drivers of demand for printing and related services. More recently, the global economic recession has caused advertisers to dramatically reduce spending. Throughout 2009 and 2008, magazine publishers facing diminished advertising pages reduced total page counts, catalog marketers reduced page counts, circulation and the frequency of print campaigns, retailers curbed investments in store inventory and reduced advertising, and other advertisers reduced their direct mail campaigns, particularly in the banking, insurance, credit card, real estate and nonprofit industries. Decreasing print volumes caused by the impacts of the economic recession, increases in postage expenses (which significantly outpaced inflation over the last 10 years) and the increase in the use of alternative marketing technologies, as discussed below, led many printing businesses to fail and the industry to undergo consolidation.

        As the economic environment stabilized in 2010, the Company saw print volumes begin to do the same. However, competition in the highly fragmented printing industry remains intense as the industry is still in the process of consolidating and suffering from overcapacity. The impacts of overcapacity and intense competition have led to continued downward pricing pressures. Management believes the ongoing uncertainty of the economic environment and the continued pricing pressure in the printing industry created by the highly competitive landscape requires a focus on financial flexibility, a strong balance sheet and an efficient cost structure.

        In response to the economic recession, Quad/Graphics believes that traditional users of print and print-related services have turned their focus to generating and tracking the highest returns on their marketing dollars. In addition, the emergence of alternative marketing technologies, such as online distribution and hosting of content and mobile technologies, on both a stand-alone basis and in conjunction with other marketing channels, has resulted in these traditional users of print and related services allocating their marketing and advertising spending across a wide and expanding selection of non-print electronic media options. The Company believes that advertisers and other traditional users of print find that they receive the greatest return on their marketing dollars when they effectively utilize data to target the appropriate customers and combine digital alternatives with customized print products in a targeted, multi-channel marketing campaign.

        In this increasingly multichannel marketplace, Quad/Graphics believes that the printing industry has been driven to make substantial capital investments in new technologies, such as those to deliver targeted and customized print solutions to integrate effectively its products and services within a multichannel marketing campaign. In addition, the Company believes the commercial print industry has moved toward shorter print runs and increased production efficiency of products with lower page counts and increasing complexity. Finally, the Company believes that successful commercial printing companies will invest in finishing and mailing and logistics capabilities to minimize their clients' total manufacturing cost, which, in addition to print, includes mailing and logistics. For many customers, mailing and distribution represent their largest cost, typically two to three times the cost of their print expense. Therefore, Quad/Graphics believes a printer's ability to impact mailing and distribution expenses through data management and sophisticated, automated distribution and manufacturing and finishing equipment is quite valuable to customers.

Seasonality

        The Company is subject to seasonality in its quarterly results as net sales are typically higher in the third and fourth quarters of the calendar year as compared to the first and second quarters. Seasonality is driven by increased magazine advertising page counts and retail inserts, catalogs and books due

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primarily to back-to-school and holiday related advertising and promotions. Quad/Graphics expects the seasonality impact in future years to continue to track with historical patterns.

Competitive Advantages

        Quad/Graphics believes its success has been fueled by its efficient and modern manufacturing platform, its mailing and distribution capabilities, its commitment to ongoing innovation and rapid adoption of technology, its intense customer service focus, its distinct corporate culture, and the continuity in its ownership and management. Quad/Graphics believes that these competitive advantages have resulted in it being one of the most profitable commercial printing companies in the industry, as measured by Adjusted EBITDA margin. This profitability, in turn, has fueled Quad/Graphics' investment in equipment, research and development and other technological innovations, which helps minimize a customer's total cost of print production and increase its customers' revenues.

        Quad/Graphics' belief that it is one of the most profitable commercial printing companies in the industry is based on a comparison of its Adjusted EBITDA margin with the Adjusted EBITDA margin of the seven largest publicly-traded commercial printing companies in North America, ranked by revenue, for each of the last three years.

Efficient and Modern Manufacturing Platform

        The key components of Quad/Graphics' manufacturing platform are described below.

        The Company has continuously invested in its manufacturing platform. The investment in modern equipment allows for more pages to be printed for each revolution of the press, reducing the amount of time that each individual printing job takes to complete. In addition, the Company's long-standing commitment to investing in manufacturing process improvements has led to increases in productivity, reductions in waste and smaller crew sizes. The Company's investment in its manufacturing platform has consistently been based on evaluating investment opportunities on the useful economic life of the underlying equipment rather than focusing on the potential mechanical life of the equipment. This discipline is critical in an industry in which technological change can create obsolescence well before the end of the mechanical life of equipment.

        Another key aspect of the Company's modern manufacturing platform is the combination of its footprint of megaplants (plants having an average size greater than 1.0 million square feet) and smaller strategically located facilities across the United States. Quad/Graphics believes that the large plant size of certain of its key printing facilities allows the Company to drive savings in certain product lines (such as magazines and catalogs). The Company believes that it accomplishes this through its investment in efficient and modern equipment and integrated automation and advanced finishing technologies. Redundancy of capacity in major equipment also provides the Company with the flexibility to meet difficult customer service requirements, such as late-breaking copy changes or the need to increase or reduce the number of pages or copies in a print run. Moreover, Quad/Graphics believes that its large plants enable optimal distribution by utilizing the Company's in-house distribution services. In addition to the Company's megaplant facility model, the Company has been able to leverage the locations of the former World Color Press facilities, which are strategically located from a geographic and demographic perspective to be within approximately six hours of the typical final delivery point, to meet specific customer needs in certain other types of product lines (such as direct marketing and retail insert products). The close proximity to the recipient provides for later content changes in this product type and faster delivery times in-home or in-newspaper.

        Quad/Graphics has also focused on investments in automation designed to reduce headcount and labor costs. Capital investments in advanced applications of robotics and automation and manufacturing process improvements have allowed the Company to lower personnel costs through attrition, reduction of overtime and temporary labor, and workforce reductions.

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        Quad/Graphics' continued investment in its distribution capabilities focuses on increasing the customer's return on print spending and lowering overall distribution costs. As discussed below, the Company believes that it achieves these goals through its integrated data, finishing and logistics operations.

        Finally, Quad/Graphics has invested in vertically-integrated, non-print capabilities to assist it in delivering lower costs for its clients, enhancing customer service levels, increasing flexibility and providing more aggregate services to each customer. Such capabilities include data management, imaging, logistics and distribution, ink manufacturing and equipment research and design. This vertical integration allows substantial control over critical links in the overall print supply chain, such as the Company's ink manufacturing capabilities, that help it control the quality, cost and availability of a key input in the printing process.

Leading Distribution Capabilities

        Quad/Graphics' distribution capabilities integrate data analytics, finishing technology and logistics operations to (1) create targeted and personalized printed materials for its customers, which increase consumer response rates and maximize a customer's return on print spending, and (2) maximize distribution efficiency and reduce costs for its customers. Personalization and targeting create the opportunity to reach the right recipients with the right (or relevant) message at the right time, resulting in a significant increase in response rates for the Company's customers. This, in turn, lowers a customer's overall cost per response. Quad/Graphics uses its data analytic capabilities to analyze mail list data, demographics data, consumer transaction data and other consumer specific data to help its customers target consumers through personalized printed materials. In addition, the Company believes that its investment in binding and mailing operations provides customers greater targeting, flexibility and cost savings by creating targeted and variable print communications cost-effectively on a mass scale. Finally, the Company believes that integrating its analysis of mail list data with its logistics services (including the use of ground and rail) allow it to reduce customer freight costs for shipments to newsstands and postal centers while providing a high level of dependability and rapid response times that are crucial to the delivery of time-sensitive materials. In addition, ownership of a fleet of company-owned tractor-trailers helps ensure that the Company will be able to meet its customers' distribution capacity requirements.

        Postal rates are a significant component of many customers' cost structures and Quad/Graphics believes that postal costs influence the number of pieces that its customers print and mail. Through its logistics operations, finishing technology and data analytics, the Company manages the distribution of most of its customers' products (primarily in the United States) to maximize efficiency and reduce these costs for its customers. The Company helps its U.S. customers reduce their overall postage costs through what it believes, based on information published by (or otherwise obtained from) its competitors, is the industry's largest co-mail program. The Company's co-mail program involves the sorting and bundling of printed products to be mailed to consumers, in order to facilitate better integration with the United States Postal Service. The United States Postal Service offers significant work-sharing discounts for this sorting and bundling as it reduces handling by the postal service. In the second quarter of 2011, the Company intends to have in place a number of strategically placed regional co-mail hubs. These hubs will complement the Company's existing co-mail capabilities located in many of its plants and allow the Company to offer an industry leading logistics solution that incorporates pre-sort optimization with distributed co-mail throughout the United States. In 2010, Quad/Graphics co-mailed more than 3.6 billion magazines and catalogs, earning in excess of $90 million in discounts from the United States Postal Service on behalf of its customers.

        Quad/Graphics is also able to leverage the volume of products running through its large plants for further customer distribution savings. In addition, each major United States population center is within

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one day's drive of at least one of the Company's strategically located facilities, providing its customers the flexibility to print closest to their ultimate consumers.

Commitment to Ongoing Innovation and Rapid Adoption of Technology

        Quad/Graphics' has had a continued commitment to research and development, manufacturing process improvements and the rapid adoption of technological innovations. The Company's engineers, designers and computer experts, working closely with its press and finishing operators, have developed a range of advancements from the manufacturing platform to the finishing department. In fact, in the 2009 Patent Board's Conglomerate Company Patent Scorecard™ published in The Wall Street Journal, Quad/Graphics received the highest Research Intensity™ score of any of the top 50 companies in the Heavy Industrial Equipment sector (moving up from second out of the top 35 companies in 2008). In that same Patent Scorecard™, in both 2009 and 2008 Quad/Graphics was ranked as the highest printer or printing equipment-related manufacturer in the Industry Impact™ category, which quantifies how influential a company's patent portfolio is on the development of technologies in other companies.

        The value of Quad/Graphics' innovations to the industry is supported by the fact that it generates revenue by supplying some of these technology solutions and consulting services to other printers. In particular, the Company believes it is an internationally known, leading manufacturer of electronic process control systems and maintains offices in the Netherlands, Ireland, India, Japan, Singapore and China to sell and service these products to equipment manufacturers and other printers.

        Another example of Quad/Graphics' innovative approach is the integration of its imaging, manufacturing and distribution networks into a single platform using a networked information technology (IT) infrastructure. This single platform present in the legacy Quad/Graphics facilities provides seamless information flow across sales and estimating, production planning, scheduling, manufacturing, warehousing, logistics, invoicing, reporting and customer service.

        The Company intends to leverage these IT tools and capabilities by extending their integration into certain operations of the former World Color Press facilities. The Company presently intends to integrate the networked information technology in each of these facilities with respect to the sales and marketing, supply chain, finance, human resources and distribution functions that support the magazine, catalog, retail and direct mail manufacturing operations. Recognizing the differences in operational needs and processes, the Company presently intends to retain the current technology platforms for the book and directory manufacturing operations, which the Company believes is sufficient to support these operations.

Intense Focus on Customer Service

        Throughout its history Quad/Graphics has focused the attention of the entire organization on customers and their needs. By empowering employees to enact customer solutions, the Company provides its clients with a tremendous amount of flexibility, allowing them be more nimble and responsive to the needs of the marketplace. Quad/Graphics "high tech/high touch" approach has led to what the Company believes is a reputation in the industry for excellent customer service. While transacting a high level of detail on a day-to-day basis, the rapid adaptation and use of technology allows the customer relationship to evolve to a more consultancy oriented exchange, and the service team is positioned to offer more strategic value rather than just manage operational details.

        Recognizing that technology is not a substitute for face-to-face relationships, but rather a way to enhance them, the Company has equipped its employees to work closely across divisions and all facilities via a singular, integrated network. At the center of this integration are Quad/Graphics' SmartTools™. These real-time information management tools link the Company's people and equipment throughout the facilities held by Quad/Graphics prior to the acquisition of World Color Press, automating the exchange of information and streamlining the entire printing process from

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creation and imaging through to press, finishing and distribution. SmartTools™ extend to the Company's clients as well, providing 24/7 access to the very same up-to-the-minute information used by the Company's production, customer service and sales representatives, and allowing them to better manage current projects and plan future work.

        The Company intends to leverage SmartTools™ by extending their integration into certain operations of the former World Color Press facilities in the same manner as the integration of the Company's networked information technology infrastructure discussed above.

Distinct Corporate Culture

        Quad/Graphics believes that its distinct corporate culture, which encourages a long-term perspective, an organization-wide entrepreneurial spirit and an opportunistic mentality, has contributed to its long-term success. The Company fosters an entrepreneurial environment by empowering and encouraging employees to take responsibility and ownership of projects and enact solutions within what it believes is a flat hierarchical structure. Employees in the United States who have been employed for at least one full calendar year also have a beneficial ownership in the Company through company stock held in a profit sharing plan, enhancing the sense of ownership present within the employee base. The Company believes that the empowerment, engagement and development of its employee owners fosters a strong partnership approach within the business.

        Quad/Graphics invests in its employees by providing ongoing technical, job and safety training; retirement planning; and health and wellness benefits. For example, through QuadMed primary care clinics located at select worksite locations, the Company provides high-quality, low-cost primary medical care and specialty services to employees and their families.

Continuity of Control

        The Quadracci family continues to play a significant role at Quad/Graphics. Joel Quadracci, Chairman, President and Chief Executive Officer, is the son of the late founder Harry V. Quadracci, and the Quadracci family remains the largest shareholder and maintains a majority voting power stake in the Company and active membership on the Company's board of directors. The Company believes that the continuity of the Quadracci family's involvement has enabled it to maintain consistent strategic goals and strategy deployment, ensure continuity in its management team and enable an entrepreneurial culture and core set of values for its employees.

        Quad/Graphics is led by an experienced management team with a proven track record in the printing industry. Members of the senior management team average 18 years of experience with the Company. This continuity of management helps to maintain consistent strategic goals and strategy deployment and enable Quad/Graphics' distinct corporate culture throughout the organization.

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Strategy

        Quad/Graphics is focused on the following strategic goals.

Redefine Print as the Foundation of Coordinated MultiChannel Marketing Campaigns

        The Company believes that print remains the core element of an effective multichannel marketing campaign. The Company seeks to facilitate coordinated multichannel marketing campaigns utilizing print, email and personalized websites to engage consumers, drive higher response rates and, thereby, returns for advertisers on their marketing dollars. According to a 2011 study by InfoTrends, marketers report an average improvement of 34% for multichannel campaigns (using print, e-mail, and web landing pages) over single channel print-only campaigns and a 2008 study by iProspect found that 67% of online action is driven by offline messages. In addition, more than 50% of marketers are utilizing three or more forms of media in their direct marketing campaigns according to a 2010 InfoTrends study. Equally important, the Art Technology Group found that nearly one-third of consumers say they rely on three or more different channels (online, in-store, print catalogs, mobile devices, customer service representatives) from the time they start researching products and services to when they complete their purchase. The Company intends to continue to redefine print communications as the foundation of multichannel marketing campaigns by:

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consulting with customers on strategies for coordinating personalized, targeted print communications with other media channels including electronic media;



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leveraging its integrated data analytics, finishing technology and logistics operations, which allow customers to create customized communications within printed products on a cost-effective basis, with the objective of delivering higher responses at a lower cost; and



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deploying its digital media capabilities, including planning, executing and monitoring email campaigns, the use of personalized URLs, digital editions, and the creation and maintenance of website portals, in support of effective, print focused marketing campaigns.

Utilize an Efficient and Innovative Distribution Network to Provide Enhanced Value to Customers

        Quad/Graphics has made strategic capital expenditure investments to build what it believes is one of the most efficient and innovative distribution networks in the commercial printing industry. The Company's goal is to maintain a fully-integrated, national distribution network that includes:

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technology and processes to reduce postage expenses for its U.S. customers, typically their largest expense, including an extensive co-mail program that combines and mails numerous clients' mail pieces together to capture sorting and handling discounts from the United States Postal Service;



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in-house transportation and logistics services, including a fleet of company-owned tractor-trailers, that enable rapid deployment of products; and



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advanced finishing capabilities that enables enhanced co-mailing efficiencies.

        Quad/Graphics intends to continue to invest in new distribution equipment, technology and services to deploy value-added distribution solutions for its customers.

Maximize Operational and Technological Excellence

        Quad/Graphics utilizes a disciplined return on capital framework to make significant investments in its print manufacturing platform and data management capabilities to result in what it believes is one of the most integrated, automated, efficient and modern manufacturing platforms in the industry. In addition, a culture of ongoing manufacturing process improvement is a high priority throughout the

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Company and drives innovation. The Company has implemented continuous improvement programs in its magazine and catalog, and directory product lines. The Company is in the process of implementing continuous improvement programs for its remaining product lines, such as its books, retail, direct mail and other commercial specialty products and expects to complete such implementation by June 2012. The in-house research and development division has been instrumental in developing and deploying what the Company believes are industry-leading manufacturing solutions, which has allowed the Company to continue to be price competitive and profitable.

Drive Domestic and International Growth in Core and Related Businesses

        Quad/Graphics intends to continue to seek opportunities to grow diversified streams of revenue, utilizing core capabilities to expand its print and print-related products and services, grow its core businesses, and strategically increase geographic coverage. The Company expects to utilize a combination of organic, partnership and acquisition growth to meet these goals.

Empower, Engage and Develop our Employees

        Quad/Graphics believes that its distinct corporate culture, which encourages a long-term perspective, an organization-wide entrepreneurial spirit and an opportunistic mentality, will contribute to its long-term success. The Company proactively fosters an entrepreneurial environment by empowering and encouraging employees to take responsibility and ownership of projects and enact solutions within a flat hierarchical structure. The Company also endorses a "promotion-from-within" strategy based on the premise that many of its best leaders are those who have had a long tenure with the company and understand its core business and customer base. The Company supports the empowerment, engagement and development of its employees by investing in its employee base through education in the latest print technologies as well as job training and leadership principles. In addition, the Company supports its employees through retirement planning and the provision of health and wellness benefits.

Segment Description

        Quad/Graphics operates primarily in the commercial print portion of the printing industry. Following completion of the acquisition of World Color Press, the Company continues to have three reportable segments: North America Print and Related Services, International and Corporate. The former United States Print and Related Services segment was expanded to include World Color Press' Canadian operations and is now referred to as the North America Print and Related Services segment, and World Color Press' Latin American operations have been included within the International segment.

North America Print and Related Services

        The North America Print and Related Services segment includes the Company's United States and Canada printing operations, managed as one integrated platform. This segment's products include catalogs, magazines, special interest publications, direct mail products, retail inserts, books and directories. The related service offerings include data management, imaging, production workflow, direct marketing and logistics services. This segment also includes the design, development, manufacture and service of printing-related auxiliary equipment, as well as the manufacture of ink. This segment accounted for approximately 90% of Quad/Graphics' consolidated net sales in 2010 and approximately 87% of its consolidated net sales in 2009 and 2008.

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International

        The International segment includes Quad/Graphics' printing operations in Europe and Latin America, which prior to the World Color Press acquisition included operations in Poland, Argentina and Brazil, and post-acquisition includes Poland, Mexico, Colombia, Peru, Chile and expanded operations in Argentina and Brazil. This segment produces and delivers all of the Company's product and service offerings in Europe and Latin America, with the exception of printing-related auxiliary equipment, which is included in the North America Print and Related Services segment. The International segment accounted for approximately 10% of the Company's consolidated net sales in 2010 and approximately 13% of its consolidated net sales in 2009 and 2008.

Corporate

        The Corporate segment consists of unallocated general and administrative activities and associated expenses including, in part, executive, legal, finance, information technology and human resources.

        For additional financial information by segment and geographic area, see Notes 24 and 25 to the Consolidated Financial Statements, respectively, in Item 8 of this Annual Report on Form 10-K.

Competition

        The printing industry, with approximately 29,000 companies in the United States, is highly fragmented and competitive. Although there has been industry consolidation, particularly in the past decade, the largest 400 printers still represent less than 40% of the United States and Canadian market, according to the 2010 Printing Impressions PI400 and the PIA/GATF 2010 Print Market Atlas. According to the December 2010 Printing Impressions PI400, Quad/Graphics was the second largest commercial printer in the United States as measured by revenue. The Company also faces competition from alternative sources of communication, including email, the internet, mobile technologies, electronic readers and interactive television.

        Across Quad/Graphics' range of products and services, competition is based on a number of factors, including the following:

•

total price of printing, materials and distribution;



•

quality;



•

range of services offered;



•

distribution capabilities;



•

customer service;



•

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.

Customers

        Quad/Graphics enjoys long-standing relationships with a diverse base of clients, which includes both national and regional corporations in the United States, Canada, Europe and Latin America. The Company's customers 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 relationship with its 10 largest customers averages more than 25 years in duration and Quad/Graphics typically signs multi-year print agreements with these customers.

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        In 2010, Quad/Graphics served more than 7,400 customers, and its ten largest customers accounted for approximately 24% of net sales, with none representing more than 5% individually. The Company believes that its large and diverse customer base, broad geographic coverage and extensive range of printing and print-related capabilities are competitive strengths.

Patents, Trademarks and Trade Names

        Quad/Graphics operates three research and development facilities that support the development of new equipment, process improvements, raw materials and content management and distribution technologies to better meet customer 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/Graphics currently holds or has rights to commercialize 123 patents and applications relating to its business. Additionally, the Company markets products, services and capabilities under a number of trademarks and trade names. The last of Quad/Graphics' presently issued patents are to expire in 2030, but the Company has a number of pending patent applications that it believes will help ensure the continued strength of its portfolio. Quad/Graphics aggressively defends its patent portfolio and intends to continue to do so in the future.

Raw Materials

        The primary raw materials Quad/Graphics uses in its print business are paper, ink and energy.

        The majority of paper used by the company is supplied directly by its customers. For those customers that do not directly supply their own paper, Quad/Graphics makes use of its purchasing efficiencies to supply paper by negotiating with leading paper suppliers to maximize purchasing efficiencies, uses a wide variety of paper grades, weights and sizes, and does not rely on any one supplier. In addition, the Company will generally include 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 customers' demand for printed products. Quad/Graphics' working capital requirements, including the impact of seasonality, is partially mitigated through the direct purchasing of paper by the majority of Quad/Graphics' customers.

        Quad/Graphics produces the majority of ink used in production, allowing it to control the quality and supply of key inputs. Raw materials for the ink manufacturing process are purchased externally from a variety of suppliers.

        Quad/Graphics generally cannot pass on to customers the impact of higher electric and natural gas energy prices on its manufacturing costs, and increases in energy prices in recent years have resulted in higher manufacturing costs for certain of its operations. The Company mitigates its risk through natural gas hedges where appropriate. In its logistic operations, however, the Company is able to pass a substantial portion of any increase in fuel prices directly to its customers.

Environmental Stewardship

        As the owner, lessee or operator of various real properties and facilities, Quad/Graphics is subject to various federal, state and local environmental laws and regulations, including those relating to air emissions; waste generation, handling, management and disposal; 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.

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        Quad/Graphics strives to be the leader in the printing industry in adopting new technologies and processes to protect the environment. The Company believes it has long been known for its environmental stewardship. In the past decade alone, the Company has been awarded more than 25 major environmental achievement honors, both on a state and national level, including becoming the first major manufacturer of any kind to achieve a Leadership in Energy and Environmental Design-Existing Building (LEED-EB) certification for an existing manufacturing site (its Sussex, Wisconsin facility in 2009, followed by its Hartford, Wisconsin facility in 2010). Quad/Graphics' proactive approach to incorporate environmentally-friendly practices has also positively impacted operating costs through the reduction of waste, energy use, emissions and labor, as well as through the implementation of water conservation solutions. The Company has also undertaken steps to reduce greenhouse gas emissions from its manufacturing processes and to improve fuel efficiency and reduce emissions in its fleet of company-owned tractor trailers.

Employees

        As of December 31, 2010, Quad/Graphics had approximately 21,000 employees in the United States and Canada, approximately 4,400 of which are covered by a collective bargaining agreement. As of that date, the Company also had approximately 4,000 employees outside of the United States and Canada, the majority of which are either governed by agreements that apply industry-wide, by a collective agreement or through works councils or similar arrangements. Quad/Graphics believes that its employee relations are good and that the Company maintains an employee-centric culture.

Business Acquisitions

        In addition to the 2010 acquisition of World Color Press, the Company's management has been pursuing strategic growth initiatives through acquisitions in adjacent product lines. During 2010, the Company acquired HGI Company, LLC ("HGI"). HGI is a full-service multi-faceted commercial and specialty printing company that produces a wide range of catalogs, publications, books, marketing collateral and retail point-of-purchase displays and materials.

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Executive Officers of Quad/Graphics

        The following table sets forth the names, ages (as of February 28, 2011) and positions of Quad/Graphics' executive officers.

        Mr. Quadracci has been a director of Quad/Graphics 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/Graphics 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 & Administration, and President and Chief Operating Officer. Mr. Quadracci is the son of Betty Ewens Quadracci, a director and employee of Quad/Graphics, and the brother-in-law of Christopher B. Harned, a director of Quad/Graphics.

        Mr. Fowler joined Quad/Graphics in 1980 as its Vice President and Controller, became Senior Vice President and Chief Financial Officer in May 2005, and became Executive Vice President and Chief Financial Officer in July 2010. Prior to joining Quad/Graphics, Mr. Fowler worked for Arthur Andersen LLP for six years.

        Mr. Frankowski has been Executive Vice President of Manufacturing & Operations and President of Europe since July 2010. Prior thereto, Mr. Frankowski was Senior Vice President of Manufacturing from 2004 to July 2010, President of QuadWinkowski, Quad/Graphics' Polish subsidiary, from 2008 to July 2010 and he served in various other capacities since he joined Quad/Graphics in 1979.

        Mr. Blais has been Executive Vice President and President of Magazines and Catalogs since July 2010. Prior thereto, Mr. Blais was Senior Vice President of Sales & Administration from May 2005 to

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July 2010, Quad/Graphics' Vice President of Operations from 1999 to May 2005 and in various other capacities since he joined the company in 1984.

        Mr. Freschi joined Quad/Graphics as its President of Retail Inserts, Directories, Books and Canada in July 2010. Prior to joining Quad/Graphics, Mr. Freschi served World Color Press as President of North American Retail, Sunday Magazine and Catalogs since 2007 and President, World Color Press North America from November 2009 to July 2010, in which capacity he was responsible for all division manufacturing, sales and marketing operations in the United States and Canada. Mr. Freschi joined World Color Press in 1994 and held various positions in sales and operations since that date.

        Mr. Jaeger has served as President of QuadDirect since August 2007 and as Vice President of Information Systems & Infrastructure for Quad/Graphics since 2006. Prior thereto, Mr. Jaeger had been Quad/Graphics' Vice President of Information Systems from 1998 to 2006 and had worked in various other capacities since he joined the company in 1994.

        Mr. Riebe has served as Quad/Graphics' President of Logistics & Distribution since July 2010. Prior thereto, Mr. Riebe was Vice President of Distribution from 1999 to July 2010 and served as Corporate Director of Distribution from 1987 to 1999. He joined Quad/Graphics in 1984. Mr. Riebe serves on the board of directors of IDEAlliance, an industry organization.

        Mr. Trahan joined Quad/Graphics in July 2010 as its President of Latin America. Prior to joining Quad/Graphics, Mr. Trahan served as President of World Color Press Latin America from 1997 to July 2010. He joined World Color Press in 1988 as President of the Eastern Canada Group.

        Mr. Bolt joined Quad/Graphics in March 2009 as its Vice President of Employee Services and became Vice President of Human Resources in July 2010. Prior to joining Quad/Graphics, Mr. Bolt had worked for 10 years in various capacities for Johnson Controls, Inc., a provider of automotive interiors, products and services for buildings, and batteries for automobiles and hybrid electric vehicles, along with systems engineering and service expertise. Most recently, Mr. Bolt was Vice President of Human Resources for Johnson Controls, Inc.'s Building Efficiency division from January 2007 until March 2009, Vice President of Human Resources for the Power Solutions division from 2005 until 2007 and Director of Human Resources for the Automotive Interiors division from 1999 until 2005.

        Mr. Honan has served as Quad/Graphics' Corporate Controller since he joined the company in May 2009. He became Vice President and Corporate Controller in December 2009 and was named Chief Accounting Officer in July 2010. Prior to joining Quad/Graphics, Mr. Honan served as Vice President, General Manager and Chief Financial Officer of Journal Community Publishing Group, a subsidiary of media conglomerate Journal Communications Inc., for five years. Before joining Journal Community Publishing Group, Mr. Honan worked in executive-level roles in investor relations and corporate development at Newell Rubbermaid, a global marketer of consumer and commercial products. Mr. Honan also worked at accounting firm Arthur Andersen LLP for 11 years.

        Ms. Packham joined Quad/Graphics in July 2010 as its Vice President of Marketing & Communications. Prior to joining Quad/Graphics, Ms. Packham served as World Color Press' Vice President of Marketing for the Marketing Solutions Group from 2003 to 2009. In 2010, Ms. Packham was named World Color Press' Vice President of Marketing for North America. She joined World Color Press in 1995 as a senior financial analyst.

        Mr. Schiesl has served as Quad/Graphics' Vice President & General Counsel since December 2006 and as its General Counsel since he joined the company in August 2003. Prior to joining Quad/Graphics, Mr. Schiesl was Senior Counsel at Harley-Davidson, Inc., the parent company for the group of companies doing business as Harley-Davidson Motor Company and Harley-Davidson Financial Services, among others. Prior to joining Harley-Davidson, Inc., Mr. Schiesl practiced law at Foley & Lardner LLP, a Milwaukee-based law firm.

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        Mr. Vanderboom has served as Quad/Graphics' Treasurer since 2007 and as its Vice President & Treasurer since 2008. Prior to becoming Quad/Graphics' Vice President & Treasurer, Mr. Vanderboom served as Director of Treasury, Risk & Planning from 2006 until 2007, as Controller of Quad/Graphics' Distribution and Facilities departments from 2004 until 2006, and as Controller of Quad/Graphics' Parcel Direct subsidiary.

        Executive officers of the Company are elected by and serve at the discretion of the Company's board of directors. Other than described above, there are no family relationships between any directors or executive officers of Quad/Graphics.

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/Graphics' 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.

Quad/Graphics operates in a highly competitive industry.

        The industry in which the Company operates is highly competitive. The printing industry, with approximately 29,000 companies in the United States, is highly fragmented. Although there has been industry consolidation, particularly in the past decade, the largest 400 printers still represent less than 40% of the United States and Canadian markets, according to the 2010 Printing Impressions PI400 and the PIA/GATF 2010 Print Market Atlas. The Company competes for commercial business not only with large and mid-sized printers, but also with smaller regional printers. In certain circumstances, due primarily to factors such as freight rates and customer preference for local services, printers with better access to certain regions of a given country may be preferred by customers in such regions. Quad/Graphics also faces competition from alternative sources of communication, including email, the internet, electronic readers, interactive television and electronic retailing.

        In recent years, the printing industry has experienced a reduction in demand for printed materials and overcapacity. The impacts of overcapacity and intense competition have led to continued downward pricing pressures. Printing industry revenues may continue to decrease in the future. Some of the industries that the Company services have been subject to consolidation efforts, leading to a smaller number of potential customers. Furthermore, if the smaller customers of Quad/Graphics are consolidated with larger companies using other printing companies, the Company could lose its customers to competing printing companies.

        The printing industry is highly competitive and 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.

Significant downward pricing pressure and fluctuating demand for printing services caused by factors outside of the Company's control may adversely affect the Company.

        The Company has experienced significant downward pricing pressures for printing services in the past and pricing for printing services has declined significantly in recent years. Such pricing may continue to decline from current levels. In addition, demand for printing services has fluctuated in recent years and may continue to fluctuate. Any increases in the supply of printing services or decreases in demand could cause prices to continue to decline, and prolonged periods of low prices,

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weak demand and/or excess supply could have a material adverse effect on the Company's business growth, results of operations and liquidity.

Quad/Graphics may not be able to improve its operating efficiency rapidly enough to meet market conditions.

        Because the markets in which the Company competes are highly competitive, Quad/Graphics will need to continue to improve its operating efficiency in order to maintain or improve its profitability. There is no assurance that the Company will be able to do so in the future. 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.

Quad/Graphics may be adversely affected by increases in its operating costs, including the cost and availability of raw materials, labor-related costs, fuel and other energy costs and freight rates.

        Paper, ink and energy are the primary raw materials used by the Company in the operation of its business. 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 Quad/Graphics 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.

        In general, the Company has been able to pass along increases in the cost of paper to many of its customers. If the Company is unable to continue to pass along increases in the cost of paper to its customers, future increases in paper costs would adversely affect its margins and profits. If Quad/Graphics passes along increases in the cost of paper and the price of the Company's products and services increases as a result, customer demand could be adversely affected and thereby negatively impact Quad/Graphics' financial performance.

        The Company has less frequently been able to pass along increases in the cost of ink and energy to its customers. If the Company is unable to pass along increases in the cost of ink and energy, future increases in these items would adversely affect its margins and profits. If Quad/Graphics is able to pass along increases in the costs of ink and energy and the price of the Company's products and services increases as a result, customer demand could be adversely affected and thereby negatively impact Quad/Graphics' financial performance.

        Due to the significance of paper in the Company's 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 customers. Although Quad/Graphics generally has not experienced significant difficulty in obtaining adequate quantities of paper, unforeseen 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.

        Labor represents a significant component of the cost structure of Quad/Graphics. Increases in wages, salaries and benefits, such as 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 following the acquisition of World Color Press and may affect the solvency of these pension plans.

        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 customers. If the Company is not able to pass along a substantial portion of increases in freight

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rates or in the price of fuel, future increases in these items would adversely impact the Company's margin and profits. If Quad/Graphics passes along increases in the cost of freight and fuel and the price of the Company's products and services increases as a result, customer demand could be adversely affected and thereby negatively impact Quad/Graphics' financial performance.

The synergies expected to be produced from integrating World Color Press' business with Quad/Graphics' business following the acquisition of World Color Press may not be realized or may require the Company to incur additional costs.

        The success of the acquisition of World Color Press will depend, in part, on Quad/Graphics' ability to realize the synergies expected to be produced from integrating World Color Press' businesses with Quad/Graphics' pre-acquisition business due to capacity consolidation (primarily in the United States), purchasing and supply chain efficiencies, logistics and distribution savings, and consolidation of corporate headquarters, among other areas. Quad/Graphics has identified somewhat more than $225 million of pre-tax annualized synergies that could be realized within 24 months after the consummation of the acquisition of World Color Press.

        Management estimates that the total cost of achieving the synergies will be approximately $195 to $240 million in integration costs, most of which the Company believes will be incurred in the first 24 months after the consummation of the acquisition, and may exceed this range. The Company's estimates are based on a number of assumptions, including, but not limited to, assumptions relating to plant rationalization, plant and equipment utilization, selling, general and administrative expense savings, logistics and distribution savings, and purchasing and supply chain efficiencies, which may prove incorrect.

        The Company also may incur additional and/or unexpected costs in order to realize the anticipated synergies. While management believes that the synergies are achievable, the Company may be unable to realize all of the synergies within the time frame expected or at all. The integration process is and will continue to be complex, costly and time-consuming. The difficulties of integrating World Color Press' businesses may include, among others:

•

unanticipated issues in integrating manufacturing, logistics, information, communications, and other systems;



•

unanticipated changes in applicable laws and regulations;



•

failure to retain key employees, which might adversely affect operations and the ability to retain other employees;



•

failure to retain customers; and



•

other unanticipated issues, expenses and liabilities.

        Quad/Graphics may not accomplish the integration of World Color Press' businesses smoothly, successfully or within the anticipated cost range or timeframe. The diversion of management's attention from the Company's operations due to the integration effort and any difficulties encountered in combining operations could prevent the Company from realizing the full benefits anticipated to result from the acquisition of World Color Press and could adversely affect its business.

Technological changes may adversely affect Quad/Graphics' products and services and may require the Company to make capital expenditures to maintain its platform and processes and to remain technologically and economically competitive, which may increase its costs or disrupt its operations.

        Technological changes continue to increase the accessibility and quality of electronic alternatives to traditional delivery of printed documents through the online distribution and hosting of media content and the electronic distribution of documents and data. The acceleration of consumer acceptance of

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such electronic media, as an alternative to print materials, may decrease the demand for the Company's printed products or result in reduced pricing for its printing services.

        Because production technologies continue to evolve, the Company has had to make significant capital expenditures to develop and maintain its platform and processes, and the Company expects to be required to make capital expenditures to maintain its platform in the future. Quad/Graphics also may be required to make capital expenditures and successfully develop and integrate new technologies to remain technologically and economically competitive. If the Company cannot obtain adequate capital or does not respond adequately to the need to develop and integrate changing technologies in a timely manner, its results of operations, financial condition or cash flows may be adversely affected.

Changes in postal rates, postal regulations and postal services may adversely impact demand for Quad/Graphics' products and services.

        Postal costs are a significant component of the cost structures of many of the Company's customers, and potential customers, and postal rate changes can influence the number of pieces that these customers will be willing to mail. Any resulting decline in print volumes mailed could have an adverse effect on the Company's business. In addition, integrated distribution with the postal service is an important component of the Company's business. Any change in the current service levels provided by the postal service could impact the demand that customers have for print services. The United States Postal Service has reported net losses in the last four fiscal years and has estimated a net loss for its current fiscal year and, as a result, may come under increased pressure to adjust its postal rates and service levels.

A significant portion of Quad/Graphics' revenues are derived from long-term contracts with customers, which may not be renewed on similar terms and conditions or may not be renewed at all. The failure to renew or be awarded such contracts could materially adversely affect Quad/Graphics' results of operations, financial condition and cash flows.

        The Company has historically derived a significant portion of its revenue from long-term contracts with important customers. If the Company loses important customers, is unable to renew such contracts on similar terms and conditions, or at all, or is not awarded new long-term contracts with important customers in the future, its results of operations, financial condition and cash flows may be adversely affected.

Changing future economic conditions and the effects of these conditions on certain of Quad/Graphics' customers in certain geographies may adversely affect the Company's results of operations.

        The uncertainty of future economic conditions could negatively impact certain of the Company's customers in some of the geographies in which the Company operates. This uncertainty about future economic conditions makes it difficult to forecast results of operations and to make decisions about future investments. Delays or reductions in customers' spending could have an adverse effect on demand for the Company's products and services, and consequently its results of operations, financial position and cash flow, and those adverse affects could be material.

Quad/Graphics and its facilities are subject to various laws and regulations, including environmental and privacy laws and regulations, and will become subject to additional laws and regulations in the future, which may subject the Company to material liability, require it to incur material costs or otherwise adversely affect its results of operations.

        The Company uses various materials in its operations that contain constituents considered hazardous or toxic under environmental laws and regulations. In addition, the Company's operations are subject to a variety of environmental laws and regulations relating to, among other things, air

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emissions, wastewater discharges and the generation, handling, storage, transportation and disposal of solid waste. Further, the Company is subject to laws and regulations designed to reduce the probability of spills and leaks and, in the event of a release, requiring an appropriate response to such an event. 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.

        The Company's operations generate wastes that are disposed of off-site. Under certain environmental laws, the Company may be liable for cleanup costs and damages relating to any contamination at these off-site disposal locations, or at the existing or former facilities of Quad/Graphics or World Color Press, whether or not the Company knows of, or was responsible for, the presence of such contamination. The remediation costs and other costs required to clean up or treat contaminated sites can be substantial. Contamination on and from such current or former locations may subject the Company to liability to third parties or governmental authorities for injuries to persons, property or natural resources and may adversely affect its ability to sell or rent its properties or to borrow money using such properties as collateral.

        The production of paper, which is a significant raw material for the Company, results in greenhouse gas emissions, as do certain of the Company's processes. 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 incurs ongoing capital and operating costs to maintain compliance with environmental laws, including monitoring its facilities for environmental conditions. The Company has taken, and, in the future, is expected to take, reserves on its financial statements to cover potential environmental remediation and compliance costs as it considers appropriate. There can be no assurance, however, that the liabilities for which reserves have been taken are the only environmental liabilities relating to the current or former locations of Quad/Graphics or World Color Press, that material environmental conditions not known to the Company do not exist, that future laws or regulations will not impose material environmental liability on the Company, or cause the Company to incur significant capital and operating expenditures, or that the actual environmental liabilities will not exceed reserves taken. In addition, failure to comply with any environmental regulations or an increase in regulations could adversely affect the Company's results of operations and financial condition.

        Quad/Graphics and its customers may be subject to various United States, European, Canadian and other foreign consumer protection, data privacy and "do not mail" requirements at the federal, state, provincial and local levels. To the extent that the Company or its customers become subject to additional or more stringent consumer protection and data privacy and similar requirements, their demand for the Company's services may decrease, which could adversely affect the Company's results of operations.

        In addition, Quad/Graphics is subject to requirements of United States, European, Canadian and other foreign occupational health and safety laws and regulations at the federal, state, provincial and local levels. These requirements are complex, constantly changing and have tended to become more stringent over time. It is possible that these requirements may change or liabilities may arise in the future in a manner that could have a material adverse effect on the financial condition or results of operations of the Company. There can be no assurance that the Company has been, or that the Company will be, at all times in complete compliance with all such requirements or that the Company will not incur material costs or liabilities in connection with those requirements in the future.

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Quad/Graphics' revenue is subject to cyclical and seasonal variations and may fluctuate significantly based on factors outside of its control.

        The business in which the Company operates is sensitive to general economic cycles and may be adversely affected by the cyclical nature of the markets it serves, as well as by local, regional, national and global economic conditions. The Company's business operations are also seasonal. Both Quad/Graphics and World Color Press have recognized the majority of their respective historical operating income during the past five years in the third and fourth quarters of the financial year, primarily as a result of the higher number of magazine pages and back-to-school, retail and holiday catalog promotions occurring during these periods. Within any year, this seasonality could adversely affect the Company's cash flows and results of operations.

Currently, there is a limited active market for Quad/Graphics' class A stock and, as a result, shareholders may be unable to sell their class A 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, the Company has not sold its class A stock to the public in any traditional type of offering (the only Quad/Graphics stock issued publicly was the class A stock issued to the former shareholders of World Color Press in the acquisition of World Color Press) and, therefore, there is currently a limited active market for the class A shares. The Company cannot predict the extent to which investor interest in the Company will lead to the development of an active trading market for its class A 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.

Quad/Graphics' debt facilities include various covenants imposing restrictions that may affect the Company's ability to operate its business.

        On September 1, 1995, as last amended on January 26, 2006, Quad/Graphics 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 $1.13 billion in various tranches. As of December 31, 2010, the borrowings outstanding under the Master Note and Security Agreement were $672 million. In connection with the acquisition of World Color Press, on April 23, 2010, Quad/Graphics entered into a $1.23 billion debt financing agreement with certain lenders. This financing agreement includes a $700 million term loan and a $530 million revolving credit facility. These lending arrangements include certain financial covenants (all financial terms, numbers and ratios are as defined in the respective debt agreements). Among these covenants, the Company must maintain the following (for each covenant, the most restrictive measurement has been included below):

•

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, 2010, the Company's leverage ratio was 2.36 to 1.00). This ratio will step down to 3.50 to 1.00 on December 31, 2012 and further step down to 3.25 to 1.00 on December 31, 2013.



•

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 3.00 to 1.00 (for the twelve months ended December 31, 2010, the Company's interest coverage ratio was 6.01 to 1.00). This ratio will step up to 3.25 to 1.00 on December 31, 2011 and further step up to 3.50 to 1.00 on December 31, 2012.



•

On a rolling twelve-month basis, the fixed charge coverage ratio, defined as consolidated EBITDA and rent expense to interest and rent expense, shall not be less than 1.50 to 1.00 (for the twelve months ended December 31, 2010, the Company's fixed charge coverage ratio was 2.94 to 1.00).

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•

Consolidated net worth of at least $745.8 million plus 40% of positive consolidated net income cumulatively for each year (as of December 31, 2010, the Company's consolidated net worth was $1.41 billion).

        The covenants also include certain limitations on acquisitions, indebtedness, liens, dividends and repurchases of capital stock. Pursuant to the Company's $1.23 billion debt financing agreement, the Company is prohibited from paying any dividends, repurchasing capital stock or making any distributions other than, among other limited situations, annual dividends or distributions not to exceed $60.0 million during each of 2011 and 2012. Starting January 1, 2013, the Company has additional dividend restrictions (based on free cash flow as defined in the debt financing agreement) if the Company's total leverage ratio is greater than 2.75 to 1.00, but has no restrictions if the Company's total leverage ratio is less than 2.75 to 1.00 (total leverage ratio as defined in the debt financing agreement).

        As of and for the rolling twelve month period ended December 31, 2010, the Company was in compliance with all of these, and all other, debt covenants. While the Company currently expects to be in compliance in future periods, there can be no assurance that these financial covenants will continue to be met. Quad/Graphics' failure to comply with these financial covenants could prevent the Company from borrowing additional amounts and could result in a default under any of the other Company debt agreements. Such default could cause the indebtedness outstanding under the credit facilities, by virtue of cross-acceleration or cross-default provisions, to become immediately due and payable.

Quad/Graphics may be adversely affected by interest rates, foreign exchange rates and credit risk.

        As of December 31, 2010, 54% 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.

        Because a portion of the Company's operations are outside 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-U.S. 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 currency 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 is exposed to risks of loss in the event of nonperformance by its customers. Some of the Company's customers may be 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 in its dealings with customers and other parties. Any increase in the nonpayment or nonperformance by customers could adversely affect the Company's results of operations and financial condition.

Through the acquisition of World Color Press, the Company has significant liabilities with respect to defined benefit pension plans and other postretirement benefits that could grow in the future and cause the Company to incur additional costs.

        As a result of the acquisition of World Color Press, the Company sponsors defined benefit pension plans for certain of its employees in the United States and Canada. The majority of the plans' assets are held in North American and global equities and fixed income or debt securities. The asset allocation as of December 31, 2010 was approximately 64% equities, 35% debt securities and 1% other. As a result of the acquisition of World Color Press, the Company also maintains postretirement medical benefits plans for certain of its employees. These postretirement medical benefit plans are not funded.

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        As of December 31, 2010, the Company had underfunded pension and other postretirement benefit liabilities of approximately $338 million for defined benefit plans and other postretirement benefits plans in the United States and Canada. Under current pension law, pension funding deficits are generally required to be funded over a seven-year period in the United States and over a ten-year period in Canada. In 2011, under current pension law, the contributions required to such plans are expected to total approximately $54 million (not including benefit payments). 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, and in particular North American, 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, as a result of the World Color Press acquisition, now participates in multiemployer pension plans in the United States and Canada. Prior to the acquisition by Quad/Graphics, World Color Press received notice that certain United States 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 may be subject to increased contribution rates associated with these plans or other multiemployer pension plans suffering from declines in their funding levels.

        Due to the significantly underfunded status of the United States multiemployer plans, the Company intends to withdraw from these multiemployer plans and replace 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. The U.S. multiemployer plans have provided estimates to Quad/Graphics of the withdrawal liability that it would incur, assuming a hypothetical immediate and complete withdrawal from the plans at the time of such estimates.

        The Company believes that the pre-tax withdrawal liability for all United States and Canadian multiemployer plans is approximately $100 million in the aggregate and that amount has been recorded in the Company's consolidated financial statements. However, the Company is not able to determine the exact amount of its withdrawal liability because the amount of that exposure could be higher or lower, depending on, among other things, the nature and timing of any triggering events and the funded status of the plans at that time.

Holders of class A stock are not able to independently elect directors of Quad/Graphics or control any of the Company's management policies or business decisions or its decisions to issue additional shares, declare and pay dividends or enter into corporate transactions because the holders of class A 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, trusts for their benefit or other affiliates of Quad/Graphics, whose interests may be different from the holders of class A stock.

        The Company's stock is divided into three classes of common stock: class A stock, class B common stock ("class B stock") and class C common stock ("class C stock"). The class B stock and the class C stock each has 10 votes per share on all matters and the class A stock is entitled to one vote per share. As of March 18, 2011, the class B stock constitutes approximately 80% of Quad/Graphics' 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, trusts for their benefit or other affiliates of Quad/Graphics, whose interests may differ from the interests of the holders of class A stock.

        Approximately 78% of the outstanding class B stock is held of record by the Quad/Graphics voting trust, and that constitutes about 63% of the Company's total voting power. The trustees of the

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Quad/Graphics voting trust have the authority to vote the stock held by the Quad/Graphics voting trust. Accordingly, the trustees of the Quad/Graphics 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.

Quad/Graphics is a controlled company within the meaning of the rules of the 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/Graphics 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 majority of the Company's board of directors consist of independent directors, as defined under the rules of the NYSE;



•

that 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



•

that 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 Quad/Graphics is a controlled company, holders of class A stock will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE.

Quad/Graphics may be adversely affected by strikes and other labor protests.

        As of December 31, 2010, Quad/Graphics had a total of approximately 25,000 employees, of which approximately 28% were covered by a collective bargaining agreement.

        As of December 31, 2010, the Company had 30 collective bargaining agreements in Canada and the United States, almost all of which cover a portion of the former World Color Press employees.

        As of December 31, 2010, the Company had approximately 4,000 employees outside of the United States and Canada, the majority of which are either governed by agreements that apply industry-wide, by a collective agreement or through works councils or similar arrangements.

        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, the Company cannot be certain that it will be able to maintain a productive and efficient labor environment. The Company cannot predict the outcome of any future negotiations relating to the renewal of the collective bargaining agreements, nor can there be any assurance that work stoppages, strikes or other forms of labor protests pending the outcome of any future negotiations will not occur. A strike or other forms of labor protest affecting a series of major plants in the future could materially disrupt the Company's operations and result in a material 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.

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Until the Company completes an assessment of what new market risks it now has due to the acquisition of World Color Press, there may be certain market risks that the Company is not aware of, and its future risk management strategies implemented following such assessment may not fully insulate it from market risks even after the integration is complete.

        The acquisition of World Color Press increased the number of transactions in which the Company is involved and expanded the international scope of the Company's operations, thereby expanding the market risks to which the Company is subject. The Company has begun to assess its post-acquisition market risks in detail and management will modify the Company's risk management strategies based on that assessment. Until this assessment and modification is completed, the Company may have exposure to market risks that it is not aware of due to, among other things, the larger number of transactions, expanded international operations and increased borrowing resulting from the acquisition. Any new risk management strategies that are implemented, moreover, may not fully insulate the Company from adverse effects due to market risks.

There are risks associated with the Company's operations outside of the United States and Canada.

        Net sales from the Company's operations outside of the United States and Canada accounted for approximately 10% and 13% of its revenues for the years ended December 31, 2010 and 2009, respectively. As a result, the Company is subject to the risks inherent in conducting business outside of the United States and Canada, including the impact of economic and political instability 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.

A decline in expected profitability of Quad/Graphics or individual reporting units of the Company could result in the impairment of assets, including goodwill, other long-lived assets and deferred tax assets.

        Primarily as a result of the acquisition of World Color Press, the Company has a material amount of goodwill, other long-lived assets and deferred tax assets on its balance sheet. A decline in expected profitability, among other factors, could call into question the recoverability of the related goodwill, other long-lived assets or deferred tax assets and require the Company to write down or write off these assets or, in the case of deferred tax assets, recognize a valuation allowance through a charge to income. Such an occurrence could have a material adverse effect on the Company's results of operations and financial position.

Quad/Graphics' failure to maintain adequate internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 or to prevent or detect material misstatements in its annual or interim consolidated financial statements in the future could result in inaccurate financial reporting, sanctions or securities litigation, or could otherwise harm its business.

        By December 31, 2011, the Company will be required to comply with the standards adopted by the Public Company Accounting Oversight Board in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404") regarding internal control over financial reporting. Prior to the acquisition of World Color Press, Quad/Graphics was a private company and, as such, was not required to comply with these requirements. The process of becoming compliant with Section 404 may divert internal resources and will take a significant amount of time and effort to complete. In addition, Quad/Graphics must also integrate World Color Press' financial reporting systems, including its internal control over financial reporting. The Company may experience higher than anticipated operating expenses, as well as increased independent auditor fees during the implementation of these changes and thereafter. The Company is required to be compliant under Section 404 by December 31, 2011, and at that time the Company's management will be required to deliver a report that assesses the effectiveness of its internal control over financial reporting, and the Company will be required to receive an opinion from its independent registered public accounting firm on the effectiveness of its

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internal controls over financial reporting. Completing documentation of its internal control system and financial processes, remediation of control deficiencies and management testing of internal controls will require substantial effort. There can be no assurance that the Company will be able to complete the required management assessment by its reporting deadline. Failure to implement these changes timely, effectively or efficiently could harm the Company's operations, financial reporting or financial results and could result in Quad/Graphics being unable to obtain an unqualified report on internal controls from its independent auditors.

        If the Company is unable to maintain effective control over financial reporting, such conclusion would be disclosed in its Annual Report on Form 10-K for the year ending December 31, 2011. In the future, the Company may identify material weaknesses and significant deficiencies which it may not be able to remediate in a timely manner. If it fails to maintain effective internal control over financial reporting in accordance with Section 404, the Company will not be able to conclude that it has and maintains effective internal control over financial reporting or its independent registered accounting firm may not be able to issue an unqualified report on the effectiveness of the Company's internal control over financial reporting. As a result, the Company's ability to report its financial results on a timely and accurate basis may be adversely affected, it may be subject to sanctions or investigation by regulatory authorities, including the SEC and/or the NYSE and investors may lose confidence in the Company's financial information, which in turn could cause the market price of the class A stock to decrease significantly. Quad/Graphics also may be required to restate financial statements relating to prior periods.

The Company is heavily dependent on its Chief Executive Officer, its management team and key personnel.

        The Company's continued success depends, in part, on the retention, recruitment and continued contributions of key management, finance, sale and marketing personnel, some of whom could be difficult to replace. The Company's success is largely dependent upon its senior management team, led by its Chief Executive Officer and other key managers. The loss of any one or more of such persons could have an adverse effect on the Company's business and financial condition.

World Color Press' bankruptcy may have lingering negative effects.

        The ongoing claims being processed from World Color Press' bankruptcy and related legal issues may adversely affect the Company's financial condition. In January 2008, World Color Press filed for bankruptcy protection in Canada and the United States. In connection with the insolvency proceedings in Canada and the U.S., World Color Press formulated plans of reorganization that were sanctioned by the Quebec Superior Court and confirmed by the U.S. Bankruptcy Court, respectively, and became effective on July 21, 2009. Proceedings relating to the resolution of claims under the insolvency proceedings are ongoing. The holders of such claims are entitled to recovery based upon the type and classification of such claims. Most types of claims are subject to liability limitations pursuant to the plans of reorganization. However, some claims are entitled to a priority cash recovery and the Company has estimated that approximately $26.1 million of such priority claims have yet to be paid as of December 31, 2010. These types of priority claims are not limited by the reorganization plans and may be significantly higher than $26.1 million. In addition, certain other unsecured claims were to be paid under the reorganization plans by unsecured notes. In connection with the acquisition of World Color Press, such unsecured notes were defeased and then redeemed resulting in $89.2 million deposited with the indenture trustee. Upon the allowance of each claim, such creditors will receive cash out of the $89.2 million in lieu of receiving a note. The Company has estimated its liability under such claims to be $52.5 million, but this liability could be as high as the full amount deposited.

Item 1B.    Unresolved Staff Comments

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

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Item 2.    Properties

        Quad/Graphics' corporate office is located in owned office space in Sussex, Wisconsin. In addition, as of December 31, 2010, the Company leases or owns 99 facilities in the United States, some of which have multiple buildings and warehouses, and these United States facilities encompass approximately 24,765,000 square feet. The Company leases or owns 43 international facilities encompassing approximately 3,794,000 square feet in Canada, Latin America and Europe. Of the facilities, approximately 22,481,000 square feet of space is owned, while the remaining 6,078,000 million square feet is leased.

        The following table lists, as of December 31, 2010, the Company's principal manufacturing facilities, all of which are owned except where noted:

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Item 3.    Legal Proceedings

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

Item 4.    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 Data

        Quad/Graphics authorized capital stock consists of 80 million shares of class A stock; 80 million shares of class B stock; 20 million shares of class C stock; and 500,000 shares of preferred stock.

        The Company's class C stock is held by the Quad/Graphics ESOP (and can only be owned by, or transferred to, a Company employee benefit plan which is intended to satisfy the qualification requirements of Section 401 of the Internal Revenue Code). The class C stock is entitled to 10 votes per share. Each share of class C 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 C stock.

        The Company's class B stock is held by certain members of the Quadracci family, trusts for their benefit or other affiliates of the Company (and can only be voluntarily transferred to the Company or to an member of the Quadracci "family group," as defined in the Company's amended and restated articles of incorporation; and any transfer in violation of the Company's amended and restated articles of incorporation results in the automatic conversion of such class B stock into class A stock). The class B stock is entitled to 10 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's class A stock is traded on the NYSE under the symbol "QUAD." The class A stock is entitled to one vote per share.

        On March 18, 2011, there were approximately 250 record holders of the class A stock, and more than 1,000 beneficial owners; 33 record holders of the class B stock; and one record holder of the class C stock. The Company has no outstanding shares of preferred stock.

        The following table sets forth the range of high and low daily closing sales prices for the Company's class A stock as reported on the NYSE for the period from July 6, 2010 (the date on which the Company's class A stock was first publicly traded) through December 31, 2010:

Dividends and Distributions

        Quad/Graphics' board of directors declared and paid a cash dividend of $0.50 per share of class A stock, class B stock and class C stock in each of 2010 and 2009. In addition, concurrent with the acquisition of World Color Press in July 2010, Quad/Graphics' board of directors declared and paid a cash distribution of $4.98 per share of class A stock, class B stock and class C stock to the pre-acquisition Quad/Graphics' shareholders. Such amounts do not include aggregate tax distributions declared to Quad/Graphics' S corporation shareholders of $5.2 million and $18.0 million in 2010 and 2009, respectively. See Note 14 to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for a discussion of the Company's former S corporation status. Pursuant to the Company's amended and restated articles of incorporation, each class of common stock has equal rights with respect to cash dividends.

        The Company has not yet determined its dividend policy following the consummation of the acquisition of World Color Press. Any determination to pay dividends in the future will be at the discretion of Company's board of directors and will depend upon its results of operations, financial

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condition, contractual restrictions, restrictions imposed by applicable law, rule or regulation, business and investment strategy, and other factors that the board of directors deems relevant.

        Pursuant to the Company's $1.23 billion debt financing agreement, the Company is prohibited from paying any dividends, repurchasing capital stock or making any distributions other than, among other limited situations, annual dividends or distributions not to exceed $60.0 million during each of 2011 and 2012. Starting January 1, 2013, the Company has additional dividend restrictions (based on free cash flow as defined in the debt financing agreement) if the Company's total leverage ratio is greater than 2.75 to 1.00, but has no restrictions if the Company's total leverage ratio is less than 2.75 to 1.00 (total leverage ratio as defined in the debt financing agreement).

Sales of Unregistered Securities

        On October 29, 2010, the Company acquired the remaining 53% interest in HGI that it did not already own for cash and 164,075 shares of its class A stock (that were held in the Company's treasury). The Company offered and sold these shares in reliance on the private placement exemption from the registration requirements of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act.

        On January 21, 2010, an employee of the Company exercised a stock option to acquire 2,625 shares of the Company's class A stock, for an aggregate exercise price of $56,875. The exercise of the stock option was effected through payment of the exercise price in cash by the employee. The Company offered and sold these shares in reliance on the exemption from the registration requirements of the Securities Act of 1933, as amended, provided by Rule 701 promulgated under such Act. The Company was eligible for reliance on Rule 701 because it was not subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, at the time of the sale.

Item 6.    Selected Financial Data

        The selected consolidated statement of operations data for the years ended December 31, 2010, 2009, and 2008, and the selected consolidated balance sheet data at December 31, 2010 and 2009, are derived from, and are qualified by reference to, the audited consolidated financial statements of the Company included in Item 8 of this Annual Report on Form 10-K. The selected statement of operations data for the years ended December 31, 2007 and 2006, and the balance sheet data at December 31, 2008, 2007, and 2006, are derived from audited consolidated financial statements not included herein.

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SELECTED FINANCIAL DATA
(In millions, except per share data)

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        The following discussion of the financial condition and results of operations of Quad/Graphics should be read together with the Quad/Graphics audited consolidated financial statements for each of the three years in the period ended December 31, 2010, including the notes thereto, included in Item 8 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 Item 1A, "Risk Factors", 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:

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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

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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 (1) the year ended December 31, 2010 to the year ended December 31, 2009 and (2) the year ended December 31, 2009 to the year ended December 31, 2008. The comparability of the Company's results of operations between periods was significantly impacted by the acquisition of World Color Press on July 2, 2010. The results of operations for World Color Press are included in the Company's consolidated results prospectively from July 2, 2010. 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, non-GAAP financial measures the Company uses to assess the performance of its business.



•

Liquidity and Capital Resources.  This section provides an analysis of the Company's capitalization, cash flows, a statement about off-balance sheet arrangements, and a discussion and table of outstanding debt and commitments. Forward-looking statements important to understanding the Company's financial condition are also included in this section.



•

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 accompanying December 31, 2010 audited consolidated financial statements.



•

New Accounting Pronouncements.  This section provides a discussion of new accounting pronouncements and the anticipated impact of those accounting pronouncements to the Company's consolidated financial statements.

Overview

Business Overview

        Quad/Graphics is a leading global provider of print and related services, producing and delivering products and services designed to provide complete solutions to a broad base of customers. The Company's print products primarily include catalogs, consumer magazines, special interest publications, direct mail and other commercial specialty printed products, retail inserts, books and directories. Print-related services the Company provides include digital imaging and photography, binding, mailing and distribution, and logistics, data optimization and analytics services. In addition, substantial investments are made in research and development and other technological innovations. The Company has developed multiple manufacturing process improvements, including innovative press and finishing control systems and material-handling equipment for use in its own print operations as well as for sale to other printers worldwide. The Company believes that its in-house research and development and a continuous improvement mentality toward printing technology is important to its success. The Company also manufactures ink, which is solely used in its own printing process. The Company separately reports its net sales and related costs of sales for its product and service offerings.

        On July 2, 2010, the Company completed the acquisition of World Color Press, which became a wholly-owned subsidiary of the Company. In connection with the closing of the acquisition, the Company registered its class A stock with the SEC under the Securities Exchange Act of 1934, as amended, and on July 6, 2010, Quad/Graphics' class A stock commenced trading on the NYSE under the symbol "QUAD". World Color Press' results of operations and account balances have been included in the Company's results of operations and balance sheet prospectively from the July 2, 2010 transaction date.

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        Following completion of the acquisition of World Color Press, the Company continues to have three reportable segments—North America Print and Related Services, International and Corporate. The former United States Print and Related Services segment was expanded to include World Color Press' Canadian operations and is now referred to as the North America Print and Related Services segment. World Color Press' Latin American operations have been included within the International segment. These operating and reporting segments are aligned with how the Company's chief operating decision maker currently manages the business.

        The North America Print and Related Services segment includes the Company's United States and Canada printing operations, managed as one integrated platform. This segment includes all of the product and related service offerings described above. The North America Print and Related Services segment accounted for approximately 90% of the combined company's consolidated net sales in the year ended December 31, 2010.

        The International segment includes the Company's printing operations in Europe and Latin America, which prior to the acquisition included operations in Poland, Argentina and Brazil, and post-acquisition now includes Poland, Mexico, Colombia, Peru, Chile and expanded operations in Argentina and Brazil. This segment produces and delivers all of Quad/Graphics' product and service offerings in Europe and Latin America, with the exception of printing-related auxiliary equipment, which is included in the North America Print and Related Services segment. The International segment accounted for approximately 10% of the combined company's consolidated net sales in the year ended December 31, 2010.

        The Corporate segment consists of unallocated general and administrative activities and associated expenses including, in part, executive, legal, finance, information technology and human resources.

Key Performance Metrics Overview

        The Company's management believes the ability to generate net sales growth and positive cash flow 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 and cash flows provided by operating activities as metrics to measure operating performance and financial condition. EBITDA and EBITDA margin are non-GAAP financial measures (see the reconciliation of net earnings (loss) attributable to Quad/Graphics common shareholders to EBITDA in the Results of Operations 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 customers, sales to new customers, sales of new or expanded solutions to existing and new customers 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.

        Cash flows provided by operating activities. The Company uses cash flows provided by operating activities as a metric to assess liquidity. The Company's management assesses cash flows provided by operating activities based on the ability to meet recurring cash obligations while increasing available cash to fund integration and restructuring requirements related to the acquired World Color Press operations, as well as to fund capital expenditures, debt service requirements, World Color Press single employer pension plan contributions, World Color Press multiemployer pension plans withdrawal liabilities and investments in future growth to create value for its shareholders. Cash flows provided by operating activities can be significantly impacted by the timing of non-recurring or infrequent receipts or expenditures.

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Overview of Trends Affecting Quad/Graphics

        Competition in the highly fragmented printing industry remains intense as the industry is still consolidating and suffering from overcapacity, resulting in downward pricing pressures. The growth and adaptation of alternative marketing technologies (such as distribution and hosting of online content and mobile technologies) may decrease demand for printed products, which would further increase the industry overcapacity. While the general economy has improved from 2009 and the Company saw volume declines begin to stabilize in 2010, management believes the ongoing uncertainty of the economic environment and the continued pricing pressure in the printing industry created by the highly competitive landscape requires a focus on financial flexibility, a strong balance sheet and an efficient cost structure. With that focus, the Company reduced overall debt and capital lease levels by $216 million since the July 2010 World Color Press acquisition, despite beginning to pay significant non-recurring costs related to the integration restructuring programs associated with the acquisition.

        Management has also been diligent in lowering the Company's cost structure through consolidating its manufacturing platform into its most efficient facilities, as well as realizing purchasing, mailing and logistics efficiencies based on centralizing volumes in its most efficient plants and streamlining its administrative and corporate operations. Management created a detailed integration plan for the World Color Press acquisition, including the creation of a Steering Committee reporting to the board of directors as well as a Project Management Office, both specifically focused on the achievement of synergy savings and the related costs to achieve such synergy savings. Management believes the synergy savings will be somewhat more than $225 million. As of December 31, 2010, the Company has announced seven plant closures, closed the former World Color Press headquarters in Montreal, Quebec Canada, and completed other restructuring actions. Additional plant closures, administrative and corporate right-sizing and non-labor related cost savings will be initiated over the planned integration period ending in the middle of 2012. Management expects that the $225 million synergy savings target will be achieved within the estimated integration-related costs range of $195 million to $240 million, and may exceed the range to the extent estimated synergy savings exceed $225 million. There can be no assurance that the synergy savings target will be fully realized or that the non-recurring costs will not exceed the estimate.

        The Company believes the key to future financial success is profitable revenue growth that provides for the ability to reinvest in technology that helps its customers achieve higher returns on their print and print related expenditures. In this increasingly multichannel marketplace, the Company believes that the printing industry has been driven to make substantial capital investments in new technologies, such as those to deliver targeted and customized print solutions to integrate effectively its products and services within a multichannel marketing campaign. The Company believes its ongoing commitment to technology, through its in-house equipment development operations, has been paramount in delivering high quality and relevant offerings to its customers. Further, the Company has remained focused on investing in its future though acquisitions that expand its geographies and capabilities.

        The Company is subject to seasonality in its quarterly results as net sales are typically higher in the third and fourth quarters of the calendar year as compared to the first and second quarters. Seasonality is driven by increased magazine advertising page counts and retail inserts, catalogs and books due primarily to back-to-school and holiday related advertising and promotions. Additionally, the Company's sales in the last six months of 2010 included the results of World Color Press, which was acquired on July 2, 2010. Removing the impact of the World Color Press acquisition, the Company's 2010 net sales followed the typical industry seasonality, and management anticipates this same impact of seasonality in 2011.

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Results of Operations for the Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009

Summary Results

        The Company's operating income, operating margin and earnings (loss) per share attributable to Quad/Graphics common shareholders—diluted for the year ended December 31, 2010 changed from the year ended December 31, 2009 as follows (dollars in millions, except per share data):

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Consolidated

        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:

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