item 14 principal accountant fees services information required item included caption miscellaneousindependent registered public accounting firm proxy statement hereby incorporated reference part iv item 15item 14 principal accountant fees services information required item included caption miscellaneousindependent registered public accounting firm proxy statement hereby incorporated reference part iv item 15item 14 principal accountant fees services information required item included caption miscellaneousindependent registered public accounting firm proxy statement hereby incorporated reference part iv item 15item 14 principal accountant fees services information required item included caption miscellaneousindependent registered public accounting firm proxy statement hereby incorporated reference part iv item 15item 14 principal accountant fees services information required item included caption miscellaneousindependent registered public accounting firm proxy statement hereby incorporated reference part iv item 15item 14 principal accountant fees services information required item included caption “miscellaneousindependent registered public accounting firm” proxy statement hereby incorporated reference part iv item 15item 14 principal accountant fees services information required item included caption “miscellaneousindependent registered public accounting firm” proxy statement hereby incorporated reference part iv item 15item 14 principal accountant fees services information required item included caption miscellaneousindependent registered public accounting firm proxy statement hereby incorporated reference part iv item 15item 14 principal accountant fees services information required item included caption miscellaneousindependent registered public accounting firm proxy statement hereby incorporated reference part iv item 15item 14 principal accountant fees services information required item included caption miscellaneousindependent registered public accounting firm proxy statement hereby incorporated reference part iv item 15item 14 principal accountant fees services information required item included caption “miscellaneousindependent registered public accounting firm” proxy statement hereby incorporated reference part iv item 15 item 7 managements discussion analysis financial condition results operations following discussion financial condition results operations quadgraphics read together quadgraphics audited consolidated financial statements three years period ended december 31 2010 including notes thereto included item 8 annual report form 10k discussion contains forwardlooking statements reflect companys plans estimates beliefs companys actual results could differ materially discussed forwardlooking statements factors could cause contribute differences include limited discussed forwardlooking statements item 1a risk factors earlier within annual report form 10k managements discussion analysis financial condition results operations provided supplement companys consolidated financial statements accompanying notes help provide understanding companys financial condition changes companys financial condition companys results operations discussion analysis organized follows •overview section includes general description companys business segments overview key performance metrics companys management measures utilizes evaluate business performance overview trends affecting company including managements actions related trends •results operations section contains analysis companys results operations comparing results 1 year ended december 31 2010 year ended december 31 2009 2 year ended december 31 2009 year ended december 31 2008 comparability companys results operations periods significantly impacted acquisition world color press july 2 2010 results operations world color press included companys consolidated results prospectively july 2 2010 forwardlooking statements providing general description recent projected industry company developments important understanding companys results operations included section also provides discussion ebitda margin nongaap financial measures company uses assess performance business •liquidity capital resources section provides analysis companys capitalization cash flows statement offbalance sheet arrangements discussion table outstanding debt commitments forwardlooking statements important understanding companys financial condition also included section •critical accounting policies estimates section contains discussion accounting policies companys management believes important companys financial condition results operations well allowances reserves require significant judgment estimates part companys management addition companys significant accounting policies including critical accounting policies summarized note 1 basis presentation summary significant accounting policies accompanying december 31 2010 audited consolidated financial statements •new accounting pronouncements section provides discussion new accounting pronouncements anticipated impact accounting pronouncements companys consolidated financial statements overview business overview quadgraphics leading global provider print related services producing delivering products services designed provide complete solutions broad base customers companys print products primarily include catalogs consumer magazines special interest publications direct mail commercial specialty printed products retail inserts books directories printrelated services company provides include digital imaging photography binding mailing distribution logistics data optimization analytics services addition substantial investments made research development technological innovations company developed multiple manufacturing process improvements including innovative press finishing control systems materialhandling equipment use print operations well sale printers worldwide company believes inhouse research development continuous improvement mentality toward printing technology important success company also manufactures ink solely used printing process company separately reports net sales related costs sales product service offerings july 2 2010 company completed acquisition world color press became whollyowned subsidiary company connection closing acquisition company registered class stock sec securities exchange act 1934 amended july 6 2010 quadgraphics class stock commenced trading nyse symbol quad world color press results operations account balances included companys results operations balance sheet prospectively july 2 2010 transaction date following completion acquisition world color press company continues three reportable segmentsnorth america print related services international corporate former united states print related services segment expanded include world color press canadian operations referred north america print related services segment world color press latin american operations included within international segment operating reporting segments aligned companys chief operating decision maker currently manages business north america print related services segment includes companys united states canada printing operations managed one integrated platform segment includes product related service offerings described north america print related services segment accounted approximately 90 combined companys consolidated net sales year ended december 31 2010 international segment includes companys printing operations europe latin america prior acquisition included operations poland argentina brazil postacquisition includes poland mexico colombia peru chile expanded operations argentina brazil segment produces delivers quadgraphics product service offerings europe latin america exception printingrelated auxiliary equipment included north america print related services segment international segment accounted approximately 10 combined companys consolidated net sales year ended december 31 2010 corporate segment consists unallocated general administrative activities associated expenses including part executive legal finance information technology human resources key performance metrics overview companys management believes ability generate net sales growth positive cash flow key indicators successful execution companys business strategy increase shareholder value company uses period net sales growth ebitda margin cash flows provided operating activities metrics measure operating performance financial condition ebitda margin nongaap financial measures see reconciliation net earnings loss attributable quadgraphics common shareholders ebitda results operations section net sales growth company uses period net sales growth key performance metric companys management assesses net sales growth based ability generate increased net sales increased sales existing customers sales new customers sales new expanded solutions existing new customers opportunities expand sales strategic investments including acquisitions ebitda margin company uses ebitda margin metrics assess operating performance companys management assesses ebitda margin based ability increase revenues controlling variable expense growth cash flows provided operating activities company uses cash flows provided operating activities metric assess liquidity companys management assesses cash flows provided operating activities based ability meet recurring cash obligations increasing available cash fund integration restructuring requirements related acquired world color press operations well fund capital expenditures debt service requirements world color press single employer pension plan contributions world color press multiemployer pension plans withdrawal liabilities investments future growth create value shareholders cash flows provided operating activities significantly impacted timing nonrecurring infrequent receipts expenditures overview trends affecting quadgraphics competition highly fragmented printing industry remains intense industry still consolidating suffering overcapacity resulting downward pricing pressures growth adaptation alternative marketing technologies distribution hosting online content mobile technologies may decrease demand printed products would increase industry overcapacity general economy improved 2009 company saw volume declines begin stabilize 2010 management believes ongoing uncertainty economic environment continued pricing pressure printing industry created highly competitive landscape requires focus financial flexibility strong balance sheet efficient cost structure focus company reduced overall debt capital lease levels 216 million since july 2010 world color press acquisition despite beginning pay significant nonrecurring costs related integration restructuring programs associated acquisition management also diligent lowering companys cost structure consolidating manufacturing platform efficient facilities well realizing purchasing mailing logistics efficiencies based centralizing volumes efficient plants streamlining administrative corporate operations management created detailed integration plan world color press acquisition including creation steering committee reporting board directors well project management office specifically focused achievement synergy savings related costs achieve synergy savings management believes synergy savings somewhat 225 million december 31 2010 company announced seven plant closures closed former world color press headquarters montreal quebec canada completed restructuring actions additional plant closures administrative corporate rightsizing nonlabor related cost savings initiated planned integration period ending middle 2012 management expects 225 million synergy savings target achieved within estimated integrationrelated costs range 195 million 240 million may exceed range extent estimated synergy savings exceed 225 million assurance synergy savings target fully realized nonrecurring costs exceed estimate company believes key future financial success profitable revenue growth provides ability reinvest technology helps customers achieve higher returns print related expenditures increasingly multichannel marketplace company believes printing industry driven make substantial capital investments new technologies deliver targeted customized print solutions integrate effectively products services within multichannel marketing campaign company believes ongoing commitment technology inhouse equipment development operations paramount delivering high quality relevant offerings customers company remained focused investing future though acquisitions expand geographies capabilities company subject seasonality quarterly results net sales typically higher third fourth quarters calendar year compared first second quarters seasonality driven increased magazine advertising page counts retail inserts catalogs books due primarily backtoschool holiday related advertising promotions additionally companys sales last six months 2010 included results world color press acquired july 2 2010 removing impact world color press acquisition companys 2010 net sales followed typical industry seasonality management anticipates impact seasonality 2011 results operations year ended december 31 2010 compared year ended december 31 2009 summary results companys operating income operating margin earnings loss per share attributable quadgraphics common shareholdersdiluted year ended december 31 2010 changed year ended december 31 2009 follows dollars millions except per share data 1restructuring impairment transactionrelated charges 1625 million incurred year ended december 31 2010 included a386 million employee termination costs plant closures well corporate administrative terminations attributed 4222 headcount reductions announced 2010 b329 million impairment charges assets primarily related pila poland plant closure announced june 2010 reno nevada plant closure announced august 2010 fredericksburg virginia plant closure announced november 2010 c415 million transaction costs related primarily acquisition world color press much lesser extent 2010 acquisition hgi d278 million integration costs incurred connection acquisition world color press e217 million various restructuring charges including utility contract termination costs lease termination costs maintain exit idled facilities connection integration operations world color press quadgraphics company expects incur substantial additional restructuring integration costs future reporting periods 2restructuring impairment charges 112 million incurred year ended december 31 2009 included 101 million headcount reductions 11 million lease termination costs headcount reductions included 965 employees 3transaction expenses included outside professional services fees incurred year ended december 31 2009 connection acquisition world color press included within selling general administrative expenses 2009 consolidated statement operations 2010 transaction expenses classified within restructuring impairment transactionrelated charges consolidated statement operations 4interest expense increased 288 million year ended december 31 2010 929 million change due increased overall debt levels result world color press acquisition company entering 123 billion debt financing arrangement april 23 2010 see discussion liquidity capital resourcesdescription significant debt obligations 5income tax expense increased 2217 million year ended december 31 2010 2232 million connection july 2 2010 acquisition world color press company changed tax status certain entities within quadgraphics legal structure corporation c corporation status provisions internal revenue code point forward entities subject federal state income taxes impact conversion c corporation status resulted recognition net shortterm deferred tax assets 236 million net longterm deferred tax liabilities 2233 million increase accumulated comprehensive loss due impact foreign currency translation 08 million recognition income tax expense third quarter 2010 2005 million income tax expense year also impacted nondeductibility certain transaction expenses 6operating income increased 931 million primarily due world color press acquisition operating income increased due larger scale business operating margin decreased period world color press business operates lower operating margin legacy quadgraphics business additionally higher paper sales generally represent pass cost customers continued pricing pressures higher retirement incentive compensation costs led overall decreased operating margins partially offset increase byproduct profits following discussion provides additional details consolidated following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales increased year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition additionally product sales legacy quadgraphics business increased primarily result increased paper sales increased byproduct sales increased volume legacy quadgraphics plants increases partially offset continued pricing pressures related industry overcapacity lesser extent negative effects foreign currency translation service sales generally correspond product sales increased year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition higher fuel prices increased data imaging services cost sales cost product sales increased year ended december 31 2010 compared year ended december 31 2009 primarily result world color press acquisition additionally cost product sales increased due increased paper sales volume increased retirement incentive compensation costs increased labor costs higher print volumes frictional costs incurred 2010 hiring training additional employees prepare certain print plants receive transferred volumes closing plants cost increases partially offset acquisition synergy savings related purchasing distribution efficiencies realized cost product sales percentage product sales increased year ended december 31 2010 compared year ended december 31 2009 due primarily lower operating profits acquired world color press business increased paper sales margin impact items described preceding paragraph paper generally billed customers passthrough rates thus paper sales increase period cost product sales well cost product sales percentage net sales increases cost service sales increased year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition higher fuel prices selling general administrative expenses selling general administrative expenses increased year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition additionally selling general administrative expenses 2010 increased acquisition due increased size company compliance support costs associated companys new status publicly traded entity includes increased nonlabor costs primarily related outside service provider fees insurance premiums ii increased levels administrative staff united states information technology finance legal human resources treasury administrative labor iii increased retirement incentive compensation retirement incentive compensation expense increased 2010 reestablish benefits reduced 2009 increases partially offset decreased bad debt expense 2010 quadgraphics preacquisition business primarily due provisions two significant customer bankruptcies 2009 restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges 1625 million incurred year ended december 31 2010 included 1 415 million transaction costs primarily incurred connection world color press acquisition 2 386 million employee termination costs related 4222 headcount reductions 3 329 million impairment charges related closure pila poland reno nevada fredericksburg virginia plants 4 278 million integration costs related world color press acquisition 5 217 million various restructuring charges including utility contract termination costs lease termination costs maintain exit idled facilities restructuring impairment charges 112 million incurred year ended december 31 2009 included 101 million 965 headcount reductions 11 million lease termination costs depreciation amortization depreciation amortization increased year ended december 31 2010 compared year ended december 31 2009 due world color press acquisition ebitda margin ebitda increased year ended december 31 2010 primarily due world color press acquisition ebitda margin decreased year ended december 31 2010 compared year ended december 31 2009 primarily due incremental restructuring impairment transactionrelated charges recorded 2010 related integration world color press lower relative operating margins acquired world color press business compared preacquisition quadgraphics business increased retirement incentive compensation costs ebitda margin year ended december 31 2010 compared year ended december 31 2009 follows ebitda represents net earnings loss attributable quadgraphics common shareholders plus interest expense ii income tax expense iii depreciation amortization ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding companys performance important measures company gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings loss measure operating performance cash flows operating activities measure liquidity companys calculation ebitda margin may different calculation used companies therefore comparability may limited reconciliation ebitda net earnings loss follows 1net earnings loss attributable quadgraphics common shareholders include effects restructuring impairment transactionrelated charges 1625 million year ended december 31 2010 restructuring impairment charges 112 million year ended december 31 2009 north america print related services following table summarizes net sales operating income operating margin certain items impacting comparability within north america print related services segment net sales product sales north american print related services segment increased year ended december 31 2010 compared year ended december 31 2009 primarily result world color press acquisition additionally product sales increased due increased paper byproduct sales volume increases preacquisition quadgraphics plants partially offset continued pricing pressures related industry overcapacity service sales north america print related services segment increased year ended december 31 2010 compared year ended december 31 2009 primarily result world color press acquisition additionally service sales increased due increased shipments increase fuel prices charged customers increased data imaging services operating income operating income north america print related services segment increased year ended december 31 2010 compared year ended december 31 2009 primarily result world color press acquisition partially offset increased restructuring impairment integration expenses operating margin decreased year ended december 31 2010 compared year ended december 31 2009 due 528 million increase restructuring impairment transactionrelated costs due integration world color press ii lower relative operating margins acquired world color press business compared preacquisition quadgraphics business iii increased retirement incentive compensation costs iv increased paper sales billed customers generally passthrough rates v frictional costs incurred hiring training additional employees prepare certain print plants receive transferred volumes closing plants restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges north america print related services segment year ended december 31 2010 637 million consisting 281 million employee termination costs related 3428 headcount reductions 105 million integration charges related world color press acquisition 85 million impairment charges primarily related closures reno nevada fredericksburg virginia plants 74 million lease termination costs 52 million various restructuring charges including costs maintain exit idled facilities 40 million utility contract termination costs restructuring impairment charges north america print related services segment year ended december 31 2009 109 million included 98 million employee termination costs related 739 headcount reductions 11 million related lease termination costs international following table summarizes net sales operating loss operating margin certain items impacting comparability equity earnings unconsolidated entities within international segment net sales product sales increased year ended december 31 2010 compared year ended december 31 2009 primarily result world color press acquisition additionally product sales increased primarily due increased byproduct paper sales well increased sales argentina partially offset negative impact foreign currency translation operating loss operating loss international segment increased year ended december 31 2010 compared year ended december 31 2009 primarily due 330 million incremental restructuring impairment charges incurred years due pila poland plant closure well increased operating losses companys european business primarily result frictional costs related consolidation companys european plants european operating losses partially offset operating income acquired latin american operations world color press restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2010 333 million consisting 244 million impairment charges related closure pila poland plant 39 million integration costs 33 million employee termination costs related 707 headcount reductions pila poland plant announced june 2010 17 million various restructuring charges restructuring impairment charges international segment year ended december 31 2009 03 million related headcount reductions 226 employees 2009 equity earnings unconsolidated entities discussed note 1 basis presentation summary significant accounting policies accompanying december 31 2010 audited consolidated financial statements investments entities quadgraphics ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting company holds 49 ownership interest plural editora e gráfica plural commercial printer based são paulo brazil well 50 interest world color chile sa chile acquired part world color press acquisition equity earnings unconsolidated entities international segment increased year ended december 31 2010 due increased volumes existing customers plural due companys share chiles income since world color press acquisition date corporate following table summarizes unallocated operating expenses presented corporate operating expenses increased year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition including 655 million restructuring integration transactionrelated charges incurred 2010 acquire integrate world color press operating expenses 2010 also increased result additional corporate expenses due increased size company compliance support costs associated companys new status publicly traded entity includes increased levels administrative staff united states information technology finance legal human resources treasury administrative labor ii increased retirement incentive compensation iii increased insurance premiums outside service provider fees corporate restructuring impairment transactionrelated charges year ended december 31 2010 655 million consisting 415 million transaction costs related primarily acquisition world color press 134 million integration charges related world color press acquisition 72 million employee termination costs related 87 headcount reductions 34 million various restructuring charges restructuring impairment charges incurred corporate segment 2009 28 million transaction expenses 2009 related acquisition world color press however expenses classified selling general administrative expenses 2009 results operations year ended december 31 2009 compared year ended december 31 2008 summary results companys operating income operating margin earnings per share attributable quadgraphics common shareholdersdiluted year ended december 31 2009 changed year ended december 31 2008 follows dollars millions except per share data 1restructuring impairment charges 112 million incurred year ended december 31 2009 included 101 million headcount reductions 11 million lease termination costs headcount reductions included 965 employees ceased employment 2009 2restructuring impairment charges 108 million incurred year ended december 31 2008 included 89 million impairment charges related idling certain equipment 16 million headcount reductions 03 million related lease termination costs headcount reductions included 100 employees ceased employment 2008 3transaction expenses included outside professional services fees incurred 2009 connection acquisition world color press included within selling general administrative expenses consolidated statement operations 4the company paid 1479 million debt capital lease obligations 2009 result interest expense decreased 105 million 2008 2009 5operating income decreased 587 million due decreased net sales primarily result global economic recession partially offset productivity initiatives reduced costs following discussion provides additional details consolidated following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased year ended december 31 2009 compared year ended december 31 2008 primarily result decline demand commercial printing due global economic recession well continued pricing pressures due part increased competition industry overcapacity result reduced print volumes results less paper consumption decreasing paper prices sales paper decreased higher proportion overall product sales product sales reflective companys business performance significant amount total operating profit generated product sales addition service sales generally correspond product sales product sales decrease yearoveryear service sales generally well 2009 relationship product sales service sales held true total weight shipped imaging work completed decreased 2009 compared 2008 beyond relationship service sales decreased 2009 due lower freight fuel prices 2009 cost sales cost product sales decreased year ended december 31 2009 compared year ended december 31 2008 primarily result lower production levels leading decline necessary materials energy costs cost sales labor cost savings restructuring initiatives discussed restructuring impairment 2009 productivity initiatives including reduction outside temporary labor usage increase parttime employee usage tightly controlled overtime decreased bonus profit sharing contributions cost product sales percentage net sales decreased year ended december 31 2009 year ended december 31 2008 due items discussed including decreased paper sales primarily represent passthrough revenue cost customer cost service sales decreased year ended december 31 2009 compared year ended december 31 2008 primarily result cost reductions restructuring labor productivity initiatives cost service sales percentage net sales decreased year ended december 31 2009 year ended december 31 2008 primarily due reductions personnel reductions fuel logistics services similar paper primarily represents passthrough customers therefore paper fuel constitute lower percentage revenue companys margins generally improve selling general administrative expenses selling general administrative expenses decreased year ended december 31 2009 compared year ended december 31 2008 primarily result 122 million gain recorded 2009 fire insurance claim companys west virginia location lower variable incentive compensation levels including decrease bonus profit sharing contributions general administrative compensation cost savings restructuring initiatives discussed restructuring impairment partially offset 129 million increase provision bad debts due depressed state economy two significant customer bankruptcies strategic investments increase size companys sales force selling general administrative expenses percentage net sales increased year ended december 31 2009 year ended december 31 2008 primarily result reduced net sales restructuring impairment restructuring impairment charges 112 million incurred year ended december 31 2009 included 101 million headcount reductions 11 million related lease termination costs 2009 headcount reductions included 965 employees ceased employment 2009 restructuring impairment charges 108 million incurred 2008 included 89 million impairment charges related idling certain equipment 16 million headcount reductions 03 million related lease termination costs order eliminate crews machines would low utilization company chose idle certain equipment december 2008 headcount reductions included 100 employees ceased employment 2008 depreciation amortization depreciation amortization decreased year ended december 31 2009 compared year ended december 31 2008 primarily due smaller depreciable asset base result certain presses becoming fully depreciated impact impairments certain equipment late 2008 discussed restructuring impairment decreased 2009 capital expenditures amortization expenses relatively low 2009 due low amount acquisitions period included amortization trademarks patents licenses agreements capitalized software acquired technology ebitda margin ebitda decreased year ended december 31 2009 compared year ended december 31 2008 primarily due decreased sales however ebitda margin increased due productivity initiatives lowered labor costs percentage sales productivity initiatives included investments automation restructuring initiatives tight labor cost management focus lean manufacturing principles improve product throughput reduce machine crew size 2009 compared 2008 company also instituted wage freeze 2009 manage labor costs lowered discretionary bonus profit sharing payments ebitda margin year ended december 31 2009 compared year ended december 31 2008 follows ebitda represents net earnings attributable quadgraphics common shareholders plus interest expense ii income tax expense iii depreciation amortization ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding companys performance important measures company gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings measure operating performance cash flows operating activities measure liquidity companys calculation ebitda margin may different calculation used companies therefore comparability may limited reconciliation ebitda net earnings follows 1net earnings attributable quadgraphics common shareholders include effects restructuring impairment charges 112 million 108 million years ended december 31 2009 2008 respectively net earnings attributable quadgraphics common shareholders year ended december 31 2009 also includes 28 million transaction expenses related world color press acquisition north america print related services following table summarizes net sales operating income operating margin certain items impacting comparability within north america print related services segment net sales product sales north america print related services segment decreased year ended december 31 2009 compared year ended december 31 2008 primarily result decline demand commercial printing due global economic recession well continued pricing pressures due part increased competition industry overcapacity product sales reflective companys business performance significant amount total operating profit generated product sales addition service sales generally correspond product sales product sales decrease yearoveryear service sales generally well 2009 relationship product sales service sales held true total weight shipped fuel surcharges imaging work completed decreased 2009 compared 2008 service sales 2009 also decreased due lower freight fuel prices operating income operating income north america print related services segment decreased year ended december 31 2009 compared year ended december 31 2008 primarily result lower net sales partially offset reductions labor expense operating margin decreased due decline net sales restructuring impairment restructuring impairment charges north american print related services segment year ended december 31 2009 109 million included 98 million restructuring charges related headcount reductions 739 employees 2009 11 million related lease termination costs restructuring impairment charges north america print related services segment year ended december 31 2008 97 million included 78 million impairment charges related idling certain equipment 16 million restructuring charges related headcount reductions 100 employees 2008 03 million related lease termination costs order eliminate certain crews machines would low utilization company chose idle certain equipment december 2008 international following table summarizes net sales operating loss operating margin certain items impacting comparability equity earnings unconsolidated entities within international segment net sales product sales international segment decreased 2009 due decline demand commercial printing due global economic recession continued pricing pressures due part increased competition industry overcapacity impacts strengthening united states dollar compared functional currencies segment service sales trended directionally related product sales operating loss operating loss international segment improved year ended december 31 2009 compared year ended december 31 2008 despite decrease revenue primarily due reduced materials usage labor costs outsourced services 2009 including impact restructuring initiatives discussed restructuring impairment companys european business benefited stronger united states dollar reduced translated operating losses additionally cost products europe improved negotiating lower prices raw materials compared north america print related services segment much higher percentage overall product sales mix paper majority international segment customers purchase paper company result overall revenue fluctuations level margin impact international segment restructuring impairment restructuring impairment charges international segment year ended december 31 2009 03 million related headcount reductions 226 employees 2009 restructuring impairment charges international segment year ended december 31 2008 11 million related idling certain equipment equity earnings unconsolidated entities discussed note 1 basis presentation summary significant accounting policies accompanying december 31 2010 audited consolidated financial statements investments entities quadgraphics ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting despite global economy equity earnings unconsolidated entities increased 2009 compared 2008 due growth sales plural gained significant new printing contracts also tightly managed labor costs 2009 resulting higher equity earnings corporate following table summarizes unallocated operating expenses presented corporate operating expenses comprised small portion overall expenses quadgraphics corporate operating expenses increased year ended december 31 2009 compared year ended december 31 2008 primarily result 28 million transaction costs related arrangement agreement world color press announced january 2010 restructuring impairment charges years ended december 31 2009 2008 corporate segment liquidity capital resources company utilizes cash flows operations borrowings credit facilities satisfy liquidity capital requirements company believes expected future cash flows operations unused available capacity revolving credit facilities 4426 million december 31 2010 provide sufficient resources fund ongoing operating requirements integration restructuring requirements related acquired world color press operations well future capital expenditures debt service requirements world color press single employer pension plan contributions world color press multiemployer pension plans withdrawal liabilities investment future growth create value shareholders cash flows provided operating activities year ended december 31 2010 compared year ended december 31 2009 net cash provided operating activities 1528 million year ended december 31 2010 compared 2424 million year ended december 31 2009 resulting 896 million decrease primarily related increased restructuring integration payments well increased transaction costs related primarily world color press acquisition 1084 million 349 million cash paid 2010 related acquired world color press pension postretirement benefit plans 199 million cash payments world color press bankruptcy claims working capital perspective receivables inventory higher due increased volume addition world color press 2010 contributed greater usage working capital partially offsetting decline operating cash flows increase operating income excluding restructuring integration transaction pension cash payments discussed year ended december 31 2009 compared year ended december 31 2008 net cash provided operating activities 2424 million year ended december 31 2009 compared 3080 million year ended december 31 2008 resulting 656 million decrease primarily result 474 million lower net earnings 2009 compared 2008 well operating cash flow impacts 122 million casualty insurance claim 89 million 2008 impairment charges 76 million decreased depreciation amortization 2009 cash flows used investing activities year ended december 31 2010 compared year ended december 31 2009 net cash used investing activities 1181 million year ended december 31 2010 compared 682 million year ended december 31 2009 resulting 499 million increase net cash used investing activities increase primarily related 385 million increase world color press bankruptcyrelated restricted cash property plant equipment additions also increased 248 million 2010 due increased requirements postacquisition company expenditures related integration world color press operations increases cash used years partially offset 100 million cash acquired 2010 generated world color acquisition year ended december 31 2009 compared year ended december 31 2008 net cash used investing activities 682 million year ended december 31 2009 compared 2287 million year ended december 31 2008 resulting 1605 million decrease result 1466 million decrease 2009 purchases property plant equipment 2009 receipt 192 million proceeds fire insurance claim companys west virginia location company made significant capital investments past several years improve productivity companys manufacturing platform integrate automate manufacturing processes result prior investments company able reduce capital expenditures pay indebtedness 2009 cash flows used financing activities year ended december 31 2010 compared year ended december 31 2009 net cash used financing activities 301 million year ended december 31 2010 compared 1846 million year ended december 31 2009 resulting 1545 million decrease net cash used financing activities decrease primarily related borrowings companys new 123 billion debt financing agreement discussed description significant debt obligations net cash provided borrowings 1786 million 2010 compared net debt reductions 1479 million 2009 resulting 3265 million decrease net cash used financing activities years also net cash used financing activities decreased 2010 company made 131 million treasury stock purchases 2009 none 2010 decreases financing cash uses partially offset 2010 acquisition related payments including 1400 million distribution quadgraphics preacquisition common shareholders 458 million payment debt issuance costs since july 2 2010 world color press acquisition completion 123 billion debt financing agreement company paid 2164 million debt capital leases december 31 2010 year ended december 31 2009 compared year ended december 31 2008 net cash used financing activities 1846 million year ended december 31 2009 compared 927 million year ended december 31 2008 resulting 919 million increase net cash used financing activities increase primarily result targeted strategy reduce debt levels 2009 company utilized cash flows operations pay 1479 million outstanding indebtedness 2009 compared increasing indebtedness 385 million 2008 including 755 million debt issuance international segment net equityrelated cash payments dividends purchases treasury stock decreased 945 million 2009 less tax distributions made corporation shareholders due lower 2009 net earnings 2009 debt reduction strategy description significant debt obligations 123 billion debt financing agreement april 23 2010 company entered 123 billion debt financing agreement certain lenders consisting 7000 million term loan 5300 million revolving credit facility borrowings debt financing agreement well quadgraphics world color press cash used july 2 2010 closing date acquisition fund 1replacement quadgraphics former revolving credit facility outstanding borrowings 1061 million including interest owed payment debt issuance costs due upon transaction new debt financing agreement 329 million 2satisfaction certain world color press debt obligations 5806 million included 80 million early repayment premiums funding 1239 million defease world color press unsecured notes 347 million returned company august 2 2010 upon unsecured notes called company leaving 892 million restricted cash related unsecured notes remaining 3transaction costs 455 million paid july 2 2010 excluding debt issuance costs transaction costs incurred quadgraphics expensed incurred accordance acquisition method accounting classified restructuring impairment transactionrelated charges condensed consolidated statements operations 4redemption outstanding world color press equity securities consisting preferred shares warrants deferred share units restricted share units cash consideration paid former world color press common shareholders described note 3 acquisitions accompanying december 31 2010 audited consolidated financial statements total 885 million addition 48 million preferred dividends paid january 25 2010 execution acquisition agreement prior july 2 2010 acquisition closing date 5distribution 1400 million quadgraphics existing common shareholders 6collateralization letters credit 320 million 7payment settle capital lease 176 million 8other obligations arising acquisition 147 million 123 billion financing guaranteed certain subsidiaries company secured substantially companys subsidiary guarantors us certain extent canadian assets unencumbered prior date new debt financing agreement 7000 million term loan matures july 1 2016 requires variable quarterly principal payments bears interest variable interest rate primarily based london interbank offered rate libor subject 15 libor minimum rate weighted average interest rate 55 december 31 2010 december 31 2010 borrowings outstanding term loan component 6865 million 5300 million revolving credit facility matures july 1 2014 bears interest variable interest rate primarily based libor weighted average interest rate 381 december 31 2010 december 31 2010 borrowings outstanding revolving credit facility component 570 million complete 123 billion debt financing agreement company incurred total 458 million debt issuance costs debt issuance costs amortized straightline basis six four year maturities term loan revolving credit facility respectively classified longterm assets consolidated balance sheet master note security agreement september 1 1995 last amended january 26 2006 company entered master note security agreement pursuant company issued time senior notes aggregate principal amount 113 billion various tranches senior notes weightedaverage interest rate 752 december 31 2010 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2036 notes collateralized certain united states land buildings press finishing equipment terms master note security agreement december 31 2010 borrowings outstanding 6720 million facilities agreement december 16 2008 quadwinkowski sp zoo quadwinkowski entered secured facilities agreement facilities agreement facilities agreement includes euro denominated term loan 755 million expires december 16 2015 used refinance quadwinkowskis existing indebtedness multicurrency revolving credit facility 167 million renewed currently expires december 16 2011 used quadwinkowskis working capital general business needs december 31 2010 borrowings outstanding euro denominated term loan 721 million december 31 2010 borrowings outstanding multicurrency revolving credit facility 149 million leaving 18 million available future borrowings terms facilities agreement include guarantee quadgraphics security agreement includes collateralizing substantially quadwinkowski assets facilities bear interest aggregate euro interbank offered rate euribor warsaw interbank offered rate wibor margin weightedaverage interest rate euro denominated term loan 331 december 31 2010 weightedaverage interest rate multicurrency revolving credit facility 368 december 31 2010 covenants compliance companys various lending arrangements include certain financial covenants financial terms numbers ratios covenants compliance section defined respective debt agreements among covenants company must maintain following covenant restrictive measurement included •on rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda shall exceed 375 100 twelve months ended december 31 2010 companys leverage ratio 236 100 ratio step 350 100 december 31 2012 step 325 100 december 31 2013 •on rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 300 100 twelve months ended december 31 2010 companys interest coverage ratio 601 100 ratio step 325 100 december 31 2011 step 350 100 december 31 2012 •on rolling twelvemonth basis fixed charge coverage ratio defined consolidated ebitda rent expense interest rent expense shall less 150 100 twelve months ended december 31 2010 companys fixed charge coverage ratio 294 100 •consolidated net worth least 7458 million plus 40 positive consolidated net income cumulatively year december 31 2010 companys consolidated net worth 141 billion covenants also include certain limitations acquisitions indebtedness liens dividends repurchases capital stock pursuant companys 123 billion debt financing agreement company prohibited paying dividends repurchasing capital stock making distributions among limited situations annual dividends distributions exceed 600 million 2011 2012 starting january 1 2013 company additional dividend restrictions based free cash flow defined debt financing agreement companys total leverage ratio greater 275 100 restrictions companys total leverage ratio less 275 100 total leverage ratio defined debt financing agreement december 31 2010 quadgraphics compliance debt covenants quadgraphics currently expects compliance future periods assurance financial covenants continue met companys failure maintain compliance financial covenants could prevent company borrowing additional amounts could result default debt agreements default could cause outstanding indebtedness become immediately due payable virtue crossacceleration crossdefault provisions risk management discussion companys exposure market risks management market risks see item 7aitem 7 managements discussion analysis financial condition results operations following discussion financial condition results operations quadgraphics read together quadgraphics audited consolidated financial statements three years period ended december 31 2012 including notes thereto included item 8 financial statements supplementary data annual report form 10k discussion contains forwardlooking statements reflect companys plans estimates beliefs companys actual results could differ materially discussed forwardlooking statements factors could cause contribute differences include limited discussed forwardlooking statements item 1a risk factors earlier within annual report form 10k managements discussion analysis financial condition results operations provided supplement companys consolidated financial statements accompanying notes help provide understanding companys financial condition changes companys financial condition companys results operations discussion analysis organized follows • overview section includes general description companys business segments overview key performance metrics companys management measures utilizes evaluate business performance overview trends affecting company including managements actions related trends • results operations section contains analysis companys results operations comparing results 1 year ended december 31 2012 year ended december 31 2011 2 year ended december 31 2011 year ended december 31 2010 comparability companys results operations periods significantly impacted acquisitions dispositions results operations world color press included companys consolidated results prospectively date acquisition july 2 2010 addition company entered definitive agreement transcontinental 2011 among things acquire transcontinentals mexican operations exchange companys canadian operations results operations transcontinentals mexican operations included companys consolidated results prospectively date acquisition september 8 2011 results companys canadian operations reported discontinued operations periods presented forwardlooking statements providing general description recent projected industry company developments important understanding companys results operations included section also provides discussion ebitda margin nongaap financial measures company uses assess performance business • liquidity capital resources section provides analysis companys capitalization cash flows statement offbalance sheet arrangements discussion table outstanding debt commitments cash flows companys canadian operations reported discontinued operations thus included cash flow analysis forwardlooking statements important understanding companys financial condition also included section also provides discussion free cash flow nongaap financial measure company uses assess liquidity capital allocation deployment • critical accounting policies estimates section contains discussion accounting policies companys management believes important companys financial condition results operations well allowances reserves require significant judgment estimates part companys management addition companys significant accounting policies including critical accounting policies summarized note 1 basis presentation summary significant accounting policies consolidated financial statements item 8 financial statements supplementary data annual report form 10k • new accounting pronouncements section provides discussion new accounting pronouncements anticipated impact accounting pronouncements companys consolidated financial statements overview business overview quadgraphics leading global printer media channel integrator company believes wellpositioned help clients integrate new emerging media proven channels print part overall multichannel marketing strategy consultative ideas worldwide capabilities leadingedge technology singlesource simplicity company believes resources knowledge help clients maximize revenue derive marketing spend minimize total cost print production distribution companys print related products services north america latin america europe primarily include • print solutions includes consumer magazines catalogs retail inserts special interest publications journals direct mail books directories instore marketing packaging commercial specialty printed products • media solutions includes marketing strategy media planing placement data insights creative services videography photography workflow solutions digital imaging digital publishing interactive print solutions augmented reality triggered image recognition near field communication response data analytics services • logistics services includes mailing distribution logistics data optimization hygiene services quadgraphics remains focused four primary strategic goals believes allow company successful despite ongoing economic industry challenges goals follows • transform industry company believes wellpositioned transform industry following three ways 1 maximize revenue clients derive marketing spend media channel integration printer media channel integrator quadgraphics uses clientcentric approach help marketers publishers connect strategy content multiple media channels create measurable client value full range integrated solutions quadgraphics clients benefit better end user engagement improved response increased revenue derived multichannel marketing campaigns 2 minimize clients total cost production distribution utilizing efficient innovative fullyintegrated us national distribution network provide enhanced value clients increased efficiency postal costsavings 3 create opportunity disciplined valuedriven industry consolidation adds complementary capabilities allowing company provide enhanced range products services create significant efficiencies overall print production distribution processes • maximize operational technological excellence quadgraphics utilizes disciplined return capital framework make significant investments print manufacturing platform research development technological innovation data management capabilities resulting believes one integrated automated efficient modern platforms industry • empower engage develop employees quadgraphics believes distinct corporate culture encourages organizationwide entrepreneurial spirit opportunistic mentality employees embrace responsibility take ownership projects encouraged create solutions advance companys strategic goals • enhance financial strength given current economic industry challenges quadgraphics believes strategy enhance financial strength contribute longterm success key components strategy centered companys disciplined financial approach maximize earnings free cash flow use consistent financial policies ensure maintains strong balance sheet liquidity levels ability retain financial flexibility needed strategically allocate deploy capital result divestiture companys canadian operations transcontinental march 1 2012 former north america print related services segment referred united states print related services segment united states print related services segment amounts restated exclude canadian discontinued operations companys operating reportable segments aligned chief operating decision maker company currently manages business company three reportable segments united states print related services international corporate united states print related services segment predominantly comprised companys united states printing operations segment managed one integrated platform includes product related service offerings described united states print related services segment accounted approximately 88 companys consolidated net sales year ended december 31 2012 international segment consists companys printing operations europe latin america including acquired transcontinental mexican operations segment produces delivers quadgraphics product service offerings europe latin america exception printingrelated auxiliary equipment included united states print related services segment international segment accounted approximately 12 companys consolidated net sales year ended december 31 2012 corporate segment consists unallocated general administrative activities associated expenses including part executive legal finance information technology human resources key performance metrics overview companys management believes ability generate net sales growth profit increases positive cash flow key indicators successful execution companys business strategy increase shareholder value company uses period net sales growth ebitda margin net cash provided operating activities free cash flow metrics measure operating performance financial condition liquidity ebitda margin free cash flow nongaap financial measures see definitions ebitda margin reconciliation net earnings loss attributable quadgraphics common shareholders ebitda results operations section see definition free cash flow reconciliation net cash provided operating activities free cash flow liquidity capital resources section net sales growth company uses period net sales growth key performance metric companys management assesses net sales growth based ability generate increased net sales increased sales existing clients sales new clients sales new expanded solutions existing new clients opportunities expand sales strategic investments including acquisitions ebitda margin company uses ebitda margin metrics assess operating performance companys management assesses ebitda margin based ability increase revenues controlling variable expense growth net cash provided operating activities company uses net cash provided operating activities metric assess liquidity companys management assesses net cash provided operating activities based ability meet recurring cash obligations increasing available cash fund integration restructuring requirements related acquired vertis transcontinental mexican operations well fund capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal liabilities acquisitions investments future growth shareholder dividends net cash provided operating activities significantly impacted timing nonrecurring infrequent receipts expenditures free cash flow company uses free cash flow metric assess liquidity capital allocation deployment companys management assesses free cash flow measure quantify cash available strategic capital allocation deployment investments business including acquisitions strengthening balance sheet including debt pension repayment returning cash shareholders including dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items payments related completing world color press bankruptcy process overview trends affecting quadgraphics competition highly fragmented printing industry remains intense industry consolidating excess manufacturing capacity causing printing industry face continued downward pricing pressures addition digital delivery documents data including online distribution hosting media content mobile technologies offer alternatives traditional delivery printed documents increasing consumer acceptance digital delivery content resulted marketers publishers allocating marketing advertising spend across expanding selection digital delivery options reduces demand contributes industry overcapacity addition company faces competition print management firms look streamline processes reduce overall print spend companys clients well strategic marketing firms focused helping businesses integrate multiple channels marketing campaigns company believes disciplined approach capital management strong balance sheet critical able invest profitable growth opportunities technological advances thereby providing highest return shareholders management currently balancing use cash deleveraging companys balance sheet reduction debt pension postretirement obligations compelling investment opportunities returns shareholders including quarterly shareholder dividend 025 per share increasing 20 030 per share 2013 200 per share special dividend totaling approximately 935 million paid december 2012 share repurchase program approved third quarter 2011 purchases program year ended december 31 2012 company reduced consolidated debt capital leases 120 million year ended december 31 2012 445 million since july 2 2010 world color press acquisition date despite incurring significant costs related acquisition integration restructuring programs company working diligently lower cost structure consolidating manufacturing platform efficient facilities well realizing purchasing mailing logistics efficiencies centralizing consolidating print manufacturing volumes eliminating redundancies administrative corporate operations efforts include deployment companys smartools® platform streamline workflows improve data visibility across consolidated platform addition restructuring actions initiated company beginning 2010 december 31 2012 resulted announcement 16 plant closures reduced headcount approximately 6300 company substantially completed world color press integration december 31 2012 company achieved approximately 285 million annual synergy savings world color press integration 272 million recognized december 31 2012 13 million expected recognized 2013 total costs incurred achieve 285 million synergy savings approximately 215 million total synergy savings 285 million exceeded companys original target 225 million 60 million costs achieve synergies staying within original targeted range 195 million 240 million addition cost savings acquisitionrelated synergies company continues focus cost reductions lean manufacturing continuous improvement initiatives order achieve improved efficiencies reduce waste lower overall operating costs enhance quality timeliness create safer work environment companys employees increasingly multichannel marketplace company believes printing industry need make capital investments new technologies deliver targeted customized print solutions deploy multichannel marketing campaigns integration new media company believes ongoing commitment technology paramount delivering highquality relevant offerings customers company invested 104 million capital projects 2012 intends invest 150 million 175 million new capital projects 2013 making capital investment decisions management undertakes thorough process aimed driving strongest contribution longterm profitability whether fixed asset additions discussed organic growth opportunities acquisitions divestitures recent examples companys acquisition divestiture activity follows • march 1 2012 company transcontinental completed business exchange transaction pursuant quadgraphics acquired transcontinentals mexican operations exchange companys canadian operations part canadian transaction transcontinental assumed pension postretirement obligations pertaining canadian employees acquisition trancontinentals mexican operations company believes able create industryleading print platform economy higher growth rate canada also achieve beneficial synergy savings operational consolidation company completed acquisition transcontinentals mexican operations september 8 2011 completed sale canadian operations transcontinental march 1 2012 • march 28 2012 company entered strategic partnership indiabased manipal technologies limited manipaltech purchase minority equity ownership interest manipaltech indias largest providers printing services supports clients marketing branding communication needs print services technology solutions strategic investment expanded quadgraphics geographic reach asia broadened product service scope • january 16 2013 company completed acquisition substantially assets vertis provider retail advertising inserts direct marketing instore marketing solutions 2674 million includes payment 974 million current assets excess normalized working capital requirements net purchase price 1700 million company believes acquisition vertis strengthen expand client offering enhanced range products services within united states commercial printing segment increased manufacturing flexibility distribution efficiencies extended geographic footprint united states additional information regarding acquisition see note 26 subsequent events consolidated financial statements item 8 financial statements supplementary data annual report form 10k company subject seasonality quarterly results net sales operating income typically higher third fourth quarters calendar year compared first second quarters seasonality driven increased magazine advertising page counts retail advertising inserts catalogs books primarily due backtoschool holiday related advertising promotions companys 2012 net sales followed typical industry seasonality management anticipates impact seasonality 2013 companys market capitalization affected among things changes industry market conditions changes results operations changes forecasts market expectations related future results companys management believes continued weak macroeconomic conditions globally print industry contributed volatility companys market capitalization last 12 months however company believes volatility companys market capitalization may necessarily reflect companys actual operating performance cash flows financial condition andor liquidity companys market capitalization remained companys carrying value equity approximately one year considered company sustained period time result company conducted interim goodwill impairment assessment third quarter 2012 united states latin american reporting units included comparing carrying amount net assets including goodwill reporting unit respective fair value july 31 2012 date interim assessment european reporting unit goodwill associated management concluded impairment existed july 31 2012 estimated fair value companys united states latin american reporting units exceeded respective carrying amounts addition interim goodwill impairment assessment company performed required annual assessment goodwill impairment october 31 2012 management concluded similar interim goodwill impairment assessment impairment existed october 31 2012 additional indicators impairment identified date annual assessment december 31 2012 results operations year ended december 31 2012 compared year ended december 31 2011 summary results companys operating income continuing operations operating margin net earnings loss attributable quadgraphics common shareholders diluted earnings loss per share attributable quadgraphics common shareholders year ended december 31 2012 changed year ended december 31 2011 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 1183 million incurred year ended december 31 2012 included 272 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 230 million impairment charges certain buildings equipment longer utilized production result facility consolidations c 41 million transactionrelated charges consisting professional service fees related business acquisition divestiture activities 446 million acquisitionrelated integration costs e 194 million various restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 128 million curtailment gain result amendment postretirement medical benefit plans 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable company expects incur additional restructuring integration costs future reporting periods connection restructuring program began 2010 related eliminating excess manufacturing capacity properly aligning cost structure part integration july 2 2010 world color press acquisition september 8 2011 transcontinental mexico acquisition january 16 2013 vertis acquisition cost reduction programs 2 restructuring impairment transactionrelated charges 1140 million incurred year ended december 31 2011 included 295 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 138 million impairment charges certain buildings equipment longer utilized production result facility consolidations c 29 million transactionrelated charges incurred primarily connection transcontinental transaction 457 million acquisitionrelated integration costs net 156 million gain collection note receivable june 2008 sale world color press european operations e 221 million various restructuring charges including costs maintain exit closed facilities well lease exit charges 3 interest expense decreased 240 million 144 million net tax year ended december 31 2012 840 million change due reduction debt 2012 lower interest rates result 15 billion debt financing agreement entered july 26 2011 4 nonrecurring 340 million loss debt extinguishment 204 million net tax recognized part 15 billion debt financing agreement entered july 26 2011 340 million loss represents certain debt issuance costs expensed 5 income tax expense decreased 575 million due primarily reversal 435 million income tax provisions related 30 million settlement irs audit preacquisition tax years world color press 135 million reserves longer required due lapses applicable statutes limitations see note 15 income taxes consolidated financial statements item 8 financial statements supplementary data annual report form 10k additional information 6 loss discontinued operations net tax decreased 354 million year ended december 31 2012 32 million loss primarily due 10 fewer months results canadian operations 2012 canadian discontinued operations sold march 1 2012 7 gain disposal discontinued operations net tax 340 million year ended december 31 2012 due completion sale companys canadian operations transcontinental march 1 2012 8 operating income decreased 461 million primarily due margin impact 2306 million 53 decline net sales partially offset 76 million incremental synergy savings integration world color press operations 599 million reduced selling general administrative costs 60 million reduced depreciation amortization expense following discussion provides additional details operating results continuing operations following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased 1870 million 49 year ended december 31 2012 compared year ended december 31 2011 primarily due 4 reduction sales combination lower print volumes lower pricing result continued pricing pressure excess manufacturing capacity printing industry 1 reduction sales lower paper byproduct sales service sales primarily consist imaging logistics distribution services decreased 436 million 87 year ended december 31 2012 compared year ended december 31 2011 primarily due lower sales logistics distribution services media solutions due primarily due lower related print volumes cost sales cost product sales decreased 734 million year ended december 31 2012 compared year ended december 31 2011 primarily due decreased print volumes synergy savings related labor purchasing manufacturing expenses result companys world color press integration restructuring programs cost product sales percentage net sales increased 676 year ended december 31 2011 696 year ended december 31 2012 primarily due lower print pricing result continued pricing pressure excess manufacturing capacity printing industry lower pricing byproduct recoveries increase cost product sales percentage net sales partially offset synergy cost savings related world color press integration cost service sales decreased 452 million year ended december 31 2012 compared year ended december 31 2011 primarily due lower sales logistics distribution services media solutions cost service sales percentage net sales decreased 88 year ended december 31 2011 82 year ended december 31 2012 primarily due lower labor costs related cost reduction activities selling general administrative expenses selling general administrative expenses decreased 599 million year ended december 31 2012 compared year ended december 31 2011 primarily due 11 million synergy savings world color press integration 11 million lower employee related costs associated nonintegration cost reduction activities 10 million lower bad debt expense mostly related change payment terms existing customer 8 million decrease legal environmental reserves primarily related sale vacant facilities 4 million lower information technology related expenses 3 million lower professional fee expense net miscellaneous spending reductions selling general administrative expenses percentage net sales decreased 94 84 years due items discussed preceding sentence restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges increased 43 million year ended december 31 2012 compared year ended december 31 2011 primarily due 92 million increase impairment charges 12 million increase transactionrelated charges partially offset 27 million decrease restructuring charges 23 million decrease employee termination charges 11 million decrease acquisitionrelated integration costs restructuring impairment transactionrelated charges 1183 million incurred year ended december 31 2012 included 1 272 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 230 million impairment charges certain buildings equipment longer utilized production result facility consolidations 3 41 million transactionrelated charges incurred consisting professional service fees related business acquisition divestiture activities 4 446 million integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 194 million various restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 128 million curtailment gain resulting amendment postretirement medical benefit plan 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable restructuring impairment transactionrelated charges 1140 million incurred year ended december 31 2011 included 1 295 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 138 million impairment charges related machinery equipment 3 29 million transactionrelated charges incurred primarily connection transcontinental transaction 4 457 million acquisitionrelated integration costs net 156 million gain collection note receivable june 2008 sale world color press european operations 5 221 million various restructuring charges including costs maintain exit closed facilities well lease exit charges depreciation amortization depreciation amortization decreased 60 million 17 year ended december 31 2012 compared year ended december 31 2011 primarily due decreased capital expenditures property plant equipment impact companys restructuring activities ebitda marginconsolidated ebitda margin year ended december 31 2012 compared year ended december 31 2011 follows ebitda increased 468 million year ended december 31 2012 primarily due 1 760 million incremental synergy savings integrating world color press operations 2 599 million decreased selling general administrative expenses 3 340 million gain disposal canadian discontinued operations recorded march 1 2012 4 340 million loss debt extinguishment recorded 2011 related 15 billion debt financing agreement recur 2012 5 354 million reduction loss discontinued operations due sale canadian operations transcontinental march 1 2012 impacts partially offset margin impact 2306 million 53 decline net sales 43 million increased restructuring impairment transactionrelated charges results impacts also increased ebitda margin 117 year ended december 31 2012 compared 100 year ended december 31 2011 ebitda represents net earnings loss attributable quadgraphics common shareholders plus interest expense ii income tax expense applicable iii depreciation amortization less income tax benefit applicable ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net earnings loss attributable quadgraphics common shareholders follows 1 net earnings loss attributable quadgraphics common shareholders includes effects restructuring impairment transactionrelated charges 1183 million 1140 million years ended december 31 2012 2011 respectively b loss debt extinguishment 340 million year ended december 31 2011 c loss discontinued operations net tax 32 million 386 million years ended december 31 2012 2011 respectively ebitda discontinued operations 32 million 256 million years ended december 31 2012 2011 respectively include restructuring impairment transactionrelated charges 17 million 451 million years ended december 31 2012 2011 respectively gain disposal discontinued operations net tax 340 million year ended december 31 2012 united states print related services following table summarizes net sales operating income operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment decreased 1868 million 56 year ended december 31 2012 compared year ended december 31 2011 primarily due 4 reduction sales combination lower print volumes lower pricing result continued pricing pressure excess manufacturing capacity printing industry 1 net reduction sales lower paper byproduct sales service sales united states print related services segment decreased 414 million 85 year ended december 31 2012 compared year ended december 31 2011 primarily due lower sales logistics distribution services media solutions due primarily due lower related print volumes operating income operating income united states print related services segment decreased 551 million year ended december 31 2012 compared year ended december 31 2011 primarily due margin impact 2282 million decrease net sales partially offset 76 million synergy savings world color press integration 502 million lower selling general administrative expenses 68 million decrease restructuring impairment transactionrelated charges operating margin united states print related services segment decreased 71 year ended december 31 2011 60 year ended december 31 2012 primarily due reasons discussed preceding paragraph restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2012 485 million consisting 1 202 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 119 million impairment charges certain buildings equipment longer utilized production result facility consolidations 3 164 million various restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 128 million curtailment gain resulting amendment postretirement medical benefit plan 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2011 553 million consisting 1 230 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 127 million impairment charges machinery equipment 3 08 million acquisitionrelated integration costs 4 188 million various restructuring charges including costs maintain exit closed facilities well lease exit charges international following table summarizes net sales operating loss operating margin certain items impacting comparability equity earnings unconsolidated entities within international segment net sales product sales international segment decreased 02 million year ended december 31 2012 compared year ended december 31 2011 primarily due 22 million increase net sales mexico result acquisition transcontinental mexico operations partially offset 22 million 5 negative impact foreign exchange operating loss operating loss international segment increased 54 million year ended december 31 2012 compared year ended december 31 2011 primarily due 190 million increase restructuring impairment integration expenses primarily related transcontinental mexico acquisition partially offset margin improvement poland result restructuring actions restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2012 263 million consisting 1 70 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 111 million impairment charges certain buildings equipment longer utilized production result facility consolidations 3 56 million integration costs primarily related integration acquired companies 4 26 million restructuring charges restructuring impairment transactionrelated charges international segment year ended december 31 2011 73 million consisting 1 31 million employee termination costs related various workforce reduction initiatives 2 11 million impairment charges machinery equipment 3 31 million restructuring charges equity earnings unconsolidated entities investments entities quadgraphics ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural editora e grafica plural commercial printer based são paulo brazil well 50 interest joint venture chile acquired part world color press acquisition equity earnings unconsolidated entities international segment decreased 08 million year ended december 31 2012 primarily due lower earnings plural due decline volumes related economic slowdown brazil corporate following table summarizes unallocated operating expenses presented corporate operating expenses decreased 101 million year ended december 31 2012 compared year ended december 31 2011 primarily due 79 million decrease restructuring impairment transactionrelated charges cost reduction activities resulted lower labor professional service costs corporate restructuring impairment transactionrelated charges year ended december 31 2012 435 million consisting 1 41 million transactionrelated charges consisting professional service fees related business acquisition divestiture activities 2 390 million acquisitionrelated integration costs 3 04 million various restructuring charges corporate restructuring impairment transactionrelated charges year ended december 31 2011 514 million consisting 1 34 million employee termination costs related workforce reduction initiatives 2 29 million transactionrelated charges incurred primarily connection transcontinental transaction 3 449 million acquisitionrelated integration costs net 156 million gain collection note receivable june 2008 sale world color press european operations 4 02 million various restructuring charges results operations year ended december 31 2011 compared year ended december 31 2010 summary results companys operating income continuing operations operating margin net earnings loss attributable quadgraphics common shareholders diluted earnings loss per share attributable quadgraphics common shareholders year ended december 31 2011 changed year ended december 31 2010 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 1140 million incurred year ended december 31 2011 included 295 million employee termination charges plant closures workforce reductions initiatives b 138 million impairment charges related closure stillwater oklahoma plant well machinery equipment facilities c 29 million transactionrelated charges incurred primarily connection transcontinental transaction 457 million world color press integration costs net 156 million gain collection note receivable june 2008 sale world color press european operations e 221 million various restructuring charges including costs maintain exit closed facilities well lease exit charges connection integration world color press operations transcontinentals mexican operations quadgraphics company expects incur additional restructuring integration costs future reporting periods 2 restructuring impairment transactionrelated charges 1475 million incurred year ended december 31 2010 included 267 million employee termination charges related plant closures various workforce reduction initiatives b 329 million impairment charges assets primarily related pila poland fredericksburg virginia reno nevada plant closures c 410 million transactionrelated charges incurred primarily connection acquisition world color press much lesser extent 2010 acquisition hgi company llc hgi 278 million world color press acquisition integration costs e 191 million various restructuring charges including costs maintain exit closed facilities well lease exit charges 3 interest expense increased 151 million 80 million net tax year ended december 31 2011 1080 million change due increased average debt levels following world color press acquisition july 2 2010 partially offset lower interest rates result 15 billion debt financing agreement entered july 26 2011 4 income tax expense decreased due companys change c corporation status july 2010 pursuant company recognized income tax expense 2005 million connection july 2 2010 acquisition world color press public registration quadgraphics class stock company changed tax status certain entities within quadgraphics legal structure c corporation status provisions internal revenue code point forward entities subject federal state income taxes 5 company recognized 340 million loss debt extinguishment july 2011 203 million net tax part 15 billion debt financing agreement 340 million loss represents certain debt issuance costs associated new refinanced debt expensed 6 loss discontinued operations net tax increased 340 million year ended december 31 2011 386 million loss primarily due 301 million increase restructuring impairment transactionrelated charges recognized 2011 restructuring impairment transactionrelated expenses included 179 million charge recognize pension curtailment loss 139 million goodwill impairment charge third quarter 2011 pending sale canadian discontinued operations due carrying value canadian net assets exceeding estimated fair value mexican net assets acquired transcontinental 7 operating income increased 618 million primarily due acquisition world color press synergy savings integration world color press operating income increased operating margin decreased due lower operating margins acquired world color press business companys preacquisition business part integration world color press company implemented significant twoyear restructuring program reduce operating administrative cost structure combined company following discussion provides additional details operating results continuing operations following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales increased 10119 million 360 year ended december 31 2011 compared year ended december 31 2010 primarily due 1061 million additional net sales related world color press acquisition higher paper byproduct sales partially offsetting increases 49 million net decreases primarily related 1 lower pricing due continued pricing pressure excess manufacturing capacity printing industry 2 lower volumes service sales primarily consist imaging logistics distribution services increased 1269 million 341 year ended december 31 2011 compared year ended december 31 2010 primarily due 118 million additional net sales related world color press acquisition 9 million higher sales imaging logistics distribution services cost sales cost product sales increased 7906 million year ended december 31 2011 compared year ended december 31 2010 primarily due world color press acquisition increased material freight costs cost increases partially offset acquisition synergy savings related purchasing efficiencies realized well labor cost reductions result plant closures cost product sales percentage product sales increased 669 year ended december 31 2010 676 year ended december 31 2011 primarily due increased paper sales generally billed customers passthrough rates thus represent minimal margin increased labor costs partially offsetting increases higher pricing byproduct recoveries synergy cost savings related world color press acquisition integration cost service sales increased 1052 million year ended december 31 2011 compared year ended december 31 2010 primarily due world color press acquisition higher freight fuel costs logistics services selling general administrative expenses selling general administrative expenses increased 1040 million year ended december 31 2011 compared year ended december 31 2010 primarily due world color press acquisition including compliance support costs associated companys status publicly reporting entity starting may 27 2010 addition 96 million increase provisions doubtful accounts recorded related increased accounts receivable writeoffs 71 million insurance gain recognized 2010 recur 2011 increases partially offset synergy savings integration world color press selling general administrative expenses percentage net sales decreased 95 94 years due synergy savings integration world color press restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges decreased 335 million year ended december 31 2011 compared year ended december 31 2010 primarily due 381 million decrease transactionrelated charges related acquisition world color press 191 million decrease impairment charges related plant closures partially offset 179 million increase world color press integration costs 30 million increase restructuring charges 28 million increase employee termination charges restructuring impairment transactionrelated charges 1140 million incurred year ended december 31 2011 included 1 295 million employee termination charges plant closures workforce reduction initiatives 2 138 million impairment charges related closure stillwater oklahoma plant well machinery equipment facilities 3 29 million transactionrelated charges incurred primarily connection transcontinental transaction 4 457 million world color press integration costs net 156 million gain collection note receivable june 2008 sale world color press european operations 5 221 million various restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring impairment transactionrelated charges 1475 million incurred year ended december 31 2010 included 1 267 million employee termination charges plant closures workforce reduction initiatives 2 329 million impairment charges assets related pila poland fredericksburg virginia reno nevada plant closures 3 410 million transactionrelated charges incurred primarily connection acquisition world color press 4 278 million world color press integration costs 5 191 million various restructuring charges including costs maintain exit closed facilities well lease exit charges depreciation amortization depreciation amortization increased 772 million year ended december 31 2011 compared year ended december 31 2010 due world color press acquisition increased capital expenditures related primarily integration world color press ebitda marginconsolidated ebitda margin year ended december 31 2011 compared year ended december 31 2010 follows ebitda increased 983 million year ended december 31 2011 primarily due world color press acquisition related synergy savings integrating world color press operations increases partially offset continued pricing pressure ebitda margin decreased year ended december 31 2011 compared year ended december 31 2010 primarily due lower relative operating margins acquired world color press business compared preacquisition quadgraphics business ebitda represents net loss attributable quadgraphics common shareholders plus interest expense ii income tax expense iii depreciation amortization ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net loss measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net loss attributable quadgraphics common shareholders follows 1 net loss attributable quadgraphics common shareholders includes effects restructuring impairment transactionrelated charges 1140 million 1475 million years ended december 31 2011 2010 respectively b loss debt extinguishment 340 million year ended december 31 2011 c loss discontinued operations net tax 386 million 46 million years ended december 31 2011 2010 respectively ebitda discontinued operations 256 million 24 million years ended december 31 2011 2010 respectively includes restructuring impairment transactionrelated charges 451 million 150 million years ended december 31 2011 2010 respectively united states print related services following table summarizes net sales operating income operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment increased 8676 million year ended december 31 2011 compared year ended december 31 2010 primarily due 927 million net sales related world color press acquisition increased paper byproduct sales partially offsetting increases 59 million net decreases primarily related 1 continued pricing pressure excess manufacturing capacity printing industry 2 lower volumes service sales united states print related services segment increased 1270 million year ended december 31 2011 compared year ended december 31 2010 primarily due 118 million net sales related world color press acquisition 9 million higher sales imaging logistics distribution services operating income operating income united states print related services segment increased 665 million year ended december 31 2011 compared year ended december 31 2010 primarily due world color press acquisition synergy savings integration world color press restructuring activities described increase partially offset increased material freight costs increased selling general administrative costs related larger postworld color press acquisition company compliance support costs associated companys public company status company became publicly reporting company may 27 2010 addition 96 million increase provisions doubtful accounts recorded related increase accounts receivable writeoffs 71 million insurance gain recognized 2010 recur 2011 operating margin united states print related services segment decreased 72 year ended december 31 2010 71 year ended december 31 2011 primarily due reasons discussed preceding paragraph restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2011 553 million consisting 1 230 million employee termination charges plant closures workforce reduction initiatives 2 127 million impairment charges related closure stillwater oklahoma plant well machinery equipment facilities 3 08 million world color press integrationrelated charges 4 188 million various restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2010 558 million consisting 1 208 million employee termination charges plant closures various workforce reduction initiatives 2 85 million impairment charges primarily related closures reno nevada fredericksburg virginia plants 3 105 million world color press integrationrelated charges 4 160 million various restructuring charges including costs maintain exit closed facilities well lease exit charges international following table summarizes net sales operating loss operating margin certain items impacting comparability equity earnings unconsolidated entities within international segment net sales product sales international segment increased 1443 million year ended december 31 2011 compared year ended december 31 2010 primarily due 134 million net sales related world color press acquisition 14 million net sales related transcontinental mexican acquisition operating loss operating loss international segment decreased 338 million year ended december 31 2011 compared year ended december 31 2010 primarily due 260 million decrease restructuring impairment integration expenses cost reductions poland result 2010 restructuring actions restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2011 73 million consisting 1 31 million employee termination charges related various workforce reduction initiatives 2 11 million impairment charges machinery equipment 3 31 million restructuring charges restructuring impairment transactionrelated charges international segment year ended december 31 2010 333 million consisting 1 33 million employee termination charges related pila poland plant closure 2 244 million impairment charges related closure pila poland plant 3 39 million integration costs 4 17 million restructuring charges equity earnings unconsolidated entities investments entities quadgraphics ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil well 50 interest joint venture chile acquired part world color press acquisition equity earnings unconsolidated entities international segment decreased 55 million year ended december 31 2011 primarily due lower earnings plural largely attributed start activities associated recently added press capacity meet growing demand corporate following table summarizes unallocated operating expenses presented corporate operating expenses increased 50 million year ended december 31 2011 compared year ended december 31 2010 primarily due world color press acquisition partially offset 70 million decrease restructuring impairment transactionrelated charges additional corporate expenses incurred 2011 due compliance support costs associated companys new status publicly traded entity includes increased levels administrative staff information technology finance legal human resources treasury internal audit administrative labor corporate restructuring impairment transactionrelated charges year ended december 31 2011 514 million consisting 1 34 million employee termination charges workforce reduction initiatives 2 29 million transactionrelated charges incurred primarily connection transcontinental transaction 3 449 million world color press integration costs net 156 million gain collection note receivable june 2008 sale world color press european operations 4 02 million various restructuring charges corporate restructuring impairment transactionrelated charges year ended december 31 2010 584 million consisting 1 26 million employee termination charges workforce reduction initiatives 2 410 million transactionrelated charges related primarily acquisition world color press 3 134 million world color press integration costs 4 14 million various restructuring charges liquidity capital resources company utilizes cash flows operating activities borrowings credit facilities satisfy liquidity capital requirements company believes expected future cash flows operating activities unused available capacity revolving credit facilities net issued letters credit 7547 million december 31 2012 provide sufficient resources fund 2674 million purchase price acquisition vertis ongoing operating requirements integration restructuring requirements related acquired vertis transcontinental mexican operations well future capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal payments investments future growth create value shareholders shareholder dividends borrowings 8500 million revolving credit facility 500 million december 31 2012 peak borrowings 1049 million year ended december 31 2012 companys borrowing capacity increased ongoing cost borrowings reduced execution 15 billion debt financing agreement july 26 2011 see description significant outstanding debt obligations december 31 2012 net cash provided operating activities year ended december 31 2012 compared year ended december 31 2011 net cash provided operating activities 3542 million year ended december 31 2012 compared 3711 million year ended december 31 2011 resulting 169 million decrease cash provided operating activities decrease primarily due decrease cash flows discontinued canadian operations sold march 1 2012 partially offset lower working capital 11 million year ended december 31 2011 compared year ended december 31 2010 net cash provided operating activities 3711 million year ended december 31 2011 compared 1528 million year ended december 31 2010 resulting 2183 million increase net cash provided operating activities primarily due 2034 million decrease net loss lower working capital uses cash net cash used investing activities year ended december 31 2012 compared year ended december 31 2011 net cash used investing activities 701 million year ended december 31 2012 compared 1843 million year ended december 31 2011 resulting 1142 million decrease cash used investing activities decrease primarily due 500 million deposit related transcontinental mexico acquisition discussed note 3 consolidated financial statements deposit made 2011 refunded back company 2012 impact cash used investing activities 1008 million improvement addition 648 million decrease capital expenditures related primarily integration world color press operations decreased uses cash partially offset 181 million manipaltech cost method investment entered march 28 2012 259 million deposit made 2012 related vertis agreement held escrow applied purchase price upon closure deal year ended december 31 2011 compared year ended december 31 2010 net cash used investing activities 1843 million year ended december 31 2011 compared 1181 million year ended december 31 2010 resulting 662 million increase net cash used investing activities primarily due 508 million deposit made 2011 transcontinental mexico acquisition discussed note 3 consolidated financial statements 557 million increase capital expenditures related primarily integration world color press operations 158 million increase cash used acquisitions impacts partially offset 631 million benefit generated reducing restricted cash balances net cash used financing activities year ended december 31 2012 compared year ended december 31 2011 net cash used financing activities 2856 million year ended december 31 2012 compared 1735 million year ended december 31 2011 resulting 1121 million increase cash used financing activities increase primarily due 1236 million increase dividend payments due primarily 935 million 200 per share special dividend paid december 2012 addition debt payments 2012 increased 115 million versus 2011 part companys effort reduce debt 2012 reduced total debt 120 million 2012 increases net cash used financing activities partially offset reduced debt issuance costs 94 million associated companys 15 billion debt financing agreement completed july 26 2011 82 million reduced purchases class stock companys 100 million share repurchase program year ended december 31 2011 compared year ended december 31 2010 net cash used financing activities 1735 million year ended december 31 2011 compared 301 million year ended december 31 2010 resulting 1434 million increase net cash used financing activities due primarily 1095 million net debt repayments 2011 compared 1786 million net cash borrowings 2010 resulting 2881 million increase net cash used financing activities years also net cash used financing activities increased due 138 million reduction liability unsecured notes issued connection world color press bankruptcy increases net cash used financing activities partially offset reduced shareholder cash distributions 1310 million 343 million lower debt issuance cost payments shareholder cash distributions decreased 2011 due 1400 million cash distribution made 2010 companys preacquisition common shareholders part world color press acquisition free cash flow free cash flow defined cash flows provided operating activities less purchases property plant equipment companys management assesses free cash flow measure quantify cash available 1 strategic capital allocation deployment investments business including acquisitions 2 strengthening balance sheet including debt pension repayment 3 returning value shareholders including dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items payments related completing world color press bankruptcy process free cash flow nongaap measure free cash flow considered alternative cash flows provided operating activities measure liquidity quadgraphics calculation free cash flow may different similar calculations used companies therefore comparability may limited free cash flow year ended december 31 2012 compared year ended december 31 2011 follows 1 net cash provided operating activities includes net restructuring payments 1134 million 1252 million years ended december 31 2012 2011 respectively net restructuring payments include total restructuring payments less restructuring cash receipts 147 million 156 million related collections disputed preacquisition world color press notes receivable years ended december 31 2012 2011 respectively b bankruptcy payments 104 million 124 million years ended december 31 2012 2011 respectively free cash flow increased 479 million year ended december 31 2012 compared year ended december 31 2011 primarily due 648 million decrease capital expenditures partially offset 169 million decrease cash flows provided operating activities see net cash provided operating activities section explanations decrease operating cash flows description significant outstanding debt obligations december 31 2012 december 31 2012 company utilized combination debt instruments fund cash requirements including • 15 billion debt financing agreement discussed includes ◦ 8500 million revolving credit facility 500 million outstanding december 31 2012 ◦ 4500 million term loan 4444 million outstanding december 31 2012 ◦ 2000 million term loan b 1967 million outstanding december 31 2012 • master note security agreement 5539 million outstanding december 31 2012 • facilities agreement 913 million foreign currency denominated facilities agreement including term loan revolving credit facility components total 701 million outstanding december 31 2012 15 billion debt financing agreement july 26 2011 last amended december 19 2012 company entered 15 billion debt financing agreement certain lenders reduce companys borrowing costs lower interest rates create flexibility higher revolving credit capacity improvement financial terms 15 billion debt financing agreement includes three different loan facilities term loan term loan b revolving credit facility revolving credit facility amount 8500 million term loan aggregate amount 4500 million initial term five years extended additional year part december 19 2012 amendment mature july 25 2017 term loan b amount 2000 million term seven years maturing july 25 2018 subject certain required amortization time companys total leverage 300 100 greater company obligated prepay two term loan facilities net proceeds asset sales casualty losses certain indebtedness borrowed money portion excess cash flow subject certain exceptions borrowings revolving facility term loan loans made 15 billion debt financing agreement bear interest london interbank offered rate libor plus 225 125 excess alternate base rate term loan b loans bear interest 300 excess libor floor 100 200 excess alternative base rate companys option proceeds term loan term loan b revolving credit facility used repay outstanding balances terminate companys previous 123 billion debt financing agreement included 7000 million term loan 5300 million revolving credit facility well pay 115 million debt issuance costs incurred refinancing 15 billion debt financing agreement secured substantially unencumbered assets company 15 billion debt financing agreement also requires company provide additional collateral lenders certain limited circumstances master note security agreement sometimes referred senior notes september 1 1995 last amended january 26 2006 company entered master note security agreement pursuant company issued time senior notes aggregate principal amount 113 billion various tranches senior notes weightedaverage interest rate 749 december 31 2012 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2036 notes collateralized certain united states land buildings press finishing equipment terms master note security agreement december 31 2012 borrowings outstanding 5539 million facilities agreement december 16 2008 quadwinkowski sp z oo quadwinkowski entered secured facilities agreement facilities agreement facilities agreement includes euro denominated term loan 751 million expires december 16 2015 used refinance quadwinkowskis existing indebtedness multicurrency revolving credit facility 162 million renewed 2012 expire december 13 2013 used quadwinkowskis working capital general business needs december 31 2012 borrowings outstanding euro denominated term loan 633 million december 31 2012 borrowings outstanding multicurrency revolving credit facility 68 million leaving 94 million available future borrowings terms facilities agreement include guarantee quadgraphics security agreement includes collateralizing substantially quadwinkowski assets facilities bear interest aggregate euro interbank offered rate euribor warsaw interbank offered rate wibor margin weightedaverage interest rate euro denominated term loan 261 december 31 2012 weightedaverage interest rate multicurrency revolving credit facility 437 december 31 2012 covenants compliance december 31 2012 companys various lending arrangements included certain financial covenants financial terms numbers ratios covenants compliance section defined companys debt agreements among covenants company required maintain following december 31 2012 covenant restrictive measurement included • rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda defined debt financing agreement shall exceed 350 100 twelve months ended december 31 2012 companys leverage ratio 237 100 • rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2012 companys interest coverage ratio 727 100 • rolling twelvemonth basis fixed charge coverage ratio defined consolidated ebitda rent expense interest rent expense shall less 150 100 twelve months ended december 31 2012 companys fixed charge coverage ratio 435 100 • consolidated net worth least 7458 million plus 40 positive consolidated net income cumulatively year december 31 2012 companys consolidated net worth restrictive covenant per various debt agreements 116 billion addition covenants 15 billion debt financing agreement also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock companys total leverage ratio greater 300 100 total leverage ratio defined debt financing agreement company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions twelvemonth period ended december 31 2012 company compliance financial covenants debt agreements company currently expects compliance future periods financial covenants assurance covenants continue met companys failure maintain compliance covenants could prevent company borrowing additional amounts could result default debt agreements default could cause outstanding indebtedness become immediately due payable virtue crossacceleration crossdefault provisions pension postretirement benefit obligations pension postretirement mepps benefit obligations 3779 million 4070 million december 31 2012 2011 respectively company focused reducing benefit obligation making cash contributions plans 2012 made cash contributions pension postretirement plans 511 million required monthly payments mepps 112 million company also announced elimination life insurance coverage current future retirees locations elimination postretirement medical benefit coverage future retirees retire december 31 2012 resulted reduction postretirement benefit obligations 226 million partially offsetting items 511 million increase unfunded liabilities due december 31 2012 valuation result decrease liability discount rate net actual 2012 asset returns share repurchase program september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock authorization share repurchases may made companys discretion time open market andor privately negotiated transactions permitted federal securities laws legal requirements timing manner price amount repurchase depend economic market conditions share price trading volume applicable legal requirements factors program may suspended discontinued time stock repurchases made year ended december 31 2012 december 31 2012 918 million authorized repurchases remaining program risk management discussion companys exposure market risks management market risks see item 7a quantitative qualitative disclosures market risk annual report form 10k offbalance sheet arrangements except set forth contractual obligations commitments table note 17 lease obligations consolidated financial statements item 8 financial statements supplementary data annual report form 10k including operating leases future interest debt capital leases incurred company offbalance sheet arrangements financings special purpose entities company expects material current future effect financial condition changes financial condition results operations liquidity capital expenditures capital resources significant components sales expenses contractual obligations commitments companys contractual cash obligations continuing operations december 31 2012 follows millions 1 debt obligations include 3521 million anticipated future interest payments respect variable interest rate portions debt interest amounts calculated applying december 31 2012 weightedaverage interest rate determine value future interest payments master note security agreement weightedaverage interest rate notes applied average principal balance outstanding time period amounts included thereafter include principal payments estimated interest expense 2036 2 pension postretirement benefits contributions benefit payments funded company assets included table actuarially estimated five year period benefit payments benefit plans expected continue beyond 2017 company believes estimate beyond period unreasonable contractual obligations table include 874 million estimated withdrawal liability us world color press mepps due uncertainty amount timing potential withdrawal liability payment see pension postretirement benefit obligations section discussion withdrawal mepps 3 purchase obligations consist primarily 122 million firm commitments purchase press finishing equipment operational purchase requirements 4 acquisition businesses represents purchase price paid upon closure acquisition vertis october 10 2012 company vertis announced execution asset purchase agreement pursuant company acquired substantially assets comprising vertis businesses accordance asset purchase agreement company made 259 million deposit held escrow applied purchase price upon closure deal acquisition completed january 16 2013 subsequent year end remaining purchase price 2415 million paid vertis 5 contractual obligations table include reserves uncertain tax positions recorded accordance accounting guidance uncertainties income taxes company taken tax positions ultimate amount years necessary payments made pertain tax positions uncertain reserve uncertain tax positions prior interest penalties 465 million december 31 2012 company also recorded accruals interest penalties related uncertain tax positions 51 million 09 million respectively december 31 2012 6 contractual obligations table include share repurchase program repurchases required program see share repurchase program section discussion including maximum potential cash payments program critical accounting policies estimates companys consolidated financial statements prepared accordance gaap companys critical accounting policies important portrayal financial condition results operations require company make difficult subjective estimates management required make judgments estimates affect reported amounts assets liabilities disclosure contingent assets liabilities date statements reported amounts revenues expenses reporting period company bases estimates historical experience various assumptions believed reasonable circumstances companys management believes judgments estimates made consistent appropriate methods based information available time reasonable deviation judgments estimates would material impact companys consolidated financial position results operations actual results may differ estimates different assumptions conditions extent estimates used differ actual results adjustments consolidated statements operations corresponding consolidated balance sheets would necessary adjustments would made future statements company identified following critical accounting policies estimates revenue recognition company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides certain cases delivery billing schedules outlined customer agreement product revenue recognized manufacturing complete title risk loss transfer customer reasonable assurance collectability product returns significant majority products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer respect companys logistics operations include delivery printed material company recognizes revenue upon completion delivery services company also manufactures printingrelated auxiliary equipment ensure industry leading technology printing operations well sell businesses revenue generally recognized equipment sales time shipment revenue services related installation equipment customer sites recognized upon completion installation payments received customers manufacture equipment prior shipment case installation services prior completion installation cases payments received advance meeting applicable revenue recognition criteria deferred revenue recorded revenue recognition criteria subsequently met services account greater 10 companys consolidated net sales therefore net sales related costs sales products services included separate line items consolidated statements operations item 8 financial statements supplementary data annual report form 10k certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations item 8 financial statements supplementary data annual report form 10k many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis impairment goodwill allocation purchase price business combinations requires management estimates judgment expectations future cash flows acquired business allocation cash flows identifiable assets liabilities assumed including valuations performed thirdparty appraisers appropriate determining estimated fair value purchase price allocation purposes goodwill measured excess purchase price fair value assigned identifiable assets acquired liabilities assumed changes managements estimates judgments including changes based actual results differing estimates judgments used purchase price allocation process could result impairment charge could material adverse effect companys results operations accounting guidance requires goodwill impairment tested reporting unit level least annual basis within three reportable segments company identified three reporting units 1 united states 2 latin america 3 europe december 31 2012 amount goodwill included continuing operations totaled 7686 million 7382 million allocated united states reporting unit 304 million allocated latin america reporting unit european reporting unit goodwill allocated company performs annual goodwill impairment test october 31 frequently event occurs circumstances change would likely reduce fair value reporting unit carrying value multistep method used determining goodwill impairment includes option first performing qualitative assessment determine whether existence events circumstances leads determination likely fair value reporting unit less carrying amount company apply optional qualitative assessment annual goodwill impairment test first step company compares estimated fair value reporting unit goodwill allocated carrying amount including goodwill fair value determined using equal weighting income market approaches income approach company determines fair value based estimated future cash flows discounted estimated weightedaverage cost capital reflects overall level inherent risk rate return outside investor would expect earn market approach company derives fair value reporting units based market multiples comparable publiclytraded companies fair value determination categorized level 3 fair value hierarchy carrying amount reporting unit exceeds estimated fair value step two completed determine amount impairment charge step two requires allocation estimated fair value reporting unit assets including unrecognized intangible assets liabilities hypothetical purchase price allocation remaining unallocated fair value represents implied fair value goodwill compared corresponding carrying value goodwill compute goodwill impairment charge companys methodologies valuing goodwill applied consistently yearoveryear basis assumptions used performing 2012 impairment calculations evaluated light market business conditions company continues believe discounted cash flow model market multiples model provide reasonable meaningful fair value estimate based upon reporting units projections future operating results cash flows replicates market participants would value companys reporting units discussed goodwill tested annually impairment frequently events changes circumstances indicate likely fair value reporting unit carrying value one indicators change business climate may evidenced among things decline companys market capitalization book value sustained period time certain periods 2012 2011 companys market capitalization book value accordingly company monitors changes share price annual impairment tests ensure estimated fair value reporting units continues exceed carrying value net assets reporting units decline market capitalization corresponds overall deterioration stock market conditions considered less indicator goodwill impairment unilateral decline company market capitalization would reflect adverse changes companys underlying operating performance cash flows financial condition andor liquidity event companys market capitalization declines book value reason decline considered assessing whether potential goodwill impairment exists company believes fluctuations share price may necessarily reflect underlying values july 31 2012 companys market capitalization remained companys carrying value equity approximately one year considered company sustained period time result company conducted interim goodwill impairment assessment united states latin american reporting units included comparing carrying amount net assets including goodwill reporting unit respective fair value july 31 2012 date interim assessment european reporting unit goodwill associated performing interim impairment assessment july 31 2012 fair value determined using equal weighting income market approaches significant assumptions used income approach included estimated future cash flows including expected future revenue growth profit margins capital expenditures working capital levels weightedaverage cost capital 99 united states reporting unit 138 latin america reporting unit terminal value multiples estimated future cash flows based companys internal projection models industry projections assumptions deemed reasonable management significant assumptions used market approach included control premium based similar transactions selection guideline public companies selected market multiples management concluded impairment existed july 31 2012 estimated fair value companys united states latin american reporting units exceeded carrying amount performing companys annual impairment assessment october 31 2012 fair value determined using equal weighting income market approaches significant assumptions used income approach included estimated future cash flows including expected future revenue growth profit margins capital expenditures working capital levels weighted average cost capital 96 united states reporting unit 133 latin america reporting unit terminal value multiples estimated future cash flows based companys internal projection models industry projections assumptions deemed reasonable management significant assumptions used market approach included control premium based similar transactions selection guideline public companies selected market multiples management concluded impairment existed october 31 2012 estimated fair value companys united states latin american reporting units exceeded carrying amount additional indications impairment identified october 31 2012 december 31 2012 addition company performed sensitivity analysis july 31 2012 october 31 2012 material assumptions used discounted cash flow valuation models two reporting units goodwill allocated performing interim annual goodwill impairment assessments percentage estimated fair value exceeded carrying value 10 united states latin america reporting units based goodwill impairment assessments performed goodwill impairment charge pertaining goodwill continuing operations required recorded years ended december 31 2012 2011 however company recorded 139 million goodwill impairment charge third quarter 2011 pending sale canadian discontinued operations due carrying value canadian net assets exceeding estimated fair value mexican assets acquired transcontinental goodwill impairment loss included loss discontinued operations consolidated statements operations year ended december 31 2011 impairment property plant equipment finitelived intangible assets company performs impairment evaluations longlived assets significant property plant equipment customer relationship intangible assets recorded world color press acquisition whenever business conditions events circumstances indicate assets may impaired including whether estimated useful life longlived assets may warrant revision whether remaining balance asset may recoverable assessing impairment longlived assets requires company make important estimates assumptions including limited expected future cash flows assets generate assets used based strategic direction remaining useful life residual value considerable judgment also applied incorporating potential impact current economic climate customer demand selling prices cost production limited activity secondary markets assets cost capital estimated future undiscounted cash flows generated assets less carrying value longlived assets written fair value charge recorded current operations company uses internal undiscounted cash flow estimates quoted market prices available independent appraisals appropriate determine fair value based assessments completed years ended december 31 2012 2011 2010 company recognized total fixed asset impairment charges 230 million 138 million 329 million respectively primarily related companys closure exit 16 manufacturing facilities impairment charges recorded 2012 2011 2010 customer relationship intangibles company continues monitor groups assets identify new events changes circumstances could indicate carrying values recoverable particularly light potential declines profitability may result highly competitive industry landscape continued uncertainty global economy event significant unanticipated changes circumstances significant adverse changes business climate adverse actions regulators unanticipated competition loss key customers andor changes technology markets actual results differ managements estimates provision impairment could required future period pension postretirement benefit plans result acquisition world color press company acquired multiple pension postretirement defined benefit plans pension plan costs determined using actuarial methods funded contributions determined accordance projected benefit method prorated service company records amounts relating pension postretirement benefit plans based calculations include various actuarial assumptions including discount rates mortality assumed rates return compensation increases turnover rates health care cost trend rates company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheet generally amortized operating earnings future periods deferred amount recorded accumulated comprehensive income loss consolidated balance sheet company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 purposes calculating expected return plan assets valued fair value company determines assumption discount rate used purposes computing annual service interest costs pension plan based index highquality corporate bond yields matchedfunding yield curve analysis date weightedaverage discount rate pension plans december 31 2012 39 postretirement benefit plans 28 company employs total return investment approach pension plans whereby diversified mix equities fixed income investments used maximize longterm pension plan assets intent strategy outperform growth plan liabilities long run plan contributions decreased balanced maintaining lower degree investment risk tolerance established careful consideration plan liabilities plan funded status corporate financial condition equity investments diversified across geography market capitalization investments us largecapitalization stocks us smallcapitalization stocks international securities investment risk measured monitored ongoing basis annual liability measurements periodic assetliability studies quarterly investment portfolio reviews expected longterm rate return plan assets based upon many factors including expected asset allocations historical asset returns current expected future market conditions risk target asset allocation 65 equity 35 fixed income actual asset allocation december 31 2012 approximately 64 equity 35 debt securities 1 expected return plan assets assumption december 31 2012 2011 65 companys funded us pension plans certain pension plans postretirement benefit plans unfunded plans hold plan assets health care cost trend rates used valuing companys postretirement medical benefit obligations established based upon actual health care cost trends consultation actuaries benefit providers december 31 2012 current weighted average health care cost trend rate assumption us postretirement plans 78 preage postage 65 participants current trend rate gradually decreases ultimate trend rate 50 one percentage point increase assumed health care cost trend rate would increase postretirement benefit obligation 02 million increase postretirement benefit service interest cost components net 01 million one percentage point decrease assumed health care cost trend rate would decrease postretirement benefit obligation 02 million decrease postretirement benefit service interest cost components net 01 million addition result acquisition world color press company participates mepps company records required cash contributions mepps expenses period incurred liability recognized contributions due unpaid consistent accounting defined contribution plans 2010 due significantly underfunded status mepps company withdrew significant mepps replace benefits company sponsored pay go defined contribution plan result decision withdraw company recorded estimated withdrawal liability mepps part purchase price allocation process based information received mepps trustees estimated withdrawal liability updated new withdrawal liability projections provided plans trustees final withdrawal liability determined exact amount withdrawal liability could higher lower estimate depending among things nature timing triggering events funded status plans time accounting income taxes connection july 2 2010 acquisition world color press public registration companys class stock company changed tax status corporation entities within quadgraphics legal structure c corporation status provisions internal revenue code point forward companys legal entities subject federal state income taxes company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations realization deferred tax assets depends upon companys ability generate future taxable income company recorded deferred tax assets related domestic foreign tax loss credit carryforwards company evaluates deferred tax assets tax jurisdiction utilization tax assets limited amount taxable income expected generated within allowable carryforward period factors accordingly management provided valuation allowance reduce certain deferred tax assets management concluded based weight available evidence likely deferred tax assets fully realized actual results differ estimates adjusted future periods adjustments valuation allowance might need recorded company regularly audited foreign domestic tax authorities audits occasionally result proposed assessments ultimate resolution might result company owing additional taxes including cases penalties interest company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit greater fiftypercent likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination companys worldwide tax provision related tax assets liabilities requires use significant judgment estimates interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain company believes appropriate support positions taken certain positions may successfully challenged taxing authorities company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions consolidated financial statements december 31 2012 2011 reflect tax positions determination companys worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions although management believes estimates reasonable final outcome uncertain tax positions may materially different reflected companys historical financial statements year ended december 31 2012 company recorded adjustment correct deferred tax liabilities related property plant equipment associated 2010 acquisition world color press company believes correction material consolidated financial statements year ended december 31 2012 prior period consolidated financial statements impact decrease longterm deferred income tax liabilities goodwill 425 million 192 million respectively increase longterm liabilities 233 million impact consolidated statements operations consolidated statements comprehensive income consolidated statements cash flows new accounting pronouncements may 2011 financial accounting standards board fasb issued new guidance fair value measurements new guidance amends definition fair value measurement principles disclosure requirements eliminate differences gaap international financial reporting standards new guidance requires new quantitative qualitative disclosures sensitivity recurring level 3 measurement disclosures well transfers level 1 level 2 fair value hierarchy company adopted guidance effective january 1 2012 adoption guidance impacted companys disclosures impact companys consolidated financial position results operations cash flows item 7aitem 7 managements discussion analysis financial condition results operations following discussion financial condition results operations quadgraphics read together quadgraphics audited consolidated financial statements three years period ended december 31 2013 including notes thereto included item 8 financial statements supplementary data annual report form 10k discussion contains forwardlooking statements reflect companys plans estimates beliefs companys actual results could differ materially discussed forwardlooking statements factors could cause contribute differences include limited discussed forwardlooking statements item 1a risk factors included earlier within annual report form 10k managements discussion analysis financial condition results operations provided supplement companys consolidated financial statements accompanying notes help provide understanding companys financial condition changes companys financial condition companys results operations discussion analysis organized follows • overview section includes general description companys business segments overview key performance metrics companys management measures utilizes evaluate business performance overview trends affecting company including managements actions related trends • results operations section contains analysis companys results operations comparing results 1 year ended december 31 2013 year ended december 31 2012 2 year ended december 31 2012 year ended december 31 2011 comparability companys results operations periods significantly impacted acquisitions dispositions results operations vertis included companys consolidated results prospectively date acquisition january 16 2013 addition company entered definitive agreement transcontinental 2011 among things acquire transcontinentals mexican operations exchange companys canadian operations results operations transcontinentals mexican operations included companys consolidated results prospectively date acquisition september 8 2011 results companys canadian operations reported discontinued operations periods presented forwardlooking statements providing general description recent projected industry company developments important understanding companys results operations included section also provides discussion ebitda margin nongaap financial measures company uses assess performance business • liquidity capital resources section provides analysis companys capitalization cash flows statement offbalance sheet arrangements discussion table outstanding debt commitments cash flows companys canadian operations reported discontinued operations thus included cash flow analysis disposition date march 1 2012 forwardlooking statements important understanding companys financial condition also included section also provides discussion free cash flow debt leverage ratio nongaap financial measures company uses assess liquidity capital allocation deployment • critical accounting policies estimates section contains discussion accounting policies companys management believes important companys financial condition results operations well allowances reserves require significant judgment estimates part companys management addition companys significant accounting policies including critical accounting policies summarized note 1 basis presentation summary significant accounting policies consolidated financial statements item 8 financial statements supplementary data annual report form 10k • new accounting pronouncements section provides discussion new accounting pronouncements anticipated impact accounting pronouncements companys consolidated financial statements overview business overview quadgraphics leading global printer media channel integrator consultative ideas worldwide capabilities leadingedge technology singlesource simplicity company believes resources knowledge help clients maximize revenue derive marketing spend minimize total cost print production distribution companys print related products services north america latin america europe primarily include • print solutions includes consumer magazines catalogs retail inserts special interest publications journals direct mail books directories instore marketing packaging commercial specialty printed products • media solutions includes marketing strategy media planning placement data insights response analytics services creative services videography photography workflow solutions digital imaging facilities management services digital publishing interactive print solutions including image recognition near field communication technology • logistics services includes mailing distribution logistics data optimization hygiene services quadgraphics remains focused four primary strategic goals believes allow company successful despite ongoing economic industry challenges goals summarized follows • transform industry company believes wellpositioned transform industry following three ways 1 maximize revenue clients derive marketing spend media channel integration printer media channel integrator quadgraphics uses clientcentric approach help marketers publishers connect strategy content multiple media channels create measurable client value full range integrated solutions quadgraphics clients benefit better end user engagement improved response increased revenue derived multichannel marketing campaigns 2 minimize clients total cost production distribution utilizing efficient innovative fullyintegrated us national distribution network provide enhanced value clients increased efficiency postal costsavings 3 create opportunity disciplined valuedriven industry consolidation adds complementary capabilities allowing company provide enhanced range products services create significant efficiencies overall print production distribution processes • maximize operational technological excellence quadgraphics utilizes disciplined return capital framework make significant investments print manufacturing platform research development technological innovation data management capabilities resulting believes one integrated automated efficient modern platforms industry • empower engage develop employees quadgraphics believes distinct corporate culture encourages organizationwide entrepreneurial spirit opportunistic mentality employees embrace responsibility take ownership projects encouraged create solutions advance companys strategic goals • enhance financial strength create shareholder value given current economic industry challenges quadgraphics believes strategy enhance financial strength create shareholder value contribute longterm success key components strategy centered companys disciplined financial approach maximize earnings free cash flow use consistent financial policies ensure maintains strong balance sheet liquidity levels ability retain financial flexibility needed strategically allocate deploy capital quadgraphics operates primarily commercial print portion printing industry related product service offerings designed offer clients complete solutions communicating message target audiences companys operating reportable segments aligned chief operating decision maker company currently manages business companys reportable operating segments summarized united states print related services segment predominantly comprised companys united states printing operations segment managed one integrated platform includes product related service offerings described result divestiture companys canadian operations transcontinental march 1 2012 see note 4 discontinued operations consolidated financial statements item 8 financial statements supplementary data annual report form 10k united states print related services segment amounts restated exclude canadian discontinued operations united states print related services segment accounted approximately 90 companys consolidated net sales year ended december 31 2013 international segment consists companys printing operations europe latin america including operations poland argentina brazil chile colombia mexico peru segment provides printed products related services consistent united states print related services segment exception printingrelated auxiliary equipment included united states print related services segment international segment accounted approximately 10 companys consolidated net sales year ended december 31 2013 corporate consists unallocated general administrative activities associated expenses including part executive legal finance key performance metrics overview companys management believes ability generate net sales growth profit increases positive cash flow key indicators successful execution companys business strategy increase shareholder value company uses period net sales growth ebitda margin net cash provided operating activities free cash flow debt leverage ratio metrics measure operating performance financial condition liquidity ebitda margin free cash flow debt leverage ratio nongaap financial measures see definitions ebitda margin reconciliation net earnings loss attributable quadgraphics common shareholders ebitda results operations section see definitions free cash flow debt leverage ratio reconciliation net cash provided operating activities free cash flow calculation debt leverage ratio liquidity capital resources section net sales growth company uses period net sales growth key performance metric companys management assesses net sales growth based ability generate increased net sales increased sales existing clients sales new clients sales new expanded solutions existing new clients opportunities expand sales strategic investments including acquisitions ebitda margin company uses ebitda margin metrics assess operating performance companys management assesses ebitda margin based ability increase revenues controlling variable expense growth net cash provided operating activities company uses net cash provided operating activities metric assess liquidity companys management assesses net cash provided operating activities based ability meet recurring cash obligations increasing available cash fund integration restructuring requirements including acquired operations cost reduction activities well fund capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal liabilities acquisitions investments future growth shareholder dividends net cash provided operating activities significantly impacted timing nonrecurring infrequent receipts expenditures free cash flow company uses free cash flow metric assess liquidity capital deployment companys management assesses free cash flow measure quantify cash available strategic capital allocation deployment investments business capital expenditures acquisitions strengthening balance sheet debt pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items payments related completing world color press bankruptcy process debt leverage ratio company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strengthening balance sheet debt pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability overview trends affecting quadgraphics competition highly fragmented printing industry remains intense industry excess manufacturing capacity created declines industry volumes past recession turn created continued downward pricing pressures addition digital delivery documents data including online distribution hosting media content mobile technologies offer alternatives traditional delivery printed documents increasing consumer acceptance digital delivery content resulted marketers publishers allocating marketing advertising spend across expanding selection digital delivery options reduces demand contributes industry overcapacity company also faces competition print management firms look streamline processes reduce overall print spend company’s clients well strategic marketing firms focused helping businesses integrate multiple channels marketing campaigns company believes disciplined approach capital management strong balance sheet critical able invest profitable growth opportunities technological advances thereby providing highest return shareholders management currently balancing use cash compelling investment opportunities deleveraging companys balance sheet reduction debt pension postretirement obligations returns shareholders including quarterly shareholder dividend increased 025 per share 2012 030 per share 2013 well 200 per share special dividend totaling 935 million paid december 2012 company increased consolidated debt capital leases 561 million year ended december 31 2013 due primarily 2354 million net cash paid vertis acquisition january 2013 431 million paid proteus packaging acquisition december 2013 partially offset debt repayments companys cash generated operations since company completed world color press acquisition july 2010 company reduced debt capital leases 388 million reduced obligations pension postretirement mepps 360 million company working diligently lower cost structure consolidating manufacturing platform efficient facilities well realizing purchasing mailing logistics efficiencies centralizing consolidating print manufacturing volumes eliminating redundancies administrative corporate operations efforts include deployment companys smartools® platform streamline workflows improve data visibility across consolidated platform addition restructuring actions initiated company beginning 2010 resulted announcement 21 plant closures including closures marengo iowa pomona california announced january 10 2014 reduced headcount approximately 6800 upon completion january 2013 acquisition vertis company began integrate operations technologies products services order realize synergy savings restructuring actions initiated company order realize anticipated synergy savings result additional costs companys integration goal maintain ratio approximately one dollar cost dollar synergy savings achieved addition cost savings acquisitionrelated synergies company continues focus cost reductions lean manufacturing continuous improvement initiatives production floor administrative support order achieve improved efficiencies reduce waste lower overall operating costs enhance quality timeliness create safer work environment companys employees postal costs significant component cost structures many companys clients potential clients postal rate changes influence number pieces clients willing print mail january 2014 usps implemented temporary twoyear exigent postage rate increase 60 includes normal expected annual cpi increase 17 additional 43 temporary exigent increase quadgraphics invested significantly mail preparation distribution capabilities mitigate impact increases postage costs help clients successfully navigate everchanging postal environment data analytics unique software merge mailstreams large scale advanced finishing capabilities technology inhouse transportation logistics operations company manages mail preparation distribution clients’ products maximize efficiency partially reduce costs however net impact increasing postal costs may create decrease client demand print mail products increasingly multichannel marketplace company believes printing industry need make capital investments new technologies deliver targeted customized print solutions deploy multichannel marketing campaigns integration new media company believes ongoing commitment technology paramount delivering highquality relevant offerings customers well driving production efficiencies response continued downward print pricing pressures company invested 150 million capital projects 2013 intends invest 150 million 175 million new capital projects 2014 making capital investment decisions management undertakes thorough process aimed driving strongest contribution longterm profitability whether fixed asset additions discussed organic growth opportunities acquisitions divestitures recent examples companys acquisition divestiture activity follows • december 18 2013 company completed 49 million acquisition wisconsinbased proteus well sister company transpak proteus designer manufacturer highend paperboard packaging offering packaging solutions wide variety industries including automotive biotechnology food personal care pharmaceuticals software electronics transpak fullservice industrial packaging company offering crating packaging warehousing distribution logistics services destinations worldwide acquisition two companies quadgraphics expanded capabilities serve packaging market • november 7 2013 company completed 14 million acquisition novia indianapolis indiana healthcare solutions company novia develops manages onsite shared primary care clinics small medium sized companies public sector school districts city county governments novia operates 50 clinics located throughout indiana four states focusing delivering advanced health wellness solutions employees dependents • january 16 2013 company completed 265 million acquisition substantially assets vertis provider retail advertising inserts direct marketing instore marketing solutions 265 million purchase price included payment 95 million current assets excess normalized working capital requirements net purchase price 170 million company believes acquisition vertis strengthened client offering enhanced range products services also increased manufacturing flexibility distribution efficiencies extended geographic footprint united states • march 28 2012 company entered 18 million strategic partnership indiabased manipal technologies limited manipaltech purchase minority equity ownership interest manipaltech one indias largest providers printing services supports clients marketing branding communication needs print services technology solutions strategic investment expanded quadgraphics geographic reach asia broadened product service scope • march 1 2012 company transcontinental completed 64 million business exchange transaction pursuant quadgraphics acquired transcontinentals mexican operations exchange companys canadian operations part canadian transaction transcontinental assumed pension postretirement obligations pertaining canadian employees acquisition trancontinentals mexican operations company believes able create industryleading print platform economy higher growth rate canada also achieve beneficial synergy savings operational consolidation company completed acquisition transcontinentals mexican operations september 8 2011 completed sale canadian operations transcontinental march 1 2012 company subject seasonality quarterly results net sales operating income excluding restructuring impairment transactionrelated charges higher third fourth quarters calendar year compared first second quarters seasonality driven increased magazine advertising page counts retail inserts catalogs books primarily due backtoschool holiday related advertising promotions following 2013 acquisition vertis company experienced increased seasonality 2013 majority vertis revenues occur second half year company expects seasonality impact continue future years results operations year ended december 31 2013 compared year ended december 31 2012 summary results companys operating income continuing operations operating margin net earnings attributable quadgraphics common shareholders diluted earnings per share attributable quadgraphics common shareholders year ended december 31 2013 changed year ended december 31 2012 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 953 million incurred year ended december 31 2013 included 157 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 218 million impairment charges including 1 101 million land building impairment charges primarily related corinth mississippi marengo iowa mexico city mexico plant closures 2 117 million machinery equipment impairment charges related facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives c 40 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related acquisitions vertis proteus transpak 252 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 286 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 21 million pension plan settlement gain company expects incur additional restructuring integration costs future reporting periods connection restructuring program began 2010 related eliminating excess manufacturing capacity properly aligning cost structure part integration july 2 2010 world color press acquisition september 8 2011 transcontinental mexico acquisition january 16 2013 vertis acquisition cost reduction programs 2 restructuring impairment transactionrelated charges 1183 million incurred year ended december 31 2012 included 272 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 230 million impairment charges including 1 131 million land building impairment charges primarily related limerick ireland mt morris illinois pila poland richmond virginia stillwater oklahoma plant closures 2 99 million machinery equipment impairment charges related facility consolidations including jonesboro arkansas mexico city mexico pila poland stillwater oklahoma well capacity reduction restructuring initiatives c 41 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related acquisition vertis business exchange transaction transcontinental 446 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 194 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 128 million curtailment gain result amendment postretirement medical benefit plans 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable 3 interest expense increased 15 million 09 million net tax year ended december 31 2013 855 million change due increase debt levels 2013 compared 2012 primarily related funding purchase price vertis acquisition partially offset lower weighted average interest rate borrowings 4 income tax expense excluding tax attributable restructuring impairment transactionsrelated charges included part 1 2 tax attributable interest expense included part 3 operating income included part 8 increased 411 million 2013 primarily due 435 million benefit recorded 2012 decreasing liability recorded unrecognized tax benefits related settlement internal revenue service irs audits expiration applicable statutes limitations benefit recur year ended december 31 2013 5 loss discontinued operations net tax 32 million year ended december 31 2012 recur year ended december 31 2013 due completion sale companys canadian operations transcontinental march 1 2012 6 gain disposal discontinued operations net tax 340 million year ended december 31 2012 recur year ended december 31 2013 due completion sale companys canadian operations transcontinental march 1 2012 7 decrease attributable investments unconsolidated entities noncontrolling interests net tax 35 million year ended december 31 2013 primarily due 48 million decrease earnings unconsolidated entities predominantly related lower equity earnings plural partially offset exclusion 13 million noncontrolling interest companys consolidated statements operations related companys 85 ownership certain operations argentina 8 operating income excluding restructuring impairment transactionrelated charges increased 127 million 76 million net tax primarily due incremental net earnings resulting vertis acquisition partially offset decline net earnings lower print volumes lower print pricing product lines owned year result continued pricing pressure excess manufacturing capacity printing industry following discussion provides additional details operating results continuing operations following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales increased 5480 million 151 year ended december 31 2013 compared year ended december 31 2012 primarily due increased product sales resulting vertis acquisition partially offset lower print volumes lower print pricing product lines owned year result continued pricing pressure excess capacity printing industry lower paper sales negative impact foreign currency translation service sales primarily consist imaging logistics distribution services increased 1539 million 338 year ended december 31 2013 compared year ended december 31 2012 primarily due additional service sales logistics distribution services media solutions resulting vertis acquisition well increases media solutions logistics distribution services owned year cost sales cost product sales increased 5118 million 180 year ended december 31 2013 compared year ended december 31 2012 primarily due vertis acquisition partially offset lower cost sales due decrease sales due reduced print volumes product lines owned year cost reduction activities cost product sales percentage net sales increased 696 year ended december 31 2012 701 year ended december 31 2013 primarily due vertis acquisition operates lower gross margins companys historical gross margins lower print volumes lower print pricing product lines owned year result continued pricing pressure excess manufacturing capacity printing industry increase cost product sales percentage net sales partially offset synergy savings related vertis integration cost reduction activities cost service sales increased 1066 million 318 year ended december 31 2013 compared year ended december 31 2012 primarily due additional cost service sales resulting vertis acquisition cost service sales percentage net sales increased 82 year ended december 31 2012 92 year ended december 31 2013 primarily due vertis acquisition operates lower gross margins companys historical gross margins selling general administrative expenses selling general administrative expenses increased 689 million 199 year ended december 31 2013 compared year ended december 31 2012 primarily due 656 million additional selling general administrative expenses predominantly resulting administrative functions acquired vertis manufacturing plants well 69 million increase losses foreign currency movements increases partially offset 28 million gain sale quadgraphics brazilian operations january 2013 companys existing brazilian joint venture plural editora e grafica plural 08 million net miscellaneous cost decreases selling general administrative expenses percentage net sales increased 84 86 years due items discussed preceding sentence restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges decreased 230 million 194 year ended december 31 2013 compared year ended december 31 2012 primarily due 194 million decrease acquisitionrelated integration costs 115 million decrease employee termination charges 12 million decrease impairment charges 01 million decrease transactionrelated charges partially offset 92 million increase restructuring charges restructuring impairment transactionrelated charges 953 million incurred year ended december 31 2013 included 1 157 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 218 million impairment charges including 101 million land building impairment charges primarily related corinth mississippi marengo iowa mexico city mexico plant closures 117 million machinery equipment impairment charges related facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives 3 40 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related acquisitions vertis proteus transpak 4 252 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 286 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 21 million pension plan settlement gain restructuring impairment transactionrelated charges 1183 million incurred year ended december 31 2012 included 1 272 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 230 million impairment charges including 131 million land building impairment charges primarily related limerick ireland mt morris illinois pila poland richmond virginia stillwater oklahoma plant closures 99 million machinery equipment impairment charges related facility consolidations including jonesboro arkansas mexico city mexico pila poland stillwater oklahoma well capacity reduction restructuring initiatives 3 41 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related acquisition vertis business exchange transaction transcontinental 4 446 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 194 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 128 million curtailment gain result amendment postretirement medical benefit plans 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable depreciation amortization depreciation amortization increased 19 million 06 year ended december 31 2013 compared year ended december 31 2012 primarily due increased capital expenditures additional depreciation amortization related vertis acquisition partially offset increase fully depreciated property plant equipment ebitda marginconsolidated ebitda margin year ended december 31 2013 compared year ended december 31 2012 follows ebitda increased 33 million year ended december 31 2013 compared year ended december 31 2012 primarily due margin impact 7019 million 171 increase net sales substantially resulting vertis acquisition 230 million decreased restructuring impairment transactionrelated charges 32 million loss discontinued operations net tax recorded year ended december 31 2012 recur 2013 impacts partially offset 689 million increased selling general administrative expenses result vertis acquisition margin impact lower print volumes lower print pricing product lines owned year 340 million gain disposal discontinued operations net tax recorded year ended december 31 2012 recur 2013 ebitda increased ebitda margin decreased 117 year ended december 31 2012 100 year ended december 31 2013 primarily due acquired vertis operations operate lower gross margins companys historical gross margins margin impact lower print pricing product lines owned year ebitda represents net earnings attributable quadgraphics common shareholders plus interest expense ii income tax expense applicable iii depreciation amortization less income tax benefit applicable ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net earnings attributable quadgraphics common shareholders follows 1 net earnings attributable quadgraphics common shareholders includes effects restructuring impairment transactionrelated charges 953 million 1183 million years ended december 31 2013 2012 respectively b loss discontinued operations net tax 32 million year ended december 31 2012 ebitda discontinued operations 32 million year ended december 31 2012 included restructuring impairment transactionrelated charges 17 million year ended december 31 2012 c gain disposal discontinued operations net tax 340 million year ended december 31 2012 united states print related services following table summarizes net sales operating income operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment increased 5949 million 189 year ended december 31 2013 compared year ended december 31 2012 primarily due increased product sales resulting vertis acquisition partially offset lower print volumes lower print pricing product lines owned year result continued pricing pressure excess capacity printing industry lower paper sales service sales united states print related services segment increased 1469 million 329 year ended december 31 2013 compared year ended december 31 2012 primarily due additional service sales logistics distribution services media solutions resulting vertis acquisition well increases media solutions logistics distribution services owned year operating income operating income united states print related services segment increased 142 million 66 year ended december 31 2013 compared year ended december 31 2012 primarily due vertis acquisition partially offset margin impact lower print volumes lower print pricing product lines owned year result continued pricing pressure excess capacity printing industry 38 million increased restructuring impairment transactionrelated charges operating margin united states print related services segment decreased 60 year ended december 31 2012 53 year ended december 31 2013 primarily due vertis acquisition operates lower gross margins companys historical gross margins lower print volumes pricing discussed preceding paragraph increased restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2013 523 million consisting 1 100 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 156 million impairment charges including 53 million land building impairment charges primarily related corinth mississippi marengo iowa plant closures 103 million machinery equipment impairment charges related facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives 3 267 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 21 million pension plan settlement gain restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2012 485 million consisting 1 202 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 119 million impairment charges including 70 million land building impairment charges primarily related mt morris illinois richmond virginia stillwater oklahoma plant closures 49 million machinery equipment impairment charges related facility consolidations including jonesoboro arkansas stillwater oklahoma well capacity reduction restructuring initiatives 3 164 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 128 million curtailment gain result amendment postretirement medical benefit plans 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable international following table summarizes net sales operating loss operating margin certain items impacting comparability equity earnings loss unconsolidated entities within international segment net sales product sales international segment decreased 469 million 96 year ended december 31 2013 compared year ended december 31 2012 primarily due sale quadgraphics brazilian operations january 2013 companys existing brazilian joint venture plural reduced product sales 199 million 172 million lower sales europe related predominantly lower paper sales print volumes 81 million lower sales mexico service sales international segment increased 70 million 795 year ended december 31 2013 compared year ended december 31 2012 primarily due increase logistics revenue europe operating loss operating loss international segment decreased 171 million 690 year ended december 31 2013 compared year ended december 31 2012 primarily due 167 million decrease restructuring impairment integration expenses 37 million reduction operating losses 2012 brazil 28 million gain sale quadgraphics brazilian operations january 2013 reductions operating loss partially offset 48 million decrease equity earnings unconsolidated entities discussed restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2013 96 million consisting 1 29 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 62 million impairment charges including 48 million land building impairment charges primarily related mexico city mexico plant closure 14 million machinery equipment impairment charges related facility consolidations pila poland well capacity reduction restructuring initiatives 3 02 million adjustment updated estimates related employee related liabilities integration transcontinentals mexican operations 4 07 million restructuring charges restructuring impairment transactionrelated charges international segment year ended december 31 2012 263 million consisting 1 70 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 111 million impairment charges including 61 million land building impairment charges primarily related limerick ireland pila poland plant closures 50 million machinery equipment impairment charges related facility consolidations including mexico city mexico pila poland well capacity reduction restructuring initiatives 3 56 million integration costs primarily related integration acquired companies 4 26 million restructuring charges equity earnings loss unconsolidated entities investments entities quadgraphics ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil january 2013 company sold 100 ownership interest quadgraphics nordeste industria gráfica ltda quadgraphics são paulo industria gráfica sa plural see note 11 equity method investments unconsolidated entities consolidated financial statements item 8 financial statements supplementary data annual report form 10k discussion company also holds 50 interest joint venture based santiago chile quadgraphics chile sa chile acquired part world color press acquisition equity earnings loss unconsolidated entities international segment decreased 48 million year ended december 31 2013 compared year ended december 31 2012 primarily due 47 million decrease equity earnings plural corporate following table summarizes unallocated operating expenses presented corporate operating expenses decreased 44 million 52 year ended december 31 2013 compared year ended december 31 2012 primarily due 101 million decrease restructuring impairment transactionrelated charges partially offset 53 million increase employee related costs 40 million increase noncash stockbased compensation expense 04 million net miscellaneous expense increases corporate restructuring impairment transactionrelated charges year ended december 31 2013 334 million consisting 1 28 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 40 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related acquisitions vertis proteus transpak 3 254 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 4 12 million restructuring charges corporate restructuring impairment transactionrelated charges year ended december 31 2012 435 million consisting 1 41 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related acquisition vertis business exchange transaction transcontinental 2 390 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 3 04 million restructuring charges results operations year ended december 31 2012 compared year ended december 31 2011 summary results companys operating income continuing operations operating margin net earnings loss attributable quadgraphics common shareholders diluted earnings loss per share attributable quadgraphics common shareholders year ended december 31 2012 changed year ended december 31 2011 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 1183 million incurred year ended december 31 2012 included 272 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 230 million impairment charges including 1 131 million land building impairment charges primarily related limerick ireland mt morris illinois pila poland richmond virginia stillwater oklahoma plant closures 2 99 million machinery equipment impairment charges related facility consolidations including jonesboro arkansas mexico city mexico pila poland stillwater oklahoma well capacity reduction restructuring initiatives c 41 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related acquisition vertis business exchange transaction transcontinental 446 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 194 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 128 million curtailment gain result amendment postretirement medical benefit plans 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable company expects incur additional restructuring integration costs future reporting periods connection restructuring program began 2010 related eliminating excess manufacturing capacity properly aligning cost structure part integration july 2 2010 world color press acquisition september 8 2011 transcontinental mexico acquisition january 16 2013 vertis acquisition cost reduction programs 2 restructuring impairment transactionrelated charges 1140 million incurred year ended december 31 2011 included 295 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 138 million impairment charges including 1 36 million land building impairment charges related stillwater oklahoma plant closure 2 102 million machinery equipment impairment charges related facility consolidations including corinth mississippi mt morris illinois pila poland well capacity reduction restructuring initiatives c 29 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related business exchange transaction transcontinental 457 million acquisitionrelated integration costs net 156 million gain collection note receivable june 2008 sale world color press european operations e 221 million restructuring charges including costs maintain exit closed facilities well lease exit charges 3 interest expense decreased 240 million 144 million net tax year ended december 31 2012 840 million change due reduction debt 2012 lower interest rates result 15 billion debt financing agreement entered july 26 2011 4 nonrecurring 340 million loss debt extinguishment 204 million net tax recognized part 15 billion debt financing agreement entered july 26 2011 340 million loss represents certain debt issuance costs expensed 5 income tax expense decreased 575 million due primarily reversal 435 million income tax provisions related 30 million settlement irs audit preacquisition tax years world color press 135 million reserves longer required due lapses applicable statutes limitations see note 15 income taxes consolidated financial statements item 8 financial statements supplementary data annual report form 10k additional information 6 loss discontinued operations net tax decreased 354 million year ended december 31 2012 32 million loss primarily due 10 fewer months results canadian operations 2012 canadian discontinued operations sold march 1 2012 7 gain disposal discontinued operations net tax 340 million year ended december 31 2012 due completion sale companys canadian operations transcontinental march 1 2012 8 operating income decreased 461 million primarily due margin impact 2306 million 53 decline net sales partially offset 76 million incremental synergy savings integration world color press operations 599 million reduced selling general administrative costs 60 million reduced depreciation amortization expense following discussion provides additional details operating results continuing operations following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased 1870 million 49 year ended december 31 2012 compared year ended december 31 2011 primarily due 4 reduction sales combination lower print volumes lower pricing result continued pricing pressure excess manufacturing capacity printing industry 1 reduction sales lower paper byproduct sales service sales primarily consist imaging logistics distribution services decreased 436 million 87 year ended december 31 2012 compared year ended december 31 2011 primarily due lower sales logistics distribution services media solutions due primarily lower related print volumes cost sales cost product sales decreased 734 million 25 year ended december 31 2012 compared year ended december 31 2011 primarily due decreased print volumes synergy savings related labor purchasing manufacturing expenses result companys world color press integration restructuring programs cost product sales percentage net sales increased 676 year ended december 31 2011 696 year ended december 31 2012 primarily due lower print pricing result continued pricing pressure excess manufacturing capacity printing industry lower pricing byproduct recoveries increase cost product sales percentage net sales partially offset synergy cost savings related world color press integration cost service sales decreased 452 million 119 year ended december 31 2012 compared year ended december 31 2011 primarily due lower sales logistics distribution services media solutions cost service sales percentage net sales decreased 88 year ended december 31 2011 82 year ended december 31 2012 primarily due lower labor costs related cost reduction activities selling general administrative expenses selling general administrative expenses decreased 599 million 147 year ended december 31 2012 compared year ended december 31 2011 primarily due 11 million synergy savings world color press integration 11 million lower employee related costs associated nonintegration cost reduction activities 10 million lower bad debt expense mostly related change payment terms existing customer 8 million decrease legal environmental reserves primarily related sale vacant facilities 4 million lower information technology related expenses 3 million lower professional fee expense net miscellaneous spending reductions selling general administrative expenses percentage net sales decreased 94 84 years due items discussed preceding sentence restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges increased 43 million 38 year ended december 31 2012 compared year ended december 31 2011 primarily due 92 million increase impairment charges 12 million increase transactionrelated charges partially offset 27 million decrease restructuring charges 23 million decrease employee termination charges 11 million decrease acquisitionrelated integration costs restructuring impairment transactionrelated charges 1183 million incurred year ended december 31 2012 included 1 272 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 230 million impairment charges including 131 million land building impairment charges primarily related limerick ireland mt morris illinois pila poland richmond virginia stillwater oklahoma plant closures 99 million machinery equipment impairment charges related facility consolidations including jonesoboro arkansas mexico city mexico pila poland stillwater oklahoma well capacity reduction restructuring initiatives 3 41 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related acquisition vertis business exchange transaction transcontinental 4 446 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 194 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 128 million curtailment gain result amendment postretirement medical benefit plans 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable restructuring impairment transactionrelated charges 1140 million incurred year ended december 31 2011 included 1 295 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 138 million impairment charges including 36 million land building impairment charges related stillwater oklahoma plant closure 102 million machinery equipment impairment charges related facility consolidations including corinth mississippi mt morris illinois pila poland well capacity reduction restructuring initiatives 3 29 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related business exchange transaction transcontinental 4 457 million acquisitionrelated integration costs net 156 million gain collection note receivable june 2008 sale world color press european operations 5 221 million restructuring charges including costs maintain exit closed facilities well lease exit charges depreciation amortization depreciation amortization decreased 60 million 17 year ended december 31 2012 compared year ended december 31 2011 primarily due decreased capital expenditures property plant equipment impact companys restructuring activities ebitda marginconsolidated ebitda margin year ended december 31 2012 compared year ended december 31 2011 follows ebitda increased 468 million year ended december 31 2012 primarily due 1 760 million incremental synergy savings integrating world color press operations 2 599 million decreased selling general administrative expenses 3 340 million gain disposal canadian discontinued operations recorded march 1 2012 4 340 million loss debt extinguishment recorded 2011 related 15 billion debt financing agreement recur 2012 5 354 million reduction loss discontinued operations due sale canadian operations transcontinental march 1 2012 impacts partially offset margin impact 2306 million 53 decline net sales 43 million increased restructuring impairment transactionrelated charges results impacts also increased ebitda margin 117 year ended december 31 2012 compared 100 year ended december 31 2011 ebitda represents net earnings loss attributable quadgraphics common shareholders plus interest expense ii income tax expense applicable iii depreciation amortization less income tax benefit applicable ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net earnings loss attributable quadgraphics common shareholders follows 1 net earnings loss attributable quadgraphics common shareholders includes effects restructuring impairment transactionrelated charges 1183 million 1140 million years ended december 31 2012 2011 respectively b loss debt extinguishment 340 million year ended december 31 2011 c loss discontinued operations net tax 32 million 386 million years ended december 31 2012 2011 respectively ebitda discontinued operations 32 million 256 million years ended december 31 2012 2011 respectively includes restructuring impairment transactionrelated charges 17 million 451 million years ended december 31 2012 2011 respectively gain disposal discontinued operations net tax 340 million year ended december 31 2012 united states print related services following table summarizes net sales operating income operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment decreased 1868 million 56 year ended december 31 2012 compared year ended december 31 2011 primarily due 4 reduction sales combination lower print volumes lower pricing result continued pricing pressure excess manufacturing capacity printing industry 1 net reduction sales lower paper byproduct sales service sales united states print related services segment decreased 414 million 85 year ended december 31 2012 compared year ended december 31 2011 primarily due lower sales logistics distribution services media solutions primarily due lower related print volumes operating income operating income united states print related services segment decreased 551 million 203 year ended december 31 2012 compared year ended december 31 2011 primarily due margin impact 2282 million decrease net sales partially offset 76 million synergy savings world color press integration 502 million lower selling general administrative expenses 68 million decrease restructuring impairment transactionrelated charges operating margin united states print related services segment decreased 71 year ended december 31 2011 60 year ended december 31 2012 primarily due reasons discussed preceding paragraph restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2012 485 million consisting 1 202 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 119 million impairment charges including 70 million land building impairment charges primarily related mt morris illinois richmond virginia stillwater oklahoma plant closures 49 million machinery equipment impairment charges related facility consolidations including jonesoboro arkansas stillwater oklahoma well capacity reduction restructuring initiatives 3 164 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 128 million curtailment gain result amendment postretirement medical benefit plans 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2011 553 million consisting 1 230 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 127 million impairment charges including 36 million land building impairment charges related stillwater oklahoma plant closure 91 million machinery equipment impairment charges related facility consolidations including corinth mississippi mt morris illinois well capacity reduction restructuring initiatives 3 08 million acquisitionrelated integration costs 4 188 million restructuring charges including costs maintain exit closed facilities well lease exit charges international following table summarizes net sales operating loss operating margin certain items impacting comparability equity earnings unconsolidated entities within international segment net sales product sales international segment decreased 02 million year ended december 31 2012 compared year ended december 31 2011 primarily due 22 million increase net sales mexico result acquisition transcontinental mexico operations partially offset 22 million 5 negative impact foreign exchange operating loss operating loss international segment increased 54 million 278 year ended december 31 2012 compared year ended december 31 2011 primarily due 190 million increase restructuring impairment transactionrelated charges primarily related transcontinental mexico acquisition partially offset margin improvement poland result restructuring actions restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2012 263 million consisting 1 70 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 111 million impairment charges including 61 million land building impairment charges primarily related limerick ireland pila poland plant closures 50 million machinery equipment impairment charges related facility consolidations including mexico city mexico pila poland well capacity reduction restructuring initiatives 3 56 million integration costs primarily related integration acquired companies 4 26 million restructuring charges restructuring impairment transactionrelated charges international segment year ended december 31 2011 73 million consisting 1 31 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 11 million impairment charges machinery equipment 3 31 million restructuring charges equity earnings unconsolidated entities investments entities quadgraphics ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil well 50 interest joint venture chile acquired part world color press acquisition equity earnings unconsolidated entities international segment decreased 08 million year ended december 31 2012 primarily due lower earnings plural due decline volumes related economic slowdown brazil corporate following table summarizes unallocated operating expenses presented corporate operating expenses decreased 101 million 106 year ended december 31 2012 compared year ended december 31 2011 primarily due 79 million decrease restructuring impairment transactionrelated charges cost reduction activities resulted lower labor professional service costs corporate restructuring impairment transactionrelated charges year ended december 31 2012 435 million consisting 1 41 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related acquisition vertis business exchange transaction transcontinental 2 390 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 3 04 million restructuring charges corporate restructuring impairment transactionrelated charges year ended december 31 2011 514 million consisting 1 34 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 29 million transactionrelated charges consisting professional service fees business acquisitions divestitures activities primarily related business exchange transaction transcontinental 3 449 million acquisitionrelated integration costs net 156 million gain collection note receivable june 2008 sale world color press european operations 4 02 million restructuring charges liquidity capital resources company utilizes cash flows operating activities borrowings credit facilities satisfy liquidity capital requirements company believes expected future cash flows operating activities unused available capacity revolving credit facility net issued letters credit 5962 million december 31 2013 provide sufficient resources fund ongoing operating requirements integration restructuring requirements related acquired operations well future capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal payments investments future growth create value shareholders shareholder dividends borrowings 8500 million revolving credit facility 2098 million december 31 2013 peak borrowings 3340 million year ended december 31 2013 net cash provided operating activities year ended december 31 2013 compared year ended december 31 2012 net cash provided operating activities 4411 million year ended december 31 2013 compared 3542 million year ended december 31 2012 resulting 869 million increase cash provided operating activities increase primarily due 814 million increase cash flows changes operating assets liabilities 45 million increase dividends unconsolidated entities changes operating assets liabilities primarily due estimated 90 million increased accounts payable accrued liabilities restoration normalized working capital levels acquisition vertis acquired without normalized level trade accounts payable certain liabilities year ended december 31 2012 compared year ended december 31 2011 net cash provided operating activities 3542 million year ended december 31 2012 compared 3711 million year ended december 31 2011 resulting 169 million decrease cash provided operating activities decrease primarily due decrease cash flows discontinued canadian operations sold march 1 2012 partially offset lower working capital 11 million net cash used investing activities year ended december 31 2013 compared year ended december 31 2012 net cash used investing activities 4306 million year ended december 31 2013 compared 701 million year ended december 31 2012 resulting 3605 million increase cash used investing activities increase primarily due 2853 million increase cash invested acquiring businesses 2013 acquisitions included 2354 million net cash outlay related acquisition vertis january 16 2013 represents total 2654 million vertis purchase price less 259 million payment made fourth quarter 2012 less 41 million cash acquired company also acquired proteus transpak december 18 2013 made cash payment 431 million part acquisition consideration addition cash invested complete acquisitions factors causing increase cash used investing activities include 1 500 million refund deposit related transcontinental acquisition received 2012 recur 2013 2 460 million increase purchases property plant equipment 2013 impacts partially offset 181 million manipaltech cost method investment made march 28 2012 year ended december 31 2012 compared year ended december 31 2011 net cash used investing activities 701 million year ended december 31 2012 compared 1843 million year ended december 31 2011 resulting 1142 million decrease cash used investing activities decrease primarily due 500 million deposit related transcontinental mexico acquisition deposit made 2011 refunded back company 2012 impact cash used investing activities 1008 million improvement addition 648 million decrease capital expenditures related primarily integration world color press operations decreased uses cash partially offset 181 million manipaltech cost method investment entered march 28 2012 259 million deposit made 2012 related vertis agreement held escrow applied purchase price upon closure deal net cash used financing activities year ended december 31 2013 compared year ended december 31 2012 net cash used financing activities 102 million year ended december 31 2013 compared 2856 million year ended december 31 2012 resulting 2754 million decrease cash used financing activities decrease primarily due net debt borrowings 413 million 2013 compared net debt repayments 1210 million 2012 representing 1623 million decrease net cash used financing activities addition cash dividend payments decreased 954 million years due 935 million 200 per share special dividend paid december 2012 world color press bankruptcy claim payments unsecured notes issued decreased 104 million 2013 year ended december 31 2012 compared year ended december 31 2011 net cash used financing activities 2856 million year ended december 31 2012 compared 1735 million year ended december 31 2011 resulting 1121 million increase cash used financing activities increase primarily due 1236 million increase dividend payments due primarily 935 million 200 per share special dividend paid december 2012 addition debt payments 2012 increased 115 million versus 2011 part companys effort reduce debt 2012 reduced total debt 120 million 2012 increases net cash used financing activities partially offset reduced debt issuance costs 94 million associated companys 15 billion debt financing agreement completed july 26 2011 82 million reduced purchases class stock companys 100 million share repurchase program free cash flow free cash flow defined net cash provided operating activities less purchases property plant equipment companys management assesses free cash flow measure quantify cash available 1 strategic capital allocation deployment investments business capital expenditures acquisitions 2 strengthening balance sheet debt pension liability reduction 3 returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items payments related completing world color press bankruptcy process free cash flow nongaap measure free cash flow considered alternative cash flows provided operating activities measure liquidity quadgraphics calculation free cash flow may different similar calculations used companies therefore comparability may limited free cash flow year ended december 31 2013 compared year ended december 31 2012 follows 1 net cash provided operating activities includes net restructuring payments 799 million 1134 million years ended december 31 2013 2012 respectively year ended december 31 2012 net restructuring payments presented net restructuring cash receipts 147 million related collection disputed preacquisition world color press note receivable b bankruptcy payments 86 million 104 million years ended december 31 2013 2012 respectively free cash flow increased 409 million year ended december 31 2013 compared year ended december 31 2012 due 869 million increase net cash provided operating activities primarily result estimated 90 million increased accounts payable accrued liabilities restoration normalized working capital levels acquisition vertis acquired without normalized level trade accounts payable certain liabilities partially offset 460 million increase capital expenditures see net cash provided operating activities section explanations increase operating cash flows debt leverage ratio debt leverage ratio defined total debt capital lease obligations divided sum 1 last twelve months ebitda see definition ebitda reconciliation net earnings loss attributable quadgraphics common shareholders ebitda results operations section 2 restructuring impairment transactionrelated charges 3 loss discontinued operations net tax less 4 gain disposal discontinued operations net tax company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strengthening balance sheet debt pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability debt leverage ratio nongaap measure considered alternative cash flows provided operating activities measure liquidity quadgraphics calculation debt leverage ratio may different similar calculations used companies therefore comparability may limited debt leverage ratio calculated differs leverage ratio included companys debt covenant calculations see note 16 debt information debt covenants debt covenant leverage ratio includes letters credit debt excludes noncash stockbased compensation expense ebitda includes certain pro forma historical results acquisitions divestitures ebitda debt leverage ratio year ended december 31 2013 compared year ended december 31 2012 follows calculation ebitda adjusted purposes calculating debt leverage ratio years ended december 31 2013 2012 follows debt leverage ratio increased 005x december 31 2013 compared december 31 2012 primarily due increased borrowings fund acquisitions debt leverage ratio december 31 2013 244x within managements desired target debt leverage ratio range 20x 25x although company may operate debt leverage ratio target range depending timing strategic investments description significant outstanding debt obligations december 31 2013 december 31 2013 company utilized combination debt instruments fund cash requirements including • 15 billion debt financing agreement discussed includes ◦ 8500 million revolving credit facility 2098 million outstanding december 31 2013 ◦ 4500 million term loan 4163 million outstanding december 31 2013 ◦ 2000 million term loan b 1948 million outstanding december 31 2013 • master note security agreement 4902 million outstanding december 31 2013 • facilities agreement 949 million foreign currency denominated facilities agreement including term loan revolving credit facility components total 605 million outstanding december 31 2013 15 billion debt financing agreement july 26 2011 last amended december 19 2012 company entered 15 billion debt financing agreement certain lenders reduce companys borrowing costs lower interest rates create flexibility higher revolving credit capacity improvement financial terms 15 billion debt financing agreement includes three different loan facilities term loan term loan b revolving credit facility revolving credit facility amount 8500 million term loan aggregate amount 4500 million initial term five years extended additional year part december 19 2012 amendment mature july 25 2017 term loan b amount 2000 million term seven years maturing july 25 2018 subject certain required amortization time companys total leverage 300 100 greater company obligated prepay two term loan facilities net proceeds asset sales casualty losses certain indebtedness borrowed money portion excess cash flow subject certain exceptions borrowings revolving facility term loan loans made 15 billion debt financing agreement bear interest london interbank offered rate libor plus 225 125 excess alternate base rate term loan b loans bear interest libor plus 300 libor floor 100 200 excess alternative base rate companys option 15 billion debt financing agreement secured substantially unencumbered assets company 15 billion debt financing agreement also requires company provide additional collateral lenders certain limited circumstances master note security agreement sometimes referred senior notes september 1 1995 last amended january 26 2006 company entered master note security agreement pursuant company issued time senior notes aggregate principal amount 113 billion various tranches senior notes weightedaverage interest rate 747 december 31 2013 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2036 notes collateralized certain united states land buildings press finishing equipment terms master note security agreement december 31 2013 borrowings outstanding 4902 million facilities agreement december 16 2008 quadwinkowski sp z oo quadwinkowski entered secured facilities agreement facilities agreement facilities agreement includes euro denominated term loan 783 million expires december 16 2015 used refinance quadwinkowskis existing indebtedness multicurrency revolving credit facility 166 million renewed 2013 expire december 16 2014 used quadwinkowskis working capital general business needs december 31 2013 borrowings outstanding euro denominated term loan 582 million december 31 2013 borrowings outstanding multicurrency revolving credit facility 23 million leaving 143 million available future borrowings terms facilities agreement include guarantee quadgraphics security agreement includes collateralizing substantially quadwinkowski assets facilities bear interest aggregate euro interbank offered rate euribor warsaw interbank offered rate wibor margin weightedaverage interest rate euro denominated term loan 274 december 31 2013 weightedaverage interest rate multicurrency revolving credit facility 416 december 31 2013 covenants compliance december 31 2013 companys various lending arrangements included certain financial covenants financial terms numbers ratios covenants compliance section defined companys debt agreements among covenants company required maintain following december 31 2013 covenant restrictive measurement included • rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda defined debt financing agreement shall exceed 350 100 twelve months ended december 31 2013 companys leverage ratio 239 100 • rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2013 companys interest coverage ratio 734 100 • rolling twelvemonth basis fixed charge coverage ratio defined consolidated ebitda rent expense interest rent expense shall less 150 100 twelve months ended december 31 2013 companys fixed charge coverage ratio 426 100 • consolidated net worth least 7458 million plus 40 positive consolidated net income cumulatively year december 31 2013 consolidated net worth must least 7939 million december 31 2013 companys consolidated net worth restrictive covenant per various debt agreements 121 billion addition covenants 15 billion debt financing agreement also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock companys total leverage ratio greater 300 100 total leverage ratio defined debt financing agreement company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions december 31 2013 company compliance financial covenants debt agreements company currently expects compliance future periods financial covenants assurance covenants continue met companys failure maintain compliance covenants could prevent company borrowing additional amounts could result default debt agreements default could cause outstanding indebtedness become immediately due payable virtue crossacceleration crossdefault provisions net pension postretirement benefit obligations net underfunded pension postretirement mepps benefit obligations decreased 1909 million year ended december 31 2013 3779 million december 31 2012 1870 million december 31 2013 company focused reducing net benefit obligation underfunded plans making cash contributions plans 2013 made cash contributions 410 million singleemployer pension plans required monthly payments 144 million mepps addition 1336 million decrease net underfunded liabilities result december 31 2013 actuarial valuation decrease primarily attributable increase liability discount rate well actual 2013 asset returns exceeding expected return plan assets share repurchase program september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock authorization share repurchases may made companys discretion time open market andor privately negotiated transactions permitted federal securities laws legal requirements timing manner price amount repurchase depend economic market conditions share price trading volume applicable legal requirements factors program may suspended discontinued time stock repurchases made year ended december 31 2013 december 31 2013 918 million authorized repurchases remaining program risk management discussion companys exposure market risks management market risks see item 7a quantitative qualitative disclosures market risk annual report form 10k offbalance sheet arrangements except set forth contractual obligations commitments table note 17 lease obligations consolidated financial statements item 8 financial statements supplementary data annual report form 10k including operating leases future interest debt capital leases incurred company offbalance sheet arrangements financings special purpose entities company expects material current future effect financial condition changes financial condition results operations liquidity capital expenditures capital resources significant components sales expenses contractual obligations commitments companys contractual cash obligations december 31 2013 follows millions 1 debt obligations include 3103 million anticipated future interest payments respect variable interest rate portions debt interest amounts calculated applying december 31 2013 weightedaverage interest rate determine value future interest payments master note security agreement weightedaverage interest rate notes applied average principal balance outstanding time period amounts included thereafter include principal payments estimated interest expense 2036 2 pension postretirement benefits contributions benefit payments funded company assets included table actuarially estimated five year period benefit payments benefit plans expected continue beyond 2018 company believes estimate beyond period unreasonable contractual obligations table include 730 million estimated withdrawal liability us world color press mepps due uncertainty amount timing potential withdrawal liability payment 2014 company required make payments 144 million pending settlement see note 20 employee retirement plans consolidated financial statements item 8 financial statements supplementary data annual report form 10k discussion withdrawal mepps 3 capital lease obligations include 09 million anticipated future interest payments 4 purchase obligations consist primarily 302 million firm commitments purchase press finishing equipment well 25 million purchase obligations 5 acquisition businesses represents deferred payment associated acquisition proteus packaging transpak corporation deferred payment made 2014 based upon finalization valuation net assets see note 3 acquisitions strategic investments consolidated financial statements item 8 financial statements supplementary data annual report form 10k discussion 6 contractual obligations table include reserves uncertain tax positions recorded accordance accounting guidance uncertainties income taxes company taken tax positions ultimate amount years necessary payments made pertain tax positions uncertain reserve uncertain tax positions prior interest penalties 445 million december 31 2013 company also recorded accruals interest penalties related uncertain tax positions 41 million 05 million respectively december 31 2013 7 contractual obligations table include share repurchase program repurchases required program see share repurchase program section discussion including maximum potential cash payments program critical accounting policies estimates companys consolidated financial statements prepared accordance gaap companys critical accounting policies important portrayal financial condition results operations require company make difficult subjective estimates management required make judgments estimates affect reported amounts assets liabilities disclosure contingent assets liabilities date statements reported amounts revenues expenses reporting period company bases estimates historical experience various assumptions believed reasonable circumstances companys management believes judgments estimates made consistent appropriate methods based information available time reasonable deviation judgments estimates would material impact companys consolidated financial position results operations actual results may differ estimates different assumptions conditions extent estimates used differ actual results adjustments consolidated statements operations corresponding consolidated balance sheets would necessary adjustments would made future statements company identified following critical accounting policies estimates revenue recognition company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides certain cases delivery billing schedules outlined customer agreement product revenue recognized manufacturing complete title risk loss transfer customer reasonable assurance collectability product returns significant majority products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer respect companys logistics operations include delivery printed material company recognizes revenue upon completion delivery services company also manufactures printingrelated auxiliary equipment ensure industryleading technology printing operations well sell businesses revenue generally recognized equipment sales time shipment revenue services related installation equipment customer sites recognized upon completion installation payments received customers manufacture equipment prior shipment case installation services prior completion installation cases payments received advance meeting applicable revenue recognition criteria deferred revenue recorded revenue recognition criteria subsequently met services account greater 10 companys consolidated net sales therefore net sales related costs sales products services included separate line items consolidated statements operations item 8 financial statements supplementary data annual report form 10k certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations item 8 financial statements supplementary data annual report form 10k many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis impairment goodwill allocation purchase price business combinations requires management estimates judgment expectations future cash flows acquired business allocation cash flows identifiable assets liabilities assumed including valuations performed thirdparty appraisers appropriate determining estimated fair value purchase price allocation purposes goodwill measured excess purchase price fair value assigned identifiable assets acquired liabilities assumed changes managements estimates judgments including changes based actual results differing estimates judgments used purchase price allocation process could result impairment charge could material adverse effect companys results operations accounting guidance requires goodwill impairment tested reporting unit level least annual basis within reportable segments company identified three reporting units 1 united states 2 latin america 3 europe december 31 2013 goodwill totaled 7731 million 7462 million allocated united states reporting unit 269 million allocated latin america reporting unit european reporting unit goodwill allocated company performs annual goodwill impairment test october 31 frequently event occurs circumstances change would likely reduce fair value reporting unit carrying value multistep method used determining goodwill impairment includes option first performing qualitative assessment determine whether existence events circumstances leads determination likely fair value reporting unit less carrying amount company apply optional qualitative assessment annual goodwill impairment test first step company compares estimated fair value reporting unit goodwill allocated carrying amount including goodwill fair value determined using equal weighting income market approaches income approach company determines fair value based estimated future cash flows discounted estimated weightedaverage cost capital reflects overall level inherent risk rate return outside investor would expect earn market approach company derives fair value reporting units based market multiples comparable publiclytraded companies fair value determination categorized level 3 fair value hierarchy see note 18 financial instruments fair value measurements consolidated financial statements item 8 financial statements supplementary data annual report form 10k definition level 3 inputs carrying amount reporting unit exceeds estimated fair value step two completed determine amount impairment charge step two requires allocation estimated fair value reporting unit assets including unrecognized intangible assets liabilities hypothetical purchase price allocation remaining unallocated fair value represents implied fair value goodwill compared corresponding carrying value goodwill compute goodwill impairment charge companys methodologies valuing goodwill applied consistently yearoveryear basis assumptions used performing 2013 impairment calculations evaluated light market business conditions company continues believe discounted cash flow model market multiples model provide reasonable meaningful fair value estimate based upon reporting units projections future operating results cash flows replicates market participants would value companys reporting units company conducted annual impairment assessment united states latin america reporting units october 31 2013 date annual assessment performing annual impairment assessment fair value determined using equal weighting income market approaches significant assumptions used income approach included estimated future cash flows including expected future revenue growth profit margins capital expenditures working capital levels weighted average cost capital 92 united states reporting unit 129 latin america reporting unit terminal value multiples estimated future cash flows based companys internal projection models industry projections assumptions deemed reasonable management significant assumptions used market approach included control premium based similar transactions selection guideline public companies selected market multiples management concluded impairment existed october 31 2013 estimated fair value companys united states latin america reporting units exceeded carrying amount additional indications impairment identified october 31 2013 december 31 2013 addition company performed sensitivity analysis october 31 2013 material assumptions used discounted cash flow valuation models two reporting units goodwill allocated performing annual goodwill impairment assessment percentage estimated fair value exceeded carrying value 10 united states latin america reporting units based goodwill impairment assessments performed goodwill impairment charge pertaining goodwill continuing operations required recorded years ended december 31 2013 2012 2011 however company recorded 139 million goodwill impairment charge third quarter 2011 pending sale canadian discontinued operations due carrying value canadian net assets exceeding estimated fair value mexican assets acquired transcontinental goodwill impairment loss included loss discontinued operations net tax consolidated statement operations year ended december 31 2011 included item 8 financial statements supplementary data annual report form 10k impairment property plant equipment finitelived intangible assets company performs impairment evaluations longlived assets significant property plant equipment customer relationship intangible assets recorded conjunction acquisition vertis world color press whenever business conditions events circumstances indicate assets may impaired including whether estimated useful life longlived assets may warrant revision whether remaining balance asset may recoverable assessing impairment longlived assets requires company make important estimates assumptions including limited expected future cash flows assets generate assets used based strategic direction company remaining useful life residual value considerable judgment also applied incorporating potential impact current economic climate customer demand selling prices cost production limited activity secondary markets assets cost capital estimated future undiscounted cash flows generated assets less carrying value longlived assets written fair value charge recorded current operations company uses internal undiscounted cash flow estimates quoted market prices available independent appraisals appropriate determine fair value based assessments completed years ended december 31 2013 2012 2011 company recognized total fixed asset impairment charges 218 million 230 million 138 million respectively primarily related companys closure exit 21 manufacturing facilities including closures marengo iowa pomona california announced january 10 2014 well capacity reduction restructuring initiatives impairment charges recorded years ended december 31 2013 2012 2011 customer relationship intangibles company continues monitor groups assets identify new events changes circumstances could indicate carrying values recoverable particularly light potential declines profitability may result highly competitive industry landscape continued uncertainty global economy event significant unanticipated changes circumstances significant adverse changes business climate adverse actions regulators unanticipated competition loss key customers andor changes technology markets actual results differ managements estimates provision impairment could required future period pension postretirement benefit plans result acquisition world color press company acquired multiple underfunded pension postretirement defined benefit plans pension plan costs determined using actuarial methods funded contributions determined accordance projected benefit method prorated service company records amounts relating pension postretirement benefit plans based calculations include various actuarial assumptions including discount rates mortality assumed rates return compensation increases turnover rates health care cost trend rates company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets included item 8 financial statements supplementary data annual report form 10k company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 purposes calculating expected return plan assets valued fair value company determines assumption discount rate used purposes computing annual service interest costs pension plan based index highquality corporate bond yields matchedfunding yield curve analysis date weightedaverage discount rate used determine benefit obligations pension plans december 31 2013 48 postretirement benefit plans 36 company employs total return investment approach pension plans whereby diversified mix equities fixed income investments used maximize longterm pension plan assets intent strategy outperform growth plan liabilities long run plan contributions decreased balanced maintaining lower degree investment risk tolerance established careful consideration plan liabilities plan funded status corporate financial condition equity investments diversified across geography market capitalization investments us largecapitalization stocks us smallcapitalization stocks international securities investment risk measured monitored ongoing basis annual liability measurements periodic assetliability studies quarterly investment portfolio reviews expected longterm rate return plan assets based upon many factors including expected asset allocations historical asset returns current expected future market conditions risk target asset allocation plan assets weightedaverage basis 65 equity securities 35 fixedincome actual asset allocation december 31 2013 approximately 67 equity securities 33 debt securities expected return plan assets assumption december 31 2013 2012 65 companys funded united states pension plans certain pension plans postretirement benefit plans unfunded plans hold plan assets health care cost trend rates used valuing companys postretirement medical benefit obligations established based upon actual health care cost trends consultation actuaries benefit providers december 31 2013 current weighted average health care cost trend rate assumption united states postretirement plans 75 preage postage 65 participants current trend rate gradually decreases ultimate trend rate 50 one percentage point increase assumed health care cost trend rate would increase postretirement benefit obligation 01 million would significant impact postretirement benefit service interest cost components one percentage point decrease assumed health care cost trend rate would decrease postretirement benefit obligation 01 million would significant impact postretirement benefit service interest cost components company also participated mepps result acquisition world color press due significant underfunded status mepps company withdrawn significant mepps replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded estimated withdrawal liability mepps part purchase price allocation process based information received mepps trustees estimated withdrawal liability updated new withdrawal liability projections provided plans trustees final withdrawal liability determined exact amount withdrawal liability could higher lower estimate depending among things nature timing triggering events funded status plans time accounting income taxes company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations realization deferred tax assets depends upon companys ability generate future taxable income company recorded deferred tax assets related domestic foreign tax loss credit carryforwards company evaluates deferred tax assets tax jurisdiction utilization tax assets limited amount taxable income expected generated within allowable carryforward period factors accordingly management provided valuation allowance reduce certain deferred tax assets management concluded based weight available evidence likely deferred tax assets fully realized actual results differ estimates adjusted future periods adjustments valuation allowance might need recorded company regularly audited foreign domestic tax authorities audits occasionally result proposed assessments ultimate resolution might result company owing additional taxes including cases penalties interest company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit greater fiftypercent likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination companys worldwide tax provision related tax assets liabilities requires use significant judgment estimates interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain company believes appropriate support positions taken certain positions may successfully challenged taxing authorities company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions tax positions reflected consolidated financial statements included item 8 financial statements supplementary data annual report form 10k determination companys worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions although management believes estimates reasonable final outcome uncertain tax positions may materially different reflected companys historical financial statements new accounting pronouncements march 2013 financial accounting standards board fasb issued new guidance accounting cumulative translation adjustment upon derecognition certain subsidiaries group assets within foreign entity investment foreign entity new guidance release cumulative translation adjustments net income required entity ceases controlling financial interest resulting complete substantially complete liquidation subsidiary group assets within foreign entity guidance effective prospectively fiscal years beginning december 15 2013 early adoption permitted company adopted guidance effective january 1 2013 determined material impact companys consolidated financial position results operations cash flows february 2013 fasb issued new guidance disclosure requirements items reclassified accumulated comprehensive income new guidance entity required provide information amounts reclassified accumulated comprehensive income component addition entity required present either face financial statements notes significant amounts reclassified accumulated comprehensive income respective line items net income amount reclassified required reclassified entirety reporting period amounts required reclassified entirety net income entity required crossreference disclosures provide additional details amounts company adopted guidance effective january 1 2013 adoption guidance change current requirements reporting net income comprehensive income material impact companys consolidated financial position results operations cash flows see note 24 accumulated comprehensive income loss consolidated financial statements item 8 financial statements supplementary data annual report form 10k required disclosure item 7aitem 7 managements discussion analysis financial condition results operations following discussion financial condition results operations quadgraphics read together quadgraphics audited consolidated financial statements three years period ended december 31 2014 including notes thereto included item 8 financial statements supplementary data annual report form 10k discussion contains forwardlooking statements reflect companys plans estimates beliefs companys actual results could differ materially discussed forwardlooking statements factors could cause contribute differences include limited discussed forwardlooking statements part item 1a risk factors included earlier within annual report form 10k managements discussion analysis financial condition results operations provided supplement companys consolidated financial statements accompanying notes help provide understanding companys financial condition changes companys financial condition companys results operations discussion analysis organized follows • overview section includes general description companys business segments overview key performance metrics companys management measures utilizes evaluate business performance overview trends affecting company including managements actions related trends • results operations section contains analysis companys results operations comparing results 1 year ended december 31 2014 year ended december 31 2013 2 year ended december 31 2013 year ended december 31 2012 comparability companys results operations periods significantly impacted acquisitions including 2013 acquisitions vertis novia proteus transpak corporation transpak 2014 acquisitions brown printing unigraphic results operations acquisitions included companys consolidated results prospectively respective acquisition dates forwardlooking statements providing general description recent projected industry company developments important understanding companys results operations included section also provides discussion ebitda margin financial measures prepared accordance accounting principles generally accepted united states america gaap company uses assess performance business • liquidity capital resources section provides analysis companys capitalization cash flows statement offbalance sheet arrangements discussion table outstanding debt commitments cash flows companys canadian operations sold transcontinental reported discontinued operations thus included cash flow analysis disposition date march 1 2012 forwardlooking statements important understanding companys financial condition also included section also provides discussion free cash flow debt leverage ratio nongaap financial measures company uses assess liquidity capital allocation deployment • critical accounting policies estimates section contains discussion accounting policies companys management believes important companys financial condition results operations well allowances reserves require significant judgment estimates part companys management addition companys significant accounting policies including critical accounting policies summarized note 1 basis presentation summary significant accounting policies consolidated financial statements item 8 financial statements supplementary data annual report form 10k • new accounting pronouncements section provides discussion new accounting pronouncements anticipated impact accounting pronouncements companys consolidated financial statements overview business overview quadgraphics leading global provider print media solutions consultative ideas worldwide capabilities leadingedge technology singlesource simplicity company believes resources knowledge help wide variety clients vertical industries including limited retail publishing insurance financial healthcare companys diverse range print related products services solutions north america south america europe primarily include • print solutions including retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing packaging newspapers custom products commercial specialty printed products paper services • logistics services including mailing solutions postal consultation delivery optimization hygiene services delivery monitoring tracking distribution logistics transportation services • digital solutions including email image recognition nearfield communication technology mobile apps mobile websites digital publishing • strategy including brand campaign media planning placement • data including data insights segmentation response analysis • creative including concept design page layout production copywriting interactive solutions photography retouching video production optimization • workflow including content management process management facilities management services color management digital file processing proofing quadgraphics remains focused five primary strategic goals support objective transform company drive performance innovation company believes strategic goals allow successful despite ongoing industry challenges goals summarized follows • strengthen core quadgraphics core print categoriesretail inserts magazines catalogs books directorieshave pressure recent years remain foundational marketers publishers business strategies generate significant amount free cash flow company using disciplined return capital framework quadgraphics makes significant ongoing investments core manufacturing distribution platform including equipment automation continuous process improvements resulting believes one integrated automated efficient modern manufacturing platforms industry companys ability maintain strength core product lines promotes continued value creation support future growth opportunities • grow business profitably company believes well positioned grow business profitably ongoing innovation organic growth disciplined acquisitions regarding acquisitions quadgraphics continues take disciplined approach pursue opportunities expand companys business new product categories geographies transform existing product create valuedriven industry consolidation company also look continue capitalize growth opportunities ongoing investments innovations quadgraphics existing platform addition helping marketers publishers deliver brands consistently across multiple media channels • walk shoes clients company focused creating client experience creates loyalty quadgraphics brand partnering clients fully understand internal processes marketing strategies challenges company better deliver solutions help achieve business objectives business solutions consultant quadgraphics examines everything clients marketing strategyincluding clients manage customer datato production marketing workflow processes consultative approach companys ultimate goal help clients lower operating costs improve productivity decrease time market providing revenue generating ideas omnichannel strategies • engage employees quadgraphics looks engage employees companys unique corporate culture encourages employees take pride ownership work take advantage continuous learning job advancement opportunities share knowledge mentoring others innovate solutions one key way company drives employee engagement acting employee feedback gathered daily conversations surveys roundtable discussions open forums company departmental meetings • enhance financial strength create shareholder value quadgraphics follows disciplined approach maintaining enhancing financial strength create shareholder value essential given ongoing industry challenges key strategic goal centered companys ability maximize free cash flow net earnings ebitda maintain consistent financial policies ensure strong balance sheet liquidity level retain financial flexibility needed strategically allocate deploy capital circumstances change quadgraphics operates primarily commercial print portion printing industry related product service offerings designed offer clients complete solutions communicating message target audiences companys operating reportable segments aligned chief operating decision maker company currently manages business companys reportable operating segments summarized united states print related services segment predominantly comprised companys united states printing operations managed one integrated platform includes consumer magazines catalogs retail inserts special interest publications journals direct mail books directories instore marketing packaging commercial specialty printed products together related service offerings including marketing strategy media planning placement data insights response analytics services creative services videography photography workflow solutions digital imaging facilities management services digital publishing interactive print solutions including image recognition near field communication technology mailing distribution logistics data optimization hygiene services segment also includes design development manufacture service printingrelated auxiliary equipment well manufacture ink united states print related services segment accounted approximately 91 companys consolidated net sales year ended december 31 2014 international segment consists companys printing operations europe latin america including operations poland argentina brazil chile colombia mexico peru segment provides printed products related services consistent united states print related services segment exception printingrelated auxiliary equipment included united states print related services segment international segment accounted approximately 9 companys consolidated net sales year ended december 31 2014 corporate consists unallocated general administrative activities associated expenses including part executive legal finance addition 2014 certain expenses income frozen employee retirement plans pension postretirement benefits plans included corporate allocated operating segments key performance metrics overview companys management believes ability generate net sales growth profit increases positive cash flow maintaining appropriate level debt key indicators successful execution companys business strategy increase shareholder value company uses period net sales growth ebitda margin net cash provided operating activities free cash flow debt leverage ratio metrics measure operating performance financial condition liquidity ebitda margin free cash flow debt leverage ratio nongaap financial measures see definitions ebitda margin reconciliation net earnings attributable quadgraphics common shareholders ebitda results operations section see definitions free cash flow debt leverage ratio reconciliation net cash provided operating activities free cash flow calculation debt leverage ratio liquidity capital resources section net sales growth company uses period net sales growth key performance metric companys management assesses net sales growth based ability generate increased net sales increased sales existing clients sales new clients sales new expanded solutions existing new clients opportunities expand sales strategic investments including acquisitions ebitda margin company uses ebitda margin metrics assess operating performance companys management assesses ebitda margin based ability increase revenues controlling variable expense growth net cash provided operating activities company uses net cash provided operating activities metric assess liquidity companys management assesses net cash provided operating activities based ability meet recurring cash obligations increasing available cash fund integration restructuring requirements including acquired operations cost reduction activities well fund capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal liabilities acquisitions investments future growth shareholder dividends net cash provided operating activities significantly impacted timing nonrecurring infrequent receipts expenditures free cash flow company uses free cash flow metric assess liquidity capital deployment companys management assesses free cash flow measure quantify cash available strategic capital allocation deployment investments business acquisitions strategic investments strengthening balance sheet debt reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items payments related completing world color press bankruptcy process debt leverage ratio company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strengthening balance sheet debt pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability overview trends affecting quadgraphics competition highly fragmented printing industry remains intense industry excess manufacturing capacity created declines industry volumes past recession turn created continued downward pricing pressures addition digital delivery documents data including online distribution hosting media content mobile technologies offer alternatives traditional delivery printed documents increasing consumer acceptance digital delivery content resulted marketers publishers allocating marketing advertising spend across expanding selection digital delivery options reduces demand contributes industry overcapacity company also faces competition print management firms look streamline processes reduce overall print spend company’s clients well strategic marketing firms focused helping businesses integrate multiple channels marketing campaigns company believes disciplined approach capital management strong balance sheet critical able invest profitable growth opportunities technological advances thereby providing highest return shareholders management balances use cash compelling investment opportunities deleveraging companys balance sheet reduction debt pension postretirement obligations returns shareholders including quarterly shareholder dividend increased 025 per share 2012 030 per share 2013 2014 well 200 per share special dividend totaling 935 million paid december 2012 company continues remain disciplined debt leverage companys consolidated debt capital leases increased 188 million year ended december 31 2014 despite borrowing 1392 million capital expenditures 1125 million fund acquisitions primarily 2014 brown unigraphic acquisitions due debt paydown resulting companys operating cash flow generation company expects brown printing acquisition contribute companys cash generation expending initial upfront integration costs 2014 consistent past consolidating acquisitions world color press vertis help deleverage companys balance sheet longterm since company completed world color press acquisition july 2010 company reduced debt capital leases 369 million reduced obligations pension postretirement mepps 325 million company working diligently integrate acquired companies thereby lowering cost structure consolidating manufacturing platform efficient facilities well realizing purchasing mailing logistics efficiencies centralizing consolidating print manufacturing volumes eliminating redundancies administrative corporate operations efforts include deployment companys smartools® platform streamline workflows improve data visibility across consolidated platform addition restructuring actions initiated company beginning 2010 resulted announcement 25 plant closures reduced headcount approximately 8300 employees december 31 2014 addition cost savings acquisitionrelated synergies company continues focus cost reductions lean manufacturing continuous improvement initiatives production floor administrative support order achieve improved efficiencies reduce waste lower overall operating costs enhance quality timeliness create safer work environment companys employees postal costs significant component cost structures many companys clients potential clients postal rate changes influence number pieces clients willing print mail january 2014 usps implemented temporary twoyear exigent postage rate increase 60 includes normal expected annual cpi increase 17 additional 43 temporary exigent increase january 2015 usps filed proposal prc april 26 2015 cpi increase 20 quadgraphics invested significantly mail preparation distribution capabilities mitigate impact increases postage costs help clients successfully navigate everchanging postal environment data analytics unique software merge mailstreams large scale advanced finishing capabilities technology inhouse transportation logistics operations company manages mail preparation distribution clients products maximize efficiency partially reduce costs however net impact increasing postal costs may create decrease client demand print mail products increasingly multichannel marketplace company believes printing industry need make capital investments new technologies deliver targeted customized print solutions deploy multichannel marketing campaigns integration new media company believes ongoing commitment technology paramount delivering highquality relevant offerings customers well driving production efficiencies response continued downward print pricing pressures company invested 139 million capital projects 2014 intends invest 145 million 165 million new capital projects 2015 making capital investment decisions management undertakes thorough process aimed driving strongest contribution longterm profitability whether fixed asset additions organic growth opportunities acquisitions recent examples capital investments made company include • company announced plan invest multiple highspeed color digital web presses january 14 2015 part threeyear strategy transform companys book platform includes 20 widest productive digital web presses available marketplace today • company completed 100 million acquisition brown printing may 30 2014 brown printing provides magazine catalog printing distribution services integrated media solutions magazine publishers catalog marketers united states • company completed acquisition unigraphic commercial specialty printing company based boston metro area february 5 2014 net purchase price 11 million unigraphic offers commercial specialty printing instore marketing digital fulfillment solutions wide variety industries including arts entertainment education financial food healthcare mass media pharmaceutical retail acquisition expands quadgraphics capabilities commercial specialty printing market strengthens companys ability service national retailers largeformat instore marketing needs adding east coast presence quadgraphics existing midwest west coast locations • company completed 49 million acquisition wisconsinbased proteus well sister company transpak december 18 2013 proteus designer manufacturer highend paperboard packaging offering packaging solutions wide variety industries including automotive biotechnology food personal care pharmaceuticals software electronics transpak fullservice industrial packaging company offering crating packaging warehousing distribution logistics services destinations worldwide acquisition two companies quadgraphics expanded capabilities serve packaging market • company completed 13 million acquisition novia indianapolis indiana healthcare solutions company november 7 2013 novia develops manages onsite shared primary care clinics small medium sized companies public sector school districts city county governments • company completed acquisition substantially assets vertis provider retail advertising inserts direct marketing instore marketing solutions january 16 2013 265 million purchase price included payment 95 million current assets excess normalized working capital requirements net purchase price 170 million company believes acquisition vertis strengthened client offering enhanced range products services also increased manufacturing flexibility distribution efficiencies extended geographic footprint united states • company entered 18 million strategic partnership indiabased manipal technologies limited manipaltech purchase minority equity ownership interest march 28 2012 manipaltech one indias largest providers printing services supports clients marketing branding communication needs print services technology solutions strategic investment expanded quadgraphics geographic reach asia broadened product service scope company subject seasonality quarterly results net sales operating income higher third fourth quarters calendar year compared first second quarters fourth quarter highest seasonal quarter cash flows operating activities free cash flow due reduction working capital requirements reach peak levels third quarter seasonality driven increased magazine advertising page counts retail inserts catalogs books primarily due backtoschool holidayrelated advertising promotions company expects seasonality impact continue future years results operations year ended december 31 2014 compared year ended december 31 2013 summary results companys operating income continuing operations operating margin net earnings attributable quadgraphics common shareholders computed using 40 normalized tax rate diluted earnings per share attributable quadgraphics common shareholders year ended december 31 2014 changed year ended december 31 2013 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 673 million incurred year ended december 31 2014 included 306 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 144 million impairment charges including 1 80 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee mexico city mexico pomona california st cloud minnesota well capacity reduction restructuring initiatives 2 64 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures c 26 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions brown printing unigraphic 112 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 85 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 49 million gain termination postretirement medical benefit plan company expects incur additional restructuring integration costs future reporting periods connection eliminating excess manufacturing capacity properly aligning cost structure conjunction companys acquisitions strategic investments cost reduction programs 2 restructuring impairment transactionrelated charges 953 million incurred year ended december 31 2013 included 157 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 218 million impairment charges including 1 117 million impairment charges machinery equipment longer utilized production result facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives 2 101 million land building impairment charges primarily related corinth mississippi marengo iowa mexico city mexico plant closures c 40 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions vertis proteus transpak 252 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 286 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 21 million pension plan settlement gain 3 interest expense increased 74 million 44 million net tax year ended december 31 2014 929 million change due higher weighted average interest rate borrowings due debt financing completed april 28 2014 increased debt levels 2014 compared 2013 primarily related acquisitions 4 nonrecurring 72 million loss debt extinguishment 43 million net tax recognized year ended december 31 2014 primarily related 19 billion debt financing arrangements completed april 28 2014 72 million represents certain debt issuance costs expensed 5 incremental income tax expense 31 million normalized amount calculated following table primarily due 1 68 million income tax expense recorded 2014 establish valuation allowance certain operations mexico 2 52 million decrease domestic deductions 3 16 million onetime foreign benefits 2013 partially offset 4 105 million tax benefit reversal reserves unrecognized tax benefits related audit settlements expiration applicable statutes limitations 6 decrease attributable investments unconsolidated entities noncontrolling interests net tax 15 million year ended december 31 2014 primarily due decrease 13 million excluded noncontrolling interest loss companys consolidated statements operations related companys ownership argentina due company increasing ownership share 85 100 7 operating income excluding restructuring impairment transactionrelated charges decreased 289 million 174 million net tax primarily due decline earnings ongoing industry volume pricing pressures well 95 million net gains 2013 repeat 2014 related favorable legal environmental bankruptcy related settlements gain sale quadgraphics brazilian operations january 2013 companys existing brazilian joint venture plural editoria e grafica plural declines partially offset operating results acquisition brown printing lower employee related costs including labor productivity improvements following discussion provides additional details operating results following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales increased 109 million 03 year ended december 31 2014 compared year ended december 31 2013 primarily due 2537 million increase acquisitions primarily brown printing acquisition completed may 30 2014 increase partially offset 1812 million decrease product sales companys united states core print specialty print product lines due ongoing volume pricing pressures 339 million lower paper sales 225 million foreign exchange losses service sales primarily consist imaging logistics distribution services increased 556 million 91 year ended december 31 2014 compared year ended december 31 2013 primarily due 333 million increased sales quadmed medical services 223 million increased logistics imaging sales primarily resulting acquisitions cost sales cost product sales increased 613 million 18 year ended december 31 2014 compared year ended december 31 2013 primarily due 2177 million increase cost product sales resulting acquisitions partially offset lower print paper volumes lower employeerelated costs product lines owned year cost product sales percentage net sales increased 703 year ended december 31 2014 701 year ended december 31 2013 primarily due brown printing acquisition operates lower gross margins companys historical gross margins cost service sales increased 287 million 65 year ended december 31 2014 compared year ended december 31 2013 primarily due 226 million additional cost service sales resulting sales generated quadmed medical services 95 million increase freight costs partially offset 51 million reduction costs service sales related imaging cost service sales percentage net sales increased 97 year ended december 31 2014 92 year ended december 31 2013 primarily due increased costs quadmed medical services increased freight costs selling general administrative expenses selling general administrative expenses increased 95 million 23 year ended december 31 2014 compared year ended december 31 2013 primarily due 88 million increase employeerelated costs attributable acquisitions predominantly brown printing acquisition 77 million net gains recorded 2013 repeat 2014 level 2014 including legal environmental bankruptcy related expenses well 28 million gain sale quadgraphics brazilian operations january 2013 companys existing brazilian joint venture plural increases partially offset 34 million decrease general administrative professional fees 31 million reduction sales promotion expense selling general administrative expenses percentage net sales increased 86 88 years due items discussed preceding sentence depreciation amortization depreciation amortization decreased 41 million 12 year ended december 31 2014 compared year ended december 31 2013 primarily due 97 million decrease depreciation expense decreased depreciation expense result property plant equipment becoming fully depreciated past year partially offset depreciation property plant equipment purchased brown acquisition decrease depreciation expense partially offset 56 million increase amortization expense primarily due amortization customer relationship intangible assets companies acquired 2013 2014 restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges decreased 280 million 294 year ended december 31 2014 compared year ended december 31 2013 primarily due 201 million decrease restructuring charges 140 million decrease acquisitionrelated integration costs 74 million decrease impairment charges 14 million decrease transactionrelated charges partially offset 149 million increase employee termination charges restructuring impairment transactionrelated charges 673 million incurred year ended december 31 2014 included 1 306 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 144 million impairment charges including 80 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee mexico city mexico pomona california st cloud minnesota well capacity reduction restructuring initiatives 64 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures 3 26 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions brown printing unigraphic 4 112 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 85 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 49 million gain termination postretirement medical benefit plan restructuring impairment transactionrelated charges 953 million incurred year ended december 31 2013 included 1 157 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 218 million impairment charges including 117 million impairment charges machinery equipment longer utilized production result facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives 101 million land building impairment charges primarily related corinth mississippi marengo iowa mexico city mexico plant closures 3 40 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions vertis proteus transpak 4 252 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 286 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 21 million pension plan settlement gain ebitda marginconsolidated ebitda margin year ended december 31 2014 compared year ended december 31 2013 follows ebitda decreased 137 million year ended december 31 2014 compared year ended december 31 2013 primarily due 1 ongoing volume pricing pressures excess capacity printing industry 2 113 million net favorable gains 2013 repeat level 2014 3 95 million increased selling general administrative expenses primarily brown printing acquisition 4 72 million loss debt extinguishment recorded 2014 impacts partially offset 280 million decreased restructuring impairment transactionrelated charges additional earnings sales generated acquisitions ebitda margin decreased 100 year ended december 31 2013 96 year ended december 31 2014 primarily due margin impact lower print pricing product lines owned year acquired brown printing operations operate lower margins companys historical margins ebitda represents net earnings attributable quadgraphics common shareholders plus interest expense ii income tax expense applicable iii depreciation amortization less income tax benefit applicable ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net earnings attributable quadgraphics common shareholders follows 1 net earnings attributable quadgraphics common shareholders includes effects restructuring impairment transactionrelated charges 673 million 953 million years ended december 31 2014 2013 respectively b loss debt extinguishment 72 million year ended december 31 2014 united states print related services following table summarizes net sales operating income operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment increased 144 million 04 year ended december 31 2014 compared year ended december 31 2013 primarily due 2537 million increase acquisitions increase partially offset 1812 million decrease product sales companys core print specialty print product lines owned year due ongoing volume pricing pressures 456 million decrease paper sales service sales united states print related services segment increased 517 million 87 year ended december 31 2014 compared year ended december 31 2013 primarily due 333 million increased sales quadmed medical services 184 million increased logistics imaging sales primarily resulting acquisitions operating income operating income united states print related services segment decreased 328 million 142 year ended december 31 2014 compared year ended december 31 2013 primarily due ongoing volume pricing pressures excess capacity printing industry decrease operating income partially offset 301 million lower employeerelated costs including labor productivity improvements increased operating profit acquisitions operating margin united states print related services segment decreased 45 year ended december 31 2014 53 year ended december 31 2013 primarily due lower print volumes pricing brown acquisition operates lower margins companys historical margins restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2014 521 million consisting 1 199 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 127 million impairment charges including 70 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee pomona california st cloud minnesota well capacity reduction restructuring initiatives 57 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures 3 88 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 4 107 million restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2013 523 million consisting 1 100 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 156 million impairment charges including 103 million impairment charges machinery equipment longer utilized production result facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives 53 million land building impairment charges primarily related corinth mississippi marengo iowa plant closures 3 267 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 21 million pension plan settlement gain international following table summarizes net sales operating loss operating margin certain items impacting comparability equity loss unconsolidated entities within international segment net sales product sales international segment decreased 35 million 08 year ended december 31 2014 compared year ended december 31 2013 primarily due 237 million decreased product sales latin america result 237 million foreign exchange losses argentina decrease partially offset 202 million increased sales europe driven increase paper sales higher volumes 12 million positive impact foreign currency translation europe service sales international segment increased 39 million 247 year ended december 31 2014 compared year ended december 31 2013 primarily due increase logistics revenue europe operating loss operating loss international segment increased 35 million 455 year ended december 31 2014 compared year ended december 31 2013 primarily due margin impact lower product sales latin america 28 million gain sale quadgraphics brazilian operations january 2013 companys existing brazilian joint venture plural recur 2014 02 million increase equity loss unconsolidated entities discussed increases operating loss partially offset improvement operating income europe restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2014 92 million consisting 1 60 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 17 million impairment charges including 10 million impairment charges machinery equipment longer utilized production result facility consolidations mexico city mexico well capacity reduction restructuring initiatives 07 million land building impairment charges result facility consolidations poland 3 15 million restructuring charges restructuring impairment transactionrelated charges international segment year ended december 31 2013 96 million consisting 1 29 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 62 million impairment charges including 48 million land building impairment charges primarily related mexico city mexico plant closure 14 million impairment charges machinery equipment longer utilized production result facility consolidations pila poland well capacity reduction restructuring initiatives 3 02 million adjustment updated estimates related employee related liabilities integration transcontinentals mexican operations 4 07 million restructuring charges equity loss unconsolidated entities investments entities quadgraphics ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil january 2013 company sold 100 ownership interest quadgraphics nordeste industria gráfica ltda quadgraphics são paulo industria gráfica sa plural see note 9 equity method investments unconsolidated entities consolidated financial statements item 8 financial statements supplementary data annual report form 10k discussion company also holds 50 interest joint venture based santiago chile quadgraphics chile sa chile acquired part world color press acquisition equity loss unconsolidated entities international segment increased 02 million year ended december 31 2014 compared year ended december 31 2013 primarily due decrease equity earnings chile unrestricted subsidiaries unrestricted subsidiaries defined senior unsecured notes indenture represented less 20 total consolidated net sales year ended december 31 2014 corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses decreased 354 million 438 year ended december 31 2014 compared year ended december 31 2013 primarily due 274 million decrease restructuring impairment transactionrelated charges 111 million pension postretirement income allocated corporate 2014 instead united states print related services segment done 2013 partially offset 33 million increase employeerelated costs including costs resulting brown printing acquisition restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges year ended december 31 2014 60 million consisting 1 47 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 26 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions brown printing unigraphic 3 24 million acquisitionrelated integration costs primarily related professional fees 4 37 million restructuring charges income includes 49 million gain termination postretirement medical benefit plan corporate restructuring impairment transactionrelated charges year ended december 31 2013 334 million consisting 1 28 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 40 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions vertis proteus transpak 3 254 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 4 12 million restructuring charges results operations year ended december 31 2013 compared year ended december 31 2012 summary results companys operating income continuing operations operating margin net earnings attributable quadgraphics common shareholders diluted earnings per share attributable quadgraphics common shareholders year ended december 31 2013 changed year ended december 31 2012 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 953 million incurred year ended december 31 2013 included 157 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 218 million impairment charges including 1 101 million land building impairment charges primarily related corinth mississippi marengo iowa mexico city mexico plant closures 2 117 million impairment charges machinery equipment longer utilized production result facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives c 40 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions vertis proteus transpak 252 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 286 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 21 million pension plan settlement gain company expects incur additional restructuring integration costs future reporting periods connection eliminating excess manufacturing capacity properly aligning cost structure conjunction companys acquisitions strategic investments cost reduction programs 2 restructuring impairment transactionrelated charges 1183 million incurred year ended december 31 2012 included 272 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 230 million impairment charges including 1 131 million land building impairment charges primarily related limerick ireland mt morris illinois pila poland richmond virginia stillwater oklahoma plant closures 2 99 million machinery equipment impairment charges related facility consolidations including jonesboro arkansas mexico city mexico pila poland stillwater oklahoma well capacity reduction restructuring initiatives c 41 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related acquisition vertis business exchange transaction transcontinental 446 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 194 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 128 million curtailment gain result amendment postretirement medical benefit plans 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable 3 interest expense increased 15 million 09 million net tax year ended december 31 2013 855 million change due increase debt levels 2013 compared 2012 primarily related funding purchase price vertis acquisition partially offset lower weighted average interest rate borrowings 4 income tax expense excluding tax attributable restructuring impairment transactionsrelated charges included part 1 2 tax attributable interest expense included part 3 operating income included part 8 increased 411 million 2013 primarily due 435 million benefit recorded 2012 decreasing liability recorded unrecognized tax benefits related settlement internal revenue service irs audits expiration applicable statutes limitations benefit recur year ended december 31 2013 5 loss discontinued operations net tax 32 million year ended december 31 2012 recur year ended december 31 2013 due completion sale companys canadian operations transcontinental march 1 2012 6 gain disposal discontinued operations net tax 340 million year ended december 31 2012 recur year ended december 31 2013 due completion sale companys canadian operations transcontinental march 1 2012 7 decrease attributable investments unconsolidated entities noncontrolling interests net tax 35 million year ended december 31 2013 primarily due 48 million decrease earnings unconsolidated entities predominantly related lower equity earnings plural partially offset exclusion 13 million noncontrolling interest companys consolidated statements operations related companys 85 ownership certain operations argentina 8 operating income excluding restructuring impairment transactionrelated charges increased 127 million 76 million net tax primarily due incremental net earnings resulting vertis acquisition partially offset decline net earnings lower print volumes lower print pricing product lines owned year result continued pricing pressure excess manufacturing capacity printing industry following discussion provides additional details operating results continuing operations following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales increased 5480 million 151 year ended december 31 2013 compared year ended december 31 2012 primarily due increased product sales resulting vertis acquisition partially offset lower print volumes lower print pricing product lines owned year result continued pricing pressure excess capacity printing industry lower paper sales negative impact foreign currency translation service sales primarily consist imaging logistics distribution services increased 1539 million 338 year ended december 31 2013 compared year ended december 31 2012 primarily due additional service sales logistics distribution services media solutions resulting vertis acquisition well increases media solutions logistics distribution services owned year cost sales cost product sales increased 5118 million 180 year ended december 31 2013 compared year ended december 31 2012 primarily due vertis acquisition partially offset lower cost sales due decrease sales related reduced print volumes product lines owned year cost reduction activities cost product sales percentage net sales increased 696 year ended december 31 2012 701 year ended december 31 2013 primarily due vertis acquisition operates lower gross margins companys historical gross margins lower print volumes lower print pricing product lines owned year result continued pricing pressure excess manufacturing capacity printing industry increase cost product sales percentage net sales partially offset synergy savings related vertis integration cost reduction activities cost service sales increased 1066 million 318 year ended december 31 2013 compared year ended december 31 2012 primarily due additional cost service sales resulting vertis acquisition cost service sales percentage net sales increased 82 year ended december 31 2012 92 year ended december 31 2013 primarily due vertis acquisition operates lower gross margins companys historical gross margins selling general administrative expenses selling general administrative expenses increased 689 million 199 year ended december 31 2013 compared year ended december 31 2012 primarily due 656 million additional selling general administrative expenses predominantly resulting administrative functions acquired vertis manufacturing plants well 69 million increase losses foreign currency movements increases partially offset 28 million gain sale quadgraphics brazilian operations january 2013 companys existing brazilian joint venture plural 08 million net miscellaneous cost decreases selling general administrative expenses percentage net sales increased 84 86 years due items discussed preceding sentence depreciation amortization depreciation amortization increased 19 million 06 year ended december 31 2013 compared year ended december 31 2012 primarily due increased capital expenditures additional depreciation amortization related vertis acquisition partially offset increase fully depreciated property plant equipment restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges decreased 230 million 194 year ended december 31 2013 compared year ended december 31 2012 primarily due 194 million decrease acquisitionrelated integration costs 115 million decrease employee termination charges 12 million decrease impairment charges 01 million decrease transactionrelated charges partially offset 92 million increase restructuring charges restructuring impairment transactionrelated charges 953 million incurred year ended december 31 2013 included 1 157 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 218 million impairment charges including 101 million land building impairment charges primarily related corinth mississippi marengo iowa mexico city mexico plant closures 117 million impairment charges machinery equipment longer utilized production result facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives 3 40 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions vertis proteus transpak 4 252 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 286 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 21 million pension plan settlement gain restructuring impairment transactionrelated charges 1183 million incurred year ended december 31 2012 included 1 272 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 230 million impairment charges including 131 million land building impairment charges primarily related limerick ireland mt morris illinois pila poland richmond virginia stillwater oklahoma plant closures 99 million machinery equipment impairment charges related facility consolidations including jonesboro arkansas mexico city mexico pila poland stillwater oklahoma well capacity reduction restructuring initiatives 3 41 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related acquisition vertis business exchange transaction transcontinental 4 446 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 194 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 128 million curtailment gain result amendment postretirement medical benefit plans 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable ebitda marginconsolidated ebitda margin year ended december 31 2013 compared year ended december 31 2012 follows ebitda increased 33 million year ended december 31 2013 compared year ended december 31 2012 primarily due margin impact 7019 million 171 increase net sales substantially resulting vertis acquisition 230 million decreased restructuring impairment transactionrelated charges 32 million loss discontinued operations net tax recorded year ended december 31 2012 recur 2013 impacts partially offset 689 million increased selling general administrative expenses result vertis acquisition margin impact lower print volumes lower print pricing product lines owned year 340 million gain disposal discontinued operations net tax recorded year ended december 31 2012 recur 2013 ebitda increased ebitda margin decreased 117 year ended december 31 2012 100 year ended december 31 2013 primarily due acquired vertis operations operate lower gross margins companys historical gross margins margin impact lower print pricing product lines owned year ebitda represents net earnings attributable quadgraphics common shareholders plus interest expense ii income tax expense applicable iii depreciation amortization less income tax benefit applicable ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net earnings attributable quadgraphics common shareholders follows 1 net earnings attributable quadgraphics common shareholders includes effects restructuring impairment transactionrelated charges 953 million 1183 million years ended december 31 2013 2012 respectively b loss discontinued operations net tax 32 million year ended december 31 2012 respectively ebitda discontinued operations 32 million year ended december 31 2012 included restructuring impairment transactionrelated charges 17 million year ended december 31 2012 c gain disposal discontinued operations net tax 340 million year ended december 31 2012 united states print related services following table summarizes net sales operating income operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment increased 5949 million 189 year ended december 31 2013 compared year ended december 31 2012 primarily due increased product sales resulting vertis acquisition partially offset lower print volumes lower print pricing product lines owned year result continued pricing pressure excess capacity printing industry lower paper sales service sales united states print related services segment increased 1469 million 329 year ended december 31 2013 compared year ended december 31 2012 primarily due additional service sales logistics distribution services media solutions resulting vertis acquisition well increases media solutions logistics distribution services owned year operating income operating income united states print related services segment increased 142 million 66 year ended december 31 2013 compared year ended december 31 2012 primarily due vertis acquisition partially offset margin impact lower print volumes lower print pricing product lines owned year result continued pricing pressure excess capacity printing industry 38 million increased restructuring impairment transactionrelated charges operating margin united states print related services segment decreased 60 year ended december 31 2012 53 year ended december 31 2013 primarily due vertis acquisition operates lower gross margins companys historical gross margins lower print volumes pricing discussed preceding paragraph increased restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2013 523 million consisting 1 100 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 156 million impairment charges including 53 million land building impairment charges primarily related corinth mississippi marengo iowa plant closures 103 million impairment charges machinery equipment longer utilized production result facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives 3 267 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 21 million pension plan settlement gain restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2012 485 million consisting 1 202 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 119 million impairment charges including 70 million land building impairment charges primarily related mt morris illinois richmond virginia stillwater oklahoma plant closures 49 million machinery equipment impairment charges related facility consolidations including jonesboro arkansas stillwater oklahoma well capacity reduction restructuring initiatives 3 164 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 128 million curtailment gain result amendment postretirement medical benefit plans 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable international following table summarizes net sales operating loss operating margin certain items impacting comparability equity earnings loss unconsolidated entities within international segment net sales product sales international segment decreased 469 million 96 year ended december 31 2013 compared year ended december 31 2012 primarily due sale quadgraphics brazilian operations january 2013 companys existing brazilian joint venture plural reduced product sales 199 million 172 million lower sales europe related predominantly lower paper sales print volumes 81 million lower sales mexico service sales international segment increased 70 million 795 year ended december 31 2013 compared year ended december 31 2012 primarily due increase logistics revenue europe operating loss operating loss international segment decreased 171 million 690 year ended december 31 2013 compared year ended december 31 2012 primarily due 167 million decrease restructuring impairment integration expenses 37 million reduction operating losses 2012 brazil 28 million gain sale quadgraphics brazilian operations january 2013 reductions operating loss partially offset 48 million decrease equity earnings unconsolidated entities discussed restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2013 96 million consisting 1 29 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 62 million impairment charges including 48 million land building impairment charges primarily related mexico city mexico plant closure 14 million impairment charges machinery equipment longer utilized production result facility consolidations pila poland well capacity reduction restructuring initiatives 3 02 million adjustment updated estimates related employee related liabilities integration transcontinentals mexican operations 4 07 million restructuring charges restructuring impairment transactionrelated charges international segment year ended december 31 2012 263 million consisting 1 70 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 111 million impairment charges including 61 million land building impairment charges primarily related limerick ireland pila poland plant closures 50 million machinery equipment impairment charges related facility consolidations including mexico city mexico pila poland well capacity reduction restructuring initiatives 3 56 million integration costs primarily related integration acquired companies 4 26 million restructuring charges equity earnings loss unconsolidated entities investments entities quadgraphics ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil january 2013 company sold 100 ownership interest quadgraphics nordeste industria gráfica ltda quadgraphics são paulo industria gráfica sa plural see note 9 equity method investments unconsolidated entities consolidated financial statements item 8 financial statements supplementary data annual report form 10k discussion company also holds 50 interest joint venture based santiago chile quadgraphics chile sa chile acquired part world color press acquisition equity earnings loss unconsolidated entities international segment decreased 48 million year ended december 31 2013 compared year ended december 31 2012 primarily due 47 million decrease equity earnings plural corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses decreased 44 million 52 year ended december 31 2013 compared year ended december 31 2012 primarily due 101 million decrease restructuring impairment transactionrelated charges partially offset 53 million increase employee related costs 40 million increase noncash stockbased compensation expense 04 million net miscellaneous expense increases restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges year ended december 31 2013 334 million consisting 1 28 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 40 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions vertis proteus transpak 3 254 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 4 12 million restructuring charges corporate restructuring impairment transactionrelated charges year ended december 31 2012 435 million consisting 1 41 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily related acquisition vertis business exchange transaction transcontinental 2 390 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 3 04 million restructuring charges liquidity capital resources company utilizes cash flows operating activities borrowings credit facilities satisfy liquidity capital requirements company believes expected future cash flows operating activities 7541 million unused available capacity revolving credit facility net 520 million issued letters credit december 31 2014 provide sufficient resources fund ongoing operating requirements integration restructuring requirements related acquired operations well future capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal payments investments future growth create value shareholders shareholder dividends borrowings 8500 million revolving credit facility 439 million december 31 2014 peak borrowings 3150 million year ended december 31 2014 net cash provided operating activities year ended december 31 2014 compared year ended december 31 2013 net cash provided operating activities 2932 million year ended december 31 2014 compared 4411 million year ended december 31 2013 resulting 1479 million decrease cash provided operating activities decrease primarily due 1613 million decrease cash flows changes operating assets liabilities 50 million decrease dividends unconsolidated entities partially offset 184 million improved operating cash flows earnings excluding noncash items 1613 million decrease cash flows changes operating assets liabilities primarily related estimated 90 million onetime benefit realized 2013 restoration normalized working capital levels following acquisition vertis acquired without normalized levels accounts payable certain liabilities remaining change due increase 71 million cash used working capital primarily due increase accounts receivable year ended december 31 2013 compared year ended december 31 2012 net cash provided operating activities 4411 million year ended december 31 2013 compared 3542 million year ended december 31 2012 resulting 869 million increase cash provided operating activities increase primarily due 814 million increase cash flows changes operating assets liabilities 45 million increase dividends unconsolidated entities changes operating assets liabilities primarily related estimated 90 million onetime benefit realized 2013 restoration normalized working capital levels following acquisition vertis acquired without normalized levels accounts payable certain liabilities net cash used investing activities year ended december 31 2014 compared year ended december 31 2013 net cash used investing activities 2242 million year ended december 31 2014 compared 4306 million year ended december 31 2013 resulting 2064 million decrease cash used investing activities decrease primarily due 1794 million reduced cash payments related acquisitions strategic investments predominantly driven 2354 million net cash paid vertis acquisition january 16 2013 431 million net cash paid proteus transpak acquisitions december 18 2013 less 964 million net cash paid brown printing acquisition may 30 2014 decrease cash used investing activities also attributable 1 203 million increase receipts restricted cash 2 103 million decrease purchases property plant equipment 2014 year ended december 31 2013 compared year ended december 31 2012 net cash used investing activities 4306 million year ended december 31 2013 compared 701 million year ended december 31 2012 resulting 3605 million increase cash used investing activities increase primarily due 2853 million increase cash invested acquiring businesses 2013 acquisitions included 2354 million net cash outlay related acquisition vertis january 16 2013 represents total 2654 million vertis purchase price less 259 million payment made fourth quarter 2012 less 41 million cash acquired company also acquired proteus transpak december 18 2013 made cash payment 431 million part acquisition consideration addition cash invested complete acquisitions factors causing increase cash used investing activities include 1 500 million refund deposit related transcontinental acquisition received 2012 recur 2013 2 460 million increase purchases property plant equipment 2013 impacts partially offset 181 million manipaltech cost method investment made march 28 2012 net cash used financing activities year ended december 31 2014 compared year ended december 31 2013 net cash used financing activities 717 million year ended december 31 2014 compared 102 million year ended december 31 2013 resulting 615 million increase cash used financing activities increase primarily due 1 298 million decrease net debt borrowings 2014 compared 2013 2 165 million debt issuance costs paid 2014 related april 28 2014 19 billion debt financing arrangements october 10 2014 redemption 1088 million senior notes master note security agreement november 24 2014 amendment master note security agreement 3 69 million reduced net cash proceeds equity incentive instruments 4 48 million higher dividend payments 2014 year ended december 31 2013 compared year ended december 31 2012 net cash used financing activities 102 million year ended december 31 2013 compared 2856 million year ended december 31 2012 resulting 2754 million decrease cash used financing activities decrease primarily due net debt borrowings 413 million 2013 compared net debt repayments 1210 million 2012 representing 1623 million decrease net cash used financing activities addition cash dividend payments decreased 954 million years due 935 million 200 per share special dividend paid december 2012 world color press bankruptcy claim payments unsecured notes issued decreased 104 million 2013 free cash flow free cash flow defined net cash provided operating activities less purchases property plant equipment companys management assesses free cash flow measure quantify cash available 1 strategic capital allocation deployment investments business acquisitions strategic investments 2 strengthening balance sheet debt reduction 3 returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items payments related completing world color press bankruptcy process free cash flow nongaap measure free cash flow considered alternative cash flows provided operating activities measure liquidity quadgraphics calculation free cash flow may different similar calculations used companies therefore comparability may limited free cash flow years ended december 31 2014 2013 2012 follows free cash flow decreased 1376 million year ended december 31 2014 compared year ended december 31 2013 due 1479 million decrease net cash provided operating activities partially offset 103 million decrease capital expenditures 1479 million decrease net cash provided operating activities includes estimated 90 million onetime benefit realized 2013 restoration normalized working capital levels following acquisition vertis increase 71 million cash used working capital primarily due increase accounts receivable free cash flow increased 409 million year ended december 31 2013 compared year ended december 31 2012 due 869 million increase net cash provided operating activities primarily result estimated 90 million onetime benefit realized 2013 restoration normalized working capital levels following acquisition vertis partially offset 460 million increase capital expenditures see net cash provided operating activities section explanations changes operating cash flows net cash used investing activities section explanations changes purchases property plant equipment debt leverage ratio debt leverage ratio defined total debt capital lease obligations divided sum 1 last twelve months ebitda see definition ebitda reconciliation net earnings attributable quadgraphics common shareholders ebitda results operations section 2 restructuring impairment transactionrelated charges 3 loss debt extinguishment 4 pro forma historical results related may 30 2014 acquisition brown printing company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strengthening balance sheet debt pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability debt leverage ratio nongaap measure considered alternative cash flows provided operating activities measure liquidity quadgraphics calculation debt leverage ratio may different similar calculations used companies therefore comparability may limited debt leverage ratio calculated differs total leverage ratio senior secured leverage ratio included companys debt covenant calculations see note 13 debt consolidated financial statements item 8 financial statements supplementary data annual report form 10k information debt covenants total leverage ratio included companys debt covenants includes letters credit debt excludes noncash stockbased compensation expense ebitda includes certain pro forma historical results acquisitions divestitures ebitda similarly senior secured leverage ratio included companys debt covenants includes excludes adjustments total leverage ratio addition exclusion outstanding balance senior unsecured notes debt leverage ratio december 31 2014 2013 follows 1 permitted senior secured credit facility certain pro forma financial information related acquisition brown printing included calculating debt leverage ratio december 31 2014 acquisition brown printing completed may 30 2014 52 million pro forma ebitda adjusted purposes calculating debt leverage ratio represents period january 1 2014 may 29 2014 pro forma ebitda adjusted purposes calculating debt leverage ratio brown printing calculated consistent manner calculation quadgraphics brown printings financial information subsequent may 30 2014 acquisition included within quadgraphics ebitda adjusted purposes calculating debt leverage ratio results brown printing consolidated quadgraphics financial results since date pro forma ebitda adjusted purposes calculating debt leverage ratio brown printing included calculation companys debt leverage ratio would 263x calculation quadgraphics ebitda adjusted purposes calculating debt leverage ratio years ended december 31 2014 2013 follows debt leverage ratio increased 016x december 31 2014 compared december 31 2013 primarily due decreased quadgraphics ebitda adjusted purposes calculating debt leverage ratio debt leverage ratio also decreased due increased borrowings 2014 188 million primarily fund acquisitions strategic investments brown printing unigraphic partially offset debt paydown resulting companys operating cash flow generation debt leverage ratio december 31 2014 260x managements desired target debt leverage ratio range 20x 25x however company operates times debt leverage ratio target range depending timing compelling strategic investment opportunities like brown printing unigraphic acquisitions seasonal working capital needs description significant outstanding debt obligations december 31 2014 december 31 2014 company utilized combination debt instruments fund cash requirements including • 19 billion debt financing arrangements includes ◦ senior secured credit facility ▪ 8500 million revolving credit facility 439 million outstanding december 31 2014 ▪ 4500 million term loan 4388 million outstanding december 31 2014 ▪ 3000 million term loan b 2958 million outstanding december 31 2014 ◦ senior unsecured notes 3000 million outstanding december 31 2014 • master note security agreement 3166 million outstanding december 31 2014 • 143 million international revolving credit facility 02 million outstanding december 31 2014 19 billion debt financing arrangements company completed 19 billion debt financing agreement april 28 2014 included refinancing extending expanding existing revolving credit facility term loan term loan b 16 billion senior secured credit facility senior secured credit facility issuance 3000 million aggregate principal amount unsecured 70 senior notes due may 1 2022 senior unsecured notes senior secured credit facility senior unsecured notes entered extend stagger companys debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals proceeds senior secured credit facility senior unsecured notes used 1 repay companys previous revolving credit facility term loan term loan b international term loan 2 fund acquisition brown printing 3 general corporate purposes • senior secured credit facility senior secured credit facility consists three different loan facilities first facility revolving credit facility amount 8500 million term five years maturing april 27 2019 second facility term loan aggregate amount 4500 million term five years maturing april 27 2019 subject certain required amortization third facility term loan b amount 3000 million term seven years maturing april 27 2021 subject certain required amortization borrowings revolving credit facility term loan loans made senior secured credit facility initially bear interest 200 excess reserve adjusted london interbank offered rate libor 100 excess alternate base rate interest rate revolving credit facility 230 interest rate term loan loans 232 december 31 2014 interest payable monthly term loan b loans bear interest 325 excess reserve adjusted libor floor 100 225 excess alternative base rate companys option interest rate term loan b loans 425 december 31 2014 interest payable monthly senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances company entered amendment senior secured credit facility december 18 2014 eliminated net debt concept calculation total leverage ratio senior secured leverage ratio provides elimination consolidated net worth covenant removed periods december 31 2014 • senior unsecured notes company received 2948 million net proceeds sale 3000 million senior unsecured notes deducting initial purchasers discounts commissions senior unsecured notes bear interest 70 interest payable semiannually senior unsecured notes due may 1 2022 companys existing future domestic subsidiaries borrower guarantees indebtedness companys senior secured credit facility guarantees certain companys indebtedness companys restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes guarantor subsidiaries current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including following 1 designation guarantor subsidiaries unrestricted subsidiary 2 release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries 3 sale disposition including sale substantially assets guarantor subsidiaries master note security agreement sometimes referred senior notes september 1 1995 last amended november 24 2014 company entered master note security agreement pursuant company issued time senior notes aggregate principal amount 11 billion various tranches 3166 million outstanding december 31 2014 senior notes weightedaverage interest rate 755 december 31 2014 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2031 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement company redeemed 1088 million senior notes master note security agreement 1096 million october 10 2014 company used revolving credit facility effect redemption primarily completed reduce interest expense based current libor rates master note security agreement amended november 24 2014 amendment among things amended financial covenants removing consolidated net worth requirement removed periods december 31 2014 fixed charge coverage ratio well adding minimum interest coverage ratio maximum total leverage ratio maximum senior secured leverage ratio amendments align financial covenants master note security agreement closely financial covenants senior secured credit facility international revolving credit facility december 16 2008 quadwinkowski sp z oo quadwinkowski entered secured facilities agreement included multicurrency revolving credit facility 143 million renewed 2014 expire september 30 2015 used quadwinkowskis working capital general business needs borrowings outstanding multicurrency revolving credit facility 02 million december 31 2014 leaving 141 million available future borrowings terms multicurrency revolving credit facility include guarantee quadgraphics security agreement includes collateralizing substantially quadwinkowski assets multicurrency revolving credit facility bears interest aggregate euro interbank offered rate euribor warsaw interbank offered rate wibor margin weightedaverage interest rate multicurrency revolving credit facility 265 december 31 2014 covenants compliance companys various lending arrangements include certain financial covenants financial terms numbers ratios defined companys debt agreements among covenants company required maintain following december 31 2014 • total leverage ratio rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda shall exceed 375 100 twelve months ended december 31 2014 companys total leverage ratio 257 100 • senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined senior secured debt consolidated ebitda shall exceed 350 100 twelve months ended december 31 2014 companys senior secured leverage ratio 204 100 • minimum interest coverage ratio rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2014 companys minimum interest coverage ratio 589 100 • consolidated net worth december 31 2014 companys consolidated net worth must least 8024 million december 31 2014 companys consolidated net worth restrictive covenant per various debt agreements 108 billion covenant removed periods december 31 2014 due recent debt agreement amendments addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock including • companys total leverage ratio greater 300 100 defined senior secured credit facility company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions • companys senior secured leverage ratio greater 300 100 companys total leverage ratio greater 350 100 ratios defined senior secured credit facility company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total leverage ratio less 350 100 restrictions indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit companys restricted subsidiaries ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially companys consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates company compliance financial covenants debt agreements december 31 2014 company currently expects compliance future periods financial covenants assurance covenants continue met companys failure maintain compliance covenants could prevent company borrowing additional amounts could result default debt agreements default could cause outstanding indebtedness become immediately due payable virtue crossacceleration crossdefault provisions net pension postretirement benefit obligations net underfunded pension postretirement mepps benefit obligations increased 347 million year ended december 31 2014 1870 million december 31 2013 2217 million december 31 2014 increase due 952 million yearend increase singleemployer pension benefit obligation result december 31 2014 actuarial valuation included 90 basis point decrease liability discount rate 48 december 31 2013 39 december 31 2014 adoption new mortality table longer life expectancies increase partially offset 2014 cash contributions 367 million singleemployer pension postretirement plans required payments 139 million mepps company continues focus reducing net benefit obligation underfunded plans cash contributions plans plan design changes 2014 termination postretirement medical benefits share repurchase program september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock authorization share repurchases may made companys discretion time open market andor privately negotiated transactions permitted federal securities laws legal requirements timing manner price amount repurchase depend economic market conditions share price trading volume applicable legal requirements factors program may suspended discontinued time stock repurchases made share repurchase program year ended december 31 2014 december 31 2014 918 million authorized repurchases remaining program risk management discussion companys exposure market risks management market risks see item 7a quantitative qualitative disclosures market risk annual report form 10k offbalance sheet arrangements except set forth contractual obligations commitments table note 14 lease obligations consolidated financial statements item 8 financial statements supplementary data annual report form 10k including operating leases future interest debt capital leases incurred company offbalance sheet arrangements financings special purpose entities company expects material current future effect financial condition changes financial condition results operations liquidity capital expenditures capital resources significant components sales expenses contractual obligations commitments companys contractual cash obligations december 31 2014 follows millions 1 debt obligations include 3848 million anticipated future interest payments respect variable interest rate portions debt interest amounts calculated applying december 31 2014 weightedaverage interest rate determine value future interest payments master note security agreement weightedaverage interest rate notes applied average principal balance outstanding time period amounts included thereafter include principal payments estimated interest expense april 2031 2 pension benefits contributions benefit payments funded company assets included table actuarially estimated five year period benefit payments benefit plans expected continue beyond 2019 company believes estimate beyond period unreasonable contractual obligations table include 590 million estimated withdrawal liability us world color press mepps due uncertainty amount timing potential withdrawal liability payment 2015 company required make minimum payments 144 million pending settlement see note 18 employee retirement plans consolidated financial statements item 8 financial statements supplementary data annual report form 10k discussion withdrawal mepps 3 capital lease obligations include 09 million anticipated future interest payments 4 purchase obligations consist primarily 411 million firm commitments purchase press finishing equipment well 27 million purchase obligations 5 acquisition businesses represents deferred payments 06 million associated acquisition proteus transpak 21 million associated acquisition unigraphic see note 2 acquisitions strategic investments consolidated financial statements item 8 financial statements supplementary data annual report form 10k discussion 6 contractual obligations table include reserves uncertain tax positions recorded accordance accounting guidance uncertainties income taxes company taken tax positions ultimate amount years necessary payments made pertain tax positions uncertain reserve uncertain tax positions prior interest penalties 311 million december 31 2014 company also recorded accruals interest penalties related uncertain tax positions 49 million 05 million respectively december 31 2014 7 contractual obligations table include share repurchase program repurchases required program see share repurchase program section discussion including maximum potential cash payments program critical accounting policies estimates companys consolidated financial statements prepared accordance gaap companys critical accounting policies important portrayal financial condition results operations require company make difficult subjective estimates management required make judgments estimates affect reported amounts assets liabilities disclosure contingent assets liabilities date statements reported amounts revenues expenses reporting period company bases estimates historical experience various assumptions believed reasonable circumstances companys management believes judgments estimates made consistent appropriate methods based information available time reasonable deviation judgments estimates would material impact companys consolidated financial position results operations actual results may differ estimates different assumptions conditions extent estimates used differ actual results adjustments consolidated statements operations corresponding consolidated balance sheets would necessary adjustments would made future statements company identified following critical accounting policies estimates revenue recognition company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides certain cases delivery billing schedules outlined customer agreement product revenue recognized manufacturing complete title risk loss transfer customer reasonable assurance collectability product returns significant majority products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer respect companys logistics operations include delivery printed material company recognizes revenue upon completion services company also manufactures printingrelated auxiliary equipment ensure industryleading technology printing operations well sell businesses revenue generally recognized equipment sales time shipment revenue services related installation equipment customer sites recognized upon completion installation payments received customers manufacture equipment prior shipment case installation services prior completion installation cases payments received advance meeting applicable revenue recognition criteria deferred revenue recorded revenue recognition criteria subsequently met services account greater 10 companys consolidated net sales therefore net sales related costs sales products services included separate line items consolidated statements operations item 8 financial statements supplementary data annual report form 10k certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations item 8 financial statements supplementary data annual report form 10k many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis impairment goodwill allocation purchase price business combinations requires management estimates judgment expectations future cash flows acquired business allocation cash flows identifiable assets liabilities assumed including valuations performed thirdparty appraisers appropriate determining estimated fair value purchase price allocation purposes goodwill measured excess purchase price fair value assigned identifiable assets acquired liabilities assumed changes managements estimates judgments including changes based actual results differing estimates judgments used purchase price allocation process could result impairment charge could material adverse effect companys results operations accounting guidance requires goodwill impairment tested reporting unit level least annual basis fourth quarter 2014 companys financial reporting structure changed align launch companys five primary strategic goals support objectives transform company drive performance innovation discussed strategy section part item 1 business annual report form 10k result company reevaluated reporting units within united states print related services operating segment concluded three reporting units compared one reporting unit prior year carrying value goodwill companys united states reporting unit allocated based relative fair value companys core print related services specialty print related services united states products services businesses october 31 2014 annual assessment date therefore company identified five reporting units 1 core print related services 2 specialty print related services 3 united states products services 4 latin america 5 europe december 31 2014 goodwill totaled 7755 million 7513 million allocated united states related services operating segment 242 million allocated international operating segment european reporting unit reporting unit goodwill allocated company performs annual goodwill impairment test october 31 frequently event occurs circumstances change would likely reduce fair value reporting unit carrying value multistep method used determining goodwill impairment includes option first performing qualitative assessment determine whether existence events circumstances leads determination likely fair value reporting unit less carrying amount company apply optional qualitative assessment annual goodwill impairment test first step company compares estimated fair value reporting unit goodwill allocated carrying amount including goodwill fair value determined using equal weighting income market approaches income approach company determines fair value based estimated future cash flows discounted estimated weightedaverage cost capital reflects overall level inherent risk rate return outside investor would expect earn market approach company derives fair value reporting units based market multiples comparable publiclytraded companies fair value determination categorized level 3 fair value hierarchy see note 16 financial instruments fair value measurements consolidated financial statements item 8 financial statements supplementary data annual report form 10k definition level 3 inputs carrying amount reporting unit exceeds estimated fair value step two completed determine amount impairment charge step two requires allocation estimated fair value reporting unit assets including unrecognized intangible assets liabilities hypothetical purchase price allocation remaining unallocated fair value represents implied fair value goodwill compared corresponding carrying value goodwill compute goodwill impairment charge companys methodologies valuing goodwill applied consistently yearoveryear basis assumptions used performing 2014 impairment calculations evaluated light market business conditions company continues believe discounted cash flow model market multiples model provide reasonable meaningful fair value estimate based upon reporting units projections future operating results cash flows replicates market participants would value companys reporting units company conducted annual impairment assessment five reporting units october 31 2014 date annual assessment performing annual impairment assessment key assumptions specific four reporting units goodwill allocated included • core print related services fair value determined using equal weighting income market approaches specific reporting unit 90 aftertax weighted average cost capital used income approach • specialty print related services fair value determined using equal weighting income market approaches specific reporting unit 95 aftertax weighted average cost capital used income approach • united states products services fair value determined using income approach specific reporting unit 125 aftertax weighted average cost capital used income approach • latin america fair value determined using equal weighting income market approaches specific reporting unit 127 aftertax weighted average cost capital used income approach significant assumptions used income approach included estimated future cash flows including expected future revenue growth profit margins capital expenditures working capital levels terminal value multiples estimated future cash flows based companys internal projection models industry projections assumptions deemed reasonable management significant assumptions used market approach included control premium based similar transactions selection guideline public companies selected market multiples management concluded impairment existed october 31 2014 estimated fair value companys reporting units exceeded carrying amount additional indications impairment identified october 31 2014 december 31 2014 addition company performed sensitivity analysis october 31 2014 material assumptions used discounted cash flow valuation models performing annual goodwill impairment assessment percentage estimated fair value exceeded carrying value 10 companys four reporting units goodwill allocated based goodwill impairment assessments performed goodwill impairment charge pertaining goodwill required recorded years ended december 31 2014 2013 2012 impairment property plant equipment finitelived intangible assets company performs impairment evaluations longlived assets significant property plant equipment customer relationship intangible assets recorded conjunction acquisition whenever business conditions events circumstances indicate assets may impaired including whether estimated useful life longlived assets may warrant revision whether remaining balance asset may recoverable assessing impairment longlived assets requires company make important estimates assumptions including limited expected future cash flows assets generate assets used based strategic direction company remaining useful life residual value considerable judgment also applied incorporating potential impact current economic climate customer demand selling prices cost production limited activity secondary markets assets cost capital estimated future undiscounted cash flows generated assets less carrying value longlived assets written fair value charge recorded current operations company uses internal undiscounted cash flow estimates quoted market prices available independent appraisals appropriate determine fair value based assessments completed years ended december 31 2014 2013 2012 company recognized total fixed asset impairment charges 144 million 218 million 230 million respectively primarily related companys closure exit 25 manufacturing facilities well capacity reduction restructuring initiatives impairment charges recorded years ended december 31 2014 2013 2012 customer relationship intangible assets company continues monitor groups assets identify new events changes circumstances could indicate carrying values recoverable particularly light potential declines profitability may result highly competitive industry landscape continued uncertainty global economy event significant unanticipated changes circumstances significant adverse changes business climate adverse actions regulators unanticipated competition loss key customers andor changes technology markets actual results differ managements estimates provision impairment could required future period pension postretirement benefit plans result acquisition world color press company acquired multiple underfunded pension postretirement defined benefit plans pension plan costs determined using actuarial methods funded contributions determined accordance projected benefit method prorated service company records amounts relating pension postretirement benefit plans based calculations include various actuarial assumptions including discount rates mortality assumed rates return turnover rates company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets included item 8 financial statements supplementary data annual report form 10k company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 purposes calculating expected return plan assets valued fair value company determines assumption discount rate used purposes computing annual service interest costs pension plan based index highquality corporate bond yields matchedfunding yield curve analysis date weightedaverage discount rate used determine benefit obligations pension plans december 31 2014 39 90 basis point decrease december 31 2013 discount rate 48 company employs total return investment approach pension plans whereby diversified mix equity securities debt securities used maximize longterm pension plan assets intent strategy outperform growth plan liabilities long run plan contributions decreased balanced maintaining lower degree investment risk tolerance established careful consideration plan liabilities plan funded status corporate financial condition equity securities diversified across geography market capitalization investments us largecapitalization stocks us smallcapitalization stocks international securities investment risk measured monitored ongoing basis annual liability measurements periodic assetliability studies quarterly investment portfolio reviews expected longterm rate return plan assets based upon many factors including expected asset allocations historical asset returns current expected future market conditions risk target asset allocation plan assets weightedaverage basis 67 equity securities 33 debt securities actual asset allocation december 31 2014 approximately 66 equity securities 34 debt securities expected return plan assets assumption december 31 2014 2013 65 companys funded united states pension plans actual return plan assets years ended december 31 2014 2013 82 183 respectively certain pension plans unfunded plans hold plan assets 2014 company announced elimination postretirement medical benefit coverage retirees resulted reduction plan obligations 37 million recognition termination gain 49 million termination gain recorded restructuring impairment transactionrelated charges consolidated statement operations company also participated mepps result acquisition world color press due significant underfunded status mepps company withdrawn significant mepps replaced union sponsored promise pay future defined benefit plans company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded estimated withdrawal liability mepps part purchase price allocation process based information received mepps trustees estimated withdrawal liability updated new withdrawal liability projections provided trustees based significant events potential new information ongoing arbitration proceedings mepps final withdrawal liability determined exact amount withdrawal liability could higher lower estimate depending among things nature timing triggering events funded status plans time new accounting pronouncements november 2014 financial accounting standards board fasb issued new guidance providing companies option apply pushdown accounting acquired entities separate financial statements upon occurrence event acquirer obtains control acquired entity acquired entity option elect apply pushdown accounting reporting period changeincontrol event occurs pushdown accounting applied reporting period changeincontrol event occurs acquired entity option elect apply pushdown accounting subsequent reporting period change accounting principle pushdown accounting applied individual changeincontrol event election irrevocable additional disclosures required enable users financial statements evaluate effect pushdown accounting guidance effective upon issuance november 18 2014 company adopted new guidance effective november 18 2014 company believe adoption guidance material impact consolidated financial statements august 2014 fasb issued new guidance required disclosures related entitys ability continue going concern guidance requires management evaluate interim annual reporting period whether conditions events raise substantial doubt entitys ability continue going concern within one year date financial statements issued provide related disclosures guidance effective annual periods ending december 15 2016 annual interim period thereafter early adoption permitted company plans adopt new guidance effective december 31 2016 company believe adoption guidance material impact consolidated financial statements june 2014 fasb issued new guidance certain sharebased payment awards clarifies treatment performance targets met requisite service period sharebased payment award new guidance entity treat performance targets met requisite period service performance conditions affect vesting guidance effective interim annual periods beginning december 15 2015 early adoption permitted company plans adopt new guidance effective january 1 2016 company believe adoption guidance material impact consolidated financial statements may 2014 fasb issued new guidance recognizing revenue contracts customers guidance entity recognize revenue transfers promised goods services customer amount reflects expects exchange goods services guidance also requires detailed disclosures enable users financial statements understand nature amount timing uncertainty revenue cash flow arising contracts customers guidance effective interim annual periods beginning december 15 2016 early adoption permitted guidance allows option either full retrospective adoption meaning guidance applied periods presented modified retrospective adoption meaning guidance applied current period company currently evaluating impact guidance consolidated financial statements determining transition method use april 2014 fasb issued new guidance presentation discontinued operations modifies requirements disposals qualify discontinued operations expands related disclosure requirements guidance effective prospectively interim annual periods beginning december 15 2014 early adoption permitted disposals reported financial statements previously issued available issuance company plans adopt new guidance effective january 1 2015 adoption guidance may impact whether future disposals qualify discontinued operations therefore could impact companys financial statement presentation disclosures item 7aitem 7 managements discussion analysis financial condition results operations following discussion financial condition results operations quadgraphics read together quadgraphics audited consolidated financial statements three years period ended december 31 2017 including notes thereto included part ii item 8 financial statements supplementary data annual report form 10k discussion contains forwardlooking statements reflect companys plans estimates beliefs companys actual results could differ materially discussed forwardlooking statements factors could cause contribute differences include limited discussed forwardlooking statements part item 1a risk factors included earlier within annual report form 10k managements discussion analysis financial condition results operations provided supplement companys consolidated financial statements accompanying notes help provide understanding companys financial condition changes companys financial condition companys results operations discussion analysis organized follows • overview section includes general description companys business segments overview key performance metrics companys management measures utilizes evaluate business performance overview trends affecting company including managements actions related trends • results operations section contains analysis companys results operations comparing results 1 year ended december 31 2017 year ended december 31 2016 2 year ended december 31 2016 year ended december 31 2015 comparability companys results operations periods impacted acquisitions including 2015 acquisitions marins international sa marins copac global packaging inc copac specialty finishing inc specialty results operations acquisitions included companys consolidated results prospectively respective acquisition dates forwardlooking statements providing general description recent projected industry company developments important understanding companys results operations included section also provides discussion ebitda margin financial measures company uses assess performance business prepared accordance accounting principles generally accepted united states america gaap • liquidity capital resources section provides analysis companys capitalization cash flows statement offbalance sheet arrangements discussion table outstanding debt commitments forwardlooking statements important understanding companys financial condition included section also provides discussion free cash flow debt leverage ratio nongaap financial measures company uses assess liquidity capital allocation deployment • critical accounting policies estimates section contains discussion accounting policies companys management believes important companys financial condition results operations well allowances reserves require significant judgment estimates part companys management addition companys significant accounting policies including critical accounting policies summarized note 1 basis presentation summary significant accounting policies consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k • new accounting pronouncements overview business overview quadgraphics leading marketing solutions provider company leverages strong print foundation part much larger robust integrated marketing platform helps marketers content creators improve efficiency effectiveness marketing spend across offline online media channels consultative approach worldwide capabilities leadingedge technology singlesource simplicity company believes resources knowledge help wide variety clients multiple vertical industries including retail publishing healthcare companys operating reportable segments aligned chief operating decision maker company currently manages business companys reportable operating segments summarized united states print related services segment predominantly comprised companys united states printing operations managed one integrated platform includes retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement together marketing complementary services including consumer insights audience targeting personalization media planning placement process optimization campaign planning creation premedia production videography photography digital execution print execution logistics segment also includes manufacture ink united states print related services segment accounted approximately 91 companys consolidated net sales year ended december 31 2017 international segment consists companys printing operations europe latin america including operations england france germany poland argentina colombia mexico peru well investments printing operations brazil india segment provides printed products marketing complementary services consistent united states print related services segment international segment accounted approximately 9 companys consolidated net sales year ended december 31 2017 corporate consists unallocated general administrative activities associated expenses including part executive legal finance well certain expenses income frozen employee retirement plans pension benefit plans key performance metrics overview companys management believes ability generate net sales growth profit increases positive cash flow maintaining appropriate level debt key indicators successful execution companys business strategy increase shareholder value company uses period net sales growth ebitda margin net cash provided operating activities free cash flow debt leverage ratio metrics measure operating performance financial condition liquidity ebitda margin free cash flow debt leverage ratio nongaap financial measures see definitions ebitda margin reconciliation net earnings loss ebitda results operations section see definitions free cash flow debt leverage ratio reconciliation net cash provided operating activities free cash flow calculation debt leverage ratio liquidity capital resources section net sales growth company uses period net sales growth key performance metric companys management assesses net sales growth based ability generate increased net sales increased sales existing clients sales new clients sales new expanded solutions existing new clients opportunities expand sales strategic investments including acquisitions ebitda margin company uses ebitda margin metrics assess operating performance companys management assesses ebitda margin based ability increase revenues controlling variable expense growth net cash provided operating activities company uses net cash provided operating activities metric assess liquidity companys management assesses net cash provided operating activities based ability meet recurring cash obligations increasing available cash fund cash restructuring requirements related cost reduction activities well fund capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal liabilities acquisitions investments future growth shareholder dividends share repurchases net cash provided operating activities significantly impacted timing nonrecurring infrequent receipts expenditures free cash flow company uses free cash flow metric assess liquidity capital deployment companys management assesses free cash flow measure quantify cash available strengthening balance sheet debt reduction strategic capital allocation deployment investments business acquisitions strategic investments returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items debt leverage ratio company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strategic investments strengthening balance sheet pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability overview trends affecting quadgraphics leading marketing solutions provider opportunity growth within us advertising services industry supports quadgraphics 30 transformation company leverages strong print foundation part much larger robust integrated marketing platform helps marketers content creators improve efficiency effectiveness marketing spend across offline online media channels consultative approach worldwide capabilities leadingedge technology singlesource simplicity company believes resources knowledge help wide variety clients multiple vertical industries including retail publishing healthcare marketing services perspective media channel proliferation continues consumers remain control buy products services trend contributed marketers publishers need solutions efficiently effectively coordinate measure digital traditional channels printing industry perspective competition remains highly fragmented intense company believes indicators heightened competitive pressures industry excess manufacturing capacity created continued declines industry volumes turn created accelerated downward pricing pressures addition digital delivery documents data including online distribution hosting media content mobile technologies offer alternatives traditional delivery printed documents increasing consumer acceptance digital delivery content resulted marketers publishers allocating marketing advertising spend across expanding selection digital delivery options reduces printing demand contributes industry overcapacity company also faces competition print management firms look streamline processes reduce overall print spend companys clients well strategic marketing firms focused helping businesses integrate multiple channels marketing campaigns company believes disciplined approach capital management strong balance sheet critical able invest profitable growth opportunities technological advances thereby providing highest return shareholders management balances use cash deleveraging companys balance sheet reduction debt pension obligations compelling investment opportunities capital expenditures acquisitions strategic investments returns shareholders share repurchases quarterly dividend 030 per share company remains disciplined debt leverage companys consolidated debt capital leases decreased 166 million year ended december 31 2017 primarily due cash provided operating activities since company completed world color press acquisition july 2010 company reduced debt capital leases 775 million reduced obligations pension postretirement mepps 450 million total obligation reduction since july 2010 12 billion company makes continuous progress integrating streamlining aspects business thereby lowering cost structure consolidating manufacturing platform efficient facilities well realizing purchasing mailing logistics efficiencies centralizing consolidating print manufacturing volumes eliminating redundancies administrative corporate operations efforts include deployment companys smartools® systems streamline workflows improve data visibility across consolidated platform cost reductions lean manufacturing continuous improvement initiatives production floor administrative support order achieve improved efficiencies reduce waste lower overall operating costs enhance quality timeliness create safer work environment companys employees company continues focus proactively aligning cost structure realities topline pressures faces printing industry sustainable continuous improvement programs restructuring actions initiated company beginning 2010 resulted announcement 41 plant closures reduced headcount approximately 11800 employees december 31 2017 company intends continue reducing costs evidenced fourth quarter 2017 announcements four plant closures ceased operations december 2017 first quarter 2018 integrated distribution postal service important component companys business material change current service levels provided postal service could impact demand clients print services usps continues experience financial problems without action congress reform usps financial stability remove unnecessary costly congressional mandates pressure postal rates continue mount additionally without reforms address systemic overall cost structure usps losses continue future benefits congressional postal reform legislation shortlived 2006 postal accountability enhancement act paea created predictable postal pricesetting process place today tied directly consumer price index urban consumers paea requires prc review price setting process ten years prc initiated review december 2016 december 2017 prc issued notice proposed rulemaking comments due march 1 2018 newly revised rates would effective result new rules issued prc may include higher rate cap potentially elimination rate cap altogether result restrictions usps ability increase rates year may lead price spikes mailers may also reduce incentive usps continue take costs instead continue rely postage cover costs outdated postal service reflect industrys ability willingness pay end result may reduced demand printed products customers may move aggressively delivery methods many digital mobile options available consumers company invested significantly mail preparation distribution capabilities mitigate impact increases postage costs help clients successfully navigate everchanging postal environment data analytics unique software merge mailstreams large scale advanced finishing capabilities technology inhouse transportation logistics operations company manages mail preparation distribution clients products maximize efficiency enable ontime consistent delivery partially reduce costs however net impact increasing postal costs may create decrease client demand print mail products another key aspect companys modern manufacturing platform combination footprint mega plants facilities greater 10 million square feet produce number different products one roof mega zones multiple facilities close geographic proximity managed one large facility smaller strategically located facilities company continued evolve platform equipping facilities product line agnostic enables company maximize equipment utilization quadgraphics believes large plant size certain key printing facilities allows company drive savings certain product lines publications catalogs due economies scale investments automation technology 2017 company continued make strategic investments support 30 transformation strengthen integrated marketing platform quadgraphics continued add clientside talent team individuals understand unique challenges facing retailers marketers publishers build solutions help drive client business results company also continued strengthen strategic partnerships agencies rise interactive specialize online channels combined expertise bluesoho multichannel agency quadgraphics believes wellpositioned create greater value clients helping create integrate deploy measure content efficiently effectively across variety channels company continued make strategic investments core print platform part ongoing commitment maintaining efficient automated dependable manufacturing distribution platform industry investments help fuel quadgraphics 30 transformation sustain highquality lowcost producer position industry investments include following • direct marketing platform company continued strengthen direct marketing platform addition stateoftheart digital press technology capable producing 100 variable content full color costeffectively mass scale technology company help clients increase consumer engagement response improve return marketing investment 2017 company installed hewlettpackard t490 digital press midwest digital print supercenter pewaukee wisconsin complement existing hewlettpackard t410 press pewaukee quadgraphics also invested additional highresolution inkjet print modules offset presses pewaukee effingham illinois facilities modules integrated existing offset presses give marketers opportunity create highquality variable images inline static fourcolor print high speeds • commercial specialty platform company also invested stateoftheart digital offset press technology enhance commercial specialty platform increasingly serves national clients variety industries including restaurants investments include fuji j press woburn massachusetts facility heidelberg speedmaster xl 106 eightcolor perfecting sheetfed press burlington wisconsin facility presses ideal shortrun printondemand work including promotional items • quadpackaging platform 2017 company doubled highend packaging production capacity moving dominican republic operations newer larger facility santo domingo close products manufactured improve timeliness costefficiency facility features several new andor upgraded pieces equipment including new heidelberg speedmaster xl 106 press rebuilt heidelberg speedmaster xl 105 press two new bobst visioncut le diecutters marquip roll sheeting machine cutting sheets paper quadpackagings spartanburg south carolina facility also installed new heidelberg speedmaster xl 106 press new digital fuji j press short runs andor variable printing folded carton market • instore marketing platform quadgraphics europe located poland invested heidelberg vlf large format sheetfed press instore marketing group press used produce various types packaging floor displays complex shapes structures serving food cosmetics chemical motor textile industries united states quadgraphics tempt instore marketing group replaced two digital presses two next generation inca x3 presses print faster feature advanced automation reduce operator error • book platform company invested 64page manroland lithoman web offset press versailles kentucky plant highspeed press produces optimal quality reduced production cycle times waste complements facilitys shortrun digital press capabilities also lowers breakeven point traditional offset digital printing company costeffectively produce run lengths ranging one copy millions copies company also upgraded three versailles plants five hewlettpackard digital presses increase top speeds 600 feetperminute 1000 feetperminute essentially adding capacity two additional presses added casein machine digital print finishing continues invest proprietary information technology solutions including onqtm demanddriven ordering system helps clients better manage ordering inventory • magazine catalog retail platform company continues enhance productivity offset labor shortages using automation including automated guided vehicles driverless forktrucks moving workinprocess finished goods automated palletizers stack product end finishing line high speeds 2017 capital investments included 10 additional automated guided vehicles total 40 sussex wisconsin mega plant 20 automated palletizers total 100 companywide strengthen marketing services company seeks strategic partnerships companies cutting edge marketing solutions 2016 partnered made minority investment rise interactive digital marketing agency strategic investment brings together company adept optimizing spend offline company online using robust analytics deliver highlyrelevant consistent messages consumers across print digital channels strategic investment rise interactive enable quadgraphics rise interactive accelerate growth coinnovation delivers value collective clients quadgraphics made number strategic investments 2016 strengthen core print platform create value clients highlights include following • direct mail platform company announced transform westampton new jersey direct marketing production plant east coast digital print supercenter specializing personalized highresponse direct marketing solutions expansion adds new technology enhance efficiency effectiveness direct marketers efforts reach individual consumers superiorquality cost effective hyperpersonalized direct mail pieces mass scale companys east coast digital print supercenter include two new hewlettpackard indigo 12000 digital presses addition supercenter also operate several digital presses well offset presses upgraded inkjet technology install two new highspeed letter inserters enhance lettershop operations east coast digital supercenter compliments quad graphics existing midwest digital print supercenter pewaukee wisconsin recently added hewlettpackard indigo 12000 digital press quadgraphics effingham illinois direct mail production facility recently expanded personalization capabilities installation new hewlettpackard c800 fourcolor variable inkjet print module system • commercial specialty platform company announced add stateoftheart digital printing capabilities dallas texas plant two new digital presses new fuji j press digital print press offering quality reliability consistency offset printing addition full variable onetoone data management fuji j press complemented kodak nexpress shortrun quickturn workflows finishing equipment also installed including horizon stitchliner 5500 saddle stitching system two fully automated horizon perfect binders well folder flatcutter shrinkwrapper lastly dallas plant expanded kitpacking fulfillment solutions simplify management distribution finished products integrated order entry doorstep delivery transformation help quadgraphics better serve next generation marketers brand owners variety industry verticals including retail travel hospitality fast casual restaurants automotive dallas texas plant close first quarter 2018 stateoftheart equipment reinstalled commercial specialty plants • book platform quadgraphics invested multiple highspeed color digital web presses part strategy transform companys book platform widest productive digital web presses available marketplace today company committed helping book publishers produce deliver books demand bringing zero inventory justintime delivery closer reality company continue invest book platform match clients changing needs redefine book supply chain increased customization versioning capabilities faster time market reduced waste inventories obsolescence lower fixed costs • company completed acquisition specialty august 25 2015 net purchase price of61 million excluding acquired cash specialty fullservice paperboard folding carton manufacturer logistics provider located omaha nebraska • company completed acquisition copac april 14 2015 net purchase price 59 million excluding acquired cash copac leading international provider innovative packaging supply chain solutions including turnkey packaging design production fulfillment services across range end markets headquartered spartanburg south carolina copac manufactures products folding cartons labels inserts tags specialty envelopes production facilities spartanburg santo domingo dominican republic well strategically sourcing packaging product manufacturing multiple end markets central america asia giving global footprint • company completed acquisition marins february 3 2015 net purchase price 21 million excluding acquired cash marins worldwide leader pointofsale display industry specializes research design display solutions headquartered paris france marins products produced global network licensees including quadgraphics well one wideformat digital print kitting fulfillment facility paris marins uses europeanbased sales force global licensees sell patented product portfolio company subject seasonality quarterly results net sales operating income higher third fourth quarters calendar year compared first second quarters fourth quarter typically highest seasonal quarter cash flows operating activities free cash flow due reduction working capital requirements reach peak levels third quarter seasonality driven increased magazine advertising page counts retail inserts catalogs books primarily due backtoschool holidayrelated advertising promotions company expects seasonality impact continue future years results operations year ended december 31 2017 compared year ended december 31 2016 summary results companys operating income operating margin net earnings computed using 40 normalized tax rate diluted earnings per share year ended december 31 2017 changed year ended december 31 2016 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 612 million 367 million net tax incurred year ended december 31 2017 included following 269 million employee termination charges related workforce reductions facility consolidations voluntary involuntary separation programs b 120 million impairment charges including 67 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity reduction restructuring activities 53 million impairment charges land building related waseca minnesota taunton massachusetts plant closures c 31 million transactionrelated charges consisting professional service fees business acquisition divestiture activities 192 million various restructuring charges including costs maintain exit closed facilities well lease exit charges net 71 million gains sale atglen pennsylvania dickson tennessee east greenville pennsylvania lenexa kansas marengo iowa plants 12 million gain companys argentina subsidiaries settlements vendors bankruptcy proceedings restructuring charges also included 67 million loss sale business 08 million noncash pension settlement charge related lumpsum pension payments company expects incur additional restructuring integration costs future reporting periods connection eliminating excess manufacturing capacity properly aligning cost structure conjunction companys acquisitions strategic investments cost reduction programs 2 restructuring impairment transactionrelated charges 806 million 484 million net tax incurred year ended december 31 2016 included following 129 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 268 million impairment charges including 147 million impairment charges machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois queretaro mexico well capacity reduction restructuring activities 121 million impairment charges land building related atglen pennsylvania plant closure c 22 million transactionrelated charges consisting professional service fees business acquisition divestiture activities 01 million acquisitionrelated integration costs e 386 million various restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring charges also included 112 million adjustment mepps withdrawal liability 70 million noncash pension settlement charge related lumpsum pension payments 3 interest expense decreased 61 million 37 million net tax year ended december 31 2017 711 million change due lower average debt levels year ended december 31 2017 compared year ended december 31 2016 4 26 million loss debt extinguishment 16 million net tax recognized year ended december 31 2017 refinancing senior secured credit facility completed february 10 2017 5 141 million gain debt extinguishment 85 million net tax recognized year ended december 31 2016 primarily repurchase 565 million aggregate principal amount senior unsecured notes 6 418 million decrease income taxes calculated following table primarily due 288 million tax benefit related reduced federal rate applied net domestic deferred tax liabilities accordance tax cuts jobs act 210 million tax benefit release valuation allowances primarily related foreign credits partially offset 71 million decreased tax benefit domestic deductions see note 14 income taxes consolidated financial statements part ii item 8 annual report form 10k information income taxes 7 decrease net loss attributable investments unconsolidated entities net tax 14 million year ended december 31 2017 related decrease losses companys brazilian joint venture investment plural industria gráfica ltda plural 8 operating income excluding restructuring impairment transactionrelated charges increased 231 million 138 million net tax primarily due following 1 446 million decrease depreciation amortization expense 2 194 million vacation reserve reduction employee vacation policy change 3 68 million lower legal expenses 4 50 million gain property insurance claim 5 savings cost reduction initiatives including employeerelated costs impacts partially offset lower print volume pricing due ongoing industry pressures 104 million benefit 2016 repeat 2017 related collection previously writtenoff vendor receivable operating results following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased 1881 million 51 year ended december 31 2017 compared year ended december 31 2016 primarily due 1416 million decrease product sales companys core print specialty print product lines due ongoing industry volume pricing pressures 471 million decrease passthrough paper sales partially offset 06 million positive foreign exchange impacts service sales primarily consist imaging logistics distribution medical services decreased 100 million 16 year ended december 31 2017 compared year ended december 31 2016 primarily due 97 million decrease logistics sales resulting lower print shipment volume cost sales cost product sales decreased 1437 million 48 year ended december 31 2017 compared year ended december 31 2016 primarily due following 1 lower print paper volume 2 85 million vacation reserve reduction employee vacation policy change 3 cost reduction initiatives reductions partially offset 104 million benefit 2016 repeat 2017 related collection previously writtenoff vendor receivable cost product sales percentage net sales decreased 684 year ended december 31 2017 686 year ended december 31 2016 primarily due reasons provided cost service sales increased 83 million 20 year ended december 31 2017 compared year ended december 31 2016 primarily due increased shipment cost service sales percentage net sales increased 105 year ended december 31 2017 98 year ended december 31 2016 primarily due reasons provided selling general administrative expenses selling general administrative expenses decreased 412 million 91 year ended december 31 2017 compared year ended december 31 2016 primarily due following 1 109 million vacation reserve reduction employee vacation policy change 2 68 million decrease legal expenses 3 50 million gain property insurance claim 4 savings cost reduction initiatives including employeerelated costs selling general administrative expenses percentage net sales decreased 105 year ended december 31 2016 100 year ended december 31 2017 primarily due reasons stated depreciation amortization depreciation amortization decreased 446 million 161 year ended december 31 2017 compared year ended december 31 2016 due 324 million decrease amortization expense primarily related customer relationship intangibles becoming fully amortized second quarter 2016 122 million decrease depreciation expense property plant equipment becoming fully depreciated past year decrease purchases property plant equipment 2017 compared 2016 restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges decreased 194 million 241 year ended december 31 2017 compared year ended december 31 2016 primarily due following 1 148 million decrease impairment charges 2 01 million decrease acquisitionrelated integration costs 3 194 million decrease restructuring charges decreases partially offset 140 million increase employee termination charges 09 million increase transactionrelated charges restructuring impairment transactionrelated charges 612 million incurred year ended december 31 2017 included following 1 269 million employee termination charges related workforce reductions facility consolidations voluntary involuntary separation programs 2 120 million impairment charges including 67 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity reduction restructuring activities 53 million impairment charges land building related waseca minnesota taunton massachusetts plant closures 3 31 million transactionrelated charges consisting professional service fees related business acquisition divestiture activities 4 192 million various restructuring charges including costs maintain exit closed facilities well lease exit charges net 71 million gains sale atglen pennsylvania dickson tennessee east greenville pennsylvania lenexa kansas marengo iowa plants 12 million gain companys argentina subsidiaries settlements vendors bankruptcy proceedings restructuring charges also included 67 million loss sale business 08 million noncash pension settlement charge related lumpsum pension payments restructuring impairment transactionrelated charges 806 million incurred year ended december 31 2016 included following 1 129 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 268 million impairment charges including 147 million impairment charges machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois queretaro mexico well capacity reduction restructuring activities 121 million impairment charges land building related atglen pennsylvania plant closure 3 22 million transactionrelated charges consisting professional service fees related business acquisition divestiture activities 4 01 million acquisitionrelated integration costs 5 386 million various restructuring charges including costs maintain exit closed facilities lease exit charges 112 million adjustment mepps withdrawal liability 70 million noncash pension settlement charge related lumpsum pension payments ebitda marginconsolidated ebitda margin year ended december 31 2017 compared year ended december 31 2016 follows ebitda decreased 174 million year ended december 31 2017 compared year ended december 31 2016 primarily due lower print volume pricing due ongoing industry pressures 104 million benefit 2016 repeat 2017 related collection previously writtenoff vendor receivable impacts partially offset following 1 194 million decreased restructuring impairment transactionrelated charges 2 194 million vacation reserve reduction employee vacation policy change 3 68 million lower legal expenses 4 50 million gain property insurance claim 5 savings cost reduction initiatives including employeerelated costs ebitda defined net earnings loss excluding 1 interest expense 2 income tax expense benefit 3 depreciation amortization ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net earnings years ended december 31 2017 2016 follows 1 net earnings included following restructuring impairment transactionrelated charges 612 million 806 million years ended december 31 2017 2016 respectively b loss debt extinguishment 26 million year ended december 31 2017 c gain debt extinguishment 141 million year ended december 31 2016 equity loss unconsolidated entities 14 million year ended december 31 2016 united states print related services following table summarizes net sales operating income operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment decreased 1782 million 53 year ended december 31 2017 compared year ended december 31 2016 primarily due 1376 million decrease product sales companys core print specialty print product lines predominantly due ongoing volume pricing pressures excess capacity printing industry 406 million decrease passthrough paper sales service sales united states print related services segment decreased 87 million 15 year ended december 31 2017 compared year ended december 31 2016 primarily due 84 million decrease logistic sales resulting lower print shipment volume operating income operating income united states print related services segment increased 82 million 44 year ended december 31 2017 compared year ended december 31 2016 primarily due following 1 416 million decrease depreciation amortization 2 194 million vacation reserve reduction due employee vacation policy change 3 57 million decrease restructuring impairment transactionrelated charges 4 50 million gain property insurance claim 5 savings cost reduction initiatives including employeerelated costs impacts partially offset lower print volume pricing 104 million benefit 2016 repeat 2017 related collection previously writtenoff vendor receivable operating margin united states print related services segment increased 52 year ended december 31 2017 47 year ended december 31 2016 primarily due reasons provided restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2017 536 million consisting 1 217 million employee termination charges related workforce reductions facility consolidations voluntary involuntary separation programs 2 115 million impairment charges including 62 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity reduction restructuring activities 53 million impairment charges land building related waseca minnesota taunton massachusetts plant closures 3 194 million various restructuring charges including costs maintain exit closed facilities well lease exit charges net 71 million gains sale atglen pennsylvania dickson tennessee east greenville pennsylvania lenexa kansas marengo iowa plants restructuring charges also included 67 million loss sale business restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2016 593 million consisting 1 105 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 259 million impairment charges including 138 million machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois well capacity reduction restructuring activities 121 million land building impairment related atglen pennsylvania plant closure 3 01 million acquisitionrelated integration costs 4 228 million various restructuring charges including costs maintain exit closed facilities well lease exit charges international following table summarizes net sales operating income operating margin certain items impacting comparability equity loss unconsolidated entities within international segment net sales product sales international segment decreased 99 million 26 year ended december 31 2017 compared year ended december 31 2016 primarily due 65 million decrease passthrough paper sales 40 million decrease volume pricing primarily peru partially offset 06 million favorable foreign exchange impacts primarily europe service sales international segment decreased 13 million 63 year ended december 31 2017 compared year ended december 31 2016 primarily due decrease logistics revenue europe operating income operating income international segment increased 61 million 452 year ended december 31 2017 compared year ended december 31 2016 primarily due 74 million increase operating income primarily europe mexico 31 million decrease depreciation amortization expense partially offset 44 million increase restructuring impairment expenses restructuring impairment transactionrelated charges income restructuring impairment transactionrelated charges income international segment year ended december 31 2017 33 million consisting following 1 47 million employee termination charges related workforce reductions facility consolidations voluntary involuntary separation programs 2 05 million impairment charges machinery equipment longer utilized production result facility consolidations 3 19 million various restructuring income primarily related companys argentina subsidiaries gain settlements vendors bankruptcy proceedings partially offset charges maintain exit closed facilities restructuring impairment transactionrelated charges income international segment year ended december 31 2016 11 million consisting following 1 14 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 09 million impairment charges machinery equipment longer utilized production result facility consolidations including queretaro mexico 3 01 million transactionrelated charges 4 35 million restructuring income primarily related companys argentina subsidiaries gain settlements vendors bankruptcy proceedings gain sale pilar argentina plant equity loss unconsolidated entities investments entities quadgraphics ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil equity loss unconsolidated entities international segment decreased 14 million year ended december 31 2017 compared year ended december 31 2016 due decrease losses companys investment plural unrestricted subsidiaries unrestricted subsidiaries defined senior unsecured notes indenture represented less 20 total consolidated net sales year ended december 31 2017 corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses decreased 282 million 365 year ended december 31 2017 compared year ended december 31 2016 primarily due 181 million decrease restructuring impairment transactionrelated charges 80 million decrease legal expenses 46 million decrease incentive compensation expense restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges year ended december 31 2017 43 million consisting following 1 05 million employee termination charges related workforce reductions facility consolidations voluntary involuntary separation programs 2 21 million transactionrelated charges primarily included professional service fees 3 17 million restructuring charges including 08 million noncash pension settlement charge related lumpsum pension payments corporate restructuring impairment transactionrelated charges year ended december 31 2016 224 million consisting following 1 10 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 21 million transactionrelated charges primarily included professional service fees 3 193 million restructuring charges including 112 million adjustment mepps withdrawal liability 70 million noncash pension settlement charge related lumpsum pension payments results operations year ended december 31 2016 compared year ended december 31 2015 summary results companys operating income loss operating margin net earnings loss computed using 40 normalized tax rate diluted earnings loss per share year ended december 31 2016 changed year ended december 31 2015 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 806 million 484 million net tax incurred year ended december 31 2016 included following 129 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 268 million impairment charges including 147 million impairment charges machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois queretaro mexico well capacity reduction restructuring activities 121 million impairment charges land building related atglen pennsylvania plant closure c 22 million transactionrelated charges consisting professional service fees business acquisition divestiture activities 01 million acquisitionrelated integration costs e 386 million various restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring charges also included 112 million adjustment mepps withdrawal liability 70 million noncash pension settlement charge related lumpsum pension payments company expects incur additional restructuring integration costs future reporting periods connection eliminating excess manufacturing capacity properly aligning cost structure conjunction companys acquisitions strategic investments cost reduction programs 2 restructuring impairment transactionrelated charges 1649 million incurred year ended december 31 2015 included following 421 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 953 million impairment charges including following 1 547 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado queretaro mexico well capacity reduction restructuring initiatives 2 186 million investmentrelated impairment charges primarily related 167 million impairment charges reduce book value companys equity method investment quadgraphics chile sa chile fair value see note 8 equity method investments unconsolidated entities consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k additional details related impairment companys equity method investment chile 3 127 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 4 71 million customer relationship intangible asset impairments 5 22 million impairment charges recorded property plant equipment intangible assets result restructuring proceedings argentina companys argentina subsidiaries c 67 million transactionrelated charges income including 100 million nonrecurring gain result courier corporations courier termination agreement pursuant quadgraphics acquire courier partially offset 33 million professional service fees including fees terminated acquisition courier acquisitions marins copac specialty 51 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 291 million various restructuring charges including 60 million noncash nondeductible expense recognize accumulated foreign exchange losses sale chile equity method investment lease exit charges related closed facilities well costs maintain exit closed facilities 3 pretax noncash goodwill impairment charges 8083 million 5424 million net tax recorded year ended december 31 2015 7783 million related united states print related services segment 300 million related international segment 4 interest expense decreased 112 million 67 million net tax year ended december 31 2016 772 million change due lower average debt levels year ended december 31 2016 compared year ended december 31 2015 5 nonrecurring 141 million gain debt extinguishment 85 million net tax recognized year ended december 31 2016 primarily repurchase 565 million aggregate principal amount senior unsecured notes 6 288 million benefit income taxes calculated following table primarily due following 1 133 million increased taxable income foreign jurisdictions company able use operating loss carryforwards 2 80 million increased domestic deductions 3 47 million increased state deferred tax assets see note 14 income taxes consolidated financial statements part ii item 8 annual report form 10k information income taxes 7 decrease net loss attributable investments unconsolidated entities net tax 49 million year ended december 31 2016 primarily related 41 million decrease losses unconsolidated entities companys investment plural companys brazilian joint venture 08 million decrease losses companys investment chile sold july 31 2015 8 operating income loss excluding restructuring impairment transactionrelated charges goodwill impairment charges increased 598 million 359 million net tax primarily due following 1 lower costs primarily associated production cost reduction initiatives 2 482 million decrease depreciation amortization expense 3 2016 collection 104 million vendor receivable writtenoff fourth quarter 2015 due collectability concerns 4 additional earnings sales generated acquisitions impacts partially offset following 1 lower print volume pricing product lines owned year 2 63 million increase selling general administrative expenses primarily due increased incentive compensation legal expenses 3 40 million vacation expense reduction 2015 due vacation policy change repeat 2016 operating results following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased 2326 million 59 year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 1729 million decrease product sales companys core print specialty print product lines owned year predominantly due ongoing industry volume pricing pressures 2 973 million decrease passthrough paper sales 3 261 million negative foreign exchange impacts decreases partially offset 637 million sales increase acquisitions service sales primarily consist imaging logistics distribution services decreased 350 million 54 year ended december 31 2016 compared year ended december 31 2015 primarily due 250 million decrease logistics sales resulting lower print shipment volume lower fuel prices 69 million decreased sales print imaging services cost sales cost product sales decreased 2425 million 75 year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 lower costs primarily associated production cost reduction initiatives 2 lower print volume product lines owned year 3 2016 collection 104 million vendor receivable writtenoff fourth quarter 2015 due collectability concerns reductions partially offset following 1 increased cost product sales resulting acquisitions 2 40 million vacation expense reduction 2015 due vacation policy change repeat 2016 cost product sales percentage net sales decreased 686 year ended december 31 2016 699 year ended december 31 2015 primarily due reasons provided cost service sales decreased 430 million 92 year ended december 31 2016 compared year ended december 31 2015 primarily due lower logistics volume overall cost reduction initiatives cost service sales percentage net sales decreased 98 year ended december 31 2016 102 year ended december 31 2015 primarily due reasons provided selling general administrative expenses selling general administrative expenses increased 63 million 14 year ended december 31 2016 compared year ended december 31 2015 due following 1 212 million increase incentive compensation expense 2 107 million increase legal expenses due 2016 reserves established favorable settlements legal claims 2015 repeat 2016 3 46 million increase foreign currency losses 4 38 million increase bad debt expense 5 34 million decrease gains sale property plant equipment increases partially offset 301 million decrease employeerelated costs 74 million decrease general administrative expenses primarily due companys cost reduction initiatives selling general administrative expenses percentage net sales increased 97 year ended december 31 2015 105 year ended december 31 2016 primarily due lower net sales reasons stated depreciation amortization depreciation amortization decreased 482 million 148 year ended december 31 2016 compared year ended december 31 2015 due 289 million decrease amortization expense predominantly related customer relationship intangibles becoming fully amortized second quarter 2016 193 million decrease depreciation expense property plant equipment becoming fully depreciated past year restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges decreased 843 million 511 year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 685 million decrease impairment charges 2 292 million decrease employee termination charges 3 50 million decrease acquisitionrelated integration costs decreases partially offset 95 million increase restructuring charges 89 million increase transactionrelated charges restructuring impairment transactionrelated charges 806 million incurred year ended december 31 2016 included following 1 129 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 268 million impairment charges including 147 million impairment charges machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois queretaro mexico well capacity reduction restructuring activities 121 million impairment charges land building related atglen pennsylvania plant closure 3 22 million transactionrelated charges consisting professional service fees related business acquisition divestiture activities 4 01 million acquisitionrelated integration costs 5 386 million various restructuring charges including costs maintain exit closed facilities lease exit charges 112 million adjustment mepps withdrawal liability 70 million noncash pension settlement charge related lumpsum pension payments restructuring impairment transactionrelated charges 1649 million incurred year ended december 31 2015 included following 1 421 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 953 million impairment charges including 547 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado queretaro mexico well capacity reduction restructuring initiatives 186 million investmentrelated impairment charges primarily related 167 million impairment charges reduce book value companys equity method investment chile fair value see note 8 equity method investments unconsolidated entities additional details related impairment companys equity method investment chile 127 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 71 million customer relationship intangible asset impairments 22 million impairment charges recorded property plant equipment intangible assets result restructuring proceedings argentina companys argentina subsidiaries 3 67 million transactionrelated charges income includes 100 million nonrecurring gain result couriers termination agreement pursuant quadgraphics acquire courier partially offset 33 million professional service fees terminated acquisition courier acquisitions marins copac specialty 4 51 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 291 million restructuring charges including costs maintain exit closed facilities lease exit charges 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment goodwill impairment march 25 2015 due deteriorating economic conditions including inflation currency devaluation combined uncertain political conditions declining print volumes labor challenges companys argentina subsidiaries included within latin america reporting unit commenced bankruptcy restructuring proceedings goal consolidating operations company conducted interim goodwill impairment assessment latin america reporting unit included comparing carrying amount net assets including goodwill respective fair value march 31 2015 date interim assessment result interim goodwill impairment assessment well annual impairment test october 31 2015 companys international segment recorded noncash nondeductible goodwill impairment charges 300 million year ended december 31 2015 primarily including 233 million noncash goodwill impairment charge latin america reporting unit due decline companys stock price third quarter 2015 interim goodwill impairment test three reporting units united states print related services segment performed july 31 2015 result interim goodwill impairment assessment well annual impairment test october 31 2015 companys united states print related services segment recorded pretax noncash goodwill impairment charges 7783 million 5124 million tax year ended december 31 2015 included impairment charges 6408 million 1189 million 186 million core print related services reporting unit specialty print related services reporting unit united states products services reporting unit respectively total company recorded pretax noncash goodwill impairment charges 8083 million 5424 million tax year ended december 31 2015 ebitda marginconsolidated ebitda margin year ended december 31 2016 compared year ended december 31 2015 follows ebitda increased 9232 million year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 8083 million noncash goodwill impairment charge recorded 2015 repeat 2016 2 843 million decreased restructuring impairment transactionrelated charges 3 lower costs primarily associated production cost reduction initiatives 4 2016 collection 104 million vendor receivable writtenoff fourth quarter 2015 due collectability concerns 5 additional earnings sales generated acquisitions impacts partially offset following 1 lower print volume pricing product lines owned year 2 63 million increase selling general administrative expenses primarily due increase incentive compensation legal expenses 3 40 million vacation expense reduction 2015 due vacation policy change repeat 2016 ebitda defined net earnings loss excluding 1 interest expense 2 income tax expense benefit 3 depreciation amortization ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net earnings loss years ended december 31 2016 2015 follows 1 net earnings loss included following restructuring impairment transactionrelated charges 806 million 1649 million years ended december 31 2016 2015 respectively b noncash goodwill impairment charge 8083 million year ended december 31 2015 c gain debt extinguishment 141 million year ended december 31 2016 equity loss unconsolidated entities 14 million 63 million years ended december 31 2016 2015 respectively united states print related services following table summarizes net sales operating income loss operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment decreased 2450 million 68 year ended december 31 2016 compared year ended december 31 2015 primarily due 1985 million decrease product sales companys core print specialty print product lines owned year predominantly due ongoing volume pricing pressures excess capacity printing industry 1089 million decrease passthrough paper sales partially offset 624 million increase net sales acquisitions service sales united states print related services segment decreased 366 million 58 year ended december 31 2016 compared year ended december 31 2015 primarily due 266 million decrease logistics sales resulting lower print shipment volume lower fuel prices 69 million decreased sales print imaging services operating income loss operating income loss united states print related services segment increased 8922 million year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 7783 million noncash goodwill impairment charge recorded 2015 repeat 2016 2 lower costs primarily associated production cost reduction initiatives 3 421 million decrease restructuring impairment transactionrelated charges 4 2016 collection 104 million vendor receivable writtenoff fourth quarter 2015 due collectability concerns 5 additional earnings sales generated acquisitions impacts partially offset following 1 lower print volume pricing product lines owned year 2 40 million vacation expense reduction 2015 due vacation policy change repeat 2016 operating margin united states print related services segment increased 47 year ended december 31 2016 negative 168 year ended december 31 2015 primarily due reasons provided restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2016 593 million consisting 1 105 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 259 million impairment charges including 138 million machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois well capacity reduction restructuring activities 121 million land building impairment related atglen pennsylvania plant closure 3 01 million acquisitionrelated integration costs 4 228 million various restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2015 1014 million consisting following 1 273 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 507 million impairment charges including 335 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado well capacity reduction restructuring initiatives 112 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 60 million customer relationship intangible asset impairments 3 46 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 4 188 million restructuring charges including costs maintain exit closed facilities well lease exit charges goodwill impairment due decline companys stock price third quarter 2015 interim goodwill impairment test three reporting units united states print related services segment performed july 31 2015 result interim goodwill impairment assessment well annual impairment test october 31 2015 companys united states print related services segment recorded pretax noncash goodwill impairment charges 7783 million 5124 million tax year ended december 31 2015 included impairment charges 6408 million 1189 million 186 million core print related services reporting unit specialty print related services reporting unit united states products services reporting unit respectively international following table summarizes net sales operating income loss operating margin certain items impacting comparability equity loss unconsolidated entities within international segment net sales product sales international segment increased 124 million 34 year ended december 31 2016 compared year ended december 31 2015 primarily due 270 million net increase price volume primarily argentina mexico colombia europe peru 115 million increase passthrough paper sales partially offset 261 million negative foreign exchange impacts primarily argentina mexico peru colombia service sales international segment increased 16 million 85 year ended december 31 2016 compared year ended december 31 2015 primarily due increase logistics revenue europe operating income loss operating income loss international segment increased 769 million year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 399 million decrease restructuring impairment expenses 2 300 million noncash goodwill impairment charge recorded 2015 repeat 2016 3 70 million increase operating income primarily mexico europe restructuring impairment transactionrelated charges income restructuring impairment transactionrelated charges income international segment year ended december 31 2016 11 million consisting following 1 14 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 09 million impairment charges machinery equipment longer utilized production result facility consolidations including queretaro mexico 3 01 million transactionrelated charges 4 35 million restructuring income primarily related companys argentina subsidiaries gain settlements vendors bankruptcy proceedings gain sale pilar argentina plant restructuring impairment transactionrelated charges international segment year ended december 31 2015 388 million consisting following 1 73 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 228 million impairment charges including 167 million impairment charges reduce book value companys equity method investment chile fair value see note 8 equity method investments unconsolidated entities additional details related impairment companys equity method investment chile 22 million impairment charges primarily related restructuring proceedings argentina companys argentina subsidiaries land building machinery equipment intangible assets 15 million land building impairment charges 13 million impairment charges machinery equipment longer utilized production well capacity reduction restructuring initiatives 11 million customer relationship intangible asset impairments 3 87 million restructuring charges primarily related 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment goodwill impairment march 25 2015 due deteriorating economic conditions including inflation currency devaluation combined uncertain political conditions declining print volumes labor challenges companys argentina subsidiaries included within latin america reporting unit commenced bankruptcy restructuring proceedings goal consolidating operations company conducted interim goodwill impairment assessment latin america reporting unit included comparing carrying amount net assets including goodwill respective fair value march 31 2015 date interim assessment result interim goodwill impairment assessment well annual impairment test october 31 2015 companys international segment recorded noncash nondeductible goodwill impairment charges 300 million year ended december 31 2015 primarily including 233 million noncash goodwill impairment charge latin america reporting unit equity loss unconsolidated entities investments entities quadgraphics ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil company also held 50 interest joint venture based chile acquired part world color press acquisition july 31 2015 investment sold equity loss unconsolidated entities international segment decreased 49 million year ended december 31 2016 compared year ended december 31 2015 primarily due 41 million decrease losses unconsolidated entities companys investment plural companys brazilian joint venture 08 million decrease losses companys investment chile sold july 31 2015 unrestricted subsidiaries unrestricted subsidiaries defined senior unsecured notes indenture represented less 20 total consolidated net sales year ended december 31 2016 corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses increased 167 million 276 year ended december 31 2016 compared year ended december 31 2015 primarily due 152 million increase incentive compensation expenses 80 million increase legal expenses partially offset cost reduction initiatives 23 million decrease restructuring impairment transactionrelated charges included 100 million nonrecurring gain 2015 result couriers termination agreement pursuant quadgraphics acquire courier restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges year ended december 31 2016 224 million consisting following 1 10 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 21 million transactionrelated charges primarily included professional service fees 3 193 million restructuring charges including 112 million adjustment mepps withdrawal liability 70 million noncash pension settlement charge related lumpsum pension payments corporate restructuring impairment transactionrelated charges year ended december 31 2015 247 million consisting following 1 75 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 218 million impairment charges including 199 million impairment charges corporate equipment 19 million investment related impairment charges 3 67 million transactionrelated charges income includes 100 million nonrecurring gain courier partially offset 33 million professional service fees including fees terminated acquisition courier acquisitions marins copac specialty 4 03 million acquisitionrelated integration costs primarily related professional fees 5 18 million restructuring charges liquidity capital resources company utilizes cash flows operating activities borrowings credit facilities satisfy liquidity capital requirements december 31 2017 company cash equivalents 643 million addition cash equivalents company 6861 million unused capacity revolving credit arrangement december 31 2017 net 389 million issued letters credit company believes expected future cash flows operating activities 6861 million unused capacity revolving credit arrangement available cash hand provide sufficient resources fund ongoing operating requirements integration restructuring requirements related acquired operations well future capital expenditures debt pension service requirements investments future growth create value shareholders shareholder dividends share repurchases borrowings 7250 million revolving credit facility december 31 2017 peak borrowings 508 million year ended december 31 2017 net cash provided operating activities year ended december 31 2017 compared year ended december 31 2016 net cash provided operating activities 3440 million year ended december 31 2017 compared 3525 million year ended december 31 2016 resulting 85 million decrease cash provided operating activities decrease primarily due 299 million decrease cash flows changes operating assets liabilities partially offset 214 million increase cash earnings year ended december 31 2016 compared year ended december 31 2015 net cash provided operating activities 3525 million year ended december 31 2016 compared 3481 million year ended december 31 2015 resulting 44 million increase cash provided operating activities increase primarily due 126 million increase cash earnings partially offset 82 million decrease cash flows changes operating assets liabilities net cash used investing activities year ended december 31 2017 compared year ended december 31 2016 net cash used investing activities 373 million year ended december 31 2017 compared 844 million year ended december 31 2016 resulting 471 million decrease cash used investing activities decrease primarily due following 1 202 million decrease purchases property plant equipment 2 141 million increase proceeds sale business 3 99 million decrease cost method investments 4 80 million increase proceeds insurance claims decreases partially offset 73 million increase loan unconsolidated entity year ended december 31 2016 compared year ended december 31 2015 net cash used investing activities 844 million year ended december 31 2016 compared 2167 million year ended december 31 2015 resulting 1323 million decrease cash used investing activities decrease primarily due following 1 1434 million decrease cash payments related acquisitions businesses marins copac specialty acquisitions completed 2015 acquisitions businesses 2016 2 269 million decrease purchases property plant equipment decreases partially offset 133 million increased receipts restricted cash 2015 105 million proceeds received 2015 sale companys 50 ownership interest chile net cash used financing activities year ended december 31 2017 compared year ended december 31 2016 net cash used financing activities 2517 million year ended december 31 2017 compared 2693 million year ended december 31 2016 resulting 176 million decrease cash used financing activities decrease primarily due 549 million decrease net repayments debt lease obligations 2017 compared 2016 50 million decrease treasury stock purchases decreases partially offset following 1 277 million decreased proceeds stock options exercised 2 46 million increased payments debt issuance costs financing fees 3 46 million increased equity awards redeemed pay employees tax obligations year ended december 31 2016 compared year ended december 31 2015 net cash used financing activities 2693 million year ended december 31 2016 compared 1279 million year ended december 31 2015 resulting 1414 million increase cash used financing activities increase primarily due 1590 million increase net repayments debt lease obligations 2016 compared 2015 88 million purchases treasury stock 2016 offset 281 million increased proceeds stock options exercised 2016 free cash flow free cash flow defined net cash provided operating activities less purchases property plant equipment companys management assesses free cash flow measure quantify cash available 1 strengthening balance sheet debt reduction 2 strategic capital allocation deployment investments business acquisitions strategic investments 3 returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items free cash flow nongaap measure free cash flow considered alternative cash flows provided operating activities measure liquidity quadgraphics calculation free cash flow may different similar calculations used companies therefore comparability may limited free cash flow years ended december 31 2017 2016 2015 follows free cash flow increased 117 million year ended december 31 2017 compared year ended december 31 2016 due 202 million decrease capital expenditures offset 85 million decrease net cash provided operating activities primarily attributable decrease cash flows changes operating assets liabilities free cash flow increased 313 million year ended december 31 2016 compared year ended december 31 2015 due following 1 269 million decrease capital expenditures 2 44 million increase net cash provided operating activities primarily attributable increase cash earnings see net cash provided operating activities section explanations changes operating cash flows net cash used investing activities section explanations changes purchases property plant equipment debt leverage ratio debt leverage ratio defined total debt capital lease obligations divided sum following 1 last twelve months ebitda see definition ebitda reconciliation net earnings loss ebitda results operations section 2 restructuring impairment transactionrelated charges 3 loss gain debt extinguishment 4 equity loss unconsolidated entities company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strategic investments strengthening balance sheet pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability debt leverage ratio nongaap measure considered alternative cash flows provided operating activities measure liquidity quadgraphics calculation debt leverage ratio may different similar calculations used companies therefore comparability may limited debt leverage ratio calculated differs total leverage ratio senior secured leverage ratio included companys debt covenant calculations see note 12 debt consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k information debt covenants total leverage ratio included companys debt covenants includes letters credit debt excludes noncash stockbased compensation expense ebitda includes equity loss unconsolidated entity ebitda similarly senior secured leverage ratio included companys debt covenants includes excludes adjustments total leverage ratio addition exclusion outstanding balance senior unsecured notes debt leverage ratio december 31 2017 2016 follows 1 company 64 million cash december 31 2017 54 million higher companys typical yearend cash balance approximately 10 million debt leverage ratio would 199x 54 million excess cash used pay debt december 31 2017 calculation ebitda adjusted purposes calculating debt leverage ratio years ended december 31 2017 2016 follows debt leverage ratio decreased 026x december 31 2017 compared december 31 2016 primarily due 1660 million decrease debt capital lease obligations partially offset 215 million decreased ebitda adjusted purposes calculating debt leverage ratio debt leverage ratio december 31 2017 210x within managements desired target debt leverage ratio range 20x 25x however company operates times debt leverage ratio target range depending timing compelling strategic investment opportunities seasonal working capital needs description significant outstanding debt obligations december 31 2017 december 31 2017 company utilized combination debt instruments fund cash requirements including following • senior secured credit facility ◦ 7250 million revolving credit facility outstanding balance december 31 2017 ◦ 3750 million term loan 2813 million outstanding december 31 2017 ◦ 3000 million term loan b 2791 million outstanding december 31 2017 • senior unsecured notes 2435 million outstanding december 31 2017 • master note security agreement 1236 million outstanding december 31 2017 senior secured credit facility senior secured credit facility consists three different loan facilities first facility revolving credit facility amount 7250 million term four years maturing january 4 2021 second facility term loan aggregate amount 3750 million term four years maturing january 4 2021 subject certain required amortization third facility term loan b amount 3000 million term seven years maturing april 27 2021 subject certain required amortization company completed second amendment companys senior secured credit facility february 10 2017 second amendment completed reduce size revolving credit facility term loan extend companys debt maturity profile maintaining companys current cost borrowing covenant structure revolving credit facility lowered maximum borrowing amount 7250 million 8500 million term loan lowered aggregate amount 3750 million 4500 million amendment senior secured credit facility impact companys quarterly financial covenant requirements borrowings revolving credit facility term loan made senior secured credit facility december 31 2017 bear interest 175 excess reserve adjusted libor 075 excess alternate base rate weighted average interest rate revolving credit facility 304 weighted average interest rate term loan loans 301 december 31 2017 interest payable monthly borrowings term loan b december 31 2017 bear interest 325 excess reserve adjusted libor floor 100 225 excess alternative base rate companys option weighted average interest rate term loan b 439 december 31 2017 interest payable monthly senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances senior unsecured notes company received 2948 million net proceeds sale 3000 million senior unsecured notes deducting initial purchasers discounts commissions senior unsecured notes bear interest 700 interest payable semiannually senior unsecured notes due may 1 2022 company repurchased 565 million senior unsecured notes open market resulting net gain debt extinguishment 143 million year ended december 31 2016 repurchased senior unsecured notes canceled company used cash flows operating activities borrowings revolving credit facility fund repurchases primarily completed efficiently reduce debt balances interest expense based current libor rates companys existing future domestic subsidiaries borrower guarantees indebtedness companys senior secured credit facility guarantees certain companys indebtedness companys restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes guarantor subsidiaries current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including following 1 designation guarantor subsidiaries unrestricted subsidiary 2 release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries 3 sale disposition including sale substantially assets guarantor subsidiaries master note security agreement sometimes referred senior notes september 1 1995 last amended november 24 2014 company entered master note security agreement pursuant company issued time senior notes aggregate principal amount 11 billion various tranches 1236 million outstanding december 31 2017 weighted average interest rate senior notes 743 december 31 2017 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2031 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement company redeemed 601 million senior notes master note security agreement resulting net loss debt extinguishment 02 million year ended december 31 2016 tendered senior notes master note security agreement canceled company used cash flows operating activities borrowings revolving credit facility fund tender primarily completed reallocate debt lower interest rate revolving credit facility thereby reduce interest expense based current libor rates covenants compliance companys various lending arrangements include certain financial covenants financial terms numbers ratios defined companys debt agreements among covenants company required maintain following december 31 2017 • total leverage ratio rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda shall exceed 375 100 twelve months ended december 31 2017 companys total leverage ratio 206 100 • senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined senior secured debt consolidated ebitda shall exceed 350 100 twelve months ended december 31 2017 companys senior secured leverage ratio 155 100 • minimum interest coverage ratio rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2017 companys minimum interest coverage ratio 703 100 indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit companys restricted subsidiaries ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially companys consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates company compliance financial covenants debt agreements december 31 2017 company currently expects compliance future periods financial covenants assurance covenants continue met companys failure maintain compliance covenants could prevent company borrowing additional amounts could result default debt agreements default could cause outstanding indebtedness become immediately due payable virtue crossacceleration crossdefault provisions addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock including following • companys total leverage ratio greater 300 100 defined senior secured credit facility company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions • companys senior secured leverage ratio greater 300 100 companys total leverage ratio greater 350 100 ratios defined senior secured credit facility company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total leverage ratio less 350 100 restrictions net pension obligations net underfunded pension mepps obligations decreased 500 million year ended december 31 2017 1623 million december 31 2016 1123 million december 31 2017 500 million decrease overall pension obligations despite 207 million increase attributable 39 basis point decline pension discount rate 391 december 31 2016 352 december 31 2017 company able reduce pension obligations 2017 despite negative impact discount rate due following 1 achieved actual return plan assets 143 year ended december 31 2017 exceeded expected return plan assets assumption 65 2 made payments totaling 240 million mepps 3 facilitated lumpsum pension payments terminated vested participants 2017 company settled 233 million pension liabilities 214 million pension payouts payments eligible participants elected receive lumpsum pension payment funded existing pension plan assets constituted settlement companys pension liabilities respect participants company continues focus reducing pension obligations cash contributions plans lumpsum settlements plan design changes share repurchase program september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock authorization share repurchases may made companys discretion time open market andor privately negotiated transactions permitted federal securities laws legal requirements timing manner price amount repurchase depend economic market conditions share price trading volume applicable legal requirements factors program may suspended discontinued time year ended december 31 2017 company repurchased 200605 shares class common stock weighted average price 1889 per share total purchase price 38 million year ended december 31 2016 company repurchased 984190 shares class common stock weighted average price 896 per share total purchase price 88 million share repurchases year ended december 31 2015 december 31 2017 792 million authorized repurchases remaining program risk management discussion companys exposure market risks management market risks see item 7a quantitative qualitative disclosures market risk annual report form 10k offbalance sheet arrangements except set forth contractual obligations commitments table note 13 lease obligations consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k including operating leases future interest debt capital leases incurred company offbalance sheet arrangements financings special purpose entities company expects material current future effect financial condition changes financial condition results operations liquidity capital expenditures capital resources significant components sales expenses contractual obligations commitments companys contractual cash obligations december 31 2017 follows millions 1 2017 company paid advance full amount required amortization payments term loan totaling 727 million years ended december 31 2018 2019 first quarter ended march 31 2020 company also paid advance full amount required amortization payments term loan b totaling 90 million years ended december 31 2018 2019 2020 debt obligations include 1886 million anticipated future interest payments exclude 103 million 14 million future amortization debt issuance costs original issue discount respectively respect variable interest rate portions debt interest amounts calculated applying december 31 2017 weighted average interest rate determine value future interest payments master note security agreement weighted average interest rate notes applied average principal balance outstanding time period amounts included thereafter include principal payments estimated interest expense april 2031 2 pension benefits contributions benefit payments funded company assets included table actuarially estimated five year period benefit payments benefit plans expected continue beyond 2022 company believes estimate beyond period unreasonable contractual obligations table include 282 million estimated withdrawal liability united states world color press mepps due uncertainty amount timing gciu potential withdrawal liability payments 2018 company scheduled make minimum payments 88 million mepps pending settlement conclusion litigation gciu trustees see note 16 employee retirement plans consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k discussion mepps withdrawal 3 capital lease obligations include 19 million anticipated future interest payments 4 purchase obligations consist primarily 223 million firm commitments purchase press finishing equipment well 102 million purchase obligations 5 contractual obligations table include reserves uncertain tax positions recorded accordance accounting guidance uncertainties income taxes company taken tax positions ultimate amount years necessary payments made pertain tax positions uncertain reserve uncertain tax positions prior interest penalties 216 million december 31 2017 146 million included longterm liabilities 62 million included deferred income taxes 08 million included accrued liabilities consolidated balance sheets company also recorded reserves interest penalties related uncertain tax positions 33 million 05 million respectively december 31 2017 6 contractual obligations table include share repurchase program repurchases required program see share repurchase program section discussion including maximum potential cash payments program critical accounting policies estimates companys consolidated financial statements prepared accordance gaap companys critical accounting policies important portrayal financial condition results operations require company make difficult subjective estimates management required make judgments estimates affect reported amounts assets liabilities disclosure contingent assets liabilities date statements reported amounts revenues expenses reporting period company bases estimates historical experience various assumptions believed reasonable circumstances companys management believes judgments estimates made consistent appropriate methods based information available time reasonable deviation judgments estimates would material impact companys consolidated financial position results operations actual results may differ estimates different assumptions conditions extent estimates used differ actual results adjustments consolidated statements operations corresponding consolidated balance sheets would necessary adjustments would made future statements company identified following critical accounting policies estimates revenue recognition company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer reasonable assurance collectability agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer respect companys logistics operations include delivery printed material company recognizes revenue upon completion services certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations item 8 financial statements supplementary data annual report form 10k many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis accounting policies estimates related revenue recognition updated effective january 1 2018 adoption revised guidance recognizing revenue contracts customers see footnote 24 new accounting pronouncements consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k information impairment property plant equipment finitelived intangible assets company performs impairment evaluations longlived assets whenever business conditions events circumstances indicate assets may impaired including whether estimated useful life longlived assets may warrant revision whether remaining balance asset may recoverable companys significant longlived assets property plant equipment customer relationship intangible assets recorded conjunction acquisition assessing impairment longlived assets requires company make important estimates assumptions including limited expected future cash flows assets generate assets used based strategic direction company remaining useful life residual value considerable judgment also applied incorporating potential impact current economic climate customer demand selling prices cost production limited activity secondary markets assets cost capital estimated future undiscounted cash flows generated assets less carrying value longlived assets written fair value charge recorded current operations company uses internal discounted cash flow estimates quoted market prices available independent appraisals appropriate determine fair value fair value determination categorized level 3 fair value hierarchy see note 15 financial instruments fair value measurements consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k definition level 3 inputs based assessments completed years ended december 31 2017 2016 2015 company recognized property plant equipment impairment charges 120 million 268 million 695 million respectively primarily related facility consolidations well capacity reduction restructuring initiatives company recorded finitelived intangible asset impairment charges 72 million year ended december 31 2015 finitelived intangible asset impairment charges recorded years ended december 31 2017 2016 company continues monitor groups assets identify new events changes circumstances could indicate carrying values recoverable particularly light potential declines profitability may result highly competitive industry landscape continued uncertainty global economy event significant unanticipated changes circumstances significant adverse changes business climate adverse actions regulators unanticipated competition loss key customers andor changes technology markets actual results differ managements estimates provision impairment could required future period pension plans result acquisition world color press company acquired multiple underfunded pension plans pension plan costs determined using actuarial methods funded contributions determined accordance projected benefit method prorated service company records amounts relating pension plans based calculations include various actuarial assumptions company believes two critical assumptions discount rate assumed rate return assets changes assumptions primarily influenced factors outside companys control significant effect amounts reported financial statements company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets included item 8 financial statements supplementary data annual report form 10k company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 purposes calculating expected return plan assets valued fair value company determines assumption discount rate used purposes computing annual service interest costs pension plan based index highquality corporate bond yields matchedfunding yield curve analysis date 2015 company measured interest costs utilizing single weighted average discount rate derived yield curve used measure plan obligations beginning 2016 company changed approach used measure interest costs pension benefits elected measure interest costs applying specific spot rates along yield curve plans liability cash flows new method would also impact calculation service costs applicable companys pension plans due frozen status company made change provide precise measurement interest costs aligning timing plans liability cash flows corresponding spot rates yield curve change affect measurement plan obligations company reflected change accounting estimate accordingly accounted prospective basis weighted average discount rate used determine benefit obligations pension plans december 31 2017 352 39 basis point decrease december 31 2016 discount rate 391 onepercentage point change discount rate would following impact december 31 2017 projected benefit obligation company employs total return investment approach pension plans whereby diversified mix equity securities debt securities used maximize longterm pension plan assets intent strategy outperform growth plan liabilities long run plan contributions decreased balanced maintaining lower degree investment risk tolerance established careful consideration plan liabilities plan funded status corporate financial condition equity securities diversified across geography market capitalization investments united states largecapitalization stocks united states smallcapitalization stocks international securities investment risk measured monitored ongoing basis annual liability measurements periodic assetliability studies quarterly investment portfolio reviews expected longterm rate return plan assets based upon many factors including expected asset allocations historical asset returns current expected future market conditions risk current target asset allocation plan assets weighted average basis 42 equity securities 58 debt securities actual asset allocation december 31 2017 approximately 41 equity securities 59 debt securities expected return plan assets assumption december 31 2017 2016 65 companys funded united states pension plans actual return plan assets years ended december 31 2017 2016 143 73 respectively certain pension plans unfunded plans hold plan assets 25 basis point change expected return plan assets would following impact 2018 pension income company also participated mepps result acquisition world color press company withdrawn significant mepps replaced union sponsored promise pay future defined benefit plans company sponsored pay go defined contribution plan two mepps gciu gcc significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued estimated withdrawal liability based information provided plans trustee company received notice withdrawal demand payment letter gciu excess reserve established company gciu withdrawal company currently litigation gciu trustees determine amount duration withdrawal payments gciu arbitration proceedings gciu completed sides appealed arbitrators ruling litigation federal court commenced april 2017 federal district court overturned arbitration decision one pending disputes matter company appealed district courts ruling ninth circuit fourth quarter 2016 company gcc reached settlement agreement claims scheduled payments february 2024 withdrawal liability reserved company december 31 2017 within range companys estimated potential outcomes updated based significant events potential new information ongoing litigation proceedings gciu final withdrawal liability determined exact amount withdrawal liability could higher lower estimate depending among things nature timing triggering events funding status plans time final conclusion litigation gciu trustees new accounting pronouncements see note 24 new accounting pronouncements consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k item 7aitem 7 management’s discussion analysis financial condition results operations following discussion financial condition results operations quad read together quad’s audited consolidated financial statements three years period ended december 31 2018 including notes thereto included part ii item 8 “financial statements supplementary data” annual report form 10k discussion contains forwardlooking statements reflect company’s plans estimates beliefs company’s actual results could differ materially discussed forwardlooking statements factors could cause contribute differences include limited discussed “forwardlooking statements” part item 1a “risk factors” included earlier within annual report form 10k management’s discussion analysis financial condition results operations provided supplement company’s consolidated financial statements accompanying notes help provide understanding company’s financial condition changes company’s financial condition company’s results operations discussion analysis organized follows • overview section includes general description company’s business segments overview key performance metrics company’s management measures utilizes evaluate business performance overview trends affecting company including management’s actions related trends • results operations section contains analysis company’s results operations comparing results 1 year ended december 31 2018 year ended december 31 2017 2 year ended december 31 2017 year ended december 31 2016 comparability company’s results operations periods impacted acquisitions strategic investments including 2018 acquisition ivie strategic investment rise results operations ivie acquisition strategic investment rise included company’s consolidated results prospectively respective acquisition date ivie date quad increased equity position 19 57 rise forwardlooking statements providing general description recent projected industry company developments important understanding company’s results operations included section also provides discussion ebitda margin financial measures company uses assess performance business prepared accordance accounting principles generally accepted united states america “gaap” • liquidity capital resources section provides analysis company’s capitalization cash flows statement offbalance sheet arrangements discussion table outstanding debt commitments forwardlooking statements important understanding company’s financial condition included section also provides discussion free cash flow debt leverage ratio nongaap financial measures company uses assess liquidity capital allocation deployment • critical accounting policies estimates section contains discussion accounting policies company’s management believes important company’s financial condition results operations well allowances reserves require significant judgment estimates part company’s management addition company’s significant accounting policies including critical accounting policies summarized note 1 “basis presentation summary significant accounting policies” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k • new accounting pronouncements overview business overview worldwide marketing solutions partner dedicated creating better way quad uses datadriven integrated marketing solutions platform help clients reduce complexity increase efficiency enhance marketing spend effectiveness full description company’s business overview product offerings quad 30 strategy refer part item 1 “business” annual report form 10k company’s operating reportable segments aligned chief operating decision maker company currently manages business company’s operating reportable segments including product service offerings “corporate” category summarized united states print related services segment predominantly comprised company’s united states printing operations managed one integrated platform includes retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement together marketing complementary services including consumer insights audience targeting personalization media planning placement process optimization campaign planning creation premedia production videography photography digital execution print execution logistics segment also includes manufacture ink united states print related services segment accounted approximately 91 company’s consolidated net sales year ended december 31 2018 international segment consists company’s printing operations europe latin america including operations england france germany poland argentina colombia mexico peru well investments printing operations brazil india segment provides printed products marketing complementary services consistent united states print related services segment international segment accounted approximately 9 company’s consolidated net sales year ended december 31 2018 corporate consists unallocated general administrative activities associated expenses including part executive legal finance well certain expenses income frozen employee retirement plans pension benefit plans key performance metrics overview company’s management believes ability generate net sales growth profit increases positive cash flow maintaining appropriate level debt key indicators successful execution company’s business strategy increase shareholder value company uses period net sales growth ebitda margin net cash provided operating activities free cash flow debt leverage ratio metrics measure operating performance financial condition liquidity ebitda margin free cash flow debt leverage ratio nongaap financial measures see definitions ebitda margin reconciliation net earnings loss ebitda “results operations” section see definitions free cash flow debt leverage ratio reconciliation net cash provided operating activities free cash flow calculation debt leverage ratio “liquidity capital resources” section net sales growth company uses period net sales growth key performance metric company’s management assesses net sales growth based ability generate increased net sales increased sales existing clients sales new clients sales new expanded solutions existing new clients opportunities expand sales strategic investments including acquisitions ebitda margin company uses ebitda margin metrics assess operating performance company’s management assesses ebitda margin based ability increase revenues controlling variable expense growth net cash provided operating activities company uses net cash provided operating activities metric assess liquidity company’s management assesses net cash provided operating activities based ability meet recurring cash obligations increasing available cash fund cash restructuring requirements related cost reduction activities well fund capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal liabilities acquisitions investments future growth shareholder dividends share repurchases net cash provided operating activities significantly impacted timing nonrecurring infrequent receipts expenditures free cash flow company uses free cash flow metric assess liquidity capital deployment company’s management assesses free cash flow measure quantify cash available strengthening balance sheet debt pension liability reduction strategic capital allocation deployment investments business acquisitions strategic investments returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted company’s restructuring activities unusual items debt leverage ratio company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strategic investments strengthening balance sheet pension liability reduction returning capital shareholders dividends share repurchases company’s priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability company remains disciplined debt leverage company’s consolidated debt capital leases decreased 24 million year ended december 31 2018 despite investing 96 million capital expenditures 71 million acquisitions strategic investments primarily 2018 ivie acquisition 63 million payment cash dividends 37 million share repurchases since company completed world color press acquisition july 2010 company reduced debt capital leases 798 million reduced obligations pension postretirement mepps 429 million total obligation reduction since july 2010 12 billion overview trends affecting quad consumer media consumption habits change marketing services providers face increased demand offer endtoend marketing services strategy creative execution across media channels new marketing advertising channels emerge marketing services providers must expand services beyond traditional channels television newspapers print publications radio digital channels mobile internet search internet display video create effective multichannel campaigns clients trend greatly influences quad’s ongoing efforts redefine future integrated marketing create greater value clients looking less complexity greater transparency accountability business partners quad 30 company leverages datadriven print expertise part integrated marketing solutions platform helps clients plan produce marketing programs also deploy manage measure across media channels competition printing industry remains highly fragmented intense company believes indicators heightened competitive pressures industry excess manufacturing capacity created continued declines industry volumes turn created accelerated downward pricing pressures addition digital delivery documents data including online distribution hosting media content mobile technologies offer alternatives traditional delivery printed documents increasing consumer acceptance digital delivery content resulted marketers publishers allocating marketing advertising spend across expanding selection digital delivery options reduces printing demand contributes industry overcapacity company also faces competition print management firms look streamline processes reduce overall print spend company’s clients well strategic marketing firms focused helping businesses integrate multiple channels marketing campaigns full description company’s industry competition overview refer part item 1 “business” annual report form 10k company believes disciplined approach capital management strong balance sheet critical able invest profitable growth opportunities technological advances thereby providing highest return shareholders management balances use cash deleveraging company’s balance sheet reduction debt pension obligations compelling investment opportunities capital expenditures acquisitions strategic investments returns shareholders share repurchases quarterly dividend 030 per share company continues make progress integrating streamlining aspects business thereby lowering cost structure consolidating manufacturing platform efficient facilities well realizing purchasing mailing logistics efficiencies centralizing consolidating print manufacturing volumes eliminating redundancies administrative corporate operations company continued evolve manufacturing platform equipping facilities product line agnostic enables company maximize equipment utilization quad believes large plant size certain key printing facilities allows company drive savings certain product lines publications catalogs due economies scale investments automation technology company continues focus proactively aligning cost structure realities topline pressures faces printing industry lean manufacturing sustainable continuous improvement programs restructuring actions initiated company beginning 2010 resulted announcement 43 plant closures reduced headcount approximately 13000 employees december 31 2018 company believes continue drive productivity improvements sustainable cost reduction initiatives future engaged workforce ongoing adoption latest manufacturing automation technology strategy company believes maintain strongest efficient print manufacturing platform remain highquality lowcost producer integrated distribution postal service important component company’s business material change current service levels provided postal service could impact demand clients print services usps continues experience financial problems without increased revenues action congress reform usps’ cost structure losses continue future financial difficulties usps come increased pressure adjust postal rates service levels additional price increases may result customers reducing mail volumes exploring use alternative methods delivering larger portion products continued diversion internet alternative media channels ensure stay within expected postage budgets current federal law limits postal rate increases outside “exigent circumstance” increase cpi cap works ensure funding stability predictability mailers however federal statute requires prc conduct review overall ratemaking structure usps results study found current rate structure partially successful meeting usps’ goals current system result predictable stable rate making however prc also concluded current rate structure meet usps’ revenue needs lacks pricing efficiency result prc proposed new ratemaking structure would provide usps additional pricing flexibility current cpi cap may result substantially altered rate structure mailers great deal uncertainty outcome review prc issued notice proposed rulemaking comments due march 1 2018 additional round comments due march 30 2018 newly revised rates would effective new rules issued prc may include higher rate cap potentially elimination rate cap altogether result restrictions usps’ ability increase rates year may lead price spikes mailers may also reduce incentive usps continue take costs instead continue rely postage cover costs outdated postal service reflect industry’s ability willingness pay result may reduced demand printed products customers may move aggressively delivery methods many digital mobile options available consumers april 12 2018 executive order issued presidential task force review usps provided time frame 120 days initiatives postal reform legislation prc response temporarily delayed pending outcome review recommendations stemming presidential task force published december 4 2018 wide scope require additional input variety stakeholders including united states congress company expects publication report postal reform legislation prc’s proposed rate structure changes investigated within next year company invested significantly mail preparation distribution capabilities mitigate impact increases postage costs help clients successfully navigate everchanging postal environment data analytics unique software merge mail streams large scale advanced finishing capabilities technology inhouse transportation logistics operations company manages mail preparation distribution clients’ products maximize efficiency enable ontime consistent delivery partially reduce costs however net impact increasing postal costs may create decrease client demand print mail products 2018 company continued fuel quad 30 transformation series strategic investments acquisitions focused building integrated marketing solutions platform • company acquired ivie marketing services provider february 21 2018 net purchase price 92 million excluding acquired cash headquartered flower mound texas ivie provides quad scale onsite marketing services 60 client locations integrated execution including sourcing procurement expanded subject matter expertise digital media creative companies’ capabilities highly complementary ivie leader customized marketing business process outsourcing quad leader content production workflow process optimization • company increased equity position rise leading digital marketing agency headquartered chicago illinois 19 57 march 14 2018 9 million cash paid conversion previously provided loans equity ownership quad long worked rise orchestrate integrated crossmedia programs give marketers improved predictability control variables drive consumer response part quad’s integrated marketing platform rise helps reduce complexities working multiple agencies improves clients’ process efficiencies overall marketing spend effectiveness • company announced plans acquire minneapolisbased creative agency periscope november 2018 completed acquisition january 3 2019 net preliminary purchase price 121 million excluding acquired cash periscope’s comprehensive offering includes media buying analytics creative account management well packaging design premedia services complement quad’s printproduction capabilities periscope company highly efficient global platform creating marketing campaigns programs strategy creative execution across media channels integrated endtoend marketing platform creates value clients traditional agency approach operates silos reducing complexity improving process efficiencies marketing spend effectiveness • october 30 2018 company entered definitive agreement acquire chicagobased lsc allstock transaction valued approximately 13 billion including refinancing lsc’s debt assumption obligations acquisition subject customary closing conditions including regulatory approval shareholders companies expected close mid2019 acquisition expected create value stakeholders leveraging strong print foundation part much larger robust integration marketing solutions offering broadening quad’s client base revenuegenerating potential transaction presents compelling opportunity achieving significant net synergies elimination duplicative functions capacity rationalization greater operational efficiencies greater efficiencies supply chain management company believes significant level synergies result profitable combined company allstock transaction structure expected allow quad maintain strong balance sheet expected create future value shareholders throughout 2018 company also continued make strategic investments manufacturing platform part ongoing commitment maintaining efficient automated dependable manufacturing distribution platform printing industry investments help fuel quad’s 30 transformation sustain highquality lowcost producer position include following • direct marketing platform company continued make investments help clients gain competitive edge datadriven hyperpersonalized print marketing impactful costeffective delivers improved return marketing investment company also debuted accelerated insightstm groundbreaking predictive direct mail virtual technology allows marketers rapidly test direct mail creative formats prior mailing technology helps marketers predict factors motivate someone act offer prior physical mailing • book platform company continued invest book platform match clients’ portfolios products redefine book supply chain increased customization versioning capabilities faster time market reduced waste inventories obsolescence innovative solutions proprietary demanddriven ordering system lower fixed costs investments throughout book platform included limited new sheetfed press printing paper covers end sheets cover mounts hardcover books new perfect binder automatic makeready features overhead storage conveyor system help work process especially small digital orders • magazine catalog retail platform company continued strengthen magazine catalog retail platform offering enhance productivity offset labor shortages company continues investment automation automated guided vehicles driverless fork trucks automated palletizers end finishing lines results operations year ended december 31 2018 compared year ended december 31 2017 summary results company’s operating income operating margin net earnings attributable quad common shareholders diluted earnings per share attributable quad common shareholders year ended december 31 2018 changed year ended december 31 2017 follows dollars millions except per share data effects changes net earnings attributable quad common shareholders computed using 25 normalized tax rate adjusted tax act enacted 2017 items subject tax year ended december 31 2018 computed using 40 normalized tax rate items subject tax year ended december 31 2017 normalized rate used company prior enactment tax act 1 restructuring impairment transactionrelated charges 1036 million 777 million net tax incurred year ended december 31 2018 included following 230 million employee termination charges related workforce reductions facility consolidations voluntary involuntary separation programs b 265 million impairment charges including 169 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota hazleton pennsylvania franklin kentucky well capacity strategic reduction restructuring initiatives including 50 million impairment charges machinery equipment peru 46 million land building impairment charges primarily related franklin kentucky plant closure c 82 million transactionrelated charges consisting professional service fees business acquisition divestiture activities including 64 million related proposed acquisition lsc 446 million various restructuring charges consisting 321 million increase company’s mepps withdrawal liability 100 million charges certain legal matters customer contract penalties related company’s operations peru costs maintain exit closed facilities charges presented net 173 million gains sale facilities including 75 million gain sale taunton massachusetts book plant 70 million gain sale dallas texas plant 22 million gain sale san ixhuatepec mexico plant company expects incur additional restructuring integration costs future reporting periods connection eliminating excess manufacturing capacity properly aligning cost structure conjunction company’s acquisitions strategic investments cost reduction programs 2 restructuring impairment transactionrelated charges 604 million 362 million net tax incurred year ended december 31 2017 included following 269 million employee termination charges related workforce reductions facility consolidations separation programs b 120 million impairment charges including 67 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity strategic reduction restructuring activities 53 million impairment charges land building related waseca minnesota taunton massachusetts plant closures c 31 million transactionrelated charges consisting professional service fees business acquisition divestiture activities 184 million various restructuring charges including costs maintain exit closed facilities well lease exit charges net 71 million gains sale atglen pennsylvania dickson tennessee east greenville pennsylvania lenexa kansas marengo iowa plants 12 million gain company’s argentina subsidiaries’ settlements vendors bankruptcy proceedings restructuring charges also included 67 million loss sale business 3 interest expense increased 22 million 123 million net tax impact due change normalized tax rate year ended december 31 2018 733 million change due higher weighted average interest rate borrowings higher average debt levels year ended december 31 2018 compared year ended december 31 2017 4 net pension income increased 28 million 35 million net tax impact due change normalized tax rate year ended december 31 2018 124 million change due 13 million decrease interest cost pension plan liabilities 08 million decrease settlement charges 07 million increase expected return pension plan assets 5 26 million loss debt extinguishment 16 million net tax recognized year ended december 31 2017 refinancing senior secured credit facility completed february 10 2017 6 434 million decrease income tax benefit calculated following table primarily due 288 million tax benefit related reduced federal rate applied net domestic deferred tax liabilities accordance tax act 131 million decreased net tax benefit release valuation allowances related foreign operations see note 13 “income taxes” consolidated financial statements part ii item 8 annual report form 10k information income taxes 7 increase investments unconsolidated entity noncontrolling interests net tax 16 million year ended december 31 2018 primarily due 10 million increase earnings company’s investment plural industria gráfica ltda “plural” company’s brazilian joint venture favorable impact adjustment 06 million net loss attributed noncontrolling interests company’s consolidated statements operations related company’s 57 ownership rise 8 operating income excluding restructuring impairment transactionrelated charges decreased 541 million 82 million net tax impact due change normalized tax rate primarily due following 1 lower print volume pricing due ongoing industry pressures 2 223 million noncash expense related special employee retirement contribution 2018 resulting benefit tax reform 3 107 million net benefit 2017 changes employee vacation policies decreases partially offset following 1 133 million net benefit 2018 gain property insurance claims 2 earnings ivie acquisition investment rise 3 56 million gain sales tax litigation settlement peru 4 savings cost reduction initiatives operating results following table sets forth certain information company’s consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased 1367 million 39 year ended december 31 2018 compared year ended december 31 2017 primarily due 1812 million decrease product sales company’s print product lines due ongoing industry volume pricing pressures 147 million unfavorable foreign exchange impacts primarily argentina partially offset 592 million increase passthrough paper sales service sales primarily consist logistics distribution marketing services imaging medical services increased 1990 million 330 year ended december 31 2018 compared year ended december 31 2017 primarily due 1762 million increase net sales ivie acquisition investment rise 295 million increase logistics sales partially offset 57 million decrease sales imaging services cost sales cost product sales increased 17 million 01 year ended december 31 2018 compared year ended december 31 2017 primarily due increase paper costs 140 million noncash expense related special employee retirement contribution 2018 increases partially offset lower print volume cost reduction initiatives cost product sales percentage net sales decreased 675 year ended december 31 2018 684 year ended december 31 2017 primarily due reasons provided cost service sales increased 1682 million 389 year ended december 31 2018 compared year ended december 31 2017 primarily due ivie acquisition investment rise increased logistics freight costs 26 million noncash expense related special employee retirement contribution 2018 cost service sales percentage net sales increased 143 year ended december 31 2018 105 year ended december 31 2017 primarily due reasons provided selling general administrative expenses selling general administrative expenses decreased 517 million 122 year ended december 31 2018 compared year ended december 31 2017 primarily due following 1 savings cost reduction initiatives including employeerelated costs 2 133 million net benefit 2018 gain property insurance claims 3 56 million gain sales tax litigation settlement peru partially offset 103 million benefit 2017 change salaried employee vacation policy repeat 2018 57 million noncash expense related special employee retirement contribution 2018 selling general administrative expenses percentage net sales decreased 103 year ended december 31 2017 89 year ended december 31 2018 primarily due reasons stated depreciation amortization depreciation amortization decreased 18 million 08 year ended december 31 2018 compared year ended december 31 2017 due 179 million decrease depreciation expense property plant equipment becoming fully depreciated past year partially offset 161 million increase amortization expense primarily related amortization expense intangible assets acquired ivie acquisition investment rise restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges increased 432 million 715 year ended december 31 2018 compared year ended december 31 2017 primarily due following 1 145 million increase impairment charges 2 51 million increase transactionrelated charges 3 13 million increase acquisitionrelated integration costs 4 262 million increase restructuring charges decreases partially offset 39 million decrease employee termination charges restructuring impairment transactionrelated charges 1036 million incurred year ended december 31 2018 included following 1 230 million employee termination charges related workforce reductions facility consolidations separation programs 2 265 million impairment charges including 169 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota hazleton pennsylvania franklin kentucky well capacity strategic reduction restructuring initiatives including 50 million impairment charges machinery equipment peru 46 million land building impairment charges primarily related franklin kentucky plant closure 3 82 million transactionrelated charges consisting professional service fees related business acquisition divestiture activities including 64 million related proposed acquisition lsc 4 446 million various restructuring charges consisting 321 million increase company’s mepps withdrawal liability 100 million charges certain legal matters customer contract penalties related company’s operations peru costs maintain exit closed facilities charges presented net 173 million gains sale facilities including 75 million gain sale taunton massachusetts book plant 70 million gain sale dallas texas plant 22 million gain sale san ixhuatepec mexico plant restructuring impairment transactionrelated charges 604 million incurred year ended december 31 2017 included following 1 269 million employee termination charges related workforce reductions facility consolidations separation programs 2 120 million impairment charges including 67 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity strategic reduction restructuring activities 53 million impairment charges land building related waseca minnesota taunton massachusetts plant closures 3 31 million transactionrelated charges consisting professional service fees related business acquisition divestiture activities 4 184 million various restructuring charges including costs maintain exit closed facilities well lease exit charges net 71 million gains sale atglen pennsylvania dickson tennessee east greenville pennsylvania lenexa kansas marengo iowa plants 12 million gain company’s argentina subsidiaries’ settlements vendors bankruptcy proceedings restructuring charges also included 67 million loss sale business ebitda marginconsolidated ebitda defined net earnings loss attributable quad common shareholders excluding 1 interest expense 2 income tax expense benefit 3 depreciation amortization ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quad’s performance important measures quad gauges profitability assesses performance business ebitda margin nongaap financial measures considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quad’s calculation ebitda margin may different calculations used companies therefore comparability may limited ebitda margin year ended december 31 2018 compared year ended december 31 2017 follows ebitda decreased 921 million year ended december 31 2018 compared year ended december 31 2017 primarily due following 1 lower print volume pricing due ongoing industry pressures 2 432 million increased restructuring impairment transactionrelated charges 3 223 million noncash expense related special employee retirement contribution 2018 4 107 million net benefit 2017 changes employee vacation policies impacts partially offset following 1 133 million net benefit 2018 gain property insurance claims 2 earnings ivie acquisition investment rise 3 56 million gain sales tax litigation settlement peru 4 savings cost reduction initiatives including employeerelated costs reconciliation ebitda net earnings attributable quad common shareholders years ended december 31 2018 2017 follows 1 net earnings attributable quad common shareholders included following restructuring impairment transactionrelated charges 1036 million 604 million years ended december 31 2018 2017 respectively b employee stock ownership plan noncash expense related special employee retirement contribution 223 million year ended december 31 2018 c net pension income 124 million 96 million years ended december 31 2018 2017 respectively loss debt extinguishment 26 million year ended december 31 2017 e equity earnings unconsolidated entity 10 million year ended december 31 2018 f net loss attributable noncontrolling interests 06 million year ended december 31 2018 united states print related services following table summarizes net sales operating income operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment decreased 1331 million 42 year ended december 31 2018 compared year ended december 31 2017 primarily due 1847 million decrease product sales company’s print product lines predominantly due ongoing volume pricing pressures excess capacity printing industry partially offset 516 million increase passthrough paper sales service sales united states print related services segment increased 1996 million 342 year ended december 31 2018 compared year ended december 31 2017 primarily due 1762 million increase net sales ivie acquisition investment rise 301 million increase logistics sales partially offset 57 million decrease sales imaging services operating income operating income united states print related services segment decreased 403 million 207 year ended december 31 2018 compared year ended december 31 2017 primarily due following 1 lower print volume pricing due ongoing industry pressures 2 219 million noncash expense related special employee retirement contribution 2018 3 107 million net benefit 2017 changes employee vacation policies impacts partially offset following 1 158 million decrease restructuring impairment transactionrelated charges 2 133 million net benefit 2018 gain property insurance claims 3 earnings ivie acquisition investment rise 4 savings cost reduction initiatives including employeerelated costs operating margin united states print related services segment decreased 40 year ended december 31 2018 52 year ended december 31 2017 primarily due reasons provided restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2018 378 million consisting following 1 161 million employee termination charges related workforce reductions facility consolidations separation programs 2 183 million impairment charges including 161 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota hazleton pennsylvania franklin kentucky well capacity strategic reduction restructuring initiatives 22 million impairment charges land building related franklin kentucky plant closure 3 20 million various restructuring charges including costs maintain exit closed facilities well lease exit charges presented net gains sale facilities including 75 million gain sale taunton massachusetts book plant 70 million gain sale dallas texas plant restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2017 536 million consisting following 1 217 million employee termination charges related workforce reductions facility consolidations separation programs 2 115 million impairment charges including 62 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity strategic reduction restructuring activities 53 million impairment charges land building related waseca minnesota taunton massachusetts plant closures 3 194 million various restructuring charges including costs maintain exit closed facilities well lease exit charges net 71 million gains sale atglen pennsylvania dickson tennessee east greenville pennsylvania lenexa kansas marengo iowa plants restructuring charges also included 67 million loss sale business international following table summarizes net sales operating income operating margin certain items impacting comparability equity loss unconsolidated entities within international segment net sales product sales international segment decreased 36 million 10 year ended december 31 2018 compared year ended december 31 2017 primarily due 147 million unfavorable foreign exchange impacts partially offset 76 million increase passthrough paper sales 35 million increase volume pricing primarily mexico service sales international segment decreased 06 million 31 year ended december 31 2018 compared year ended december 31 2017 primarily due decrease logistics revenue europe operating income operating income international segment decreased 181 million 923 year ended december 31 2018 compared year ended december 31 2017 primarily due 189 million increase restructuring impairment expenses partially offset 56 million gain sales tax litigation settlement peru 48 million increase operating income primarily mexico restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2018 222 million consisting following 1 37 million employee termination charges related workforce reductions facility consolidations separation programs 2 82 million impairment charges including 58 million machinery equipment longer utilized production result facility consolidations well capacity strategic reduction restructuring initiatives including 50 million impairment charges machinery equipment peru 24 million impairment charges land building 3 103 million various restructuring charges including 100 million charges certain legal matters customer contract penalties related company’s operations peru restructuring impairment transactionrelated charges international segment year ended december 31 2017 33 million consisting following 1 47 million employee termination charges related workforce reductions facility consolidations separation programs 2 05 million impairment charges machinery equipment longer utilized production result facility consolidations 3 19 million various restructuring income primarily related company’s argentina subsidiaries’ gain settlements vendors bankruptcy proceedings partially offset charges maintain exit closed facilities equity earnings unconsolidated entities investments entities quad ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil equity earnings unconsolidated entity international segment increased 10 million year ended december 31 2018 compared year ended december 31 2017 due increase earnings company’s investment plural unrestricted subsidiaries unrestricted subsidiaries defined senior unsecured notes indenture represented less 20 total consolidated net sales year ended december 31 2018 corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses increased 389 million 664 year ended december 31 2018 compared year ended december 31 2017 primarily due 401 million increase restructuring impairment transactionrelated charges 04 million noncash expense related special employee retirement contribution 2018 restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges year ended december 31 2018 436 million consisting following 1 32 million employee termination charges related workforce reductions facility consolidations separation programs 2 81 million transactionrelated charges primarily included professional service fees 3 323 million restructuring charges including 321 million increase mepps withdrawal liability corporate restructuring impairment transactionrelated charges year ended december 31 2017 35 million consisting following 1 05 million employee termination charges related workforce reductions facility consolidations separation programs 2 21 million transactionrelated charges primarily included professional service fees 3 09 million restructuring charges results operations year ended december 31 2017 compared year ended december 31 2016 summary results company’s operating income operating margin net earnings attributable quad common shareholders computed using 40 normalized tax rate diluted earnings per share attributable quad common shareholders year ended december 31 2017 changed year ended december 31 2016 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 604 million 362 million net tax incurred year ended december 31 2017 included following 269 million employee termination charges related workforce reductions facility consolidations separation programs b 120 million impairment charges including 67 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity strategic reduction restructuring activities 53 million impairment charges land building related waseca minnesota taunton massachusetts plant closures c 31 million transactionrelated charges consisting professional service fees business acquisition divestiture activities 184 million various restructuring charges including costs maintain exit closed facilities well lease exit charges net 71 million gains sale atglen pennsylvania dickson tennessee east greenville pennsylvania lenexa kansas marengo iowa plants 12 million gain company’s argentina subsidiaries’ settlements vendors bankruptcy proceedings restructuring charges also included 67 million loss sale business company expects incur additional restructuring integration costs future reporting periods connection eliminating excess manufacturing capacity properly aligning cost structure conjunction company’s acquisitions strategic investments cost reduction programs 2 restructuring impairment transactionrelated charges 736 million 442 million net tax incurred year ended december 31 2016 included following 129 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 268 million impairment charges including 147 million impairment charges machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois queretaro mexico well capacity strategic reduction restructuring activities 121 million impairment charges land building related atglen pennsylvania plant closure c 22 million transactionrelated charges consisting professional service fees business acquisition divestiture activities 01 million acquisitionrelated integration costs e 316 million various restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring charges also included 112 million increase mepps withdrawal liability 3 interest expense decreased 61 million 37 million net tax year ended december 31 2017 711 million change due lower average debt levels year ended december 31 2017 compared year ended december 31 2016 4 net pension income increased 45 million 27 million net tax impact due change normalized tax rate year ended december 31 2017 96 million change due 08 million decrease interest cost pension plan liabilities 62 million decrease settlement charges offset 25 million decrease expected return pension plan assets 5 26 million loss debt extinguishment 16 million net tax recognized year ended december 31 2017 refinancing senior secured credit facility completed february 10 2017 6 141 million gain debt extinguishment 85 million net tax recognized year ended december 31 2016 primarily repurchase 565 million aggregate principal amount senior unsecured notes 7 418 million decrease income taxes calculated following table primarily due 288 million tax benefit related reduced federal rate applied net domestic deferred tax liabilities accordance tax act 210 million tax benefit release valuation allowances primarily related foreign credits partially offset 71 million decreased tax benefit domestic deductions see note 13 “income taxes” consolidated financial statements part ii item 8 annual report form 10k information income taxes 7 decrease investments unconsolidated entity noncontrolling interests net tax 14 million year ended december 31 2017 related decrease losses company’s brazilian joint venture investment plural 8 operating income excluding restructuring impairment transactionrelated charges increased 248 million 149 million net tax primarily due following 1 446 million decrease depreciation amortization expense 2 194 million vacation reserve reduction employee vacation policy change 3 68 million lower legal expenses 4 50 million gain property insurance claim 5 savings cost reduction initiatives including employeerelated costs impacts partially offset lower print volume pricing due ongoing industry pressures 104 million benefit 2016 repeat 2017 related collection previously writtenoff vendor receivable operating results following table sets forth certain information company’s consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased 1881 million 51 year ended december 31 2017 compared year ended december 31 2016 primarily due 1416 million decrease product sales company’s print product lines due ongoing industry volume pricing pressures 471 million decrease passthrough paper sales partially offset 06 million positive foreign exchange impacts service sales primarily consist imaging logistics distribution medical services decreased 100 million 16 year ended december 31 2017 compared year ended december 31 2016 primarily due 97 million decrease logistics sales resulting lower print shipment volume cost sales cost product sales decreased 1437 million 48 year ended december 31 2017 compared year ended december 31 2016 primarily due following 1 lower print paper volume 2 85 million vacation reserve reduction employee vacation policy change 3 cost reduction initiatives reductions partially offset 104 million benefit 2016 repeat 2017 related collection previously writtenoff vendor receivable cost product sales percentage net sales decreased 684 year ended december 31 2017 686 year ended december 31 2016 primarily due reasons provided cost service sales increased 83 million 20 year ended december 31 2017 compared year ended december 31 2016 primarily due increased shipment cost service sales percentage net sales decreased 105 year ended december 31 2017 98 year ended december 31 2016 primarily due reasons provided selling general administrative expenses selling general administrative expenses decreased 429 million 92 year ended december 31 2017 compared year ended december 31 2016 primarily due following 1 109 million vacation reserve reduction employee vacation policy change 2 68 million decrease legal expenses 3 50 million gain property insurance claim 4 savings cost reduction initiatives including employeerelated costs selling general administrative expenses percentage net sales decreased 108 year ended december 31 2016 103 year ended december 31 2017 primarily due reasons stated depreciation amortization depreciation amortization decreased 446 million 161 year ended december 31 2017 compared year ended december 31 2016 due 324 million decrease amortization expense primarily related customer relationship intangibles becoming fully amortized second quarter 2016 122 million decrease depreciation expense property plant equipment becoming fully depreciated past year decrease purchases property plant equipment 2017 compared 2016 restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges decreased 132 million 179 year ended december 31 2017 compared year ended december 31 2016 primarily due following 1 148 million decrease impairment charges 2 01 million decrease acquisitionrelated integration costs 3 132 million decrease restructuring charges decreases partially offset 140 million increase employee termination charges 09 million increase transactionrelated charges restructuring impairment transactionrelated charges 604 million incurred year ended december 31 2017 included following 1 269 million employee termination charges related workforce reductions facility consolidations voluntary involuntary separation programs 2 120 million impairment charges including 67 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity strategic reduction restructuring activities 53 million impairment charges land building related waseca minnesota taunton massachusetts plant closures 3 31 million transactionrelated charges consisting professional service fees related business acquisition divestiture activities 4 184 million various restructuring charges including costs maintain exit closed facilities well lease exit charges net 71 million gains sale atglen pennsylvania dickson tennessee east greenville pennsylvania lenexa kansas marengo iowa plants 12 million gain company’s argentina subsidiaries’ settlements vendors bankruptcy proceedings restructuring charges also included 67 million loss sale business restructuring impairment transactionrelated charges 736 million incurred year ended december 31 2016 included following 1 129 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 268 million impairment charges including 147 million impairment charges machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois queretaro mexico well capacity strategic reduction restructuring activities 121 million impairment charges land building related atglen pennsylvania plant closure 3 22 million transactionrelated charges consisting professional service fees related business acquisition divestiture activities 4 01 million acquisitionrelated integration costs 5 316 million various restructuring charges including costs maintain exit closed facilities lease exit charges 112 million increase mepps withdrawal liability ebitda marginconsolidated ebitda defined net earnings loss attributable quad common shareholders excluding 1 interest expense 2 income tax expense benefit 3 depreciation amortization ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quad’s performance important measures quad gauges profitability assesses performance business ebitda margin nongaap financial measures considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quad’s calculation ebitda margin may different calculations used companies therefore comparability may limited ebitda margin year ended december 31 2017 compared year ended december 31 2016 follows ebitda decreased 174 million year ended december 31 2017 compared year ended december 31 2016 primarily due lower print volume pricing due ongoing industry pressures 104 million benefit 2016 repeat 2017 related collection previously writtenoff vendor receivable impacts partially offset following 1 132 million decreased restructuring impairment transactionrelated charges 2 194 million vacation reserve reduction employee vacation policy change 3 68 million lower legal expenses 4 50 million gain property insurance claim 5 savings cost reduction initiatives including employeerelated costs reconciliation ebitda net earnings attributable quad common shareholders years ended december 31 2017 2016 follows 1 net earnings attributable quad common shareholders included following restructuring impairment transactionrelated charges 604 million 736 million years ended december 31 2017 2016 respectively b net pension income 96 million 51 million years ended december 31 2017 2016 respectively c loss debt extinguishment 26 million year ended december 31 2017 gain debt extinguishment 141 million year ended december 31 2016 e equity loss unconsolidated entity 14 million year ended december 31 2016 united states print related services following table summarizes net sales operating income operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment decreased 1782 million 53 year ended december 31 2017 compared year ended december 31 2016 primarily due 1376 million decrease product sales company’s print product lines predominantly due ongoing volume pricing pressures excess capacity printing industry 406 million decrease passthrough paper sales service sales united states print related services segment decreased 87 million 15 year ended december 31 2017 compared year ended december 31 2016 primarily due 84 million decrease logistic sales resulting lower print shipment volume operating income operating income united states print related services segment increased 82 million year ended december 31 2017 compared year ended december 31 2016 primarily due following 1 416 million decrease depreciation amortization 2 194 million vacation reserve reduction due employee vacation policy change 3 57 million restructuring impairment transactionrelated charges 4 50 million gain property insurance claim 5 savings cost reduction initiatives including employeerelated costs impacts partially offset lower print volume pricing 104 million benefit 2016 repeat 2017 related collection previously writtenoff vendor receivable operating margin united states print related services segment increased 52 year ended december 31 2017 47 year ended december 31 2016 primarily due reasons provided restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2017 536 million consisting following 1 217 million employee termination charges related workforce reductions facility consolidations separation programs 2 115 million impairment charges including 62 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity strategic reduction restructuring activities 53 million impairment charges land building related waseca minnesota taunton massachusetts plant closures 3 194 million various restructuring charges including costs maintain exit closed facilities well lease exit charges net 71 million gains sale atglen pennsylvania dickson tennessee east greenville pennsylvania lenexa kansas marengo iowa plants restructuring charges also included 67 million loss sale business restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2016 593 million consisting 1 105 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 259 million impairment charges including 138 million machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois well capacity strategic reduction restructuring activities 121 million land building impairment related atglen pennsylvania plant closure 3 01 million acquisitionrelated integration costs 4 228 million various restructuring charges including costs maintain exit closed facilities well lease exit charges international following table summarizes net sales operating income loss operating margin certain items impacting comparability equity loss unconsolidated entities within international segment net sales product sales international segment decreased 99 million 26 year ended december 31 2017 compared year ended december 31 2016 primarily due 65 million decrease passthrough paper sales 40 million decrease volume pricing primarily peru partially offset 06 million favorable foreign exchange impacts primarily europe service sales international segment decreased 13 million 63 year ended december 31 2017 compared year ended december 31 2016 primarily due decrease logistics revenue europe operating income operating income international segment increased 61 million 452 year ended december 31 2017 compared year ended december 31 2016 primarily due 74 million increase operating income primarily europe mexico 31 million decrease depreciation amortization expense partially offset 44 million increase restructuring impairment expenses restructuring impairment transactionrelated charges income restructuring impairment transactionrelated charges international segment year ended december 31 2017 33 million consisting following 1 47 million employee termination charges related workforce reductions facility consolidations separation programs 2 05 million impairment charges machinery equipment longer utilized production result facility consolidations 3 19 million various restructuring income primarily related company’s argentina subsidiaries’ gain settlements vendors bankruptcy proceedings partially offset charges maintain exit closed facilities restructuring impairment transactionrelated income international segment year ended december 31 2016 11 million consisting following 1 14 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 09 million impairment charges machinery equipment longer utilized production result facility consolidations including queretaro mexico 3 01 million transactionrelated charges 4 35 million restructuring income primarily related company’s argentina subsidiaries’ gain settlements vendors bankruptcy proceedings gain sale pilar argentina plant equity loss unconsolidated entity investments entities quadgraphics ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil equity loss unconsolidated entities international segment decreased 14 million year ended december 31 2017 compared year ended december 31 2016 due decrease losses company’s investment plural unrestricted subsidiaries unrestricted subsidiaries defined senior unsecured notes indenture represented less 20 total consolidated net sales year ended december 31 2017 corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses decreased 237 million 288 year ended december 31 2017 compared year ended december 31 2016 primarily due 119 million decrease restructuring impairment transactionrelated charges 80 million decrease legal expenses 46 million decrease incentive compensation expense restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges year ended december 31 2017 35 million consisting following 1 05 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 21 million transactionrelated charges primarily included professional service fees 3 09 million restructuring charges corporate restructuring impairment transactionrelated charges year ended december 31 2016 154 million consisting following 1 10 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 21 million transactionrelated charges primarily included professional service fees 3 123 million restructuring charges including 112 million increase mepps withdrawal liability liquidity capital resources company utilizes cash flows operating activities borrowings credit facilities satisfy liquidity capital requirements december 31 2018 company cash equivalents 695 million addition cash equivalents company 6909 million unused capacity revolving credit arrangement december 31 2018 net 341 million issued letters credit company believes expected future cash flows operating activities 6909 million unused capacity revolving credit arrangement available cash hand provide sufficient resources fund ongoing operating requirements integration restructuring requirements related acquired operations well future capital expenditures debt pension service requirements investments future growth create value shareholders shareholder dividends share repurchases borrowings 7250 million revolving credit facility december 31 2018 peak borrowings 2466 million year ended december 31 2018 net cash provided operating activities year ended december 31 2018 compared year ended december 31 2017 net cash provided operating activities 2606 million year ended december 31 2018 compared 3440 million year ended december 31 2017 resulting 834 million decrease cash provided operating activities decrease primarily due 934 million decrease cash earnings partially offset 100 million increase cash flows changes operating assets liabilities year ended december 31 2017 compared year ended december 31 2016 net cash provided operating activities 3440 million year ended december 31 2017 compared 3536 million year ended december 31 2016 resulting 96 million decrease cash provided operating activities decrease primarily due 310 million decrease cash flows changes operating assets liabilities partially offset 214 million increase cash earnings net cash used investing activities year ended december 31 2018 compared year ended december 31 2017 net cash used investing activities 1205 million year ended december 31 2018 compared 472 million year ended december 31 2017 resulting 733 million increase cash used investing activities increase primarily due following 1 714 million increase acquisition businesses 2 141 million decrease proceeds sale business 3 104 million increase purchases property plant equipment increases partially offset following 1 88 million increase proceeds sale property plant equipment 2 73 million loan unconsolidated entity 2017 repeat 2018 3 65 million increase proceeds property insurance claims year ended december 31 2017 compared year ended december 31 2016 net cash used investing activities 472 million year ended december 31 2017 compared 888 million year ended december 31 2016 resulting 416 million decrease cash used investing activities decrease primarily due following 1 202 million decrease purchases property plant equipment 2 141 million increase proceeds sale business 3 99 million decrease cost method investments 4 80 million increase proceeds property insurance claims decreases partially offset 73 million increase loan unconsolidated entity net cash used financing activities year ended december 31 2018 compared year ended december 31 2017 net cash used financing activities 1335 million year ended december 31 2018 compared 2517 million year ended december 31 2017 resulting 1182 million decrease cash used financing activities decrease primarily due following 1 1439 million decrease net repayments debt lease obligations 2018 compared 2017 2 47 million decrease payments debt issuance costs financing fees decreases partially offset following 1 329 million increase purchases treasury stock 2 30 million increase equity awards redeemed pay employees’ tax obligations year ended december 31 2017 compared year ended december 31 2016 net cash used financing activities 2517 million year ended december 31 2017 compared 2693 million year ended december 31 2016 resulting 176 million decrease cash used financing activities decrease primarily due 549 million decrease net repayments debt lease obligations 2017 compared 2016 50 million decrease treasury stock purchases decreases partially offset following 1 277 million decreased proceeds stock options exercised 2 46 million increased payments debt issuance costs financing fees 3 46 million increased equity awards redeemed pay employees’ tax obligations free cash flow free cash flow defined net cash provided operating activities less purchases property plant equipment company’s management assesses free cash flow measure quantify cash available 1 strengthening balance sheet debt reduction 2 strategic capital allocation deployment investments business acquisitions strategic investments 3 returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted company’s restructuring activities unusual items free cash flow nongaap financial measure considered alternative cash flows provided operating activities measure liquidity quad’s calculation free cash flow may different similar calculations used companies therefore comparability may limited free cash flow years ended december 31 2018 2017 2016 follows free cash flow decreased 938 million year ended december 31 2018 compared year ended december 31 2017 primarily due 834 million decrease net cash provided operating activities primarily due decrease cash earnings 104 million increase capital expenditures free cash flow increased 106 million year ended december 31 2017 compared year ended december 31 2016 due 202 million decrease capital expenditures offset 96 million decrease net cash provided operating activities primarily attributable decrease cash flows changes operating assets liabilities see “net cash provided operating activities” section explanations change operating cash flows “net cash used investing activities” section explanations changes purchases property plant equipment debt leverage ratio debt leverage ratio defined total debt capital lease obligations divided trailing twelve months adjusted ebitda comprised sum following 1 last twelve months ebitda see definition ebitda reconciliation net earnings loss attributable quad common shareholders ebitda “results operations” section 2 restructuring impairment transactionrelated charges 3 net pension income 4 employee stock ownership plan contributions 5 loss gain debt extinguishment 6 equity earnings loss unconsolidated entity 7 net earnings loss attributable noncontrolling interests company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strategic investments strengthening balance sheet pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability debt leverage ratio nongaap measure considered alternative cash flows provided operating activities measure liquidity quad’s calculation debt leverage ratio may different similar calculations used companies therefore comparability may limited debt leverage ratio calculated differs total leverage ratio senior secured leverage ratio included company’s debt covenant calculations see note 11 “debt” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k information debt covenants total leverage ratio included company’s debt covenants includes letters credit surety bonds debt excludes noncash stockbased compensation expense ebitda includes equity earnings loss unconsolidated entity net income loss attributable noncontrolling interests ebitda similarly senior secured leverage ratio included company’s debt covenants includes excludes adjustments total leverage ratio addition exclusion outstanding balance senior unsecured notes surety bonds debt leverage ratio december 31 2018 2017 follows 1 permitted company’s senior secured credit facility certain pro forma financial information related acquisition ivie included calculating debt leverage ratio december 31 2018 acquisition ivie completed february 21 2018 29 million pro forma adjusted ebitda represents period january 1 2018 february 20 2018 adjusted ebitda ivie calculated consistent manner calculation quad ivie’s financial information consolidated within quad’s financial results since date acquisition two months pro forma adjusted ebitda ivie included calculation company’s debt leverage ratio would 227x december 31 2018 2 company 70 million 64 million cash equivalents december 31 2018 2017 respectively based company’s typical yearend cash balance approximately 10 million quad 60 million 54 million excess cash december 31 2018 2017 respectively excess cash year used pay debt leverage ratio would 211x 203x december 31 2018 2017 respectively calculation adjusted ebitda years ended december 31 2018 2017 follows 1 result adoption asu 201707 pension components service cost required excluded operating income company also excluded pension income calculation adjusted ebitda reflected periods presented debt leverage ratio increased 010x december 31 2018 compared december 31 2017 primarily due 336 million decrease adjusted ebitda debt leverage ratio december 31 2018 225x within management’s desired target debt leverage ratio range 20x 25x however company operates times debt leverage ratio target range depending timing compelling strategic investment opportunities seasonal working capital needs description significant outstanding debt obligations december 31 2018 december 31 2018 company utilized combination debt instruments fund cash requirements including following • senior secured credit facility ◦ 7250 million revolving credit facility outstanding balance december 31 2018 ◦ 3750 million term loan 2813 million outstanding december 31 2018 ◦ 3000 million term loan b 2795 million outstanding december 31 2018 • senior unsecured notes 2435 million outstanding december 31 2018 • master note security agreement 962 million outstanding december 31 2018 senior secured credit facility senior secured credit facility consists three different loan facilities first facility revolving credit facility amount 7250 million term four years maturing january 4 2021 second facility term loan aggregate amount 3750 million term four years maturing january 4 2021 subject certain required amortization third facility term loan b amount 3000 million term seven years maturing april 27 2021 subject certain required amortization company completed second amendment company’s senior secured credit facility february 10 2017 second amendment completed reduce size revolving credit facility term loan extend company’s debt maturity profile maintaining company’s current cost borrowing covenant structure revolving credit facility lowered maximum borrowing amount 7250 million 8500 million term loan lowered aggregate amount 3750 million 4500 million amendment senior secured credit facility impact company’s quarterly financial covenant requirements borrowings revolving credit facility term loan made senior secured credit facility december 31 2018 bear interest 200 excess reserve adjusted libor 100 excess alternate base rate weighted average interest rate revolving credit facility 391 weighted average interest rate term loan loans 378 december 31 2018 interest payable monthly borrowings term loan b december 31 2018 bear interest 325 excess reserve adjusted libor floor 100 225 excess alternative base rate company’s option weighted average interest rate term loan b 524 december 31 2018 interest payable monthly senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances january 31 2019 company completed third amendment senior secured credit facility see note 24 “subsequent events” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k detail senior unsecured notes company received 2948 million net proceeds sale 3000 million senior unsecured notes deducting initial purchasers’ discounts commissions senior unsecured notes bear interest 700 interest payable semiannually senior unsecured notes due may 1 2022 company repurchased 565 million senior unsecured notes open market resulting net gain debt extinguishment 143 million year ended december 31 2016 repurchased senior unsecured notes canceled company used cash flows operating activities borrowings revolving credit facility fund repurchases primarily completed efficiently reduce debt balances interest expense based current libor rates company’s existing future domestic subsidiaries borrower guarantees indebtedness company’s senior secured credit facility guarantees certain company’s indebtedness company’s restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes “guarantor subsidiaries” current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including following 1 designation guarantor subsidiaries unrestricted subsidiary 2 release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries 3 sale disposition including sale substantially assets guarantor subsidiaries master note security agreement sometimes referred senior notes september 1 1995 last amended november 24 2014 company entered master note security agreement pursuant company issued time senior notes aggregate principal amount 11 billion various tranches 962 million outstanding december 31 2018 weighted average interest rate senior notes 736 december 31 2018 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2031 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement company redeemed 601 million senior notes master note security agreement resulting net loss debt extinguishment 02 million year ended december 31 2016 tendered senior notes master note security agreement canceled company used cash flows operating activities borrowings revolving credit facility fund tender primarily completed reallocate debt lower interest rate revolving credit facility thereby reduce interest expense based current libor rates covenants compliance company’s various lending arrangements include certain financial covenants financial terms numbers ratios defined company’s debt agreements among covenants company required maintain following december 31 2018 • total leverage ratio rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda shall exceed 375 100 twelve months ended december 31 2018 company’s total leverage ratio 219 100 • senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined senior secured debt consolidated ebitda shall exceed 350 100 twelve months ended december 31 2018 company’s senior secured leverage ratio 163 100 • minimum interest coverage ratio rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2018 company’s minimum interest coverage ratio 623 100 indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit company’s restricted subsidiaries’ ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially company’s consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates company compliance financial covenants debt agreements december 31 2018 company currently expects compliance future periods financial covenants assurance covenants continue met company’s failure maintain compliance covenants could prevent company borrowing additional amounts could result default debt agreements default could cause outstanding indebtedness become immediately due payable virtue crossacceleration crossdefault provisions addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock including following • company’s total leverage ratio greater 300 100 defined senior secured credit facility company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions • company’s senior secured leverage ratio greater 300 100 company’s total leverage ratio greater 350 100 ratios defined senior secured credit facility company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total leverage ratio less 350 100 restrictions net pension obligations net underfunded pension mepps obligations increased 212 million year ended december 31 2018 1123 million december 31 2017 1335 million december 31 2018 increase overall pension obligations primarily due 321 million increase mepps withdrawal liability recorded year ended december 31 2018 following unfavorable ruling panel ninth circuit court appeals december 2018 also due actual return plan assets 54 year ended december 31 2018 fell expected return plan assets assumption 65 increase partially offset 70 basis point increase pension discount rate 352 december 31 2017 422 december 31 2018 payments totaling 131 million made mepps year ended december 31 2018 company continues focus reducing pension obligations cash contributions plans lumpsum settlements plan design changes share repurchase program september 6 2011 company’s board directors authorized share repurchase program 1000 million company’s outstanding class stock july 30 2018 company’s board directors discontinued remainder september 6 2011 share repurchase program authorized new share repurchase program 1000 million company’s outstanding class common stock authorization share repurchases may made company’s discretion time open market andor privately negotiated transactions permitted federal securities laws legal requirements timing manner price amount repurchase depend economic market conditions share price trading volume applicable legal requirements factors program may suspended discontinued time year ended december 31 2018 company repurchased 1871631 shares class common stock weighted average price 1959 per share total purchase price 367 million year ended december 31 2017 company repurchased 200605 shares class common stock weighted average price 1889 per share total purchase price 38 million year ended december 31 2016 company repurchased 984190 shares class common stock weighted average price 896 per share total purchase price 88 million december 31 2018 1000 million authorized repurchases remaining program risk management discussion company’s exposure market risks management market risks see item 7a “quantitative qualitative disclosures market risk” annual report form 10k offbalance sheet arrangements except set forth contractual obligations commitments table note 12 “lease obligations” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k including operating leases future interest debt capital leases incurred company offbalance sheet arrangements financings special purpose entities company expects material current future effect financial condition changes financial condition results operations liquidity capital expenditures capital resources significant components sales expenses contractual obligations commitments company’s contractual cash obligations december 31 2018 follows millions 1 debt obligations include 1394 million anticipated future interest payments net 43 million estimated interest income interest rate swap excludes 72 million 10 million future amortization debt issuance costs original issue discount respectively 2017 company paid advance full amount required amortization payments term loan totaling 727 million years ended december 31 2018 2019 first quarter ended march 31 2020 company also paid advance full amount required amortization payments term loan b totaling 90 million years ended december 31 2018 2019 2020 amounts included “thereafter” include principal payments estimated interest expense april 2031 january 31 2019 company completed third amendment senior secured credit facility see note 24 “subsequent events” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k detail 2 mepps withdrawal obligations include 221 million anticipated future interest payments see note 15 “employee retirement plans” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k discussion mepps withdrawal liability 3 pension benefits contributions benefit payments funded company assets included table actuarially estimated five year period benefit payments benefit plans expected continue beyond 2023 company believes estimate beyond period unreasonable 4 capital lease obligations include 17 million anticipated future interest payments 5 purchase obligations consist primarily 532 million firm commitments purchase press finishing equipment 79 million purchase obligations 6 business acquisitions represents estimated 154 million future cash payments associated acquisition ivie see note 3 “acquisitions strategic investments” consolidated financial statements item 8 “financial statements supplementary data” annual report form 10k discussion 7 contractual obligations table include reserves uncertain tax positions recorded accordance accounting guidance uncertainties income taxes company taken tax positions ultimate amount years necessary payments made pertain tax positions uncertain reserve uncertain tax positions prior interest penalties 144 million december 31 2018 79 million included longterm liabilities 62 million included deferred income taxes 03 million included accrued liabilities consolidated balance sheets company also recorded reserves interest penalties related uncertain tax positions 05 million 01 million respectively december 31 2018 8 contractual obligations table include share repurchase program repurchases required program see “share repurchase program” section discussion including maximum potential cash payments program critical accounting policies estimates company’s consolidated financial statements prepared accordance gaap company’s critical accounting policies important portrayal financial condition results operations require company make difficult subjective estimates management required make judgments estimates affect reported amounts assets liabilities disclosure contingent assets liabilities date statements reported amounts revenues expenses reporting period company bases estimates historical experience various assumptions believed reasonable circumstances company’s management believes judgments estimates made consistent appropriate methods based information available time reasonable deviation judgments estimates would material impact company’s consolidated financial position results operations actual results may differ estimates different assumptions conditions extent estimates used differ actual results adjustments consolidated statements operations corresponding consolidated balance sheets would necessary adjustments would made future statements company identified following critical accounting policies estimates revenue recognition performance obligations contract inception company assesses products services promised contracts customers identifies performance obligations promise transfer customer product service distinct identify performance obligations company considers goods services promised contract regardless whether explicitly stated implied customary business practices company determined following distinct products services represent separate performance obligations •prepress services •print •other services prepress services company recognizes revenue pointintime upon completion performed service acceptance customer company considers transfer control occur service performed company right payment customer legal title risk reward ownership company recognizes print revenues upon transfer title passage risk loss pointintime upon shipment customer reasonable assurance collectability revenues related company’s logistics operations includes delivery printed material included print performance obligation also recognized pointintime services completed revenues related company’s imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily company’s logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations item 8 “financial statements supplementary data” annual report form 10k many company’s operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis instances company deliver print work customer bill customer postage cases company acting agent billings recorded net basis net sales significant payment terms payment terms conditions contracts customers vary company typically offers standard terms net 30 days company’s standard business practice offer extended payment terms longer one year company may offer cash discounts prepayment extended terms depending certain facts circumstances timing company’s delivery products services differs timing payment company record either contract asset contract liability variable consideration evaluating transaction price company analyzes contract basis applicable variable considerations noncash consideration also performs constraint analysis nature company’s contracts give rise variable consideration including volume rebates credits discounts similar items generally decrease transaction price variable amounts generally credited customer based achieving certain levels sales activity contracts signed making payments within specific terms product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends transaction price requires allocation multiple performance obligations company uses estimated standalone selling prices using adjusted market assessment approach costs obtain contracts company capitalizes certain sales incentives sales compensation packages costs directly attributed awarded customer contract renewal would incurred contract obtained company also defers certain contract acquisition costs paid customer contract inception costs obtain contracts duration less one year expensed incurred contract costs contracts one year company amortizes costs obtain contracts straightline basis estimated life contract reviews quarterly impairment accounting policies estimates related revenue recognition updated effective january 1 2018 adoption revised guidance recognizing revenue contracts customers see note 1 “basis presentation summary significant accounting policies” note 2 “revenue recognition” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k information impairment property plant equipment finitelived intangible assets company performs impairment evaluations longlived assets whenever business conditions events circumstances indicate assets may impaired including whether estimated useful life longlived assets may warrant revision whether remaining balance asset may recoverable company’s significant longlived assets property plant equipment customer relationship intangible assets recorded conjunction acquisition assessing impairment longlived assets requires company make important estimates assumptions including limited expected future cash flows assets generate assets used based strategic direction company remaining useful life residual value considerable judgment also applied incorporating potential impact current economic climate customer demand selling prices cost production limited activity secondary markets assets cost capital estimated future undiscounted cash flows generated assets less carrying value longlived assets written fair value charge recorded current operations company uses internal discounted cash flow estimates quoted market prices available independent appraisals appropriate determine fair value fair value determination categorized level 3 fair value hierarchy see note 14 “financial instruments fair value measurements” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k definition level 3 inputs based assessments completed years ended december 31 2018 2017 2016 company recognized property plant equipment impairment charges 265 million 120 million 268 million respectively primarily related facility consolidations well capacity strategic reduction restructuring initiatives finitelived intangible asset impairment charges recorded years ended december 31 2018 2017 2016 company continues monitor groups assets identify new events changes circumstances could indicate carrying values recoverable particularly light potential declines profitability may result highly competitive industry landscape continued uncertainty global economy event significant unanticipated changes circumstances significant adverse changes business climate adverse actions regulators unanticipated competition loss key customers andor changes technology markets actual results differ management’s estimates provision impairment could required future period impairment goodwill accordance accounting guidance company performs annual impairment test goodwill october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value goodwill represents excess purchase price fair value identifiable net assets acquired business combination assigned specific reporting units changes management’s estimates judgments including changes based actual results differing estimates judgments used purchase price allocation process could result impairment charge could material adverse effect companys results operations within united states print related services segment company identified three reporting units 1 core print related services 2 specialty print related services 3 united states products services december 31 2018 goodwill totaled 546 million allocated core print related services specialty print related services reporting unit united states products services reporting unit goodwill allocated additionally goodwill international segment consolidated balance sheets determining fair value core print related services reporting unit company used equal weighting income market approaches significant assumptions used income approach included estimated future cash flows including expected future revenue growth profit margins capital expenditures working capital levels terminal value multiples 112 aftertax weighted average cost capital core print related services estimated future cash flows based companys internal projection models industry projections assumptions deemed reasonable management significant assumptions used market approach included control premium based similar transactions selection guideline public companies selected market multiples fair value determination categorized level 3 fair value hierarchy see note 14 “financial instruments fair value measurements” consolidated financial statements item 8 “financial statements supplementary data” annual report form 10k definition level 3 inputs completing evaluation estimated fair value core print related services reporting unit united states print related services segment determined exceed carrying value reporting unit addition company performed sensitivity analysis october 31 2018 material assumptions used discounted cash flow valuation models performing annual goodwill impairment assessment percentage estimated fair value exceeded carrying value core print related services reporting unit 50 management concluded impairment existed october 31 2018 additional indications impairment identified october 31 2018 december 31 2018 pension plans result acquisition world color press company acquired multiple underfunded pension plans pension plan costs determined using actuarial methods funded contributions determined accordance projected benefit method prorated based service company records amounts relating pension plans based calculations include various actuarial assumptions company believes two critical assumptions discount rate assumed rate return assets changes assumptions primarily influenced factors outside company’s control significant effect amounts reported financial statements company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets included item 8 “financial statements supplementary data” annual report form 10k company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors event gives rise curtailment settlement curtailment accounted prior settlement company’s measurement date measure defined benefit plan assets projected benefit obligation december 31 purposes calculating expected return plan assets valued fair value company determines assumption discount rate used purposes computing annual service interest costs pension plan based index highquality corporate bond yields matchedfunding yield curve analysis date company measures interest costs pension benefits applying specific spot rates along yield curve plans’ liability cash flows weighted average discount rate used determine benefit obligations pension plans december 31 2018 422 70 basis point increase discount rate 352 december 31 2017 onepercentage point change discount rate would following impact projected benefit obligation december 31 2018 company employs total return investment approach pension plans whereby diversified mix equity securities debt securities used maximize longterm pension plan assets intent strategy outperform growth plan liabilities long run plan contributions decreased balanced maintaining lower degree investment risk tolerance established careful consideration plan liabilities plan funded status corporate financial condition equity securities diversified across geography market capitalization investments united states largecapitalization stocks united states smallcapitalization stocks international securities investment risk measured monitored ongoing basis annual liability measurements periodic assetliability studies quarterly investment portfolio reviews expected longterm rate return plan assets based upon many factors including expected asset allocations historical asset returns current expected future market conditions risk current target asset allocation plan assets weighted average basis 30 equity securities 70 debt securities actual asset allocation december 31 2018 approximately 30 equity securities 70 debt securities expected return plan assets assumption december 31 2018 2017 65 company’s funded united states pension plans actual return plan assets 54 143 years ended december 31 2018 2017 respectively certain pension plans unfunded plans hold plan assets 25 basis point change expected return plan assets would following impact net pension income year ended december 31 2018 company also participated mepps result acquisition world color press company withdrawn significant mepps replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan two mepps gciu gcc significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued estimated withdrawal liability based information provided plan’s trustee fourth quarter 2016 company gcc reached settlement agreement claims scheduled payments february 2024 company received notice withdrawal demand payment letter gciu company currently litigation gciu trustees determine amount duration withdrawal payments gciu arbitration proceedings gciu completed sides appealed arbitrator’s ruling litigation federal court commenced april 2017 federal district court overturned arbitration decision one pending disputes matter company appealed district court’s ruling panel ninth circuit court appeals december 2018 panel upheld district court’s decision company filed motion reconsideration panel denied litigation gciu trustees concluded exact amount withdrawal liability known result unfavorable rulings company recorded 321 million increase mepps withdrawal liability year ended december 31 2018 recorded restructuring impairment transactionrelated charges consolidated statements operations new accounting pronouncements see note 23 “new accounting pronouncements” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k item 7aitem 7 management’s discussion analysis financial condition results operations following discussion financial condition results operations quad read together quad’s audited consolidated financial statements three years period ended december 31 2019 including notes thereto included part ii item 8 “financial statements supplementary data” annual report form 10k discussion contains forwardlooking statements reflect company’s plans estimates beliefs company’s actual results could differ materially discussed forwardlooking statements factors could cause contribute differences include limited discussed “forwardlooking statements” part item 1a “risk factors” included earlier within annual report form 10k management’s discussion analysis financial condition results operations provided supplement company’s consolidated financial statements accompanying notes help provide understanding company’s financial condition changes company’s financial condition company’s results operations discussion analysis organized follows • overview section includes general description company’s business segments overview key performance metrics company’s management measures utilizes evaluate business performance overview trends affecting company including management’s actions related trends • results operations section contains analysis company’s results operations comparing results 1 year ended december 31 2019 year ended december 31 2018 2 year ended december 31 2018 year ended december 31 2017 comparability company’s results operations periods impacted acquisitions strategic investments divestitures including 2019 acquisition periscope 2018 acquisition ivie strategic investment rise results operations acquisitions investments included company’s consolidated results prospectively respective dates acquisition consolidation results company’s united states book business reported discontinued operations periods presented forwardlooking statements providing general description recent projected industry company developments important understanding company’s results operations included section also provides discussion ebitda margin financial measures company uses assess performance business prepared accordance accounting principles generally accepted united states america “gaap” • liquidity capital resources section provides analysis company’s capitalization cash flows statement offbalance sheet arrangements discussion table outstanding debt commitments forwardlooking statements important understanding company’s financial condition included section also provides discussion free cash flow debt leverage ratio nongaap financial measures company uses assess liquidity capital allocation deployment • critical accounting policies estimates section contains discussion accounting policies company’s management believes important company’s financial condition results operations well allowances reserves require significant judgment estimates part company’s management addition company’s significant accounting policies including critical accounting policies summarized note 1 “basis presentation summary significant accounting policies” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k overview business overview quad worldwide marketing solutions partner dedicated creating better way clients datadriven integrated marketing platform helps reduce complexity increase efficiency enhance marketing spend effectiveness full description company’s business overview refer part item 1 “business” annual report form 10k company’s operating reportable segments aligned chief operating decision maker company currently manages business company’s operating reportable segments including product service offerings “corporate” category summarized united states print related services segment predominantly comprised company’s united states printing operations managed one integrated platform includes retail inserts publications catalogs special interest publications journals direct mail directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement together marketing complementary services including consumer insights audience targeting personalization media planning placement process optimization campaign planning creation premedia production videography photography digital execution print execution logistics segment also includes manufacture ink united states print related services segment accounted approximately 90 company’s consolidated net sales year ended december 31 2019 international segment consists company’s printing operations europe latin america including operations england france germany poland argentina colombia mexico peru well investments printing operations brazil india segment provides printed products marketing complementary services consistent united states print related services segment international segment accounted approximately 10 company’s consolidated net sales year ended december 31 2019 corporate consists unallocated general administrative activities associated expenses including part executive legal finance well certain expenses income frozen employee retirement plans pension benefit plans key performance metrics overview company’s management believes ability generate net sales growth profit increases positive cash flow maintaining appropriate level debt key indicators successful execution company’s business strategy increase shareholder value company uses periodoverperiod net sales growth ebitda margin net cash provided operating activities free cash flow debt leverage ratio metrics measure operating performance financial condition liquidity ebitda margin free cash flow debt leverage ratio nongaap financial measures see definitions ebitda margin reconciliation net earnings loss attributable quad common shareholders ebitda “results operations” section see definitions free cash flow debt leverage ratio reconciliation net cash provided operating activities free cash flow calculation debt leverage ratio “liquidity capital resources” section net sales growth company uses periodoverperiod net sales growth key performance metric company’s management assesses net sales growth based ability generate increased net sales increased sales existing clients sales new clients sales new expanded solutions existing new clients opportunities expand sales strategic investments including acquisitions ebitda margin company uses ebitda margin metrics assess operating performance company’s management assesses ebitda margin based ability increase revenues controlling variable expense growth net cash provided operating activities company uses net cash provided operating activities metric assess liquidity company’s management assesses net cash provided operating activities based ability meet recurring cash obligations increasing available cash fund cash restructuring requirements related cost reduction activities well fund capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal liabilities acquisitions investments future growth shareholder dividends share repurchases net cash provided operating activities significantly impacted timing nonrecurring infrequent receipts expenditures free cash flow company uses free cash flow metric assess liquidity capital deployment company’s management assesses free cash flow measure quantify cash available strengthening balance sheet debt pension liability reduction strategic capital allocation deployment investments business acquisitions strategic investments returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted company’s restructuring activities unusual items debt leverage ratio company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strategic investments strengthening balance sheet pension liability reduction returning capital shareholders dividends share repurchases company’s priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability company remains disciplined debt leverage company’s consolidated debt finance lease obligations increased 171 million year ended december 31 2019 primarily fund acquisition periscope since company completed world color press acquisition july 2010 company reduced debt finance lease obligations 627 million reduced obligations pension postretirement mepps 439 million total obligation reduction since july 2010 10 billion overview trends affecting quad consumer media consumption habits change marketing services providers face increased demand offer endtoend marketing services strategy creative execution across media channels new marketing advertising channels emerge marketing services providers must expand services beyond traditional channels television newspapers print publications radio digital channels mobile internet search internet display video create effective multichannel campaigns clients trend greatly influences quad’s ongoing efforts redefine future integrated marketing create greater value clients looking less complexity greater transparency accountability business partners company leverages datadriven print expertise part integrated marketing platform helps clients plan produce marketing programs also deploy manage measure across media channels competition printing industry remains highly fragmented intense company believes indicators heightened competitive pressures industry excess manufacturing capacity created continued declines industry volumes turn created accelerated downward pricing pressures addition digital delivery documents data including online distribution hosting media content mobile technologies offer alternatives traditional delivery printed documents increasing consumer acceptance digital delivery content resulted marketers publishers allocating marketing advertising spend across expanding selection digital delivery options reduces printing demand contributes print industry overcapacity company also faces competition print management firms look streamline processes reduce overall print spend company’s clients well strategic marketing firms focused helping businesses integrate multiple channels marketing campaigns full description company’s industry competition overview refer part item 1 “business” annual report form 10k company believes disciplined approach capital management strong balance sheet critical able invest profitable growth opportunities technological advances thereby providing highest return shareholders management balances use cash deleveraging company’s balance sheet reduction debt pension obligations compelling investment opportunities capital expenditures acquisitions strategic investments returns shareholders share repurchases quarterly dividends company continues make progress integrating streamlining aspects business thereby lowering cost structure consolidating manufacturing platform efficient facilities well realizing purchasing mailing logistics efficiencies centralizing consolidating print manufacturing volumes eliminating redundancies administrative corporate operations company continued evolve manufacturing platform equipping facilities product line agnostic enables company maximize equipment utilization quad believes large plant size certain key printing facilities allows company drive savings certain product lines publications catalogs due economies scale investments automation technology company continues focus proactively aligning cost structure realities topline pressures faces printing industry lean manufacturing sustainable continuous improvement programs restructuring actions initiated company beginning 2010 resulted announcement 45 plant closures december 31 2019 company believes continue drive productivity improvements sustainable cost reduction initiatives future engaged workforce ongoing adoption latest manufacturing automation technology strategy company believes maintain strongest efficient print manufacturing platform remain highquality lowcost producer integrated distribution usps important component company’s business material change current service levels provided usps could impact demand clients print services usps continues experience financial problems without increased revenues action congress reform usps’ cost structure losses continue future financial difficulties usps come increased pressure adjust postal rates service levels additional price increases may result customers reducing mail volumes exploring use alternative methods delivering larger portion products continued diversion internet alternative media channels ensure stay within expected postage budgets current federal law limits postal rate increases outside “exigent circumstance” increase cpi cap works ensure funding stability predictability mailers however federal statute requires prc conduct review overall ratemaking structure usps prc proposed new ratemaking structure would provide usps additional pricing flexibility current cpi cap may result substantially altered rate structure mailers newly revised rates would effective new rules issued prc may include higher rate cap potentially elimination rate cap altogether result restrictions usps’ ability increase rates year may lead price spikes mailers may also reduce incentive usps continue take costs instead continue rely postage cover costs outdated postal service reflect industry’s ability willingness pay result may reduced demand printed products customers may move aggressively delivery methods many digital mobile options available consumers company invested significantly mail preparation distribution capabilities mitigate impact increases postage costs help clients successfully navigate everchanging postal environment data analytics unique software merge mail streams large scale advanced finishing capabilities technology inhouse transportation logistics operations company manages mail preparation distribution clients’ products maximize efficiency enable ontime consistent delivery partially reduce costs however net impact increasing postal costs may create decrease client demand print mail products 2019 company continued focus building integrated marketing platform acquiring minneapolisbased creative agency periscope january 3 2019 purchase price 121 million excluding acquired cash noncash equity awards granted periscope’s comprehensive offering includes media buying analytics creative account management well packaging design premedia services complement quad’s printproduction capabilities periscope company highly efficient global platform creating marketing campaigns programs strategy creative execution across media channels integrated endtoend marketing platform creates value clients traditional agency approach operates silos reducing complexity improving process efficiencies marketing spend effectiveness throughout 2019 company also continued make strategic investments manufacturing platform part ongoing commitment maintaining efficient automated dependable manufacturing distribution platform printing industry investments included digital press technology help clients gain competitive edge datadriven personalized print marketing quickmakeready wideweb offset press technology automated guided vehicles driverless fork trucks automated palletizers end finishing lines enhance productivity offset labor shortages help quad sustain position highquality lowcost producer third quarter 2019 company made decision sell book business part ongoing process review business portfolio divest assets core transformation strategy accordingly company classified book business assets liabilities held sale discontinued operation accordance asc 20520 discontinued operations book business consists three facilities versailles kentucky fairfield pennsylvania martinsburg west virginia company’s book business historically included within united states print related services segment core print related services reporting unit results operations year ended december 31 2019 compared year ended december 31 2018 summary results company’s operating income continuing operations operating margin net earnings loss attributable quad common shareholders computed using 25 normalized tax rate items subject tax diluted earnings loss per share attributable quad common shareholders year ended december 31 2019 changed year ended december 31 2018 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges decreased 139 million 104 million net tax 894 million year ended december 31 2019 included following 08 million decrease employee termination charges 230 million year ended december 31 2018 222 million year ended december 31 2019 b 183 million decrease impairment charges 262 million year ended december 31 2018 79 million year ended december 31 2019 c 434 million increase transactionrelated charges 82 million year ended december 31 2018 to516 million year ended december 31 2019 20 million increase integrationrelated charges 13 million year ended december 31 2018 to33 million year ended december 31 2019 e 402 million decrease various restructuring charges 446 million year ended december 31 2018 44 million year ended december 31 2019 company expects incur additional restructuring integration costs future reporting periods connection eliminating excess manufacturing capacity properly aligning cost structure conjunction company’s acquisitions strategic investments cost reduction programs 2 interest expense increased 168 million 126 million net tax year ended december 31 2019 900 million change due higher weighted average interest rate borrowings higher average debt levels year ended december 31 2019 compared year ended december 31 2018 3 net pension income decreased 64 million 48 million net tax year ended december 31 2019 60 million due 49 million decrease change expected longterm return pension plan assets assumption 625 650 15 million increase interest cost pension plan liabilities 4 305 million loss debt extinguishment 229 million net tax recognized year ended december 31 2019 includes 159 million relating third amendment company’s senior secured credit facility completed january 31 2019 146 million relating retirement term loan b completed july 26 2019 5 46 million decrease income tax benefit calculated following table primarily due 61 million decreased tax benefit decrease company’s liability unrecognized tax benefits 2018 repeat 2019 partially offset 13 million tax benefit related deductibility acquisitionrelated transaction costs 6 increase loss discontinued operations net tax 786 million year ended december 31 2019 primarily due 918 million increase restructuring impairment transactionrelated charges year ended december 31 2019 reduce carrying value book business fair value including 865 million impairment tangible property plant equipment 56 million impairment contract assets company also recorded 101 million goodwill impairment charge year ended december 31 2019 due carrying value book business net assets exceeding estimated fair value increase loss partially offset 264 million increase income tax benefit 7 decrease investments unconsolidated entity noncontrolling interests net tax 19 million year ended december 31 2019 primarily due 13 million decrease earnings company’s investment plural industria gráfica ltda “plural” company’s brazilian joint venture 06 million decrease loss attributed noncontrolling interests company’s consolidated statements operations related company’s 57 ownership rise 8 operating income continuing operations excluding restructuring impairment transactionrelated charges decreased 665 million 498 million net tax primarily due following 1 lower print volume pricing print service sales 2 increase employeerelated costs primarily due 286 million increase production hourly wages competitive labor markets 3 267 million decrease paper byproduct recoveries 4 175 million net benefit 2018 gains property insurance claims 5 87 million benefit 2018 changes employee vacation policies 6 56 million gain 2018 sales tax litigation settlement peru decreases partially offset following 1 223 million noncash expense related special employee retirement contribution 2018 resulting benefit tax reform repeat 2019 2 savings cost reduction initiatives 3 earnings ivie periscope acquisitions investment rise operating results continuing operations following table sets forth certain information company’s consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased 861 million 27 year ended december 31 2019 compared year ended december 31 2018 primarily due 715 million decrease product sales company’s print product lines due ongoing industry volume pricing pressures 228 million unfavorable foreign exchange impacts primarily argentina europe partially offset 82 million increase passthrough paper sales service sales primarily consist logistics distribution marketing services imaging medical services increased 237 million 30 year ended december 31 2019 compared year ended december 31 2018 primarily due 783 million increase net sales ivie periscope acquisitions investment rise partially offset following 1 301 million decrease sales marketing services primarily print management 2 189 million decrease print imaging services 3 44 million decrease sales quadmed external medical services 4 12 million decrease logistics sales cost sales cost product sales decreased 55 million 02 year ended december 31 2019 compared year ended december 31 2018 primarily due following 1 lower print volume 2 cost reduction initiatives 3 140 million noncash expense related special employee retirement contribution 2018 repeat 2019 decreases partially offset following 1 increase employeerelated costs primarily due 286 million increase production hourly wages competitive labor markets 2 267 million decrease paper byproduct recoveries 3 87 million net benefit 2018 changes employee vacation policies cost product sales percentage net sales increased 667 year ended december 31 2019 658 year ended december 31 2018 primarily due reasons provided cost service sales decreased 237 million 39 year ended december 31 2019 compared year ended december 31 2018 primarily due following 1 lower print service sales 2 lower freight costs 3 26 million noncash expense related special employee retirement contribution 2018 repeat 2019 decreases partially offset ivie periscope acquisitions investment rise cost service sales percentage net sales decreased 147 year ended december 31 2019 151 year ended december 31 2018 primarily due reasons provided selling general administrative expenses selling general administrative expenses increased 387 million 108 year ended december 31 2019 compared year ended december 31 2018 primarily due following 1 175 million net benefit 2018 gains property insurance claims 2 96 million increase employeerelated costs 3 83 million increase legal environmental charges 4 56 million gain 2018 sales tax litigation settlement peru repeat 2019 increases partially offset 57 million noncash expense related special employee retirement contribution 2018 repeat 2019 savings cost reduction initiatives selling general administrative expenses percentage net sales increased 90 year ended december 31 2018 101 year ended december 31 2019 primarily due reasons stated depreciation amortization depreciation amortization decreased 54 million 25 year ended december 31 2019 compared year ended december 31 2018 due 158 million decrease depreciation expense property plant equipment becoming fully depreciated past year partially offset 104 million increase amortization expense primarily related amortization expense intangible assets acquired ivie acquisition investment rise restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges decreased 139 million 135 year ended december 31 2019 compared year ended december 31 2018 primarily due following includes 76 million 216 million impairment charges machinery equipment longer utilized production result facility consolidations well capacity reduction restructuring activities years ended december 31 2019 2018 respectively 03 million 46 million land building impairment charges years ended december 31 2019 2018 respectively b includes 450 million reverse termination fee paid year ended december 31 2019 connection termination definitive agreement pursuant quad would acquired lsc includes 64 million transactionrelated charges related proposed acquisition lsc year ended december 31 2018 c includes 25 million gain sale franklin kentucky facility 35 million gain sale hazleton pennsylvania facility year ended december 31 2019 75 million gain sale taunton massachusetts book facility 70 million gain sale dallas texas facility 22 million gain sale san ixhuatepec mexico facility year ended december 31 2018 includes 23 million charges related valueadded tax assessment closed facility well restructuring activities net 84 million gain sale business year ended december 31 2019 includes 321 million increase company’s mepps withdrawal liability well 100 million charges certain legal matters customer contract penalties related company’s operations peru year ended december 31 2018 ebitda marginconsolidated ebitda defined net earnings loss attributable quad common shareholders excluding 1 interest expense 2 income tax expense benefit 3 depreciation amortization ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quad’s performance important measures quad gauges profitability assesses performance business ebitda margin nongaap financial measures considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quad’s calculation ebitda margin may different calculations used companies therefore comparability may limited ebitda margin year ended december 31 2019 compared year ended december 31 2018 follows ebitda decreased 1754 million year ended december 31 2019 compared year ended december 31 2018 primarily due following 1 786 million increase loss discontinued operations net tax 2 lower print volume pricing print service sales 3 increase employeerelated costs primarily due 286 million increase production hourly wages competitive labor markets 4 267 million decrease paper byproduct recoveries 5 175 million net benefit 2018 gains property insurance claims 6 87 million benefit 2018 changes employee vacation policies 7 56 million gain 2018 sales tax litigation settlement peru decreases partially offset following 1 223 million noncash expense related special employee retirement contribution 2018 resulting benefit tax reform repeat 2019 2 139 million decreased restructuring impairment transactionrelated charges 3 savings cost reduction initiatives 4 earnings ivie periscope acquisitions investment rise reconciliation ebitda net earnings loss attributable quad common shareholders years ended december 31 2019 2018 follows 1 net earnings loss attributable quad common shareholders included following restructuring impairment transactionrelated charges 894 million 1033 million years ended december 31 2019 2018 respectively b employee stock ownership plan noncash expense related special employee retirement contribution 223 million year ended december 31 2018 c net pension income 60 million 124 million years ended december 31 2019 2018 respectively loss debt extinguishment 305 million year ended december 31 2019 e equity loss unconsolidated entity 03 million equity earnings unconsolidated entity 10 million years ended december 31 2019 2018 respectively f loss discontinued operations net tax 1006 million 220 million years ended december 31 2019 2018 respectively g net loss attributable noncontrolling interests 06 million year ended december 31 2018 united states print related services following table summarizes net sales operating income continuing operations operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment decreased 1026 million 36 year ended december 31 2019 compared year ended december 31 2018 primarily due 925 million decrease product sales company’s print product lines due ongoing industry volume pricing pressures 101 million decrease passthrough paper sales service sales united states print related services segment increased 249 million 32 year ended december 31 2019 compared year ended december 31 2018 primarily due 783 million increase net sales ivie periscope acquisitions investment rise 04 million increase logistics sales partially offset following 1 305 million decrease sales marketing services primarily print management 2 189 million decrease print imaging services 3 44 million decrease sales quadmed external medical services operating income continuing operations operating income continuing operations united states print related services segment decreased 532 million 290 year ended december 31 2019 compared year ended december 31 2018 primarily due following 1 lower print volume pricing due ongoing industry pressures 2 increase employeerelated costs primarily due 286 million increase production hourly wages competitive labor markets 3 267 million decrease paper byproduct recoveries 4 175 million net benefit 2018 gains property insurance claims 5 lower print service sales 6 87 million benefit 2018 change employee vacation policies impacts partially offset following 1 219 million noncash expense related special employee retirement contribution 2018 2 129 million decrease restructuring impairment transactionrelated charges 3 savings cost reduction initiatives including employeerelated costs 4 earnings ivie periscope acquisitions investment rise operating margin united states print related services segment decreased 37 year ended december 31 2019 51 year ended december 31 2018 primarily due reasons provided restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment decreased 129 million 344 year ended december 31 2019 compared year ended december 31 2018 primarily due following includes 45 million 158 million impairment charges machinery equipment longer utilized production result facility consolidations well capacity reduction restructuring activities years ended december 31 2019 2018 respectivelyand 22 million land building impairment charges year ended december 31 2018 b includes 25 million gain sale franklin kentucky facility 35 million gain sale hazleton pennsylvania facility 84 million gain sale business year ended december 31 2019 75 million gain sale taunton massachusetts book facility 70 million gain sale dallas texas facility year ended december 31 2018 international following table summarizes net sales operating income continuing operations operating margin certain items impacting comparability equity loss unconsolidated entities within international segment net sales product sales international segment increased 165 million 45 year ended december 31 2019 compared year ended december 31 2018 primarily due 210 million increase volume primarily europe peru mexico 183 million increase passthrough paper sales partially offset 228 million unfavorable foreign exchange impacts primarily argentina europe service sales international segment decreased 12 million 65 year ended december 31 2019 compared year ended december 31 2018 primarily due 16 million decrease logistics revenue europe partially offset 04 million increase marketing service sales operating income continuing operations operating income continuing operations international segment increased 71 million year ended december 31 2019 compared year ended december 31 2018 primarily due 122 million decrease restructuring impairment expenses partially offset 56 million gain 2018 sales tax litigation settlement peru restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment decreased 122 million 550 year ended december 31 2019 compared year ended december 31 2018 primarily due following includes 58 million impairment charges machinery equipment longer utilized production result facility consolidations well capacity reduction restructuring activities including 50 million impairment charges machinery equipment peru year ended december 31 2018 03 million 24 million land building impairment charges years ended december 31 2019 december 31 2018 respectively b includes 23 million charges related valueadded tax assessment closed facility year ended december 31 2019 100 million charges certain legal matters customer contract penalties related company’s operations peru net 22 million gain sale san ixhuatepec mexico facility year ended december 31 2018 equity earnings loss unconsolidated entities investments entities quad ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil equity earnings unconsolidated entity international segment decreased 13 million year ended december 31 2019 compared year ended december 31 2018 due decrease earnings company’s investment plural unrestricted subsidiaries december 31 2019 company unrestricted subsidiaries defined senior unsecured notes indenture corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses increased 65 million 67 year ended december 31 2019 compared year ended december 31 2018 primarily due 112 million increase restructuring impairment transactionrelated charges partially offset lower employeerelated costs including 13 million lower incentive compensation expense 04 million noncash expense related special employee retirement contribution 2018 repeat 2019 restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges increased 112 million 257 year ended december 31 2019 compared year ended december 31 2018 primarily due following includes 30 million impairment charges equipment year ended december 31 2019 b includes 450 million reverse termination fee paid year ended december 31 2019 connection termination definitive agreement pursuant quad would acquired lsc includes 64 million transactionrelated charges related proposed acquisition lsc year ended december 31 2018 c includes 321 million increase company’s mepps withdrawal liability year ended december 31 2018 results operations year ended december 31 2018 compared year ended december 31 2017 summary results company’s operating income continuing operations operating margin net earnings attributable quad common shareholders diluted earnings per share attributable quad common shareholders year ended december 31 2018 changed year ended december 31 2017 follows dollars millions except per share data information contained section updated reflect impacts discontinued operations company’s book business effects changes net earnings attributable quad common shareholders computed using 25 normalized tax rate adjusted tax act enacted 2017 items subject tax year ended december 31 2018 computed using 40 normalized tax rate items subject tax year ended december 31 2017 normalized rate used company prior enactment tax act 1 restructuring impairment transactionrelated charges 1033 million 775 million net tax incurred year ended december 31 2018 included following 230 million employee termination charges related workforce reductions facility consolidations voluntary involuntary separation programs b 262 million impairment charges including 166 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota hazleton pennsylvania franklin kentucky well capacity strategic reduction restructuring initiatives including 50 million impairment charges machinery equipment peru 46 million land building impairment charges primarily related franklin kentucky plant closure c 82 million transactionrelated charges consisting professional service fees business acquisition divestiture activities including 64 million related proposed acquisition lsc 13 million integration costs primarily integration acquired companies e 446 million various restructuring charges consisting 321 million increase company’s mepps withdrawal liability 100 million charges certain legal matters customer contract penalties related company’s operations peru costs maintain exit closed facilities charges presented net 173 million gains sale facilities including 75 million gain sale taunton massachusetts book plant 70 million gain sale dallas texas plant 22 million gain sale san ixhuatepec mexico plant 2 restructuring impairment transactionrelated charges 599 million 359 million net tax incurred year ended december 31 2017 included following 264 million employee termination charges related workforce reductions facility consolidations separation programs b 120 million impairment charges including 67 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity strategic reduction restructuring activities 53 million impairment charges land building related waseca minnesota taunton massachusetts plant closures c 31 million transactionrelated charges consisting professional service fees business acquisition divestiture activities 184 million various restructuring charges including costs maintain exit closed facilities well lease exit charges net 71 million gains sale atglen pennsylvania dickson tennessee east greenville pennsylvania lenexa kansas marengo iowa plants 12 million gain company’s argentina subsidiaries’ settlements vendors bankruptcy proceedings restructuring charges also included 67 million loss sale business 3 interest expense increased 23 million 123 million net tax impact due change normalized tax rate year ended december 31 2018 732 million change due higher weighted average interest rate borrowings higher average debt levels year ended december 31 2018 compared year ended december 31 2017 4 net pension income increased 28 million 35 million net tax impact due change normalized tax rate year ended december 31 2018 124 million change due 13 million decrease interest cost pension plan liabilities 08 million decrease settlement charges 07 million increase expected return pension plan assets 5 26 million loss debt extinguishment 16 million net tax recognized year ended december 31 2017 refinancing senior secured credit facility completed february 10 2017 6 438 million decrease income tax benefit continuing operations calculated following table primarily due 288 million tax benefit related reduced federal rate applied net domestic deferred tax liabilities accordance tax act 131 million decreased net tax benefit release valuation allowances related foreign operations see note 14 “income taxes” consolidated financial statements part ii item 8 annual report form 10k information income taxes 7 increase loss discontinued operations net tax 111 million year ended december 31 2018 primarily due lower print pricing ongoing industry pressures 8 increase investments unconsolidated entity noncontrolling interests net tax 16 million year ended december 31 2018 primarily due 10 million increase earnings company’s investment plural 06 million decrease earnings attributed noncontrolling interests company’s consolidated statements operations related company’s 57 ownership rise 9 operating income continuing operations excluding restructuring impairment transactionrelated charges decreased 421 million 34 million net tax impact due change normalized tax rate primarily due following 1 lower print volume pricing due ongoing industry pressures 2 223 million noncash expense related special employee retirement contribution 2018 resulting benefit tax reform 3 107 million net benefit 2017 changes employee vacation policies decreases partially offset following 1 133 million net benefit 2018 gain property insurance claims 2 earnings ivie acquisition investment rise 3 56 million gain sales tax litigation settlement peru 4 savings cost reduction initiatives operating results continuing operations following table sets forth certain information company’s consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased 1644 million 49 year ended december 31 2018 compared year ended december 31 2017 primarily due 2022 million decrease product sales company’s print product lines due ongoing industry volume pricing pressures 147 million unfavorable foreign exchange impacts primarily argentina partially offset 525 million increase passthrough paper sales service sales primarily consist logistics distribution marketing services imaging medical services increased 1990 million 330 year ended december 31 2018 compared year ended december 31 2017 primarily due 1762 million increase net sales ivie acquisition investment rise 295 million increase logistics sales partially offset 57 million decrease sales imaging services cost sales cost product sales decreased 381 million 14 year ended december 31 2018 compared year ended december 31 2017 primarily due lower print volume cost reduction initiatives decreases partially offset increase paper costs 140 million noncash expense related special employee retirement contribution 2018 cost product sales percentage net sales decreased 658 year ended december 31 2018 673 year ended december 31 2017 primarily due reasons provided cost service sales increased 1682 million 389 year ended december 31 2018 compared year ended december 31 2017 primarily due ivie acquisition investment rise increased logistics freight costs 26 million noncash expense related special employee retirement contribution 2018 cost service sales percentage net sales increased 151 year ended december 31 2018 109 year ended december 31 2017 primarily due reasons provided selling general administrative expenses selling general administrative expenses decreased 498 million 122 year ended december 31 2018 compared year ended december 31 2017 primarily due following 1 savings cost reduction initiatives including employeerelated costs 2 133 million net benefit 2018 gain property insurance claims 3 56 million gain sales tax litigation settlement peru partially offset 103 million benefit 2017 change salaried employee vacation policy repeat 2018 57 million noncash expense related special employee retirement contribution 2018 selling general administrative expenses percentage net sales decreased 104 year ended december 31 2017 90 year ended december 31 2018 primarily due reasons stated depreciation amortization depreciation amortization decreased 36 million 16 year ended december 31 2018 compared year ended december 31 2017 due 197 million decrease depreciation expense property plant equipment becoming fully depreciated past year partially offset 161 million increase amortization expense primarily related amortization expense intangible assets acquired ivie acquisition investment rise restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges increased 434 million 725 year ended december 31 2018 compared year ended december 31 2017 primarily due following 1 142 million increase impairment charges 2 51 million increase transactionrelated charges 3 13 million increase acquisitionrelated integration costs 4 262 million increase restructuring charges decreases partially offset 34 million decrease employee termination charges restructuring impairment transactionrelated charges 1033 million incurred year ended december 31 2018 included following 1 230 million employee termination charges related workforce reductions facility consolidations separation programs 2 262 million impairment charges including 166 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota hazleton pennsylvania franklin kentucky well capacity strategic reduction restructuring initiatives including 50 million impairment charges machinery equipment peru 46 million land building impairment charges primarily related franklin kentucky plant closure 3 82 million transactionrelated charges consisting professional service fees related business acquisition divestiture activities including 64 million related proposed acquisition lsc 4 13 million integration costs primarily integration acquired companies 5 446 million various restructuring charges consisting 321 million increase company’s mepps withdrawal liability 100 million charges certain legal matters customer contract penalties related company’s operations peru costs maintain exit closed facilities charges presented net 173 million gains sale facilities including 75 million gain sale taunton massachusetts book plant 70 million gain sale dallas texas plant 22 million gain sale san ixhuatepec mexico plant restructuring impairment transactionrelated charges 599 million incurred year ended december 31 2017 included following 1 264 million employee termination charges related workforce reductions facility consolidations separation programs 2 120 million impairment charges including 67 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity strategic reduction restructuring activities 53 million impairment charges land building related waseca minnesota taunton massachusetts plant closures 3 31 million transactionrelated charges consisting professional service fees related business acquisition divestiture activities 4 184 million various restructuring charges including costs maintain exit closed facilities well lease exit charges net 71 million gains sale atglen pennsylvania dickson tennessee east greenville pennsylvania lenexa kansas marengo iowa plants 12 million gain company’s argentina subsidiaries’ settlements vendors bankruptcy proceedings restructuring charges also included 67 million loss sale business ebitda marginconsolidated ebitda defined net earnings loss attributable quad common shareholders excluding 1 interest expense 2 income tax expense benefit 3 depreciation amortization ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quad’s performance important measures quad gauges profitability assesses performance business ebitda margin nongaap financial measures considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quad’s calculation ebitda margin may different calculations used companies therefore comparability may limited ebitda margin year ended december 31 2018 compared year ended december 31 2017 follows ebitda decreased 932 million year ended december 31 2018 compared year ended december 31 2017 primarily due following 1 lower print volume pricing due ongoing industry pressures 2 434 million increased restructuring impairment transactionrelated charges 3 223 million noncash expense related special employee retirement contribution 2018 4 111 million increase loss discontinued operations net tax 5 107 million net benefit 2017 changes employee vacation policies impacts partially offset following 1 133 million net benefit 2018 gain property insurance claims 2 earnings ivie acquisition investment rise 3 56 million gain sales tax litigation settlement peru 4 savings cost reduction initiatives including employeerelated costs reconciliation ebitda net earnings attributable quad common shareholders years ended december 31 2018 2017 follows 1 net earnings attributable quad common shareholders included following restructuring impairment transactionrelated charges 1033 million 599 million years ended december 31 2018 2017 respectively b employee stock ownership plan noncash expense related special employee retirement contribution 223 million year ended december 31 2018 c net pension income 124 million 96 million years ended december 31 2018 2017 respectively loss debt extinguishment 26 million year ended december 31 2017 e equity earnings unconsolidated entity 10 million year ended december 31 2018 f loss discontinued operations net tax 220 million 109 million years ended december 31 2018 2017 respectively g net loss attributable noncontrolling interests 06 million year ended december 31 2018 united states print related services following table summarizes net sales operating income continuing operations operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment decreased 1608 million 54 year ended december 31 2018 compared year ended december 31 2017 primarily due 2057 million decrease product sales company’s print product lines predominantly due ongoing volume pricing pressures excess capacity printing industry partially offset 449 million increase passthrough paper sales service sales united states print related services segment increased 1996 million 342 year ended december 31 2018 compared year ended december 31 2017 primarily due 1762 million increase net sales ivie acquisition investment rise 301 million increase logistics sales partially offset 57 million decrease sales imaging services operating income continuing operations operating income continuing operations united states print related services segment decreased 285 million year ended december 31 2018 compared year ended december 31 2017 primarily due following 1 lower print volume pricing due ongoing industry pressures 2 219 million noncash expense related special employee retirement contribution 2018 3 107 million net benefit 2017 changes employee vacation policies impacts partially offset following 1 156 million decrease restructuring impairment transactionrelated charges 2 133 million net benefit 2018 gain property insurance claims 3 earnings ivie acquisition investment rise 4 savings cost reduction initiatives including employeerelated costs operating margin united states print related services segment decreased 51 year ended december 31 2018 59 year ended december 31 2017 primarily due reasons provided restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2018 375 million consisting following 1 161 million employee termination charges related workforce reductions facility consolidations separation programs 2 180 million impairment charges including 158 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota hazleton pennsylvania franklin kentucky well capacity strategic reduction restructuring initiatives 22 million impairment charges land building related franklin kentucky plant closure 3 20 million various restructuring charges including costs maintain exit closed facilities well lease exit charges presented net gains sale facilities including 75 million gain sale taunton massachusetts book plant 70 million gain sale dallas texas plant restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2017 531 million consisting following 1 212 million employee termination charges related workforce reductions facility consolidations separation programs 2 115 million impairment charges including 62 million impairment charges machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity strategic reduction restructuring activities 53 million impairment charges land building related waseca minnesota taunton massachusetts plant closures 3 194 million various restructuring charges including costs maintain exit closed facilities well lease exit charges net 71 million gains sale atglen pennsylvania dickson tennessee east greenville pennsylvania lenexa kansas marengo iowa plants restructuring charges also included 67 million loss sale business international following table summarizes net sales operating income continuing operations operating margin certain items impacting comparability equity earnings unconsolidated entity within international segment net sales product sales international segment decreased 36 million 10 year ended december 31 2018 compared year ended december 31 2017 primarily due 147 million unfavorable foreign exchange impacts partially offset 76 million increase passthrough paper sales 35 million increase volume pricing primarily mexico service sales international segment decreased 06 million 31 year ended december 31 2018 compared year ended december 31 2017 primarily due decrease logistics revenue europe operating income continuing operations operating income continuing operations international segment decreased 181 million 923 year ended december 31 2018 compared year ended december 31 2017 primarily due 189 million increase restructuring impairment expenses partially offset 56 million gain sales tax litigation settlement peru 48 million increase operating income primarily mexico restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2018 222 million consisting following 1 37 million employee termination charges related workforce reductions facility consolidations separation programs 2 82 million impairment charges including 58 million machinery equipment longer utilized production result facility consolidations well capacity strategic reduction restructuring initiatives including 50 million impairment charges machinery equipment peru 24 million impairment charges land building 3 103 million various restructuring charges including 100 million charges certain legal matters customer contract penalties related company’s operations peru restructuring impairment transactionrelated charges international segment year ended december 31 2017 33 million consisting following 1 47 million employee termination charges related workforce reductions facility consolidations separation programs 2 05 million impairment charges machinery equipment longer utilized production result facility consolidations 3 19 million various restructuring income primarily related company’s argentina subsidiaries’ gain settlements vendors bankruptcy proceedings partially offset charges maintain exit closed facilities equity earnings unconsolidated entities investments entities quad ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil equity earnings unconsolidated entity international segment increased 10 million year ended december 31 2018 compared year ended december 31 2017 due increase earnings company’s investment plural unrestricted subsidiaries unrestricted subsidiaries defined senior unsecured notes indenture represented less 20 total consolidated net sales year ended december 31 2018 corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses increased 389 million 664 year ended december 31 2018 compared year ended december 31 2017 primarily due 401 million increase restructuring impairment transactionrelated charges 04 million noncash expense related special employee retirement contribution 2018 restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges year ended december 31 2018 436 million consisting following 1 32 million employee termination charges related workforce reductions facility consolidations separation programs 2 81 million transactionrelated charges primarily included professional service fees 3 323 million restructuring charges including 321 million increase mepps withdrawal liability corporate restructuring impairment transactionrelated charges year ended december 31 2017 35 million consisting following 1 05 million employee termination charges related workforce reductions facility consolidations separation programs 2 21 million transactionrelated charges primarily included professional service fees 3 09 million restructuring charges liquidity capital resources company utilizes cash flows operating activities borrowings credit facilities satisfy liquidity capital requirements december 31 2019 company cash equivalents 787 million addition cash equivalents company 7642 million unused capacity revolving credit arrangement december 31 2019 net 358 million issued letters credit company believes expected future cash flows operating activities 7642 million unused capacity revolving credit arrangement available cash hand provide sufficient resources fund ongoing operating requirements integration restructuring requirements related acquired operations well future capital expenditures debt pension service requirements investments future growth create value shareholders shareholder dividends share repurchases borrowings 8000 million revolving credit facility december 31 2019 peak borrowings 4254 million year ended december 31 2019 net cash provided operating activities year ended december 31 2019 compared year ended december 31 2018 net cash provided operating activities 1555 million year ended december 31 2019 compared 2606 million year ended december 31 2018 resulting 1051 million decrease cash provided operating activities decrease primarily due 1029 million decrease cash earnings 22 million decrease cash flows changes operating assets liabilities year ended december 31 2018 compared year ended december 31 2017 net cash provided operating activities 2606 million year ended december 31 2018 compared 3440 million year ended december 31 2017 resulting 834 million decrease cash provided operating activities decrease primarily due 934 million decrease cash earnings partially offset 100 million increase cash flows changes operating assets liabilities net cash used investing activities year ended december 31 2019 compared year ended december 31 2018 net cash used investing activities 2081 million year ended december 31 2019 compared 1205 million year ended december 31 2018 resulting 876 million increase cash used investing activities increase primarily due following 1 496 million increase acquisition businesses 2 152 million decrease proceeds sale property plant equipment 3 147 million increase purchases property plant equipment 4 142 million decrease proceeds property insurance claims 5 50 million loan unconsolidated entity increases partially offset 111 million increase proceeds sale business year ended december 31 2018 compared year ended december 31 2017 net cash used investing activities 1205 million year ended december 31 2018 compared 472 million year ended december 31 2017 resulting 733 million increase cash used investing activities increase primarily due following 1 714 million increase acquisition businesses 2 141 million decrease proceeds sale business 3 104 million increase purchases property plant equipment increases partially offset following 1 88 million increase proceeds sale property plant equipment 2 73 million loan unconsolidated entity 2017 repeat 2018 3 65 million increase proceeds property insurance claims net cash provided used financing activities year ended december 31 2019 compared year ended december 31 2018 net cash provided financing activities 618 million year ended december 31 2019 compared 1335 million used year ended december 31 2018 resulting 1953 million increase cash provided financing activities increase primarily due following 1 1801 million increase net borrowings 2 367 million decrease purchases treasury stock 3 58 million decrease payments cash dividends 4 24 million decrease equity awards redeemed pay employees’ tax obligations partially offset following 1 202 million increase payments debt issuance costs financing fees 2 53 million increase contingent cash paid business acquired 3 42 million decrease proceeds stock options exercised year ended december 31 2018 compared year ended december 31 2017 net cash used financing activities 1335 million year ended december 31 2018 compared 2517 million year ended december 31 2017 resulting 1182 million decrease cash used financing activities decrease primarily due following 1 1439 million decrease net repayments debt lease obligations 2018 compared 2017 2 47 million decrease payments debt issuance costs financing fees decreases partially offset following 1 329 million increase purchases treasury stock 2 30 million increase equity awards redeemed pay employees’ tax obligations free cash flow free cash flow defined net cash provided operating activities less purchases property plant equipment plus lscrelated payments company’s management assesses free cash flow measure quantify cash available 1 strengthening balance sheet debt reduction 2 strategic capital allocation deployment investments business acquisitions strategic investments 3 returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted company’s restructuring activities unusual items free cash flow nongaap financial measure considered alternative cash flows provided operating activities measure liquidity quad’s calculation free cash flow may different similar calculations used companies therefore comparability may limited free cash flow years ended december 31 2019 2018 2017 follows 1 lscrelated payments include transactionrelated costs associated proposed terminated acquisition lsc including 450 million reverse termination fee incremental interest payments associated 2019 amended debt refinancing free cash flow decreased 585 million year ended december 31 2019 compared year ended december 31 2018 primarily due 438 million decrease net cash provided operating activities excluding 613 million lscrelated payments primarily due decrease cash earnings 147 million increase capital expenditures free cash flow decreased 938 million year ended december 31 2018 compared year ended december 31 2017 primarily due 834 million decrease net cash provided operating activities primarily due decrease cash earnings 104 million increase capital expenditures see “net cash provided operating activities” section explanations change operating cash flows “net cash used investing activities” section explanations changes purchases property plant equipment calculation free cash flow includes cash flows related book business periods presented debt leverage ratio debt leverage ratio defined total debt finance lease obligations divided trailing twelve months adjusted ebitda comprised sum following 1 last twelve months ebitda see definition ebitda reconciliation net earnings loss attributable quad common shareholders ebitda “results operations” section 2 restructuring impairment transactionrelated charges 3 earnings loss discontinued operations net tax 4 net pension income 5 employee stock ownership plan contributions 6 loss gain debt extinguishment 7 equity earnings loss unconsolidated entity 8 adjusted ebitda unconsolidated equity method investments calculated consistent manner calculation quad 9 net earnings loss attributable noncontrolling interests company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strategic investments strengthening balance sheet pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability debt leverage ratio nongaap measure considered alternative cash flows provided operating activities measure liquidity quad’s calculation debt leverage ratio may different similar calculations used companies therefore comparability may limited debt leverage ratio calculated differs total leverage ratio total net leverage ratio senior secured leverage ratio included company’s debt covenant calculations see note 12 “debt” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k information debt covenants total leverage ratio included company’s debt covenants includes letters credit surety bonds debt excludes noncash stockbased compensation expense ebitda includes net income loss attributable noncontrolling interests ebitda total net leverage ratio includes excludes adjustments total leverage ratio addition netting domestic unrestricted cash debt similarly senior secured leverage ratio includes excludes adjustments total leverage ratio addition exclusion outstanding balance senior unsecured notes surety bonds debt netting domestic unrestricted cash debt leverage ratio december 31 2019 2018 follows 1 permitted company’s senior secured credit facility certain pro forma financial information related acquisition ivie included calculating debt leverage ratio december 31 2018 acquisition ivie completed february 21 2018 29 million pro forma adjusted ebitda represents period january 1 2018 february 20 2018 adjusted ebitda ivie calculated consistent manner calculation quad ivie’s financial information consolidated within quad’s financial results since date acquisition two months pro forma adjusted ebitda ivie included calculation company’s debt leverage ratio would 220x december 31 2018 2 company 79 million 70 million cash equivalents december 31 2019 2018 respectively based company’s typical yearend cash balance approximately 10 million quad 69 million 60 million excess cash december 31 2019 2018 respectively excess cash year used pay debt leverage ratio would 312x 205x december 31 2019 2018 respectively calculation adjusted ebitda years ended december 31 2019 2018 follows 1 comprised equity earnings loss unconsolidated entity adjusted ebitda unconsolidated equity method investments net earnings loss attributable noncontrolling interests debt leverage ratio net excess cash increased 107x december 31 2019 compared december 31 2018 primarily due 1714 million increase debt finance lease obligations primarily related cash paid periscope acquisition 450 million reverse termination fee paid termination lsc acquisition 147 million increase purchases property plant equipment debt leverage ratio december 31 2019 332x management’s desired target debt leverage ratio range 20x 25x however company operates times debt leverage ratio target range depending timing compelling strategic investment opportunities like periscope acquisition well seasonal working capital needs description significant outstanding debt obligations december 31 2019 december 31 2019 company utilized combination debt instruments fund cash requirements including following • senior secured credit facility ◦ 8000 million revolving credit facility outstanding balance december 31 2019 ◦ 8250 million term loan 7683 million outstanding december 31 2019 • senior unsecured notes 2435 million outstanding december 31 2019 • master note security agreement 707 million outstanding december 31 2019 senior secured credit facility april 28 2014 company entered senior secured credit facility included revolving credit facility term loan term loan b company completed third amendment senior secured credit facility january 31 2019 third amendment completed provide quad liquidity structural flexibility consummate proposed terminated acquisition lsc extend existing maturities increasing aggregate amount existing revolving credit facility 7250 million 8000 million term five years maturing january 31 2024 b increasing aggregate amount existing term loan 3750 million 8250 million delayed draw feature term five years maturing january 31 2024 c increasing aggregate amount existing term loan b 3000 million 5000 million term seven years maturing january 31 2026 company intended loans available amended revolving credit facility would used repay refinance repurchase redeem exchange otherwise terminate lsc’s existing indebtedness connection consummation merger pay transaction expenses july 26 2019 following termination proposed acquisition lsc quad fully funded 8250 million delayed draw term loan retire entire amount outstanding 5000 million term loan b reduced borrowings revolving credit facility third amendment also amended certain quarterly financial covenants company subject financial terms numbers ratios defined senior secured credit facility amended third amendment december 31 2019 company outstanding borrowings revolving credit facility 358 million issued letters credit leaving 7642 million available future borrowings revolving credit facility delayed draw term loan made senior secured credit facility december 31 2019 bear interest 250 excess reserve adjusted libor 150 excess alternate base rate senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances senior unsecured notes company issued 3000 million aggregate principal amount senior unsecured notes due may 1 2022 april 28 2014 senior unsecured notes bear interest 700 interest payable semiannually senior unsecured notes issued extend stagger company’s debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals company received 2948 million net proceeds sale senior unsecured notes deducting initial purchasers’ discounts commissions proceeds senior unsecured notes used purposes detailed senior secured credit facility company’s existing future domestic subsidiaries borrower guarantees indebtedness company’s senior secured credit facility guarantees certain company’s indebtedness company’s restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes “guarantor subsidiaries” current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including following 1 designation guarantor subsidiaries unrestricted subsidiary 2 release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries 3 sale disposition including sale substantially assets guarantor subsidiaries master note security agreement september 1 1995 last amended november 24 2014 company entered master note security agreement pursuant company issued time senior notes aggregate principal amount 11 billion various tranches 707 million outstanding december 31 2019 senior notes master note security agreement weighted average interest rate 724 december 31 2019 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2031 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement covenants compliance company’s various lending arrangements include certain financial covenants financial terms numbers ratios defined company’s debt agreements among covenants company required maintain following december 31 2019 • total leverage ratio rolling twelvemonth basis total leverage ratio defined consolidated total indebtedness consolidated ebitda shall exceed 375 100 twelve months ended december 31 2019 company’s total leverage ratio 322 100 • amount outstanding revolving credit facility term loan lender revolving credit exposure term loan credit exposure company required maintain following ◦ senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined consolidated senior secured net indebtedness consolidated ebitda shall exceed 350 100 twelve months ended december 31 2019 company’s senior secured leverage ratio 230 100 • interest coverage ratio rolling twelvemonth basis interest coverage ratio defined consolidated ebitda cash consolidated interest expense shall less 300 100 twelve months ended december 31 2019 company’s interest coverage ratio 452 100 indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit company’s restricted subsidiaries’ ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially company’s consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates company compliance financial covenants debt agreements december 31 2019 company currently expects compliance future periods financial covenants assurance covenants continue met company’s failure maintain compliance covenants could prevent company borrowing additional amounts could result default debt agreements default could cause outstanding indebtedness become immediately due payable virtue crossacceleration crossdefault provisions addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock following limitations utilize total net leverage ratio calculation rolling twelvemonth basis defined consolidated net indebtedness consolidated ebitda twelve months ended december 31 2019 company’s total net leverage ratio 301 100 • company’s total net leverage ratio greater 275 100 company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total net leverage ratio less 275 100 restrictions company’s total net leverage ratio december 31 2019 301 100 limitations described currently applicable • company’s senior secured leverage ratio greater 300 100 company’s total net leverage ratio greater 350 100 company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total net leverage ratio less 350 100 restrictions limitations described currently applicable company’s senior secured leverage ratio 230 100 total net leverage ratio 301 100 december 31 2019 net pension obligations net underfunded pension mepps obligations decreased 105 million year ended december 31 2019 1335 million december 31 2018 1230 million december 31 2019 decrease overall pension obligations primarily due payments totaling 104 million made mepps year ended december 31 2019 actual return pension plan assets 213 year ended december 31 2019 expected return plan assets assumption 625 decrease partially offset 102 basis point decrease pension discount rate 422 december 31 2018 320 december 31 2019 company continues focus reducing pension obligations cash contributions plans lumpsum settlements plan design changes share repurchase program september 6 2011 company’s board directors authorized share repurchase program 1000 million company’s outstanding class stock july 30 2018 company’s board directors discontinued remainder september 6 2011 share repurchase program authorized new share repurchase program 1000 million company’s outstanding class common stock authorization share repurchases may made company’s discretion time open market andor privately negotiated transactions permitted federal securities laws legal requirements timing manner price amount repurchase depend economic market conditions share price trading volume applicable legal requirements factors program may suspended discontinued time shares company’s class stock repurchased year ended december 31 2019 year ended december 31 2018 company repurchased 1871631 shares class common stock weighted average price 1959 per share total purchase price 367 million year ended december 31 2017 company repurchased 200605 shares class common stock weighted average price 1889 per share total purchase price 38 million december 31 2019 1000 million authorized repurchases remaining program risk management discussion company’s exposure market risks management market risks see item 7a “quantitative qualitative disclosures market risk” annual report form 10k offbalance sheet arrangements except set forth contractual obligations commitments table company offbalance sheet arrangements financings special purpose entities company expects material current future effect financial condition changes financial condition results operations liquidity capital expenditures capital resources significant components sales expenses contractual obligations commitments company’s contractual cash obligations december 31 2019 follows millions 1 debt obligations include 1804 million anticipated future interest payments including 76 million estimated interest payments interest rate swaps excludes 93 million future amortization debt issuance costs 2019 company paid advance full amount required amortization payments term loan totaling 464 million year ended december 31 2020 amounts included “thereafter” include principal payments estimated interest expense april 2031 2 mepps withdrawal obligations include 185 million anticipated future interest payments see note 16 “employee retirement plans” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k discussion mepps withdrawal liability 3 pension benefit obligations contributions benefit payments funded company assets included table actuarially estimated five year period benefit payments benefit plans expected continue beyond 2024 company believes estimate beyond period unreasonable 4 finance lease obligations include 06 million anticipated future interest payments 5 purchase obligations consist primarily 266 million firm commitments purchase press finishing equipment 31 million purchase obligations 6 business acquisitions represents estimated 101 million future cash payments associated acquisition ivie see note 3 “acquisitions strategic investments” consolidated financial statements item 8 “financial statements supplementary data” annual report form 10k discussion 7 contractual obligations table include reserves uncertain tax positions recorded accordance accounting guidance uncertainties income taxes company taken tax positions ultimate amount years necessary payments made pertain tax positions uncertain reserve uncertain tax positions prior interest penalties 178 million december 31 2019 102 million included longterm liabilities 73 million included deferred income taxes 03 million included accrued liabilities consolidated balance sheets company also recorded reserves interest penalties related uncertain tax positions 10 million 01 million respectively december 31 2019 8 contractual obligations table include share repurchase program repurchases required program see “share repurchase program” section discussion including maximum potential cash payments program critical accounting policies estimates company’s consolidated financial statements prepared accordance gaap company’s critical accounting policies important portrayal financial condition results operations require company make difficult subjective estimates management required make judgments estimates affect reported amounts assets liabilities disclosure contingent assets liabilities date statements reported amounts revenues expenses reporting period company bases estimates historical experience various assumptions believed reasonable circumstances company’s management believes judgments estimates made consistent appropriate methods based information available time reasonable deviation judgments estimates would material impact company’s consolidated financial position results operations actual results may differ estimates different assumptions conditions extent estimates used differ actual results adjustments consolidated statements operations corresponding consolidated balance sheets would necessary adjustments would made future statements company identified following critical accounting policies estimates revenue recognition performance obligations contract inception company assesses products services promised contracts customers identifies performance obligations promise transfer customer product service distinct identify performance obligations company considers goods services promised contract regardless whether explicitly stated implied customary business practices company determined following distinct products services represent separate performance obligations •prepress services •print •other services prepress services company recognizes revenue pointintime upon completion performed service acceptance customer company considers transfer control occur service performed company right payment customer legal title risk reward ownership company recognizes print revenues upon transfer title passage risk loss pointintime upon shipment customer reasonable assurance collectability revenues related company’s logistics operations includes delivery printed material included print performance obligation also recognized pointintime services completed revenues related company’s imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily company’s logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations item 8 “financial statements supplementary data” annual report form 10k many company’s operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis instances company deliver print work customer bill customer postage cases company acting agent billings recorded net basis net sales significant payment terms payment terms conditions contracts customers vary company typically offers standard terms net 30 days company’s standard business practice offer extended payment terms longer one year company may offer cash discounts prepayment extended terms depending certain facts circumstances timing company’s delivery products services differs timing payment company record either contract asset contract liability variable consideration evaluating transaction price company analyzes contract basis applicable variable considerations noncash consideration also performs constraint analysis nature company’s contracts give rise variable consideration including volume rebates credits discounts similar items generally decrease transaction price variable amounts generally credited customer based achieving certain levels sales activity contracts signed making payments within specific terms product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends transaction price requires allocation multiple performance obligations company uses estimated standalone selling prices using adjusted market assessment approach costs obtain contracts company capitalizes certain sales incentives sales compensation packages costs directly attributed awarded customer contract renewal would incurred contract obtained company also defers certain contract acquisition costs paid customer contract inception costs obtain contracts duration less one year expensed incurred contract costs contracts one year company amortizes costs obtain contracts straightline basis estimated life contract reviews quarterly impairment accounting policies estimates related revenue recognition updated effective january 1 2018 adoption revised guidance recognizing revenue contracts customers see note 1 “basis presentation summary significant accounting policies” note 2 “revenue recognition” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k information impairment goodwill represents excess purchase price fair value identifiable net assets acquired business combination assigned specific reporting units changes management’s estimates judgments including changes based actual results differing estimates judgments used purchase price allocation process could result impairment charge could material adverse effect companys results operations accordance accounting guidance company performs annual impairment test goodwill october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value third quarter 2019 company initiated evaluation strategic alternatives relation quad’s book business within united states print related services reporting unit resulted decision divest business accordingly company performed interim assessment united states print related services reporting unit’s goodwill impairment fair value reporting unit estimated using income valuation model discounted cash flow market approach based estimated selling price book business thencurrent market environment result thenanticipated divestiture company recognized noncash goodwill impairment charge 101 million representing entire balance goodwill associated book business within united states print related services reporting unit july 31 2019 within united states print related services segment company identified three reporting units 1 core print related services 2 specialty print related services 3 united states products services december 31 2019 goodwill totaled 1030 million allocated core print related services specialty print related services reporting unit united states products services reporting unit goodwill allocated additionally goodwill international segment consolidated balance sheets determining fair value core print related services reporting unit october 31 2019 company used equal weighting income market approaches significant assumptions used income approach included estimated future cash flows including expected future revenue growth profit margins capital expenditures working capital levels terminal value multiples 108 aftertax weighted average cost capital core print related services estimated future cash flows based companys internal projection models industry projections assumptions deemed reasonable management significant assumptions used market approach included control premium based similar transactions selection guideline public companies selected market multiples fair value determination categorized level 3 fair value hierarchy see note 15 “financial instruments fair value measurements” consolidated financial statements item 8 “financial statements supplementary data” annual report form 10k definition level 3 inputs completing annual evaluation estimated fair value core print related services reporting unit united states print related services segment determined exceed carrying value reporting unit addition company performed sensitivity analysis october 31 2019 material assumptions used discounted cash flow valuation models performing annual goodwill impairment assessment percentage estimated fair value exceeded carrying value core print related services reporting unit 50 management concluded impairment existed october 31 2019 additional indications impairment identified october 31 2019 december 31 2019 impairment property plant equipment finitelived intangible assets company performs impairment evaluations longlived assets whenever business conditions events circumstances indicate assets may impaired including whether estimated useful life longlived assets may warrant revision whether remaining balance asset may recoverable company’s significant longlived assets property plant equipment customer relationship intangible assets recorded conjunction acquisition assessing impairment longlived assets requires company make important estimates assumptions including limited expected future cash flows assets generate assets used based strategic direction company remaining useful life residual value considerable judgment also applied incorporating potential impact current economic climate customer demand selling prices cost production limited activity secondary markets assets cost capital estimated future undiscounted cash flows generated assets less carrying value longlived assets written fair value charge recorded current operations company uses internal discounted cash flow estimates quoted market prices available independent appraisals appropriate determine fair value fair value determination categorized level 3 fair value hierarchy see note 15 “financial instruments fair value measurements” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k definition level 3 inputs company classifies longlived assets sold held sale period approved plan sell asset company committed plan ii asset available immediate sale present condition iii active program locate buyer actions required sell asset initiated iv sale asset probable v asset actively marketed sale price reasonable relation current fair value vi unlikely significant changes plan made plan withdrawn assets held sale initially measured lower carrying value fair value less cost sell losses resulting measurement recognized period held sale criteria met gains recognized date sale designated held sale company stops recording depreciation expense property plant equipment fair value less cost sell longlived assets held sale assessed reporting period longer meets classification upon decision sell book business third quarter 2019 net assets book business reclassified held sale accordance authoritative guidance fair value determined company based internal discounted cash flows estimates quoted market prices available independent appraisals appropriate accordingly periods leading pending disposition book business company continues assess carrying value net assets compared value implied bids received connection sale process result assessment year ended december 31 2019 company recorded noncash impairment charges 921 million reduce carrying value estimated fair value less costs sell see note 4 “discontinued operations” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k information company’s intent sell book business based assessments completed years ended december 31 2019 2018 2017 company recognized property plant equipment impairment charges continuing operations 79 million 262 million 120 million respectively primarily related facility consolidations well capacity strategic reduction restructuring initiatives finitelived intangible asset impairment charges recorded years ended december 31 2019 2018 2017 company continues monitor groups assets identify new events changes circumstances could indicate carrying values recoverable particularly light potential declines profitability may result highly competitive industry landscape continued uncertainty global economy event significant unanticipated changes circumstances significant adverse changes business climate adverse actions regulators unanticipated competition loss key customers andor changes technology markets actual results differ management’s estimates provision impairment could required future period pension plans result acquisition world color press company acquired multiple underfunded pension plans pension plan costs determined using actuarial methods funded contributions determined accordance projected benefit method prorated based service company records amounts relating pension plans based calculations include various actuarial assumptions company believes two critical assumptions discount rate assumed rate return assets changes assumptions primarily influenced factors outside company’s control significant effect amounts reported financial statements company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets included item 8 “financial statements supplementary data” annual report form 10k company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors event gives rise curtailment settlement curtailment accounted prior settlement company’s measurement date measure defined benefit plan assets projected benefit obligation december 31 purposes calculating expected return plan assets valued fair value company determines assumption discount rate used purposes computing annual service interest costs pension plan based index highquality corporate bond yields matchedfunding yield curve analysis date company measures interest costs pension benefits applying specific spot rates along yield curve plans’ liability cash flows weighted average discount rate used determine benefit obligations pension plans december 31 2019 320 102 basis point decrease discount rate 422 december 31 2018 onepercentage point change discount rate would following impact projected benefit obligation december 31 2019 company employs total return investment approach pension plans whereby diversified mix equity securities debt securities used maximize longterm pension plan assets intent strategy outperform growth plan liabilities long run plan contributions decreased balanced maintaining lower degree investment risk tolerance established careful consideration plan liabilities plan funded status corporate financial condition equity securities diversified across geography market capitalization investments united states largecapitalization stocks united states smallcapitalization stocks international securities investment risk measured monitored ongoing basis annual liability measurements periodic assetliability studies quarterly investment portfolio reviews expected longterm rate return plan assets based upon many factors including expected asset allocations historical asset returns current expected future market conditions risk current target asset allocation plan assets weighted average basis 30 equity securities 70 debt securities actual asset allocation december 31 2019 approximately 30 equity securities 70 debt securities expected return plan assets assumption 625 650 december 31 2019 2018 respectively company’s funded united states pension plans actual return plan assets 2128 543 years ended december 31 2019 2018 respectively certain pension plans unfunded plans hold plan assets 25 basis point change expected return plan assets would following impact net pension income year ended december 31 2019 company also participated mepps result acquisition world color press company withdrawn significant mepps replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan two mepps gciu gcc significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued estimated withdrawal liability based information provided plan’s trustee 2016 company gcc reached settlement agreement claims scheduled payments february 2024 company recorded 321 million increase mepps withdrawal liability year ended december 31 2018 result unfavorable rulings following litigation gciu trustees recorded restructuring impairment transactionrelated charges consolidated statements operations 2019 company gciu reached settlement agreement claims scheduled payments april 2032 new accounting pronouncements see note 24 “new accounting pronouncements” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k item 7aitem 7 managements discussion analysis financial condition results operations following discussion financial condition results operations quadgraphics read together quadgraphics audited consolidated financial statements three years period ended december 31 2011 including notes thereto included item 8 annual report form 10k discussion contains forwardlooking statements reflect companys plans estimates beliefs companys actual results could differ materially discussed forwardlooking statements factors could cause contribute differences include limited discussed forwardlooking statements item 1a risk factors earlier within annual report form 10k managements discussion analysis financial condition results operations provided supplement companys consolidated financial statements accompanying notes help provide understanding companys financial condition changes companys financial condition companys results operations discussion analysis organized follows • overview section includes general description companys business segments overview key performance metrics companys management measures utilizes evaluate business performance overview trends affecting company including managements actions related trends • results operations section contains analysis companys results operations comparing results 1 year ended december 31 2011 year ended december 31 2010 2 year ended december 31 2010 year ended december 31 2009 comparability companys results operations periods significantly impacted acquisition world color press july 2 2010 results operations world color press included companys consolidated results prospectively july 2 2010 addition connection july 12 2011 execution definitive agreement transcontinental among things acquire transcontinentals mexican operations exchange companys canadian operations exception companys vancouver british columbia facility results operations companys canadian operations reported discontinued operations periods presented companys canadian operations originally acquired part world color press acquisition july 2 2010 therefore discontinued operations presentation impacts 2011 2010 results operations forwardlooking statements providing general description recent projected industry company developments important understanding companys results operations included section also provides discussion ebitda margin nongaap financial measures company uses assess performance business • liquidity capital resources section provides analysis companys capitalization cash flows statement offbalance sheet arrangements discussion table outstanding debt commitments cash flows companys canadian operations reported discontinued operations thus included cash flow analysis forwardlooking statements important understanding companys financial condition also included section also provides discussion free cash flow nongaap financial measure company uses assess liquidity capital deployment • critical accounting policies estimates section contains discussion accounting policies companys management believes important companys financial condition results operations well allowances reserves require significant judgment estimates part companys management addition companys significant accounting policies including critical accounting policies summarized note 1 basis presentation summary significant accounting policies consolidated financial statements item 8 annual report form 10k • new accounting pronouncements section provides discussion new accounting pronouncements anticipated impact accounting pronouncements companys consolidated financial statements overview business overview quadgraphics leading global provider print related products services designed provide integrated multichannel solutions marketers publishers north america latin america europe companys products services include • print solutions including catalogs consumer magazines special interest publications direct mail packaging commercial specialty printed products retail inserts books directories • media solutions including creative digital imaging video photography workflow solutions interactive technology including mobile social media response data analytics services • logistics services including mailing distribution logistics data optimization hygiene services addition substantial investments made research development technological innovations company developed multiple manufacturing process improvements including innovative press finishing control systems materialhandling equipment use print operations well sale printers worldwide company believes inhouse research development continuous improvement mentality toward printing technology important success company also manufactures ink used printing process company separately reports net sales related costs sales product service offerings clientfacing perspective quadgraphics focused integrating new media redefine print customers companys media solutions group dedicated delivering innovative solutions across multiple media channels media solutions core building blocks include creative digital imaging video photography workflow solutions interactive technology including mobile social media response data analytics services building blocks seamlessly integrated help clients optimize content create experiences connect customers subscribers across multiple channels including print web mobile email ebook tablet instore companys operating reporting segments aligned companys chief operating decision maker currently manages business company three reportable segments north america print related services international corporate north america print related services segment includes companys united states printing operations well canadian printing operations vancouver british columbia retained sale companys canadian operations transcontinental segment managed one integrated platform includes product related service offerings described north america print related services segment accounted approximately 88 companys consolidated net sales year ended december 31 2011 international segment consists companys printing operations europe latin america include operations poland argentina brazil columbia peru chile mexico including newly acquired transcontinental mexican operations segment produces delivers quadgraphics product service offerings europe latin america exception printingrelated auxiliary equipment included north america print related services segment international segment accounted approximately 12 companys consolidated net sales year ended december 31 2011 corporate segment consists unallocated general administrative activities associated expenses including part executive legal finance information technology human resources key performance metrics overview companys management believes ability generate net sales growth profit increases positive cash flow key indicators successful execution companys business strategy increase shareholder value company uses period net sales growth ebitda margin cash flows provided operating activities free cash flow metrics measure operating performance financial condition liquidity ebitda margin free cash flow nongaap financial measures see definitions ebitda margin reconciliation net earnings loss attributable quadgraphics common shareholders ebitda results operations sections see definition free cash flow reconciliation cash flows provided operating activities free cash flow liquidity capital resources section net sales growth company uses period net sales growth key performance metric companys management assesses net sales growth based ability generate increased net sales increased sales existing customers sales new customers sales new expanded solutions existing new customers opportunities expand sales strategic investments including acquisitions ebitda margin company uses ebitda margin metrics assess operating performance companys management assesses ebitda margin based ability increase revenues controlling variable expense growth cash flows provided operating activities company uses cash flows provided operating activities metric assess liquidity companys management assesses cash flows provided operating activities based ability meet recurring cash obligations increasing available cash fund integration restructuring requirements related acquired world color press transcontinental mexican operations well fund capital expenditures debt service requirements world color press single employer pension plan contributions world color press multiemployer pension plan withdrawal liabilities acquisitions investments future growth shareholder dividends share repurchases cash flows provided operating activities significantly impacted timing nonrecurring infrequent receipts expenditures free cash flow company uses free cash flow metric assess liquidity capital deployment free cash flow defined cash flows provided operating activities less capital expenditures companys management assesses free cash flow measure quantify cash available strategic capital deployment investments business including acquisitions strengthening balance sheet including debt pension repayment returning cash shareholders including dividends share repurchases priorities capital deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items payments related completing world color press bankruptcy process overview trends affecting quadgraphics competition highly fragmented printing industry remains intense industry excess manufacturing capacity created declines industry volumes causing printing industry face continued downward pricing pressures addition growth adaptation alternative marketing technologies online distribution hosting content mobile technologies well alternative delivery content resulted marketers publishers allocating marketing advertising spend across wide expanding selection nonprint media options exacerbates industry overcapacity management anticipates volume pricing pressures continue 2012 response management continue focus financial flexibility strong balance sheet efficient cost structure company believes disciplined approach capital management strong balance sheet critical able invest profitable growth opportunities technological advances thereby providing highest return shareholders management currently balancing use cash compelling investment opportunities deleveraging companys balance sheet reductions debt contributions pension postretirement obligations returns shareholders including quarterly shareholder dividend 020 per share initiated second quarter 2011 increasing 025 per share 2012 also share repurchase program initiated third quarter 2011 company reduced consolidated debt capital leases 325 million since july 2 2010 world color press acquisition date despite incurring significant costs related acquisition integration restructuring programs furthermore july 26 2011 company refinanced significant portion debt new 15 billion debt financing agreement new debt agreement increases revolving credit available company 5300 million 8500 million providing greater capacity support companys growth plans addition increasing financial flexibility new debt agreement reduces cash interest payments estimated 16 20 million annually current borrowing levels company working diligently lower cost structure consolidating manufacturing platform efficient facilities well realizing purchasing mailing logistics efficiencies centralizing consolidating print manufacturing volumes eliminating redundancies administrative corporate operations efforts include deployment companys brand erp software tools streamline workflows improve data visibility across consolidated platform companys restructuring actions since july 2 2010 world color press acquisition december 31 2011 resulted approximately 6200 gross fulltime equivalent positions eliminated approximately 4500 net positions eliminated considering job additions related work transferred facilities related 12 plant closures comprised 10 united states plants including october 17 2011 announcements stillwater oklahoma richmond virginia plant closures well two canadian plant closures completed prior execution transcontinental exchange agreement closure former world color press headquarters workforce reductions announced fourth quarter 2011 upon completion 24 month integration period june 2012 management estimates annual synergy savings somewhat 250 million since acquisition december 31 2011 company achieved approximately 196 million total synergy savings management expects synergy savings achieved within estimated integrationrelated costs range 195 million 240 million costs achieve synergy savings may exceed range extent synergy savings exceed 250 million assurance synergy savings target fully realized integrationrelated costs exceed estimate addition cost savings acquisitionrelated synergies company continues focus cost reductions lean manufacturing continuous improvement initiatives order achieve improved efficiencies reduce waste lower overall operating costs enhance quality timeliness create safer work environment companys employees increasingly multichannel marketplace company believes printing industry driven make capital investments new technologies deliver targeted customized print solutions deploy multichannel marketing campaigns integration new media company believes ongoing commitment technology paramount delivering highquality relevant offerings customers company invested 168 million capital projects 2011 intends invest 125 million 150 million new capital projects 2012 making capital allocation decisions management undertakes thorough process aimed driving strongest contribution longterm profitability whether fixed asset additions discussed organic growth opportunities acquisitions divestitures july 12 2011 company transcontinental entered definitive agreement whereby quadgraphics acquired transcontinentals mexican operations exchange companys canadian operations exception companys vancouver british columbia facility part canadian transaction transcontinental assume pension postretirement obligations pertaining canadian employees company believes acquisition trancontinentals mexican operations able create industryleading print platform economy higher growth rate canada also achieve beneficial synergy savings operational consolidation company completed acquisition transcontinentals mexican operations september 8 2011 february 7 2012 company announced authorized canadas competition bureau complete sale canadian operations transcontinental company expects sale completed march 31 2012 company subject seasonality quarterly results net sales operating income typically higher third fourth quarters calendar year compared first second quarters seasonality driven increased magazine advertising page counts retail inserts catalogs books primarily due backtoschool holiday related advertising promotions companys 2011 net sales followed typical industry seasonality management anticipates impact seasonality 2012 results operations year ended december 31 2011 compared year ended december 31 2010 summary results companys operating income continuing operations operating margin net earnings loss attributable quadgraphics common shareholders diluted earnings loss per share attributable quadgraphics common shareholders year ended december 31 2011 changed year ended december 31 2010 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 1140 million incurred year ended december 31 2011 included 295 million employee termination costs plant closures workforce reductions initiatives b 138 million impairment charges related closure stillwater oklahoma plant well machinery equipment facilities c 29 million transaction costs incurred primarily connection transcontinental transaction 457 million world color press integration costs net 156 million gain collection note receivable june 2008 sale world color press european operations e 221 million various restructuring charges including costs maintain exit closed facilities well lease exit charges connection integration world color press operations transcontinentals mexican operations quadgraphics company expects incur additional restructuring integration costs future reporting periods 2 restructuring impairment transactionrelated charges 1475 million incurred year ended december 31 2010 included 267 million employee termination costs related plant closures various workforce reduction initiatives b 329 million impairment charges assets primarily related pila poland fredericksburg virginia reno nevada plant closures c 410 million transaction costs related primarily acquisition world color press much lesser extent 2010 acquisition hgi company llc hgi 278 million world color press acquisition integration costs e 191 million various restructuring charges including costs maintain exit closed facilities well lease exit charges 3 interest expense increased 151 million 80 million net tax year ended december 31 2011 1080 million change due increased average debt levels following world color press acquisition july 2 2010 partially offset lower interest rates result 15 billion debt financing agreement entered july 26 2011 4 income tax expense decreased due companys change c corporation status july 2010 pursuant company recognized income tax expense 2005 million connection july 2 2010 acquisition world color press public registration quadgraphics class stock company changed tax status certain entities within quadgraphics legal structure c corporation status provisions internal revenue code point forward entities subject federal state income taxes 5 company recognized 340 million loss debt extinguishment july 2011 203 million net tax part 15 billion debt financing agreement 340 million loss represents certain debt issuance costs associated new refinanced debt expensed 6 loss discontinued operations net tax increased 340 million year ended december 31 2011 386 million loss primarily due 301 million increase restructuring impairment transactionrelated charges recognized 2011 restructuring impairment transactionrelated expenses included 179 million charge recognize pension curtailment loss 139 million goodwill impairment charge third quarter 2011 pending sale canadian discontinued operations due carrying value canadian net assets exceeding estimated fair value mexican net assets acquired transcontinental 7 operating income increased 618 million primarily due acquisition world color press synergy savings integration world color press operating income increased operating margin decreased due lower operating margins acquired world color press business companys preacquisition business part integration world color press company implemented significant twoyear restructuring program reduce operating administrative cost structure combined company following discussion provides additional details operating results continuing operations following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth excluding canadian discontinued operations net sales product sales increased 10119 million 360 year ended december 31 2011 compared year ended december 31 2010 primarily due 1061 million additional net sales related world color press acquisition higher paper byproduct sales partially offsetting increases 49 million net decreases primarily related 1 lower pricing due continued pricing pressure excess manufacturing capacity printing industry 2 lower volumes service sales primarily consist imaging logistics distribution services increased 1269 million 341 year ended december 31 2011 compared year ended december 31 2010 primarily due 118 million additional net sales related world color press acquisition 9 million higher sales imaging logistics distribution services cost sales cost product sales increased 7906 million year ended december 31 2011 compared year ended december 31 2010 primarily due world color press acquisition increased material freight costs increases partially offset acquisition synergy savings related purchasing efficiencies realized well labor cost reductions result plant closures cost product sales percentage net sales increased 669 year ended december 31 2010 676 year ended december 31 2011 primarily due increased paper sales generally billed customers passthrough rates thus represent minimal margin increased labor costs partially offsetting increases higher pricing byproduct recoveries synergy cost savings related world color press acquisition integration cost service sales increased 1052 million year ended december 31 2011 compared year ended december 31 2010 primarily due world color press acquisition higher freight fuel costs logistics services selling general administrative expenses selling general administrative expenses increased 1040 million year ended december 31 2011 compared year ended december 31 2010 primarily due world color press acquisition including compliance support costs associated companys status publicly traded entity starting july 6 2010 addition 61 million increase provisions doubtful accounts recorded related increased accounts receivable writeoffs 71 million insurance gain recognized 2010 recur 2011 increases partially offset synergy savings integration world color press selling general administrative expenses percentage net sales decreased 95 94 years due synergy savings integration world color press restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges decreased 335 million year ended december 31 2011 compared year ended december 31 2010 primarily due 381 million decrease transaction costs related acquisition world color press 191 million decrease impairment charges related plant closures partially offset 179 million increase world color press integration costs 30 million increase restructuring costs 28 million increase employee termination costs restructuring impairment transactionrelated charges 1140 million incurred year ended december 31 2011 included 1 295 million employee termination costs plant closures workforce reduction initiatives 2 138 million impairment charges related closure stillwater oklahoma plant well machinery equipment facilities 3 29 million transaction costs incurred primarily connection transcontinental transaction 4 457 million world color press integration costs net 156 million gain collection note receivable june 2008 sale world color press european operations 5 221 million various restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring impairment transactionrelated charges 1475 million incurred year ended december 31 2010 included 1 267 million employee termination costs plant closures workforce reduction initiatives 2 329 million impairment charges assets related pila poland fredericksburg virginia reno nevada plant closures 3 410 million transaction costs incurred primarily connection acquisition world color press 4 278 million world color press integration costs 5 191 million various restructuring charges including costs maintain exit closed facilities well lease exit charges depreciation amortization depreciation amortization increased 772 million year ended december 31 2011 compared year ended december 31 2010 due world color press acquisition increased capital expenditures related primarily integration world color press ebitda marginconsolidated ebitda margin year ended december 31 2011 compared year ended december 31 2010 follows ebitda increased 983 million year ended december 31 2011 primarily due world color press acquisition related synergy savings integrating world color press operations increases partially offset continued pricing pressure ebitda margin decreased year ended december 31 2011 compared year ended december 31 2010 primarily due lower relative operating margins acquired world color press business compared preacquisition quadgraphics business ebitda represents net loss attributable quadgraphics common shareholders plus interest expense ii income tax expense iii depreciation amortization ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net loss measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net loss attributable quadgraphics common shareholders follows 1 net loss attributable quadgraphics common shareholders includes effects restructuring impairment transactionrelated charges 1140 million 1475 million years ended december 31 2011 2010 respectively b loss debt extinguishment 340 million year ended december 31 2011 c loss discontinued operations net tax 386 million 46 million years ended december 31 2011 2010 respectively ebitda discontinued operations 256 million 24 million years ended december 31 2011 2010 respectively include restructuring impairment transactionrelated charges 451 million 150 million years ended december 31 2011 2010 respectively north america print related services following table summarizes net sales operating income operating margin certain items impacting comparability within north america print related services segment excluding canadian discontinued operations net sales product sales north america print related services segment increased 8676 million year ended december 31 2011 compared year ended december 31 2010 primarily due 927 million net sales related world color press acquisition increased paper byproduct sales partially offsetting increases 59 million net decreases primarily related 1 continued pricing pressure excess manufacturing capacity printing industry 2 lower volumes service sales north america print related services segment increased 1270 million year ended december 31 2011 compared year ended december 31 2010 primarily due 118 million net sales related world color press acquisition 9 million higher sales imaging logistics distribution services operating income operating income north america print related services segment increased 665 million year ended december 31 2011 compared year ended december 31 2010 primarily due world color press acquisition synergy savings integration world color press restructuring activities described increase partially offset increased material freight costs increased selling general administrative costs related larger postworld color press acquisition company compliance support costs associated companys public company status company became publiclytraded company july 6 2010 addition 61 million increase provisions doubtful accounts recorded related increase accounts receivable writeoffs 71 million insurance gain recognized 2010 recur 2011 operating margin north america print related services segment decreased 72 year ended december 31 2010 71 year ended december 31 2011 primarily due reasons discussed preceding paragraph restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges north america print related services segment year ended december 31 2011 553 million consisting 1 230 million employee termination costs plant closures workforce reduction initiatives 2 127 million impairment charges related closure stillwater oklahoma plant well machinery equipment facilities 3 08 million world color press integration costs 4 188 million various restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring impairment transactionrelated charges north america print related services segment year ended december 31 2010 558 million consisting 1 208 million employee termination costs plant closures various workforce reduction initiatives 2 85 million impairment charges primarily related closures reno nevada fredericksburg virginia plants 3 105 million world color press integration costs 4 160 million various restructuring charges including costs maintain exit closed facilities well lease exit charges international following table summarizes net sales operating loss operating margin certain items impacting comparability equity earnings unconsolidated entities within international segment net sales product sales international segment increased 1443 million year ended december 31 2011 compared year ended december 31 2010 primarily due 134 million net sales related world color press acquisition 14 million net sales related transcontinental mexican acquisition operating loss operating loss international segment decreased 338 million year ended december 31 2011 compared year ended december 31 2010 primarily due 260 million decrease restructuring impairment integration expenses cost reductions poland result 2010 restructuring actions restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2011 73 million consisting 1 31 million employee termination costs related various workforce reduction initiatives 2 11 million impairment charges machinery equipment 3 31 million restructuring charges restructuring impairment transactionrelated charges international segment year ended december 31 2010 333 million consisting 1 33 million employee termination costs related pila poland plant closure 2 244 million impairment charges related closure pila poland plant 3 39 million integration charges 4 17 million restructuring charges equity earnings unconsolidated entities investments entities quadgraphics ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting company holds 49 ownership interest plural editora e grafica plural commercial printer based são paulo brazil well 50 interest joint venture chile acquired part world color press acquisition equity earnings unconsolidated entities international segment decreased 55 million year ended december 31 2011 primarily due lower earnings plural largely attributed start activities associated recently added press capacity meet growing demand corporate following table summarizes unallocated operating expenses presented corporate operating expenses increased 50 million year ended december 31 2011 compared year ended december 31 2010 primarily due world color press acquisition partially offset 70 million decrease restructuring impairment transactionrelated charges additional corporate expenses incurred 2011 due compliance support costs associated companys new status publicly traded entity includes increased levels administrative staff information technology finance legal human resources treasury internal audit administrative labor corporate restructuring impairment transactionrelated charges year ended december 31 2011 514 million consisting 1 34 million employee termination costs workforce reductions initiatives 2 29 million transaction costs incurred primarily connection transcontinental transaction 3 449 million world color press integration costs net 156 million gain collection note receivable june 2008 sale world color press european operations 4 02 million various restructuring charges corporate restructuring impairment transactionrelated charges year ended december 31 2010 584 million consisting 1 26 million employee termination costs workforce reduction initiatives 2 410 million transaction costs related primarily acquisition world color press 3 134 million world color press integration costs 4 14 million various restructuring charges results operations year ended december 31 2010 compared year ended december 31 2009 summary results companys operating income operating margin net earnings loss attributable quadgraphics common shareholders diluted earnings loss per share attributable quadgraphics common shareholders year ended december 31 2010 changed year ended december 31 2009 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 1475 million incurred year ended december 31 2010 included 267 million employee termination costs related plant closures various workforce reduction initiatives b 329 million impairment charges assets primarily related pila poland fredericksburg virginia reno nevada plant closures c 410 million transaction costs related primarily acquisition world color press much lesser extent 2010 acquisition hgi 278 million world color press acquisition integration costs e 191 million various restructuring charges including costs maintain exit closed facilities well lease exit charges 2 restructuring impairment charges 112 million incurred year ended december 31 2009 included 101 million headcount reductions 11 million lease termination costs 3 transaction expenses included outside professional services fees incurred year ended december 31 2009 connection acquisition world color press included within selling general administrative expenses 2009 consolidated statements operations 2010 transaction expenses classified within restructuring impairment transactionrelated charges consolidated statements operations 4 interest expense increased 288 million 56 million net tax year ended december 31 2010 929 million change due increased overall debt levels result world color press acquisition company entering 123 billion debt financing arrangement april 23 2010 5 due companys change c corporation status july 2010 company recognized onetime income tax expense 2005 million connection july 2 2010 acquisition world color press public registration quadgraphics class stock company changed tax status certain entities within quadgraphics legal structure c corporation status provisions internal revenue code point forward entities subject federal state income taxes 6 loss discontinued operations net tax related canadian operations increased 46 million year ended december 31 2010 company acquired canadian operations part world color press acquisition july 2 2010 thus financial results canadian operations 2009 7 operating income increased 827 million primarily due world color press acquisition operating income increased due larger scale business operating margin decreased period world color press business operates lower operating margin legacy quadgraphics business additionally higher paper sales generally represent pass cost customers continued pricing pressures higher retirement incentive compensation costs led overall decreased operating margins partially offset increase byproduct profits following discussion provides additional details operating results continuing operations following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth excluding canadian discontinued operations net sales product sales increased 12395 million year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition additionally product sales legacy quadgraphics business increased primarily result increased paper sales increased byproduct sales increased volume legacy quadgraphics plants increases partially offset continued pricing pressures related industry overcapacity lesser extent negative effects foreign currency translation service sales primarily consist imaging logistics distribution services increased 1578 million year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition higher fuel prices increased data imaging services cost sales cost product sales increased 10018 million year ended december 31 2010 compared year ended december 31 2009 primarily result world color press acquisition additionally cost product sales increased due increased paper sales volume increased retirement incentive compensation costs increased labor costs higher print volumes frictional costs incurred 2010 hiring training additional employees prepare certain print plants receive transferred volumes closing plants cost increases partially offset acquisition synergy savings related purchasing distribution efficiencies realized cost product sales percentage product sales increased year ended december 31 2010 compared year ended december 31 2009 due primarily lower operating profits acquired world color press business increased paper sales margin impact items described preceding paragraph paper generally billed customers passthrough rates thus paper sales increase period cost product sales well cost product sales percentage net sales increases cost service sales increased 1303 million year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition higher fuel prices selling general administrative expenses selling general administrative expenses increased 1090 million year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition additionally selling general administrative expenses 2010 increased acquisition due increased size company compliance support costs associated companys new status publicly traded entity includes 1 increased nonlabor costs primarily related outside service provider fees insurance premiums 2 increased levels administrative staff united states information technology finance legal human resources treasury administrative labor 3 increased retirement incentive compensation retirement incentive compensation expense increased 2010 reestablish benefits reduced 2009 increases partially offset decreased bad debt expense 2010 quadgraphics preacquisition business primarily due provisions two significant customer bankruptcies 2009 restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges increased 1363 million year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition including 1017 million transactionrelated charges integration costs impairment charges related plant closures 166 million increase employee termination costs related plant closures announced 2010 180 million increase restructuring costs restructuring impairment transactionrelated charges 1475 million incurred year ended december 31 2010 included 1 267 million employee termination costs related plant closures various workforce reduction initiatives 2 329 million impairment charges related closure pila poland reno nevada fredericksburg virginia plants 3 410 million transactionrelated charges primarily incurred connection world color press acquisition 4 278 million world color press integration costs 5 191 million various restructuring charges including utility contract termination costs lease exit charges costs maintain exit closed facilities restructuring impairment charges 112 million incurred year ended december 31 2009 included 101 million employee termination costs related various workforce reduction initiatives 11 million lease exit charges depreciation amortization depreciation amortization increased 707 million year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition ebitda marginconsolidated ebitda margin year ended december 31 2010 compared year ended december 31 2009 follows ebitda increased 183 million year ended december 31 2010 primarily due world color press acquisition related synergy savings integrating world color press lower incentive compensation partially offset continued pricing pressure ebitda margin decreased year ended december 31 2010 compared year ended december 31 2009 primarily due incremental restructuring impairment transactionrelated charges recorded 2010 related integration world color press lower relative operating margins acquired world color press business compared preacquisition quadgraphics business increased retirement incentive compensation costs synergy savings integrating world color press ebitda represents net earnings loss attributable quadgraphics common shareholders plus interest expense ii income tax expense iii depreciation amortization ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net earnings loss attributable quadgraphics common shareholders follows 1 net earnings loss attributable quadgraphics common shareholders includes effects restructuring impairment transactionrelated charges 1475 million 112 million years ended december 31 2010 2009 respectively b loss discontinued operations net tax 46 million year ended december 31 2010 ebitda discontinued operations 24 million year ended december 31 2010 includes restructuring impairment transaction related charges 150 million year ended december 31 2010 north america print related services following table summarizes net sales operating income operating margin certain items impacting comparability within north america print related services segment excluding canadian discontinued operations net sales product sales north america print related services segment increased 11193 million year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition additionally product sales increased due increased paper byproduct sales volume increases preacquisition quadgraphics plants partially offset lower pricing due continued pricing pressures related industry overcapacity service sales north america print related services segment increased 1580 million year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition additionally service sales increased result higher fuel surcharges customers increased data imaging services operating income operating income north america print related services segment increased 708 million year ended december 31 2010 compared year ended december 31 2009 primarily result world color press acquisition partially offset 449 million increase restructuring impairment integration expenses operating margin decreased year ended december 31 2010 compared year ended december 31 2009 due 449 million increase restructuring impairment transactionrelated costs due integration world color press ii lower relative operating margins acquired world color press business compared preacquisition quadgraphics business iii increased retirement incentive compensation costs iv increased paper sales billed customers generally passthrough rates v frictional costs incurred hiring training additional employees prepare certain print plants receive transferred volumes closing plants restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges north america print related services segment increased 449 million year ended december 31 2010 compared year ended december 31 2009 primarily due 149 million increase various restructuring charges 110 million increase employee termination costs related plant closures announced 2010 105 million increase world color press integration costs 85 million increase impairment charges related plant closures restructuring impairment transactionrelated charges north america print related services segment year ended december 31 2010 558 million consisting 1 208 million employee termination costs plant closures various workforce reduction initiatives 2 85 million impairment charges primarily related closures reno nevada fredericksburg virginia plants 3 105 million world color press integration costs 4 160 million various restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring impairment transactionrelated charges north america print related services segment year ended december 31 2009 109 million included 98 million employee termination costs related various workforce reduction initiatives 11 million related lease exit charges international following table summarizes net sales operating loss operating margin certain items impacting comparability equity earnings unconsolidated entities within international segment net sales product sales international segment increased 1202 million year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition additionally product sales increased due increased byproduct paper sales well increased sales argentina partially offset negative impact foreign currency translation operating loss operating loss international segment increased 425 million year ended december 31 2010 compared year ended december 31 2009 primarily due 330 million incremental restructuring impairment charges incurred years due pila poland plant closure well increased operating losses companys european business primarily result frictional costs related consolidation companys european plants european operating losses partially offset operating income acquired latin american operations world color press restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2010 333 million consisting 1 33 million employee termination costs related pila poland plant closure 2 244 million impairment charges related closure pila poland plant 3 39 million integration costs 4 17 million various restructuring charges restructuring impairment charges international segment year ended december 31 2009 03 million related employee termination costs workforce reduction initiatives equity earnings unconsolidated entities investments entities quadgraphics ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil well 50 interest joint venture chile acquired part world color press acquisition equity earnings unconsolidated entities international segment increased 23 million year ended december 31 2010 primarily due increased volumes existing customers plural due companys share chiles income since world color press acquisition date corporate following table summarizes unallocated operating expenses presented corporate operating expenses increased 791 million year ended december 31 2010 compared year ended december 31 2009 primarily due world color press acquisition including 584 million restructuring integration transactionrelated charges incurred 2010 acquire integrate world color press operating expenses 2010 also increased result additional corporate expenses due increased size company compliance support costs associated companys new status publicly traded entity includes 1 increased levels administrative staff united states information technology finance legal human resources treasury administrative labor 2 increased retirement incentive compensation 3 increased insurance premiums outside service provider fees corporate restructuring impairment transactionrelated charges year ended december 31 2010 584 million consisting 1 26 million employee termination costs workforce reduction initiatives 2 410 million transaction costs related primarily acquisition world color press 3 134 million world color press integration costs 4 14 million various restructuring charges restructuring impairment charges incurred corporate segment year ended december 31 2009 28 million transaction expenses 2009 related acquisition world color press however expenses classified selling general administrative expenses 2009 liquidity capital resources company utilizes cash flows operations borrowings credit facilities satisfy liquidity capital requirements company believes expected future cash flows operations unused available capacity revolving credit facilities 7301 million december 31 2011 provide sufficient resources fund ongoing operating requirements integration restructuring requirements related acquired world color press transcontinental mexican operations well future capital expenditures debt service requirements world color press single employer pension plan contributions world color press multiemployer pension plans withdrawal liabilities investments future growth create value shareholders shareholder dividends share repurchases borrowings revolving credit facility 850 million december 31 2011 peak borrowings 2511 million year ended december 31 2011 companys borrowing capacity increased ongoing cost borrowings reduced execution 15 billion debt financing agreement july 26 2011 see description significant outstanding debt obligations december 31 2011 cash flows provided operating activities year ended december 31 2011 compared year ended december 31 2010 net cash provided operating activities 3711 million year ended december 31 2011 compared 1528 million year ended december 31 2010 resulting 2183 million increase net cash provided operating activities primarily due 2034 million decrease net loss lower working capital uses cash year ended december 31 2010 compared year ended december 31 2009 net cash provided operating activities 1528 million year ended december 31 2010 compared 2424 million year ended december 31 2009 resulting 896 million decrease primarily related increased restructuring integration payments well increased transaction costs related primarily world color press acquisition 1084 million 349 million cash paid 2010 related acquired world color press pension postretirement benefit plans 199 million cash payments world color press bankruptcy claims working capital perspective receivables inventory higher due increased volume addition world color press 2010 contributed higher working capital partially offsetting decline operating cash flows increase operating income excluding restructuring integration transaction pension cash payments discussed cash flows used investing activities year ended december 31 2011 compared year ended december 31 2010 net cash used investing activities 1843 million year ended december 31 2011 compared 1181 million year ended december 31 2010 resulting 662 million increase net cash used investing activities primarily due 508 million deposit made 2011 transcontinental mexico acquisition discussed note 3 consolidated financial statements 557 million increase capital expenditures related primarily integration world color press operations 158 million increase cash used acquisitions impacts partially offset 631 million benefit generated reducing restricted cash balances year ended december 31 2010 compared year ended december 31 2009 net cash used investing activities 1181 million year ended december 31 2010 compared 682 million year ended december 31 2009 resulting 499 million increase primarily related 385 million increase world color press bankruptcyrelated restricted cash property plant equipment additions also increased 248 million 2010 due increased requirements postacquisition company expenditures related integration world color press operations increases cash used years partially offset 100 million cash acquired 2010 generated world color acquisition cash flows used financing activities year ended december 31 2011 compared year ended december 31 2010 net cash used financing activities 1735 million year ended december 31 2011 compared 301 million year ended december 31 2010 resulting 1434 million increase net cash used financing activities due primarily 1095 million net debt repayments 2011 compared 1786 million net borrowings 2010 resulting 2881 million increase net cash used financing activities years also net cash used financing activities increased due 138 million reduction liability unsecured notes issued connection world color press bankruptcy increases net cash used financing activities partially offset reduced shareholder cash distributions 1310 million 343 million lower debt issuance cost payments shareholder cash distributions decreased 2011 due 1400 million cash distribution made 2010 companys preacquisition common shareholders part world color press acquisition year ended december 31 2010 compared year ended december 31 2009 net cash used financing activities 301 million year ended december 31 2010 compared 1846 million year ended december 31 2009 resulting 1545 million decrease net cash used financing activities decrease primarily related borrowings companys former 123 billion debt financing agreement entered 2010 net cash provided borrowings 1786 million 2010 compared net debt reductions 1479 million 2009 resulting 3265 million decrease net cash used financing activities years also net cash used financing activities decreased 2010 company made 131 million treasury stock purchases 2009 none 2010 decreases financing cash uses partially offset 2010 acquisition related payments including 1400 million shareholder cash distribution discussed 458 million payment debt issuance costs free cash flow free cash flow defined cash flows provided operating activities less capital expenditures companys management assesses free cash flow measure quantify cash available 1 strategic capital deployment investments business including acquisitions 2 strengthening balance sheet including debt pension repayment 3 returning value shareholders including dividends share repurchases priorities capital deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items payments related completing world color press bankruptcy process free cash flow nongaap measure free cash flow considered alternative cash flows provided operating activities measure liquidity quadgraphics calculation free cash flow may different similar calculations used companies therefore comparability may limited free cash flow year ended december 31 2011 compared year ended december 31 2010 follows 1 cash flows provided operating activities includes effects restructuring transactionrelated cash payments 1252 million 1185 million years ended december 31 2011 2010 respectively b bankruptcy payments 124 million 248 million years ended december 31 2011 2010 respectively free cash flow increased 1626 million year ended december 31 2011 compared year ended december 31 2010 primarily due 2183 million increase cash flows provided operating activities partially offset 557 million increased capital expenditures primarily related integration world color press please refer cash flows provided operating activities section explanations increase operating cash flows description significant outstanding debt obligations december 31 2011 december 31 2011 company utilized combination debt instruments fund cash requirements including • 15 billion debt financing agreement discussed includes ◦ 8500 million revolving credit facility 850 million outstanding december 31 2011 ◦ 4500 million term loan 4500 million outstanding december 31 2011 ◦ 2000 million term loan b 1986 million outstanding december 31 2011 • master note security agreement 6160 million outstanding december 31 2011 • facilities agreement 883 million foreign currency denominated facilities agreement including term loan revolving credit facility components total 726 million outstanding december 31 2011 15 billion debt financing agreement july 26 2011 company entered 15 billion debt financing agreement certain lenders 15 billion debt financing agreement includes three different loan facilities first revolving facility amount 8500 million term five years maturing july 25 2016 second facility term loan aggregate amount 4500 million term five years maturing july 25 2016 third facility term loan b amount 2000 million term seven years maturing july 25 2018 subject certain required amortization time companys total leverage 300 100 greater company obligated prepay two term loan facilities net proceeds asset sales casualty losses certain indebtedness borrowed money portion excess cash flow subject certain exceptions borrowings revolving facility term loan loans made 15 billion debt financing agreement bear interest london interbank offered rate libor plus 225 125 excess alternate base rate term loan b loans bear interest 300 excess libor floor 100 200 excess alternative base rate companys option debt financing agreement entered reduce companys borrowing costs lower interest rates create flexibility higher revolving credit capacity improvement financial terms proceeds term loan term loan b revolving credit facility used repay outstanding balances terminate companys 123 billion debt financing agreement included 7000 million term loan 5300 million revolving credit facility well pay 115 million new debt issuance costs incurred refinancing 15 billion debt financing agreement secured substantially unencumbered assets company 15 billion debt financing agreement also requires company provide additional collateral lenders certain limited circumstances master note security agreement sometimes referred senior notes september 1 1995 last amended january 26 2006 company entered master note security agreement pursuant company issued time senior notes aggregate principal amount 113 billion various tranches senior notes weightedaverage interest rate 751 december 31 2011 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2036 notes collateralized certain united states land buildings press finishing equipment terms master note security agreement december 31 2011 borrowings outstanding 6160 million facilities agreement december 16 2008 quadwinkowski sp zoo quadwinkowski entered secured facilities agreement facilities agreement facilities agreement includes euro denominated term loan 738 million expires december 16 2015 used refinance quadwinkowskis existing indebtedness multicurrency revolving credit facility 145 million renewed currently expires december 16 2012 used quadwinkowskis working capital general business needs december 31 2011 borrowings outstanding euro denominated term loan 659 million december 31 2011 borrowings outstanding multicurrency revolving credit facility 67 million leaving 78 million available future borrowings terms facilities agreement include guarantee quadgraphics security agreement includes collateralizing substantially quadwinkowski assets facilities bear interest aggregate euro interbank offered rate euribor warsaw interbank offered rate wibor margin weightedaverage interest rate euro denominated term loan 360 december 31 2011 weightedaverage interest rate multicurrency revolving credit facility 330 december 31 2011 covenants compliance december 31 2011 companys various lending arrangements included certain financial covenants financial terms numbers ratios covenants compliance section defined companys debt agreements among covenants company required maintain following december 31 2011 covenant restrictive measurement included • rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda defined debt financing agreement shall exceed 350 100 twelve months ended december 31 2011 companys leverage ratio 227 100 • rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 325 100 twelve months ended december 31 2011 companys interest coverage ratio 663 100 • rolling twelvemonth basis fixed charge coverage ratio defined consolidated ebitda rent expense interest rent expense shall less 150 100 twelve months ended december 31 2011 companys fixed charge coverage ratio 323 100 • consolidated net worth least 7458 million plus 40 positive consolidated net income cumulatively year december 31 2011 companys consolidated net worth restrictive covenant per various debt agreements 124 billion addition covenants 15 billion debt financing agreement also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock companys total leverage ratio greater 300 100 total leverage ratio defined debt financing agreement company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions twelvemonth period ended december 31 2011 company compliance financial covenants debt agreements company currently expects compliance future periods financial covenants assurance covenants continue met companys failure maintain compliance covenants could prevent company borrowing additional amounts could result default debt agreements default could cause outstanding indebtedness become immediately due payable virtue crossacceleration crossdefault provisions pension postretirement benefit obligations upon acquiring world color press company pension postretirement defined benefit obligations 5469 million including single employer multiemployer pension plans mepps united states canada company focused reducing pension postretirement benefit obligations following methods • contributions company made 930 million pension postretirement contributions benefit payments since july 2 2010 world color press acquisition • divestitures part divestiture canadian operations transcontinental exchange transaction transcontinental assume pension postretirement mepps obligations pertaining canadian employees obligations total 866 million currently included companys balance sheet within discontinued operations canadian portion transaction closed december 31 2011 • mepp withdrawals due significantly underfunded status mepps company began process withdraw mepps replace benefits company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees company reached agreements unions participating plants withdraw mepps relieving companys obligation make future annual benefit contributions company notified mepp trustees companys withdrawal conducting discussions trustees company expects ultimately conclude future cash payment settle obligation excluding 866 million pension postretirement mepps liabilities canadian discontinued operations company 3919 million recorded december 31 2011 pension postretirement mepps benefit obligations company reduced pension postretirement liability 1550 million since july 2 2010 world color press acquisition date primarily due cash contributions divestiture canadian operations despite 756 million increase liability december 31 2011 valuation result decrease liability discount rate expected asset returns share repurchase program september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock authorization share repurchases may made companys discretion time open market andor privately negotiated transactions permitted federal securities laws legal requirements timing manner price amount repurchase depend economic market conditions share price trading volume applicable legal requirements factors program may suspended discontinued time december 31 2011 company repurchased 04 million shares class stock open market 82 million risk management discussion companys exposure market risks management market risks see item 7a quantitative qualitative disclosures market risk annual report form 10k offbalance sheet arrangements except set forth contractual obligations commitments table note 17 lease obligations consolidated financial statements item 8 annual report form 10k including operating leases future interest debt capital leases incurred company offbalance sheet arrangements financings special purpose entities company expects material current future effect financial condition changes financial condition results operations liquidity capital expenditures capital resources significant components sales expenses contractual obligations commitments companys contractual cash obligations continuing operations december 31 2011 follows millions 1 debt obligations include 4196 million anticipated future interest payments respect variable interest rate portions debt interest amounts calculated applying december 31 2011 weightedaverage interest rate determine value future interest payments master note security agreement weightedaverage interest rate notes applied average principal balance outstanding time period amounts included thereafter include principal payments estimated interest expense 2036 2 pension postretirement benefits contributions benefit payments funded company assets included table actuarially estimated 5 year period benefit payments benefit plans expected continue beyond 2016 company believes estimate beyond period unreasonable contractual obligations table include 835 million estimated withdrawal liability us world color press mepps due uncertainty amount timing potential withdrawal liability payment see pension postretirement benefit obligations section discussion withdrawal mepps 3 liabilities consist primarily 200 million stock option termination payment utility contracts 136 million restructuringrelated severance payments 107 million deferred compensation arrangements 4 purchase obligations consist primarily 204 million firm commitments purchase press finishing equipment operational purchase requirements 5 contractual obligations table include reserves uncertain tax positions recorded accordance accounting guidance uncertainties income taxes company taken tax positions ultimate amount years necessary payments made pertain tax positions uncertain reserve december 31 2011 uncertain tax positions prior interest penalties 1060 million company also recorded accruals interest penalties related uncertain tax positions 58 million 09 million respectively december 31 2011 6 contractual obligations table include value shares companys class c stock classified redeemable equity 35 million consolidated balance sheet december 31 2011 7 contractual obligations table include purchase price payable transcontinental business exchange transaction payable settled company noncash net assets companys canadian business company believes cash payments complete sale ultimately immaterial company announced february 7 2012 received authorization canadas competition bureau complete sale canadian operations transcontinental expected occur march 31 2012 8 contractual obligations table include share repurchase program repurchases required program see share repurchase program section discussion including maximum potential cash payments program critical accounting policies estimates companys consolidated financial statements prepared accordance gaap companys critical accounting policies important portrayal financial condition results operations require company make difficult subjective estimates management required make judgments estimates affect reported amounts assets liabilities disclosure contingent assets liabilities date statements reported amounts revenues expenses reporting period company bases estimates historical experience various assumptions believed reasonable circumstances companys management believes judgments estimates made consistent appropriate methods based information available time reasonable deviation judgments estimates would material impact companys consolidated financial position results operations actual results may differ estimates different assumptions conditions extent estimates used differ actual results adjustments consolidated statements operations corresponding consolidated balance sheets would necessary adjustments would made future statements company identified following critical accounting policies estimates revenue recognition company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides certain cases delivery billing schedules outlined customer agreement product revenue recognized manufacturing complete title risk loss transfer customer reasonable assurance collectability product returns significant majority products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer respect companys logistics operations include delivery printed material company recognizes revenue upon completion delivery services company also manufactures printingrelated auxiliary equipment ensure industry leading technology printing operations well sell businesses revenue generally recognized equipment sales time shipment revenue services related installation equipment customer sites recognized upon completion installation payments received customers manufacture equipment prior shipment case installation services prior completion installation cases payments received advance meeting applicable revenue recognition criteria deferred revenue recorded revenue recognition criteria subsequently met services account greater 10 companys consolidated net sales therefore net sales related costs sales products services included separate line items consolidated statements operations item 8 annual report form 10k certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations item 8 annual report form 10k many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis impairment property plant equipment finitelived intangible assets company performs impairment evaluations longlived assets significant property plant equipment customer relationship intangible assets recorded world color press acquisition whenever business conditions events circumstances indicate assets may impaired including whether estimated useful life longlived assets may warrant revision whether remaining balance asset may recoverable assessing impairment longlived assets requires company make important estimates assumptions including limited expected future cash flows assets generate assets used based strategic direction remaining useful life residual value considerable judgment also applied incorporating potential impact current economic climate customer demand selling prices cost production limited activity secondary markets assets cost capital estimated future undiscounted cash flows generated assets less carrying value longlived assets written fair value charge recorded current operations company uses internal undiscounted cash flow estimates quoted market prices available independent appraisals appropriate determine fair value based assessments completed year ended december 31 2011 company recognized total fixed asset impairment charges 138 million 36 million related closure stillwater oklahoma plant 102 million related machinery equipment facilities 2010 company recognized total impairment charges 329 million including 244 million 64 million 21 million respectively related plant closures pila poland reno nevada fredericksburg virginia impairment charges recorded 2011 2010 customer relationship intangibles company continues monitor groups assets identify new events changes circumstances could indicate carrying values recoverable particularly light potential declines profitability may result highly competitive industry landscape continued uncertainty global economy event significant unanticipated changes circumstances significant adverse changes business climate adverse actions regulators unanticipated competition loss key customers andor changes technology markets actual results differ managements estimates provision impairment could required future period impairment goodwill allocation purchase price business combinations requires management estimates judgment expectations future cash flows acquired business allocation cash flows identifiable assets liabilities assumed including valuations performed thirdparty appraisers appropriate determining estimated fair value purchase price allocation purposes goodwill measured excess purchase price fair value assigned identifiable assets acquired liabilities assumed changes managements estimates judgments including changes based actual results differing estimates judgments used purchase price allocation process could result impairment charge could material adverse effect companys results operations accounting guidance requires goodwill impairment tested reporting unit level least annual basis within three reportable segments company identified four reporting units 1 united states 2 canada 3 latin america 4 europe december 31 2011 amount goodwill included continuing operations totaled 7871 million 7574 million allocated united states reporting unit 297 million allocated latin america reporting unit goodwill allocated canada reporting unit totaled 209 million december 31 2011 included within discontinued operations european reporting unit goodwill allocated company performs annual goodwill impairment test october 31 frequently event occurs circumstances change would likely reduce fair value reporting unit carrying value twostep method used determining goodwill impairment first step company compares estimated fair value reporting unit goodwill allocated carrying amount including goodwill fair value determined using equal weighting income market approaches income approach company determined fair value based estimated future cash flows discounted estimated weightedaverage cost capital reflects overall level inherent risk rate return outside investor would expect earn market approach company derived fair value reporting units based market multiples comparable publiclytraded companies fair value determination categorized level 3 fair value hierarchy carrying amount reporting unit exceeds estimated fair value step two completed determine amount impairment charge step two requires allocation estimated fair value reporting unit assets including unrecognized intangible assets liabilities hypothetical purchase price allocation remaining unallocated fair value represents implied fair value goodwill compared corresponding carrying value goodwill compute goodwill impairment charge companys methodologies valuing goodwill applied consistently yearoveryear basis assumptions used performing 2011 impairment calculations evaluated light market business conditions company continues believe discounted cash flow model market multiples model provide reasonable meaningful fair value estimate based upon reporting units projections future operating results cash flows replicates market participants would value companys reporting units discussed goodwill tested annually impairment frequently events changes circumstances indicate likely fair value reporting unit carrying value one indicators change business climate may evidenced among things decline companys market capitalization book value third quarter 2011 companys stock price decreased companys market capitalization less carrying value equity result company conducted interim goodwill impairment assessment united states latin american reporting units included comparing carrying amount net assets including goodwill reporting unit respective fair value august 31 2011 date interim assessment european reporting unit goodwill canadian reporting unit assessed separately goodwill impairment part pending sale canadian operations performing interim impairment assessment august 31 2011 fair value determined using equal weighting income market approaches significant assumptions used income approach included estimated future cash flows including expected future revenue growth profit margins capital expenditures working capital levels weightedaverage cost capital 102 united states reporting unit 134 latin america reporting unit terminal value multiples estimated future cash flows based companys internal projection models industry projections assumptions deemed reasonable management significant assumptions used market approach included control premium based similar transactions selection guideline public companies selected market multiples estimated fair value companys united states latin american reporting units exceeded carrying amount management concluded impairment existed august 31 2011 performing companys annual impairment assessment october 31 2011 fair value determined using equal weighting income market approaches significant assumptions used income approach included estimated future cash flows including expected future revenue growth profit margins capital expenditures working capital levels weighted average cost capital 100 united states reporting unit 151 latin america reporting unit terminal value multiples significant assumptions used market approach included control premium based similar transactions selection guideline public companies selected market multiples estimated fair value companys united states latin american reporting units exceeded carrying amount management concluded impairment existed october 31 2011 additional indications impairment identified october 31 2011 december 31 2011 addition company performed sensitivity analysis october 31 2011 material assumptions used discounted cash flow valuation models three reporting units goodwill allocated performing annual goodwill impairment assessment percentage estimated fair value exceeded carrying value 10 united states latin america reporting units based goodwill impairment assessments 2011 goodwill impairment charge pertaining goodwill continuing operations required recorded however company recorded 139 million goodwill impairment charge third quarter 2011 pending sale canadian discontinued operations due carrying value canadian net assets exceeding estimated fair value mexican acquired transcontinental goodwill impairment loss included loss discontinued operations consolidated statements operations year ended december 31 2011 certain periods 2011 companys market capitalization book value accordingly company monitors changes share price annual impairment tests ensure estimated fair value reporting units continues exceed carrying value net assets reporting units decline market capitalization corresponds overall deterioration stock market conditions considered less indicator goodwill impairment unilateral decline company market capitalization would reflect adverse changes companys underlying operating performance cash flows financial condition andor liquidity event companys market capitalization declines book value reason decline considered assessing whether potential goodwill impairment exists company believes fluctuations share price may necessarily reflect underlying values accounting income taxes connection july 2 2010 acquisition world color press public registration companys class stock company changed tax status corporation entities within quadgraphics legal structure c corporation status provisions internal revenue code point forward companys legal entities subject federal state income taxes company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations realization deferred tax assets depends upon companys ability generate future taxable income company recorded deferred tax assets related domestic foreign tax loss credit carryforwards company evaluates deferred tax assets tax jurisdiction utilization tax assets limited amount taxable income expected generated within allowable carryforward period factors accordingly management provided valuation allowance reduce certain deferred tax assets management concluded based weight available evidence likely deferred tax assets fully realized actual results differ estimates adjusted future periods adjustments valuation allowance might need recorded company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit greater fiftypercent likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination companys worldwide tax provision related tax assets liabilities requires use significant judgment estimates interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain company believes appropriate support positions taken certain positions may successfully challenged taxing authorities company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions consolidated financial statements december 31 2011 2010 reflect tax positions determination companys worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions although management believes estimates reasonable final outcome uncertain tax positions may materially different reflected companys historical financial statements pension postretirement benefit plans result acquisition world color press company acquired multiple pension postretirement defined benefit plans prior acquisition company defined benefit plans resulting pension postretirement obligations company established initial liabilities pension postretirement obligations based thirdparty valuation part purchase price allocation process pension plan costs determined using actuarial methods funded contributions determined accordance projected benefit method prorated service company records amounts relating pension postretirement benefit plans based calculations include various actuarial assumptions including discount rates mortality assumed rates return compensation increases turnover rates health care cost trend rates company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheet generally amortized operating earnings future periods deferred amount recorded accumulated comprehensive income loss consolidated balance sheet company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 purposes calculating expected return plan assets valued fair value company determines assumption discount rate used purposes computing annual service interest costs pension plan based index highquality corporate bond yields matchedfunding yield curve analysis date weightedaverage discount rate pension plans december 31 2011 47 postretirement benefit plans 39 company employs total return investment approach pension plans whereby diversified mix equities fixed income investments used maximize longterm pension plan assets intent strategy outperform growth plan liabilities long run plan contributions decreased balanced maintaining lower degree investment risk tolerance established careful consideration plan liabilities plan funded status corporate financial condition equity investments diversified across geography market capitalization investments us largecapitalization stocks us smallcapitalization stocks international securities investment risk measured monitored ongoing basis annual liability measurements periodic assetliability studies quarterly investment portfolio reviews expected longterm rate return plan assets based upon many factors including expected asset allocations historical asset returns current expected future market conditions risk target asset allocation 65 equity 35 fixed income actual asset allocation december 31 2011 approximately 64 equity 35 debt securities 1 expected return plan assets assumption december 31 2011 2010 65 companys funded us pension plans certain pension plans postretirement benefit plans unfunded plans hold plan assets health care cost trend rates used valuing companys postretirement medical benefit obligations established based upon actual health care cost trends consultation actuaries benefit providers december 31 2011 current weighted average health care cost trend rate assumption us postretirement plans 80 preage postage 65 participants current trend rate gradually decreases ultimate trend rate 50 one percentage point increase assumed health care cost trend rate would increase postretirement benefit obligation 16 million increase postretirement benefit service interest cost components net 01 million one percentage point decrease assumed health care cost trend rate would decrease postretirement benefit obligation 14 million decrease postretirement benefit service interest cost components net 01 million addition result acquisition world color press company participates mepps company records required cash contributions mepps expenses period incurred liability recognized contributions due unpaid consistent accounting defined contribution plans due significantly underfunded status mepps time world color press acquisition company began process withdraw significant mepps replace benefits company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded estimated withdrawal liability mepps part purchase price allocation process based information received mepps trustees estimated withdrawal liability updated new withdrawal liability projections provided plans trustees final withdrawal liability determined paid exact amount withdrawal liability could higher lower estimate depending among things nature timing triggering events funded status plans time new accounting pronouncements september 2011 financial accounting standards board fasb issued new guidance disclosures employers participation mepps new guidance requires additional disclosures regarding significant mepps employer participates includes level employers contributions mepps whether contributions represent five percent total contributions made plan contributing employers expanded disclosures also address financial health significant mepps including funded status existence funding improvement plans existence imposed surcharges contributions plan well nature employer commitments plan company adopted guidance effective december 31 2011 adoption guidance impacted companys disclosures material impact companys consolidated financial position results operations cash flows company began process withdrawing significant mepps 2010 recorded estimated 835 million withdrawal liability based information provided plans trustees september 2011 fasb issued new guidance testing goodwill impairment new guidance gives entities subject certain conditions option first performing qualitative assessment determine whether existence events circumstances leads determination likely fair value reporting unit less carrying amount guidance effective prospectively annual interim goodwill impairment tests performed fiscal years beginning december 15 2011 early adoption permitted adoption guidance material impact companys consolidated financial position results operations cash flows june 2011 fasb issued new guidance presentation comprehensive income new guidance requires components net income comprehensive income either presented one continuous statement referred statement comprehensive income two separate consecutive statements new guidance eliminates current option report comprehensive income components statement shareholders equity new guidance changes presentation comprehensive income changes components recognized net income comprehensive income current accounting guidance subsequently december 2011 fasb issued update recently issued guidance presentation comprehensive income update defers effective date requirement present face financial statements reclassification adjustments component accumulated comprehensive income guidance effective retrospectively fiscal years beginning december 15 2011 early adoption permitted company elected early adopt requirements guidance retrospective application upon adoption guidance company reported separate consolidated statement comprehensive income loss periods presented adoption guidance amended presentation components comprehensive income impact companys consolidated financial position results operations cash flows may 2011 fasb issued new guidance fair value measurements new guidance amends definition fair value measurement principles disclosure requirements eliminate differences gaap international financial reporting standards new guidance requires new quantitative qualitative disclosures sensitivity recurring level 3 measurement disclosures well transfers level 1 level 2 fair value hierarchy guidance effective prospectively fiscal years beginning december 15 2011 adoption guidance material impact companys consolidated financial position results operations cash flows december 2010 fasb issued new guidance disclosures supplementary pro forma information business combinations new guidance specifies pro forma disclosures reported business combination occurred current year occurred beginning comparable prior annual reporting period pro forma disclosures must include description material nonrecurring pro forma adjustments company adopted guidance effective january 1 2011 adoption guidance impacted companys disclosures material impact companys consolidated financial position results operations cash flows item 7aitem 7 managements discussion analysis financial condition results operations following discussion financial condition results operations quadgraphics read together quadgraphics audited consolidated financial statements three years period ended december 31 2015 including notes thereto included item 8 financial statements supplementary data annual report form 10k discussion contains forwardlooking statements reflect companys plans estimates beliefs companys actual results could differ materially discussed forwardlooking statements factors could cause contribute differences include limited discussed forwardlooking statements part item 1a risk factors included earlier within annual report form 10k managements discussion analysis financial condition results operations provided supplement companys consolidated financial statements accompanying notes help provide understanding companys financial condition changes companys financial condition companys results operations discussion analysis organized follows • overview section includes general description companys business segments overview key performance metrics companys management measures utilizes evaluate business performance overview trends affecting company including managements actions related trends • results operations section contains analysis companys results operations comparing results 1 year ended december 31 2015 year ended december 31 2014 2 year ended december 31 2014 year ended december 31 2013 comparability companys results operations periods impacted acquisitions including 2013 acquisitions vertis novia proteus transpak corporation transpak 2014 acquisitions brown printing unigraphic inc unigraphic 2015 acquisitions marins copac specialty results operations acquisitions included companys consolidated results prospectively respective acquisition dates forwardlooking statements providing general description recent projected industry company developments important understanding companys results operations included section also provides discussion ebitda margin financial measures company uses assess performance business prepared accordance accounting principles generally accepted united states america gaap • liquidity capital resources section provides analysis companys capitalization cash flows statement offbalance sheet arrangements discussion table outstanding debt commitments forwardlooking statements important understanding companys financial condition also included section also provides discussion free cash flow debt leverage ratio nongaap financial measures company uses assess liquidity capital allocation deployment • critical accounting policies estimates section contains discussion accounting policies companys management believes important companys financial condition results operations well allowances reserves require significant judgment estimates part companys management addition companys significant accounting policies including critical accounting policies summarized note 1 basis presentation summary significant accounting policies consolidated financial statements item 8 financial statements supplementary data annual report form 10k • new accounting pronouncements section provides discussion new accounting pronouncements anticipated impact accounting pronouncements companys consolidated financial statements overview business overview quadgraphics leading print marketing services provider consultative approach worldwide capabilities leadingedge technology singlesource simplicity company believes resources knowledge help wide variety clients vertical industries including limited retail publishing healthcare insurance financial company uses consultative approach tailor companys wide range print products complementary services unique characteristics vertical industry serves products services include • print including retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement • logistics including mailing solutions postal consultation delivery optimization hygiene services delivery monitoring tracking distribution logistics transportation services • digital including email social mobile activated print apps websites digital publishing beacon technology • strategy including brand campaign media planning placement • data including data insights segmentation response analysis • creative including concept design page layout production copywriting photography retouching mobile video production optimization • workflow including content management process management production facilities management services color management digital file processing proofing quadgraphics remains focused five primary strategic goals support objective industrys highquality lowcost producer fuel transformative growth opportunities drive improved performance innovation clients company believes goals summarized allow successful despite ongoing industry challenges • strengthen core quadgraphics core print categoriesretail inserts publications catalogs books directorieshave pressure recent years remain foundational marketers publishers business strategies generate significant amount cash flow company quadgraphics utilizes disciplined return capital framework historically made significant investments print manufacturing platform data management capabilities resulted believes one integrated automated efficient modern manufacturing platforms industry companys ability maintain strength core product lines promotes sustainable cash flow continued value creation support future growth opportunities • grow business profitably company believes well positioned grow business profitably ongoing innovation organic growth disciplined acquisitions expand business new product categories geographies transform existing product line create valuedriven industry consolidation helping clients use print combination media channels including digital mobile social signage increase response rates deliver high levels marketing roi particular focus company adept leveraging existing client relationships key vertical industries drive innovation develop complementary products services help brand owners market products services content efficiently effectively across media channels company look grow compelling ongoing investments platform well acquisitions create value either providing enhanced range products services creating manufacturing distribution efficiencies • walk shoes clients company focused creating client experience creates loyalty quadgraphics brand partnering clients fully understand internal processes marketing strategies challenges company better deliver solutions help achieve business objectives quadgraphics examines everything clients marketing strategyincluding clients manage customer datato production marketing workflow processes consultative approach companys goal become invaluable strategic partner clientsa partner focused helping client successfully navigate todays changing media landscape • engage employees quadgraphics looks engage employees companys distinct corporate culture encourages employees take pride ownership work take advantage continuous learning apprentice jobadvancement opportunities share knowledge mentoring others innovate solutions quadgraphics believes one important ways drive employee engagement acting continuous employee feedback loop quadgraphics believes transparent regular twoway communication employees provides opportunity employees voice share opinion number different channels including surveys open forums company town hall department meetings • enhance financial strength create shareholder value quadgraphics follows disciplined approach maintaining enhancing financial strength create shareholder value essential given ongoing industry challenges key strategic goal centered companys ability maximize free cash flow net earnings ebitda maintain consistent financial policies ensure strong balance sheet liquidity level retain financial flexibility needed strategically allocate deploy capital circumstances change quadgraphics operates primarily commercial print portion printing industry related product service offerings designed offer clients complete solutions communicating message target audiences companys operating reportable segments aligned chief operating decision maker company currently manages business companys reportable operating segments summarized united states print related services segment predominantly comprised companys united states printing operations managed one integrated platform includes retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement together complementary service offerings including marketing strategy media planning placement data insights segmentation response analytics services creative services videography photography workflow solutions digital imaging facilities management services digital publishing interactive print solutions including image recognition near field communication technology mailing distribution logistics data optimization hygiene services segment also includes manufacture ink united states print related services segment accounted approximately 92 companys consolidated net sales year ended december 31 2015 international segment consists companys printing operations europe latin america including operations england france germany poland argentina colombia mexico peru well strategic investments printing operations brazil india segment provides printed products complementary service offerings consistent united states print related services segment international segment accounted approximately 8 companys consolidated net sales year ended december 31 2015 corporate consists unallocated general administrative activities associated expenses including part executive legal finance addition 2014 2015 certain expenses income frozen employee retirement plans pension postretirement benefit plans included corporate allocated operating segment key performance metrics overview companys management believes ability generate net sales growth profit increases positive cash flow maintaining appropriate level debt key indicators successful execution companys business strategy increase shareholder value company uses period net sales growth ebitda margin net cash provided operating activities free cash flow debt leverage ratio metrics measure operating performance financial condition liquidity ebitda margin free cash flow debt leverage ratio nongaap financial measures see definitions ebitda margin reconciliation net earnings loss attributable quadgraphics common shareholders ebitda results operations section see definitions free cash flow debt leverage ratio reconciliation net cash provided operating activities free cash flow calculation debt leverage ratio liquidity capital resources section net sales growth company uses period net sales growth key performance metric companys management assesses net sales growth based ability generate increased net sales increased sales existing clients sales new clients sales new expanded solutions existing new clients opportunities expand sales strategic investments including acquisitions ebitda margin company uses ebitda margin metrics assess operating performance companys management assesses ebitda margin based ability increase revenues controlling variable expense growth net cash provided operating activities company uses net cash provided operating activities metric assess liquidity companys management assesses net cash provided operating activities based ability meet recurring cash obligations increasing available cash fund integration restructuring requirements including acquired operations cost reduction activities well fund capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal liabilities acquisitions investments future growth shareholder dividends share repurchases net cash provided operating activities significantly impacted timing nonrecurring infrequent receipts expenditures free cash flow company uses free cash flow metric assess liquidity capital deployment companys management assesses free cash flow measure quantify cash available strengthening balance sheet debt reduction strategic capital allocation deployment investments business acquisitions strategic investments returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items debt leverage ratio company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strengthening balance sheet debt pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability overview trends affecting quadgraphics competition highly fragmented printing industry remains intense company believes indicators heightened competitive pressures industry excess manufacturing capacity created continued declines industry volumes turn created accelerated downward pricing pressures addition digital delivery documents data including online distribution hosting media content mobile technologies offer alternatives traditional delivery printed documents increasing consumer acceptance digital delivery content resulted marketers publishers allocating marketing advertising spend across expanding selection digital delivery options reduces printing demand contributes industry overcapacity company also faces competition print management firms look streamline processes reduce overall print spend companys clients well strategic marketing firms focused helping businesses integrate multiple channels marketing campaigns company believes disciplined approach capital management strong balance sheet critical able invest profitable growth opportunities technological advances thereby providing highest return shareholders management balances use cash compelling investment opportunities deleveraging companys balance sheet reduction debt pension obligations returns shareholders share repurchases quarterly dividend 030 per share company continues remain disciplined debt leverage companys consolidated debt capital leases decreased 56 million year ended december 31 2015 despite investing 133 million capital expenditures 143 million acquisitions primarily 2015 marins copac specialty acquisitions since company completed world color press acquisition july 2010 company reduced debt capital leases 390 million reduced obligations pension postretirement mepps 361 million company working diligently integrate acquired companies thereby lowering cost structure consolidating manufacturing platform efficient facilities well realizing purchasing mailing logistics efficiencies centralizing consolidating print manufacturing volumes eliminating redundancies administrative corporate operations efforts include deployment companys smartools® platform streamline workflows improve data visibility across consolidated platform addition restructuring actions initiated company beginning 2010 resulted announcement 31 plant closures reduced headcount approximately 10000 employees december 31 2015 addition cost savings acquisitionrelated synergies company continues focus cost reductions lean manufacturing continuous improvement initiatives production floor administrative support order achieve improved efficiencies reduce waste lower overall operating costs enhance quality timeliness create safer work environment companys employees january 2016 company announced completed previously announced 100 million sustainable cost reduction program ahead schedule intended bring companys cost structure line revenues light heightened competitive pressures program included reducing excess manufacturing capacity plant closures intensifying companys focus productivity reducing selling general administrative costs implementing new streamlined organizational structure cost reduction program incrementally reduced companys cost structure 100 million starting january 1 2016 company intends continue reducing costs 2016 years beyond integrated distribution postal service important component companys business material change current service levels provided postal service could impact demand clients print services usps reported cumulative net losses totaling 56 billion since 2007 without increased revenues action congress reform usps cost structure losses continue future result financial difficulties usps come increased pressure adjust postal rates service levels january 2014 usps implemented temporary exigent postage rate increase 60 includes normal expected annual cpi increase 17 additional 43 temporary exigent increase january 2015 usps filed proposal prc cpi increase 20 april 26 2015 rejected twice prc third proposal approved prices implemented may 31 2015 additionally 43 temporary exigent increase extended scheduled end april 2016 however usps filed appeal federal court requesting surcharge continued made part permanent base postage rate additionally legislation pending congress would also make surcharge permanent part base postage rate allowances within law governing cpi increase impact clients varied greatly decreases double digit increases quadgraphics invested significantly mail preparation distribution capabilities mitigate impact increases postage costs help clients successfully navigate everchanging postal environment data analytics unique software merge mailstreams large scale advanced finishing capabilities technology inhouse transportation logistics operations company manages mail preparation distribution clients products maximize efficiency partially reduce costs however net impact increasing postal costs may create decrease client demand print mail products making capital investment decisions management undertakes thorough process aimed driving strongest contribution longterm profitability whether property plant equipment additions organic growth opportunities acquisitions recent examples capital investments made company include following • company completed acquisition specialty august 25 2015 net purchase price 62 million excluding acquired cash specialty fullservice paperboard folding carton manufacturer logistics provider located omaha nebraska • company completed acquisition copac april 14 2015 net purchase price 59 million excluding acquired cash copac leading international provider innovative packaging supply chain solutions including turnkey packaging design production fulfillment services across range end markets headquartered spartanburg south carolina copac manufactures products folding cartons labels inserts tags specialty envelopes production facilities spartanburg santo domingo dominican republic well strategically sourcing packaging product manufacturing multiple end markets central america asia giving global footprint • company completed acquisition marins february 3 2015 net purchase price 21 million excluding acquired cash marins worldwide leader point sale display industry specializes research design display solutions headquartered paris france marins products produced global network licensees including quadgraphics well one wideformat digital print kitting fulfillment facility paris marins uses europeanbased sales force global licensees sell patented product portfolio • company announced plan invest multiple highspeed color digital web presses january 14 2015 part threeyear strategy transform companys book platform widest productive digital web presses available marketplace today december 31 2015 seven digital web presses installed • company completed acquisition brown printing may 30 2014 net purchase price 98 million excluding acquired cash brown printing provides magazine catalog printing distribution services integrated media solutions magazine publishers catalog marketers united states • company completed acquisition unigraphic february 5 2014 net purchase price 11 million excluding acquired cash unigraphic commercial specialty printing company based boston metro area offers commercial specialty printing instore marketing digital fulfillment solutions wide variety industries including arts entertainment education financial food healthcare mass media pharmaceutical retail acquisition expands quadgraphics capabilities commercial specialty printing market strengthens companys ability service national retailers largeformat instore marketing needs adding east coast presence quadgraphics existing midwest west coast locations • company completed acquisition wisconsinbased proteus well sister company transpak december 18 2013 49 million proteus designer manufacturer highend paperboard packaging offering packaging solutions wide variety industries including automotive biotechnology food beverage personal care pharmaceuticals software electronics transpak fullservice industrial packaging company offering crating packaging warehousing distribution logistics services destinations worldwide acquisition two companies quadgraphics expanded capabilities serve packaging market • company completed acquisition novia november 7 2013 13 million novia healthcare solutions company develops manages onsite shared primary care clinics small medium sized companies public sector school districts city county governments located indianapolis indiana • company completed acquisition substantially assets vertis january 16 2013 265 million including 95 million current assets excess normalized working capital requirements vertis provider retail advertising inserts direct marketing instore marketing solutions company believes acquisition vertis strengthened client offering enhanced range products services also increased manufacturing flexibility distribution efficiencies extended geographic footprint united states company subject seasonality quarterly results net sales operating income higher third fourth quarters calendar year compared first second quarters fourth quarter highest seasonal quarter cash flows operating activities free cash flow due reduction working capital requirements reach peak levels third quarter seasonality driven increased magazine advertising page counts retail inserts catalogs books primarily due backtoschool holidayrelated advertising promotions company expects seasonality impact continue future years results operations year ended december 31 2015 compared year ended december 31 2014 summary results companys operating income loss operating margin net earnings loss attributable quadgraphics common shareholders computed using 40 normalized tax rate diluted earnings loss per share attributable quadgraphics common shareholders year ended december 31 2015 changed year ended december 31 2014 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 1649 million incurred year ended december 31 2015 included 421 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 953 million impairment charges including 1 547 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado queretaro mexico well capacity reduction restructuring initiatives 2 186 million investmentrelated impairment charges primarily related 167 million impairment charges reduce book value companys equity method investment quadgraphics chile sa chile fair value see note 8 equity method investments unconsolidated entities consolidated financial statements item 8 financial statements supplementary data annual report form 10k additional details related impairment companys equity method investment chile 3 127 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 4 71 million customer relationship intangible asset impairments 5 22 million impairment charges primarily related restructuring proceedings argentina companys argentina subsidiaries anselmo l morvillo sa morvillo world color argentina sa argentina subsidiaries land building machinery equipment intangible assets c 67 million transactionrelated charges income including 100 million nonrecurring gain result courier corporations courier termination agreement pursuant quadgraphics acquire courier partially offset 33 million professional service fees including fees terminated acquisition courier acquisitions marins copac specialty 51 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 291 million various restructuring charges including 60 million noncash nondeductible expense recognize accumulated foreign exchange losses sale chile equity method investment lease exit charges related closed facilities well costs maintain exit closed facilities company expects incur additional restructuring integration costs future reporting periods connection eliminating excess manufacturing capacity properly aligning cost structure conjunction companys acquisitions strategic investments cost reduction programs 2 restructuring impairment transactionrelated charges 673 million incurred year ended december 31 2014 included 306 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 144 million impairment charges including 1 80 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee mexico city mexico pomona california st cloud minnesota well capacity reduction restructuring initiatives 2 64 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures c 26 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions brown printing unigraphic 112 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 85 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 49 million gain termination postretirement medical benefit plan 3 pretax noncash goodwill impairment charges 8083 million 5424 million net tax recorded year ended december 31 2015 7783 million related united states print related services segment 300 million related international segment 4 interest expense decreased 45 million 27 million net tax year ended december 31 2015 884 million change due lower weighted average interest rate borrowings lower average debt levels 2015 compared 2014 5 nonrecurring 72 million loss debt extinguishment 43 million net tax recognized year ended december 31 2014 primarily related 19 billion debt financing arrangements completed april 28 2014 72 million represents certain debt issuance costs expensed 6 decrease income tax benefit 144 million calculated following table primarily due 104 million reduced tax benefits 2015 reversal liability unrecognized tax benefits 2014 based expiration statutes limitations 56 million related losses foreign jurisdictions 2015 excess 2014 company receive tax benefit see note 14 income taxes consolidated financial statements item 8 annual report form 10k information income taxes 7 decrease attributable investments unconsolidated entities noncontrolling interests net tax 39 million year ended december 31 2015 primarily due 28 million increase losses unconsolidated entities companys investment plural industria gráfica ltda plural companys brazilian joint venture 09 million increase losses companys investment chile sold july 31 2015 8 operating income loss excluding restructuring impairment transactionrelated charges goodwill impairment charges decreased 654 million 392 million net tax primarily due 1 38 reduction net sales predominantly ongoing industry volume pricing pressures 2 higher labor costs associated lower productivity 3 108 million charge reduce vendor receivable due collectability concerns 4 61 million net gains 2014 related favorable legal bankruptcy settlements declines partially offset 1 operating results additional earnings sales attributed recent acquisitions 2 45 million increase net gains sale property plant equipment 3 45 million decrease foreign currency losses 4 40 million lower vacation expense due change vacation policy 5 25 million gain sale cost method investment 6 11 million favorable impact resolution certain acquisition related contingencies following discussion provides additional details operating results following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased 1672 million 40 year ended december 31 2015 compared year ended december 31 2014 primarily due 2605 million decrease product sales companys core print specialty print product lines owned year predominantly due ongoing volume pricing pressures 533 million negative foreign exchange impact decreases partially offset 1466 million increase acquisitions service sales primarily consist imaging logistics distribution services decreased 175 million 26 year ended december 31 2015 compared year ended december 31 2014 primarily due decrease logistics sales resulting ongoing volume pressures decrease partially offset 129 million increased sales quadmed medical services 90 million increased logistics imaging sales resulting acquisitions cost sales cost product sales decreased 1273 million 37 year ended december 31 2015 compared year ended december 31 2014 primarily due lower print paper volumes product lines owned year 40 million vacation reserve reduction due vacation policy change reductions partially offset increased cost product sales resulting acquisitions higher labor costs associated lower productivity 108 million charge reduce vendor receivable due collectability concerns cost product sales percentage net sales increased 704 year ended december 31 2015 703 year ended december 31 2014 primarily due reasons provided cost service sales decreased 37 million 08 year ended december 31 2015 compared year ended december 31 2014 primarily due lower logistics volumes partially offset additional costs resulting quadmed medical services increased sales generated acquisitions cost service sales percentage net sales increased 100 year ended december 31 2015 97 year ended december 31 2014 primarily due increased costs quadmed medical services selling general administrative expenses selling general administrative expenses increased 228 million 54 year ended december 31 2015 compared year ended december 31 2014 primarily due 1 167 million increase employeerelated costs due acquisitions net 98 million reduction compensation expense recognized related equity incentive programs 2 61 million net gains 2014 related favorable legal bankruptcy settlements 3 35 million increase legal professional fees 4 25 million increase general administrative expenses increases partially offset 1 45 million increase net gains sale property plant equipment 2 45 million decrease foreign currency losses 3 25 million gain sale cost investment 4 11 million favorable impact resolution certain acquisition related contingencies selling general administrative expenses percentage net sales increased 88 95 years primarily due reasons depreciation amortization depreciation amortization decreased 111 million 33 year ended december 31 2015 compared year ended december 31 2014 primarily due 148 million decrease depreciation expense decreased depreciation expense result property plant equipment becoming fully depreciated past year partially offset depreciation property plant equipment purchased acquisitions decrease depreciation expense partially offset 37 million increase amortization expense primarily due amortization customer relationship intangible assets intangible assets companies acquired 2015 restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges increased 976 million 1450 year ended december 31 2015 compared year ended december 31 2014 primarily due 809 million increase impairment charges 206 million increase restructuring charges 115 million increase employee termination charges partially offset 93 million decrease transactionrelated charges 61 million decrease acquisitionrelated integration costs restructuring impairment transactionrelated charges 1649 million incurred year ended december 31 2015 included 1 421 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 953 million impairment charges including 547 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado queretaro mexico well capacity reduction restructuring initiatives 186 million investment related impairment charges primarily related 167 million impairment charges reduce book value companys equity method investment chile fair value see note 8 equity method investments unconsolidated entities additional details related impairment companys equity method investment chile 127 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 71 million customer relationship intangible asset impairments 12 million impairment charges land building 09 million impairment charges machinery equipment 01 million impairment charges intangible assets result companys argentina subsidiaries restructuring proceedings 3 67 million transactionrelated charges income includes 100 million nonrecurring gain result couriers termination agreement pursuant quadgraphics acquire courier partially offset 33 million professional service fees terminated acquisition courier acquisitions marins copac specialty 4 51 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 291 million restructuring charges including 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment well lease exit charges costs maintain exit closed facilities restructuring impairment transactionrelated charges 673 million incurred year ended december 31 2014 included 1 306 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 144 million impairment charges including 80 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee mexico city mexico pomona california st cloud minnesota well capacity reduction restructuring initiatives 64 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures 3 26 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions brown printing unigraphic 4 112 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 85 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 49 million gain termination postretirement medical benefit plan goodwill impairment march 25 2015 due deteriorating economic conditions including inflation currency devaluation combined uncertain political conditions declining print volumes labor challenges companys argentina subsidiaries included within latin america reporting unit commenced bankruptcy restructuring proceedings goal consolidating operations company conducted interim goodwill impairment assessment latin america reporting unit included comparing carrying amount net assets including goodwill respective fair value march 31 2015 date interim assessment result interim goodwill impairment assessment well annual impairment test october 31 2015 companys international segment recorded noncash nondeductible goodwill impairment charges 300 million year ended december 31 2015 primarily including 233 million noncash goodwill impairment charge latin america reporting unit due decline companys stock price third quarter 2015 interim goodwill impairment test three reporting units united states print related services segment performed july 31 2015 result interim goodwill impairment assessment well annual impairment test october 31 2015 companys united states print related services segment recorded pretax noncash goodwill impairment charges 7783 million 5124 million tax year ended december 31 2015 included impairment charges 6408 million 1189 million 186 million core print related services reporting unit specialty print related services reporting unit united states products services reporting unit respectively total company recorded pretax noncash goodwill impairment charges 8083 million 5424 million tax year ended december 31 2015 ebitda marginconsolidated ebitda margin year ended december 31 2015 compared year ended december 31 2014 follows ebitda decreased 9791 million year ended december 31 2015 compared year ended december 31 2014 primarily due 1 8083 million noncash goodwill impairment charge recorded 2015 2 976 million increased restructuring impairment transactionrelated charges 3 ongoing volume pricing pressures excess capacity printing industry 4 higher labor costs associated lower productivity 5 108 million charge reduce vendor receivable due collectability concerns 6 61 million net gains 2014 related favorable legal bankruptcy settlements impacts partially offset 1 additional earnings sales generated acquisitions 2 45 million increase net gains sale property plant equipment 3 45 million decrease foreign currency losses 4 40 million vacation reserve reduction due vacation policy change 5 25 million gain sale cost investment 6 11 million favorable impact resolution certain acquisition related contingencies ebitda represents net earnings loss attributable quadgraphics common shareholders plus interest expense ii income tax expense applicable iii depreciation amortization less income tax benefit applicable ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net earnings loss attributable quadgraphics common shareholders follows 1 net earnings loss attributable quadgraphics common shareholders includes following effects restructuring impairment transactionrelated charges 1649 million 673 million years ended december 31 2015 2014 respectively b noncash goodwill impairment charge 8083 million year ended december 31 2015 c loss debt extinguishment 72 million year ended december 31 2014 united states print related services following table summarizes net sales operating income loss operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment decreased 1088 million 29 year ended december 31 2015 compared year ended december 31 2014 primarily due 2425 million decrease product sales companys core print specialty print product lines owned year predominantly due ongoing volume pricing pressures excess capacity printing industry partially offset 1337 million increase acquisitions service sales united states print related services segment decreased 167 million 26 year ended december 31 2015 compared year ended december 31 2014 primarily due decrease logistics sales resulting ongoing volume pressures decrease partially offset 129 million increased sales quadmed medical services 90 million logistics imaging sales resulting acquisitions operating income loss operating income loss united states print related services segment decreased 9040 million year ended december 31 2015 compared year ended december 31 2014 primarily due 1 7783 million noncash goodwill impairment charge 2 493 million increased restructuring impairment transactionrelated charges 3 ongoing volume pricing pressures excess capacity printing industry 4 108 million charge reduce vendor receivable due collectability concerns 5 25 million net gains 2014 related favorable legal bankruptcy settlements decreases operating income partially offset 1 additional earnings sales attributed recent acquisitions 2 45 million increase net gains sale property plant equipment 3 40 million vacation reserve reduction due vacation policy change 4 25 million gain sale cost investment 5 11 million favorable impact resolution certain acquisition related contingencies operating margin united states print related services segment decreased 165 year ended december 31 2015 45 year ended december 31 2014 primarily due reasons provided restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2015 1014 million consisting 1 273 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 507 million impairment charges including 335 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado well capacity reduction restructuring initiatives 112 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 60 million customer relationship intangible asset impairments 3 46 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 4 188 million restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2014 521 million consisting 1 199 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 127 million impairment charges including 70 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee pomona california st cloud minnesota well capacity reduction restructuring initiatives 57 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures 3 88 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 4 107 million restructuring charges including costs maintain exit closed facilities well lease exit charges goodwill impairment due decline companys stock price third quarter 2015 interim goodwill impairment test three reporting units united states print related services segment performed july 31 2015 result interim goodwill impairment assessment well annual impairment test october 31 2015 companys united states print related services segment recorded pretax noncash goodwill impairment charges 7783 million 5124 million tax year ended december 31 2015 included impairment charges 6408 million 1189 million 186 million core print related services reporting unit specialty print related services reporting unit united states products services reporting unit respectively international following table summarizes net sales operating loss operating margin certain items impacting comparability equity loss unconsolidated entities within international segment net sales product sales international segment decreased 584 million 134 year ended december 31 2015 compared year ended december 31 2014 primarily due 533 million foreign exchange losses primarily europe mexico colombia argentina 286 million lower volumes predominantly mexico colombia decreases partially offset 129 million sales marins acquisition 106 million increase europe primarily due higher volumes service sales international segment decreased 08 million 41 year ended december 31 2015 compared year ended december 31 2014 primarily due decrease logistics revenue europe operating loss operating loss international segment increased 522 million year ended december 31 2015 compared year ended december 31 2014 primarily due 1 300 million noncash nondeductible goodwill impairment charges 2 296 million higher restructuring impairment expenses including 167 million impairment charges reduce book value companys equity method investment chile 60 million nondeductible foreign exchange losses sale equity method investment chile 3 36 million net gains 2014 related favorable legal settlements 4 36 million increase equity loss unconsolidated entities discussed increases operating loss partially offset 40 million increase operating income europe increased operating income latin america despite lower product sales latin america restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2015 388 million consisting 1 73 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 228 million impairment charges including 167 million impairment charges reduce book value companys equity method investment chile fair value see note 8 equity method investments unconsolidated entities additional details related impairment companys equity method investment chile 22 million impairment charges primarily related restructuring proceedings argentina companys argentina subsidiaries land building machinery equipment intangible assets 15 million land building impairment charges 13 million impairment charges machinery equipment longer utilized production well capacity reduction restructuring initiatives 11 million customer relationship intangible asset impairments 3 87 million restructuring charges primarily related 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment restructuring impairment transactionrelated charges international segment year ended december 31 2014 92 million consisting 1 60 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 17 million impairment charges including 10 million impairment charges machinery equipment longer utilized production result facility consolidations mexico city mexico well capacity reduction restructuring initiatives 07 million land building impairment charges result facility consolidations poland 3 15 million restructuring charges goodwill impairment march 25 2015 due deteriorating economic conditions including inflation currency devaluation combined uncertain political conditions declining print volumes labor challenges companys argentina subsidiaries included within latin america reporting unit commenced bankruptcy restructuring proceedings goal consolidating operations company conducted interim goodwill impairment assessment latin america reporting unit included comparing carrying amount net assets including goodwill respective fair value march 31 2015 date interim assessment result interim goodwill impairment assessment well annual impairment test october 31 2015 companys international segment recorded noncash nondeductible goodwill impairment charges 300 million year ended december 31 2015 primarily including 233 million noncash goodwill impairment charge latin america reporting unit equity loss unconsolidated entities investments entities quadgraphics ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil company also held 50 interest joint venture based chile acquired part world color press inc acquisition july 31 2015 investment sold equity loss unconsolidated entities international segment increased 36 million year ended december 31 2015 compared year ended december 31 2014 primarily due 28 million increase equity losses plural 09 million increase equity losses chile unrestricted subsidiaries unrestricted subsidiaries defined senior unsecured notes indenture represented less 20 total consolidated net sales year ended december 31 2015 corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses increased 151 million 333 year ended december 31 2015 compared year ended december 31 2014 primarily due 187 million increase restructuring impairment transactionrelated charges partially offset 73 million lower compensation expense related equity incentive programs restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges year ended december 31 2015 247 million consisting 1 75 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 218 million impairment charges including 199 million impairment charges corporate equipment 19 million investment related impairment charges 3 67 million transactionrelated charges income includes 100 million nonrecurring gain courier partially offset 33 million professional service fees including fees terminated acquisition courier acquisitions marins copac specialty 4 03 million acquisitionrelated integration costs primarily related professional fees 5 18 million restructuring charges corporate restructuring impairment transactionrelated charges year ended december 31 2014 60 million consisting 1 47 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 26 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions brown printing unigraphic 3 24 million acquisitionrelated integration costs primarily related professional fees 4 37 million restructuring charges income includes 49 million gain termination postretirement medical benefit plan results operations year ended december 31 2014 compared year ended december 31 2013 summary results companys operating income continuing operations operating margin net earnings attributable quadgraphics common shareholders computed using 40 normalized tax rate diluted earnings per share attributable quadgraphics common shareholders year ended december 31 2014 changed year ended december 31 2013 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 673 million incurred year ended december 31 2014 included 306 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 144 million impairment charges including 1 80 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee mexico city mexico pomona california st cloud minnesota well capacity reduction restructuring initiatives 2 64 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures c 26 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions brown printing unigraphic 112 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 85 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 49 million gain termination postretirement medical benefit plan company expects incur additional restructuring integration costs future reporting periods connection eliminating excess manufacturing capacity properly aligning cost structure conjunction companys acquisitions strategic investments cost reduction programs 2 restructuring impairment transactionrelated charges 953 million incurred year ended december 31 2013 included 157 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 218 million impairment charges including 1 117 million impairment charges machinery equipment longer utilized production result facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives 2 101 million land building impairment charges primarily related corinth mississippi marengo iowa mexico city mexico plant closures c 40 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions vertis proteus transpak 252 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 286 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 21 million pension plan settlement gain 3 interest expense increased 74 million 44 million net tax year ended december 31 2014 929 million change due higher weighted average interest rate borrowings due debt financing arrangements completed april 28 2014 increased debt levels 2014 compared 2013 primarily related acquisitions 4 nonrecurring 72 million loss debt extinguishment 43 million net tax recognized year ended december 31 2014 primarily related 19 billion debt financing arrangements completed april 28 2014 72 million represents certain debt issuance costs expensed 5 incremental income tax expense 31 million normalized amount calculated following table primarily due following 1 68 million income tax expense recorded 2014 establish valuation allowance certain operations mexico 2 52 million decrease domestic deductions 3 16 million onetime foreign benefits 2013 partially offset 4 105 million tax benefit reversal reserves unrecognized tax benefits related audit settlements expiration applicable statutes limitations 6 decrease attributable investments unconsolidated entities noncontrolling interests net tax 15 million year ended december 31 2014 primarily due decrease 13 million excluded noncontrolling interest loss companys consolidated statements operations related companys ownership argentina due company increasing ownership share 85 100 7 operating income excluding restructuring impairment transactionrelated charges decreased 289 million 174 million net tax primarily due decline earnings ongoing industry volume pricing pressures well 95 million net gains 2013 repeat 2014 related favorable legal environmental bankruptcy related settlements gain sale quadgraphics brazilian operations january 2013 companys existing brazilian joint venture plural declines partially offset operating results acquisition brown printing lower employee related costs including labor productivity improvements following discussion provides additional details operating results following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales increased 109 million 03 year ended december 31 2014 compared year ended december 31 2013 primarily due 2537 million increase acquisitions primarily brown printing acquisition completed may 30 2014 increase partially offset 1812 million decrease product sales companys united states core print specialty print product lines due ongoing volume pricing pressures 339 million lower paper sales 225 million foreign exchange losses service sales primarily consist imaging logistics distribution services increased 556 million 91 year ended december 31 2014 compared year ended december 31 2013 primarily due 333 million increased sales quadmed medical services 223 million increased logistics imaging sales primarily resulting acquisitions cost sales cost product sales increased 613 million 18 year ended december 31 2014 compared year ended december 31 2013 primarily due 2177 million increase cost product sales resulting acquisitions partially offset lower print paper volumes lower employeerelated costs product lines owned year cost product sales percentage net sales increased 703 year ended december 31 2014 701 year ended december 31 2013 primarily due brown printing acquisition operates lower gross margins companys historical gross margins cost service sales increased 287 million 65 year ended december 31 2014 compared year ended december 31 2013 primarily due 226 million additional cost service sales resulting sales generated quadmed medical services 95 million increase freight costs partially offset 51 million reduction costs service sales related imaging cost service sales percentage net sales increased 97 year ended december 31 2014 92 year ended december 31 2013 primarily due increased costs quadmed medical services increased freight costs selling general administrative expenses selling general administrative expenses increased 95 million 23 year ended december 31 2014 compared year ended december 31 2013 primarily due 88 million increase employeerelated costs attributable acquisitions predominantly brown printing acquisition 77 million net gains recorded 2013 repeat 2014 level 2014 including legal environmental bankruptcy related expenses well 28 million gain sale quadgraphics brazilian operations january 2013 companys existing brazilian joint venture plural increases partially offset 34 million decrease general administrative professional fees 31 million reduction sales promotion expense selling general administrative expenses percentage net sales increased 86 88 years due items discussed preceding sentence depreciation amortization depreciation amortization decreased 41 million 12 year ended december 31 2014 compared year ended december 31 2013 primarily due 97 million decrease depreciation expense decreased depreciation expense result property plant equipment becoming fully depreciated past year partially offset depreciation property plant equipment purchased brown acquisition decrease depreciation expense partially offset 56 million increase amortization expense primarily due amortization customer relationship intangible assets companies acquired 2013 2014 restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges decreased 280 million 294 year ended december 31 2014 compared year ended december 31 2013 primarily due 201 million decrease restructuring charges 140 million decrease acquisitionrelated integration costs 74 million decrease impairment charges 14 million decrease transactionrelated charges partially offset 149 million increase employee termination charges restructuring impairment transactionrelated charges 673 million incurred year ended december 31 2014 included 1 306 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 144 million impairment charges including 80 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee mexico city mexico pomona california st cloud minnesota well capacity reduction restructuring initiatives 64 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures 3 26 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions brown printing unigraphic 4 112 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 85 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 49 million gain termination postretirement medical benefit plan restructuring impairment transactionrelated charges 953 million incurred year ended december 31 2013 included 1 157 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 218 million impairment charges including 117 million impairment charges machinery equipment longer utilized production result facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives 101 million land building impairment charges primarily related corinth mississippi marengo iowa mexico city mexico plant closures 3 40 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions vertis proteus transpak 4 252 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 286 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 21 million pension plan settlement gain ebitda marginconsolidated ebitda margin year ended december 31 2014 compared year ended december 31 2013 follows ebitda decreased 137 million year ended december 31 2014 compared year ended december 31 2013 primarily due 1 ongoing volume pricing pressures excess capacity printing industry 2 113 million net favorable gains 2013 repeat level 2014 3 95 million increased selling general administrative expenses primarily brown printing acquisition 4 72 million loss debt extinguishment recorded 2014 impacts partially offset 280 million decreased restructuring impairment transactionrelated charges additional earnings sales generated acquisitions ebitda margin decreased 100 year ended december 31 2013 96 year ended december 31 2014 primarily due margin impact lower print pricing product lines owned year acquired brown printing operations operate lower margins companys historical margins ebitda represents net earnings attributable quadgraphics common shareholders plus interest expense ii income tax expense applicable iii depreciation amortization less income tax benefit applicable ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net earnings attributable quadgraphics common shareholders follows 1 net earnings attributable quadgraphics common shareholders includes following effects restructuring impairment transactionrelated charges 673 million 953 million years ended december 31 2014 2013 respectively b loss debt extinguishment 72 million year ended december 31 2014 united states print related services following table summarizes net sales operating income operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment increased 144 million 04 year ended december 31 2014 compared year ended december 31 2013 primarily due 2537 million increase acquisitions increase partially offset 1812 million decrease product sales companys core print specialty print product lines owned year due ongoing volume pricing pressures 456 million decrease paper sales service sales united states print related services segment increased 517 million 87 year ended december 31 2014 compared year ended december 31 2013 primarily due 333 million increased sales quadmed medical services 184 million increased logistics imaging sales primarily resulting acquisitions operating income operating income united states print related services segment decreased 328 million 142 year ended december 31 2014 compared year ended december 31 2013 primarily due ongoing volume pricing pressures excess capacity printing industry decrease operating income partially offset 301 million lower employeerelated costs including labor productivity improvements increased operating profit acquisitions operating margin united states print related services segment decreased 45 year ended december 31 2014 53 year ended december 31 2013 primarily due lower print volumes pricing brown printing acquisition operates lower margins companys historical margins restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2014 521 million consisting 1 199 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 127 million impairment charges including 70 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee pomona california st cloud minnesota well capacity reduction restructuring initiatives 57 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures 3 88 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 4 107 million restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2013 523 million consisting 1 100 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 156 million impairment charges including 103 million impairment charges machinery equipment longer utilized production result facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives 53 million land building impairment charges primarily related corinth mississippi marengo iowa plant closures 3 267 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 21 million pension plan settlement gain international following table summarizes net sales operating loss operating margin certain items impacting comparability equity loss unconsolidated entities within international segment net sales product sales international segment decreased 35 million 08 year ended december 31 2014 compared year ended december 31 2013 primarily due 237 million decreased product sales latin america result 237 million foreign exchange losses argentina decrease partially offset 202 million increased sales europe driven increase paper sales higher volumes 12 million positive impact foreign currency translation europe service sales international segment increased 39 million 247 year ended december 31 2014 compared year ended december 31 2013 primarily due increase logistics revenue europe operating loss operating loss international segment increased 35 million 455 year ended december 31 2014 compared year ended december 31 2013 primarily due margin impact lower product sales latin america 28 million gain sale quadgraphics brazilian operations january 2013 companys existing brazilian joint venture plural recur 2014 02 million increase equity loss unconsolidated entities discussed increases operating loss partially offset improvement operating income europe restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2014 92 million consisting 1 60 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 17 million impairment charges including 10 million impairment charges machinery equipment longer utilized production result facility consolidations mexico city mexico well capacity reduction restructuring initiatives 07 million land building impairment charges result facility consolidations poland 3 15 million restructuring charges restructuring impairment transactionrelated charges international segment year ended december 31 2013 96 million consisting 1 29 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 62 million impairment charges including 48 million land building impairment charges primarily related mexico city mexico plant closure 14 million impairment charges machinery equipment longer utilized production result facility consolidations pila poland well capacity reduction restructuring initiatives 3 02 million adjustment updated estimates related employee related liabilities integration transcontinentals mexican operations 4 07 million restructuring charges equity loss unconsolidated entities investments entities quadgraphics ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil january 2013 company sold 100 ownership interest quadgraphics nordeste industria gráfica ltda quadgraphics são paulo industria gráfica sa plural see note 8 equity method investments unconsolidated entities consolidated financial statements item 8 financial statements supplementary data annual report form 10k discussion company also holds 50 interest joint venture based santiago chile quadgraphics chile sa chile acquired part world color press acquisition equity loss unconsolidated entities international segment increased 02 million year ended december 31 2014 compared year ended december 31 2013 primarily due decrease equity earnings chile unrestricted subsidiaries unrestricted subsidiaries defined senior unsecured notes indenture represented less 20 total consolidated net sales year ended december 31 2014 corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses decreased 354 million 438 year ended december 31 2014 compared year ended december 31 2013 primarily due 274 million decrease restructuring impairment transactionrelated charges 111 million pension postretirement income allocated corporate 2014 instead united states print related services segment done 2013 partially offset 33 million increase employeerelated costs including costs resulting brown printing acquisition restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges year ended december 31 2014 60 million consisting 1 47 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 26 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions brown printing unigraphic 3 24 million acquisitionrelated integration costs primarily related professional fees 4 37 million restructuring charges income includes 49 million gain termination postretirement medical benefit plan corporate restructuring impairment transactionrelated charges year ended december 31 2013 334 million consisting 1 28 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 40 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions vertis proteus transpak 3 254 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 4 12 million restructuring charges liquidity capital resources company utilizes cash flows operating activities borrowings credit facilities satisfy liquidity capital requirements company believes expected future cash flows operating activities 7309 million unused capacity revolving credit facility net 483 million issued letters credit december 31 2015 provide sufficient resources fund ongoing operating requirements integration restructuring requirements related acquired operations well future capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal payments investments future growth create value shareholders shareholder dividends share repurchases borrowings 8500 million revolving credit facility 708 million december 31 2015 peak borrowings 2881 million year ended december 31 2015 net cash provided operating activities year ended december 31 2015 compared year ended december 31 2014 net cash provided operating activities 3481 million year ended december 31 2015 compared 2932 million year ended december 31 2014 resulting 549 million increase cash provided operating activities increase primarily due 1634 million increase cash flows changes operating assets liabilities predominantly improvements working capital 100 million nonrecurring cash receipt couriers termination agreement pursuant quadgraphics acquire courier partially offset 1185 million decrease cash earnings year ended december 31 2014 compared year ended december 31 2013 net cash provided operating activities 2932 million year ended december 31 2014 compared 4411 million year ended december 31 2013 resulting 1479 million decrease cash provided operating activities decrease primarily due 1613 million decrease cash flows changes operating assets liabilities 50 million decrease dividends unconsolidated entities partially offset 184 million improved operating cash flows earnings excluding noncash items 1613 million decrease cash flows changes operating assets liabilities primarily related estimated 90 million onetime benefit realized 2013 restoration normalized working capital levels following acquisition vertis acquired without normalized levels accounts payable certain liabilities remaining change due increase 71 million cash used working capital primarily due increase accounts receivable net cash used investing activities year ended december 31 2015 compared year ended december 31 2014 net cash used investing activities 2167 million year ended december 31 2015 compared 2242 million year ended december 31 2014 resulting 75 million decrease cash used investing activities decrease primarily due 364 million increased cash proceeds sale property plant equipment investments 2015 partially offset 309 million increased cash payments related acquisitions year ended december 31 2014 compared year ended december 31 2013 net cash used investing activities 2242 million year ended december 31 2014 compared 4306 million year ended december 31 2013 resulting 2064 million decrease cash used investing activities decrease primarily due 1794 million reduced cash payments related acquisitions strategic investments predominantly driven 2354 million net cash paid vertis acquisition january 16 2013 431 million net cash paid proteus transpak acquisitions december 18 2013 less 964 million net cash paid brown printing acquisition may 30 2014 decrease cash used investing activities also attributable following 1 203 million increase receipts restricted cash 2 103 million decrease purchases property plant equipment 2014 net cash used financing activities year ended december 31 2015 compared year ended december 31 2014 net cash used financing activities 1279 million year ended december 31 2015 compared 717 million year ended december 31 2014 resulting 562 million increase cash used financing activities increase primarily due net debt repayments 689 million 2015 compared net debt borrowings 115 million 2014 representing 804 million increase net cash used financing activities increase partially offset 1 165 million debt issuance costs paid 2014 related april 28 2014 19 billion debt financing arrangements october 10 2014 redemption 1088 million senior notes master note security agreement november 24 2014 amendment master note security agreement compared debt issuance cost payments 2015 2 79 million reduced world color press bankruptcy claim payments year ended december 31 2014 compared year ended december 31 2013 net cash used financing activities 717 million year ended december 31 2014 compared 102 million year ended december 31 2013 resulting 615 million increase cash used financing activities increase primarily due 1 298 million decrease net debt borrowings 2014 compared 2013 2 165 million debt issuance costs paid 2014 related april 28 2014 19 billion debt financing arrangements october 10 2014 redemption 1088 million senior notes master note security agreement november 24 2014 amendment master note security agreement 3 69 million reduced net cash proceeds equity incentive instruments 4 48 million higher dividend payments 2014 free cash flow free cash flow defined net cash provided operating activities less purchases property plant equipment companys management assesses free cash flow measure quantify cash available 1 strengthening balance sheet debt reduction 2 strategic capital allocation deployment investments business acquisitions strategic investments 3 returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items free cash flow nongaap measure free cash flow considered alternative cash flows provided operating activities measure liquidity quadgraphics calculation free cash flow may different similar calculations used companies therefore comparability may limited free cash flow years ended december 31 2015 2014 2013 follows 1 free cash flow 2916 million 2013 includes estimated 90 million onetime benefit realized restoration normalized working capital levels following 2013 acquisition vertis excluding 90 million onetime benefit free cash flow would 2016 million year ended december 31 2013 free cash flow increased 611 million year ended december 31 2015 compared year ended december 31 2014 due following 1 549 million increase net cash provided operating activities primarily attributable improvements working capital receipt 100 million courier termination fee 2 62 million decrease capital expenditures free cash flow decreased 1376 million year ended december 31 2014 compared year ended december 31 2013 due 1479 million decrease net cash provided operating activities partially offset 103 million decrease capital expenditures 1479 million decrease net cash provided operating activities includes estimated 90 million onetime benefit realized 2013 restoration normalized working capital levels following acquisition vertis increase 71 million cash used working capital primarily due increase accounts receivable see net cash provided operating activities section explanations changes operating cash flows net cash used investing activities section explanations changes purchases property plant equipment debt leverage ratio debt leverage ratio defined total debt capital lease obligations divided sum 1 last twelve months ebitda see definition ebitda reconciliation net earnings loss attributable quadgraphics common shareholders ebitda results operations section 2 restructuring impairment transactionrelated charges 3 noncash goodwill impairment charges 4 loss debt extinguishment 5 pro forma historical results related may 30 2014 acquisition brown printing company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strengthening balance sheet debt pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability debt leverage ratio nongaap measure considered alternative cash flows provided operating activities measure liquidity quadgraphics calculation debt leverage ratio may different similar calculations used companies therefore comparability may limited debt leverage ratio calculated differs total leverage ratio senior secured leverage ratio included companys debt covenant calculations see note 12 debt consolidated financial statements item 8 financial statements supplementary data annual report form 10k information debt covenants total leverage ratio included companys debt covenants includes letters credit debt excludes noncash stockbased compensation expense ebitda includes certain pro forma historical results acquisitions divestitures ebitda similarly senior secured leverage ratio included companys debt covenants includes excludes adjustments total leverage ratio addition exclusion outstanding balance senior unsecured notes accordance adoption accounting guidance presentation debt issuance costs discussed note 25 new accounting pronouncements financial statements item 8 financial statements supplementary data annual report form 10k debt leverage ratio calculation december 31 2015 2014 reflects reduction longterm debt 161 million 200 million respectively debt issuance costs debt leverage ratio december 31 2015 2014 follows 1 permitted senior secured credit facility certain pro forma financial information related acquisition brown printing included calculating debt leverage ratio december 31 2014 acquisition brown printing completed may 30 2014 52 million pro forma ebitda adjusted purposes calculating debt leverage ratio represents period january 1 2014 may 29 2014 pro forma ebitda adjusted purposes calculating debt leverage ratio brown printing calculated consistent manner calculation quadgraphics brown printings financial information subsequent may 30 2014 acquisition included within quadgraphics ebitda adjusted purposes calculating debt leverage ratio results brown printing consolidated quadgraphics financial results since date five months pro forma ebitda adjusted purposes calculating debt leverage ratio brown printing included calculation companys debt leverage ratio would 259x december 31 2014 calculation quadgraphics ebitda adjusted purposes calculating debt leverage ratio years ended december 31 2015 2014 follows debt leverage ratio increased 035x december 31 2015 compared december 31 2014 primarily due decrease quadgraphics ebitda adjusted purposes calculating debt leverage ratio predominantly ongoing industry volume pricing pressures partially offset impact 563 million reduction debt capital lease obligations consolidated balance sheets debt leverage ratio december 31 2015 292x managements desired target debt leverage ratio range 20x 25x however company operates times debt leverage ratio target range depending timing compelling strategic investment opportunities like specialty copac marins brown printing acquisitions seasonal working capital needs description significant outstanding debt obligations december 31 2015 december 31 2015 company utilized combination debt instruments fund cash requirements including following • 19 billion debt financing arrangements includes following ◦ senior secured credit facility ▪ 8500 million revolving credit facility 708 million outstanding december 31 2015 ▪ 4500 million term loan 4106 million outstanding december 31 2015 ▪ 3000 million term loan b 2932 million outstanding december 31 2015 ◦ senior unsecured notes 3000 million outstanding december 31 2015 • master note security agreement 2604 million outstanding december 31 2015 19 billion debt financing arrangements company completed 19 billion debt financing agreement april 28 2014 included refinancing extending expanding existing revolving credit facility term loan term loan b 16 billion senior secured credit facility issuance 3000 million aggregate principal amount senior unsecured notes senior secured credit facility senior unsecured notes entered extend stagger companys debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals proceeds senior secured credit facility senior unsecured notes used 1 repay companys previous revolving credit facility term loan term loan b international term loan 2 fund acquisition brown printing 3 general corporate purposes • senior secured credit facility senior secured credit facility consists three different loan facilities first facility revolving credit facility amount 8500 million term five years maturing april 27 2019 second facility term loan aggregate amount 4500 million term five years maturing april 27 2019 subject certain required amortization third facility term loan b amount 3000 million term seven years maturing april 27 2021 subject certain required amortization borrowings revolving credit facility term loan loans made senior secured credit facility initially bear interest 200 excess reserve adjusted london interbank offered rate libor 100 excess alternate base rate weightedaverage interest rate revolving credit facility 237 weightedaverage interest rate term loan loans 236 december 31 2015 interest payable monthly term loan b loans bear interest 325 excess reserve adjusted libor floor 100 225 excess alternative base rate companys option weightedaverage interest rate term loan b loans 425 december 31 2015 interest payable monthly senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances company entered amendment senior secured credit facility december 18 2014 eliminated net debt concept calculation total leverage ratio senior secured leverage ratio eliminated consolidated net worth covenant • senior unsecured notes company received 2948 million net proceeds sale 3000 million senior unsecured notes deducting initial purchasers discounts commissions senior unsecured notes bear interest 70 interest payable semiannually senior unsecured notes due may 1 2022 subsequent december 31 2015 february 18 2016 company repurchased 274 million senior unsecured notes total purchase price 185 million repurchased notes canceled companys existing future domestic subsidiaries borrower guarantees indebtedness companys senior secured credit facility guarantees certain companys indebtedness companys restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes guarantor subsidiaries current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including following 1 designation guarantor subsidiaries unrestricted subsidiary 2 release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries 3 sale disposition including sale substantially assets guarantor subsidiaries master note security agreement sometimes referred senior notes september 1 1995 last amended november 24 2014 company entered master note security agreement pursuant company issued time senior notes aggregate principal amount 11 billion various tranches 2604 million outstanding december 31 2015 weightedaverage interest rate senior notes 753 december 31 2015 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2031 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement company redeemed 1088 million senior notes master note security agreement 1096 million october 10 2014 company used revolving credit facility effect redemption primarily completed reduce interest expense based current libor rates master note security agreement amended november 24 2014 amendment among things amended financial covenants removing consolidated net worth requirement fixed charge coverage ratio well adding minimum interest coverage ratio maximum total leverage ratio maximum senior secured leverage ratio amendments align financial covenants master note security agreement closely financial covenants senior secured credit facility covenants compliance companys various lending arrangements include certain financial covenants financial terms numbers ratios defined companys debt agreements among covenants company required maintain following december 31 2015 • total leverage ratio rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda shall exceed 375 100 twelve months ended december 31 2015 companys total leverage ratio 289 100 • senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined senior secured debt consolidated ebitda shall exceed 350 100 twelve months ended december 31 2015 companys senior secured leverage ratio 226 100 • minimum interest coverage ratio rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2015 companys minimum interest coverage ratio 566 100 indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit companys restricted subsidiaries ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially companys consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates company compliance financial covenants debt agreements december 31 2015 company currently expects compliance future periods financial covenants assurance covenants continue met companys failure maintain compliance covenants could prevent company borrowing additional amounts could result default debt agreements default could cause outstanding indebtedness become immediately due payable virtue crossacceleration crossdefault provisions addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock including following • companys total leverage ratio greater 300 100 defined senior secured credit facility company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions • companys senior secured leverage ratio greater 300 100 companys total leverage ratio greater 350 100 ratios defined senior secured credit facility company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total leverage ratio less 350 100 restrictions net pension obligations net underfunded pension mepps obligations decreased 363 million year ended december 31 2015 2217 million december 31 2014 1854 million december 31 2015 decrease due following 1 244 million combined singleemployer mepp contributions 2 80 million liability reduction expected return plan assets exceeded interest cost frozen plans 3 37 million yearend actuarial valuation adjustment company continues focus reducing net obligation underfunded plans cash contributions plans plan design changes share repurchase program september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock authorization share repurchases may made companys discretion time open market andor privately negotiated transactions permitted federal securities laws legal requirements timing manner price amount repurchase depend economic market conditions share price trading volume applicable legal requirements factors program may suspended discontinued time stock repurchases made share repurchase program year ended december 31 2015 december 31 2015 918 million authorized repurchases remaining program subsequent december 31 2015 february 18 2016 company repurchased 984190 shares class stock weighted average price 896 per share total purchase price 88 million risk management discussion companys exposure market risks management market risks see item 7a quantitative qualitative disclosures market risk annual report form 10k offbalance sheet arrangements except set forth contractual obligations commitments table note 13 lease obligations consolidated financial statements item 8 financial statements supplementary data annual report form 10k including operating leases future interest debt capital leases incurred company offbalance sheet arrangements financings special purpose entities company expects material current future effect financial condition changes financial condition results operations liquidity capital expenditures capital resources significant components sales expenses contractual obligations commitments companys contractual cash obligations december 31 2015 follows millions 1 debt obligations include 3217 million anticipated future interest payments exclude 161 million 22 million future amortization debt issuance costs original issue discount respectively respect variable interest rate portions debt interest amounts calculated applying december 31 2015 weightedaverage interest rate determine value future interest payments master note security agreement weightedaverage interest rate notes applied average principal balance outstanding time period amounts included thereafter include principal payments estimated interest expense april 2031 2 pension benefits contributions benefit payments funded company assets included table actuarially estimated five year period benefit payments benefit plans expected continue beyond 2020 company believes estimate beyond period unreasonable contractual obligations table include 476 million estimated withdrawal liability united states world color press mepps due uncertainty amount timing potential withdrawal liability payment 2016 company scheduled make minimum payments 111 million pending settlement conclusion litigation mepps trustees see note 17 employee retirement plans consolidated financial statements item 8 financial statements supplementary data annual report form 10k discussion withdrawal mepps 3 capital lease obligations include 05 million anticipated future interest payments 4 purchase obligations consist primarily 149 million firm commitments purchase press finishing equipment well 16 million purchase obligations 5 contractual obligations table include reserves uncertain tax positions recorded accordance accounting guidance uncertainties income taxes company taken tax positions ultimate amount years necessary payments made pertain tax positions uncertain reserve uncertain tax positions prior interest penalties 298 million december 31 2015 company also recorded accruals interest penalties related uncertain tax positions 48 million 04 million respectively december 31 2015 6 contractual obligations table include share repurchase program repurchases required program see share repurchase program section discussion including maximum potential cash payments program critical accounting policies estimates companys consolidated financial statements prepared accordance gaap companys critical accounting policies important portrayal financial condition results operations require company make difficult subjective estimates management required make judgments estimates affect reported amounts assets liabilities disclosure contingent assets liabilities date statements reported amounts revenues expenses reporting period company bases estimates historical experience various assumptions believed reasonable circumstances companys management believes judgments estimates made consistent appropriate methods based information available time reasonable deviation judgments estimates would material impact companys consolidated financial position results operations actual results may differ estimates different assumptions conditions extent estimates used differ actual results adjustments consolidated statements operations corresponding consolidated balance sheets would necessary adjustments would made future statements company identified following critical accounting policies estimates revenue recognition company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer reasonable assurance collectability agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides product returns significant majority products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer respect companys logistics operations include delivery printed material company recognizes revenue upon completion services account greater 10 companys consolidated net sales therefore net sales related costs sales products services included separate line items consolidated statements operations item 8 financial statements supplementary data annual report form 10k certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations item 8 financial statements supplementary data annual report form 10k many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis impairment goodwill allocation purchase price business combinations requires management estimates judgment expectations future cash flows acquired business allocation cash flows identifiable assets liabilities assumed including valuations performed thirdparty appraisers appropriate determining estimated fair value purchase price allocation purposes goodwill represents excess purchase price fair value identifiable net assets acquired business combination changes managements estimates judgments including changes based actual results differing estimates judgments used purchase price allocation process could result impairment charge could material adverse effect companys results operations goodwill assigned specific reporting units accordance accounting guidance tested annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value united states print related services segment due decline companys stock price third quarter 2015 interim goodwill impairment test three reporting units united states print related services segment performed july 31 2015 reporting units include core print related services reporting unit specialty print related services reporting unit united states products services reporting unit goodwill 6408 million 1156 million 186 million respectively july 31 2015 determining fair value reporting unit company used equal weighting income market approaches except united states products services reporting unit income approach used significant assumptions used income approach included estimated future cash flows including expected future revenue growth profit margins capital expenditures working capital levels terminal value multiples 101 aftertax weighted average cost capital core print related services specialty print related services reporting units 109 aftertax weighted average cost capital united states products services reporting unit estimated future cash flows based companys internal projection models industry projections assumptions deemed reasonable management significant assumptions used market approach included control premium based similar transactions selection guideline public companies selected market multiples fair value determination categorized level 3 fair value hierarchy see note 15 financial instruments fair value measurements consolidated financial statements item 8 financial statements supplementary data annual report form 10k definition level 3 inputs completing step one evaluation estimated fair value three reporting units united states print related services segment determined lower carrying value respective reporting unit three reporting units failed step one goodwill impairment test step two goodwill impairment test requires company perform hypothetical purchase price allocation reporting unit determine implied fair value goodwill compare implied fair value goodwill carrying amount goodwill estimate fair value complex requires significant judgment thirdparty valuation firm engaged assist step two valuation process result interim goodwill impairment assessment well annual impairment test october 31 2015 companys united states print related services segment recorded pretax noncash goodwill impairment charges 7783 million 5124 million tax year ended december 31 2015 included impairment charges 6408 million 1189 million 186 million core print related services reporting unit specialty print related services reporting unit united states products services reporting unit respectively goodwill impairment charge resulted reduction estimated fair value reporting unit based lower expectations future revenue profitability cash flows primarily due volume pricing pressures compared expectations last annual goodwill impairment assessment performed october 31 2014 december 31 2015 goodwill united states print related services segment consolidated balance sheets international segment march 25 2015 due deteriorating economic conditions including inflation currency devaluation combined uncertain political conditions declining print volumes labor challenges companys argentina subsidiaries included within latin america reporting unit commenced bankruptcy restructuring proceedings goal consolidating operations result company conducted interim goodwill impairment assessment latin america reporting unit included comparing carrying amount net assets including goodwill respective fair value march 31 2015 date interim assessment first step company compared estimated fair value latin america reporting unit carrying amount including goodwill fair value determined using equal weighting income market approaches income approach company determined fair value based estimated future cash flows discounted estimated weightedaverage cost capital reflects overall level inherent risk rate return outside investor would expect earn market approach company derived fair value reporting unit based market multiples comparable publiclytraded companies fair value determination categorized level 3 fair value hierarchy see note 15 financial instruments fair value measurements consolidated financial statements item 8 financial statements supplementary data annual report form 10k definition level 3 inputs carrying amount reporting unit exceeds estimated fair value step two completed determine amount impairment charge step two requires allocation estimated fair value latin america reporting unit assets including unrecognized intangible assets liabilities hypothetical purchase price allocation remaining unallocated fair value represents implied fair value goodwill compared corresponding carrying value goodwill compute goodwill impairment charge assumptions used performing march 31 2015 interim goodwill impairment assessment evaluated light market business conditions company continues believe discounted cash flow model market multiples model provides reasonable meaningful fair value estimate based upon reporting units projections future operating results cash flows replicates market participants would value companys reporting unit significant assumptions used income approach included estimated future cash flows including expected future revenue growth profit margins capital expenditures working capital levels terminal value multiples 133 aftertax weighted average cost capital estimated future cash flows based companys internal projection models industry projections assumptions deemed reasonable management significant assumptions used market approach included control premium based similar transactions selection guideline public companies selected market multiples interim goodwill impairment assessment latin america reporting unit march 31 2015 fair value reporting unit carrying amount company performed step two additional fair value measurement calculation described determine whether latin america reporting unit impairment charge recorded part calculation company also estimated fair values significant tangible intangible longlived assets latin america reporting unit result interim goodwill impairment assessment well annual impairment test october 31 2015 companys international segment recorded noncash nondeductible goodwill impairment charges 300 million year ended december 31 2015 primarily including 233 million noncash goodwill impairment charge latin america reporting unit goodwill impairment charge resulted reduction estimated fair value reporting unit based lower expectations future revenue profitability cash flows primarily due volume pricing pressures compared expectations last annual goodwill impairment assessment performed october 31 2014 december 31 2015 goodwill international segment consolidated balance sheets impairment property plant equipment finitelived intangible assets company performs impairment evaluations longlived assets whenever business conditions events circumstances indicate assets may impaired including whether estimated useful life longlived assets may warrant revision whether remaining balance asset may recoverable companys significant longlived assets property plant equipment customer relationship intangible assets recorded conjunction acquisition assessing impairment longlived assets requires company make important estimates assumptions including limited expected future cash flows assets generate assets used based strategic direction company remaining useful life residual value considerable judgment also applied incorporating potential impact current economic climate customer demand selling prices cost production limited activity secondary markets assets cost capital estimated future undiscounted cash flows generated assets less carrying value longlived assets written fair value charge recorded current operations company uses internal undiscounted cash flow estimates quoted market prices available independent appraisals appropriate determine fair value fair value determination categorized level 3 fair value hierarchy see note 15 financial instruments fair value measurements consolidated financial statements item 8 financial statements supplementary data annual report form 10k definition level 3 inputs based assessments completed years ended december 31 2015 2014 2013 company recognized property plant equipment impairment charges 695 million 144 million 218 million respectively primarily related facility consolidations well capacity reduction restructuring initiatives company recorded finitelived intangible asset impairment charges 72 million year ended december 31 2015 finitelived intangible assets impairment charges recorded years ended december 31 2014 2013 company continues monitor groups assets identify new events changes circumstances could indicate carrying values recoverable particularly light potential declines profitability may result highly competitive industry landscape continued uncertainty global economy event significant unanticipated changes circumstances significant adverse changes business climate adverse actions regulators unanticipated competition loss key customers andor changes technology markets actual results differ managements estimates provision impairment could required future period pension plans result acquisition world color press company acquired multiple underfunded pension plans pension plan costs determined using actuarial methods funded contributions determined accordance projected benefit method prorated service company records amounts relating pension plans based calculations include various actuarial assumptions company believes two critical assumptions discount rate assumed rate return assets changes assumptions primarily influenced factors outside companys control significant effect amounts reported financial statements company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets included item 8 financial statements supplementary data annual report form 10k company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 purposes calculating expected return plan assets valued fair value company determines assumption discount rate used purposes computing annual service interest costs pension plan based index highquality corporate bond yields matchedfunding yield curve analysis date weightedaverage discount rate used determine benefit obligations pension plans december 31 2015 414 24 basis point increase december 31 2014 discount rate 390 onepercentage point change discount rate would following impact december 31 2015 projected benefit obligation company employs total return investment approach pension plans whereby diversified mix equity securities debt securities used maximize longterm pension plan assets intent strategy outperform growth plan liabilities long run plan contributions decreased balanced maintaining lower degree investment risk tolerance established careful consideration plan liabilities plan funded status corporate financial condition equity securities diversified across geography market capitalization investments united states largecapitalization stocks united states smallcapitalization stocks international securities investment risk measured monitored ongoing basis annual liability measurements periodic assetliability studies quarterly investment portfolio reviews expected longterm rate return plan assets based upon many factors including expected asset allocations historical asset returns current expected future market conditions risk current target asset allocation plan assets weightedaverage basis 55 equity securities 45 debt securities actual asset allocation december 31 2015 approximately 54 equity securities 46 debt securities expected return plan assets assumption december 31 2015 2014 65 companys funded united states pension plans actual return plan assets years ended december 31 2015 2014 01 82 respectively certain pension plans unfunded plans hold plan assets 25 basis point change expected return plan assets would following impact 2016 pension income company also participated mepps result acquisition world color press due significant underfunded status mepps company withdrawn significant mepps replaced union sponsored promise pay future defined benefit plans company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded estimated withdrawal liability mepps part world color press purchase price allocation process based information received mepps trustees estimated withdrawal liability updated based significant events potential new information ongoing litigation proceedings mepps final withdrawal liability determined arbitration proceedings process gciu also company gciu filed lawsuits federal court arbitration proceedings gcc completed sides appealed arbitrators ruling litigation commenced exact amount withdrawal liability could higher lower estimate depending among things nature timing triggering events funded status plans time final conclusion litigation mepps trustees new accounting pronouncements see note 25 new accounting pronouncements consolidated financial statements item 8 financial statements supplementary data annual report form 10k item 7aitem 7 managements discussion analysis financial condition results operations following discussion financial condition results operations quadgraphics read together quadgraphics audited consolidated financial statements three years period ended december 31 2016 including notes thereto included part ii item 8 financial statements supplementary data annual report form 10k discussion contains forwardlooking statements reflect companys plans estimates beliefs companys actual results could differ materially discussed forwardlooking statements factors could cause contribute differences include limited discussed forwardlooking statements part item 1a risk factors included earlier within annual report form 10k managements discussion analysis financial condition results operations provided supplement companys consolidated financial statements accompanying notes help provide understanding companys financial condition changes companys financial condition companys results operations discussion analysis organized follows • overview section includes general description companys business segments overview key performance metrics companys management measures utilizes evaluate business performance overview trends affecting company including managements actions related trends • results operations section contains analysis companys results operations comparing results 1 year ended december 31 2016 year ended december 31 2015 2 year ended december 31 2015 year ended december 31 2014 comparability companys results operations periods impacted acquisitions including 2014 acquisitions brown printing company brown printing unigraphic inc unigraphic 2015 acquisitions marins international sa marins copac global packaging inc copac specialty finishing inc specialty results operations acquisitions included companys consolidated results prospectively respective acquisition dates forwardlooking statements providing general description recent projected industry company developments important understanding companys results operations included section also provides discussion ebitda margin financial measures company uses assess performance business prepared accordance accounting principles generally accepted united states america gaap • liquidity capital resources section provides analysis companys capitalization cash flows statement offbalance sheet arrangements discussion table outstanding debt commitments forwardlooking statements important understanding companys financial condition included section also provides discussion free cash flow debt leverage ratio nongaap financial measures company uses assess liquidity capital allocation deployment • critical accounting policies estimates section contains discussion accounting policies companys management believes important companys financial condition results operations well allowances reserves require significant judgment estimates part companys management addition companys significant accounting policies including critical accounting policies summarized note 1 basis presentation summary significant accounting policies consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k • new accounting pronouncements overview business overview quadgraphics global marketing services provider helps brand owners market products services content efficiently effectively using strong print foundation combination media channels consultative approach worldwide capabilities leadingedge technology singlesource simplicity company believes resources knowledge help wide variety clients multiple vertical industries including retail publishing healthcare quadgraphics operates primarily commercial print portion printing industry related product service offerings designed offer clients complete solutions communicating message target audiences companys operating reportable segments aligned chief operating decision maker company currently manages business companys reportable operating segments summarized united states print related services segment predominantly comprised companys united states printing operations managed one integrated platform includes retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement together marketing complementary services including marketing strategy media planning placement data insights segmentation response analytics services creative services videography photography workflow solutions digital imaging facilities management services digital publishing interactive print solutions including image recognition near field communication technology mailing distribution logistics data optimization hygiene services segment also includes manufacture ink united states print related services segment accounted approximately 91 companys consolidated net sales year ended december 31 2016 international segment consists companys printing operations europe latin america including operations england france germany poland argentina colombia mexico peru well investments printing operations brazil india segment provides printed products marketing complementary services consistent united states print related services segment international segment accounted approximately 9 companys consolidated net sales year ended december 31 2016 corporate consists unallocated general administrative activities associated expenses including part executive legal finance well certain expenses income frozen employee retirement plans pension benefit plans key performance metrics overview companys management believes ability generate net sales growth profit increases positive cash flow maintaining appropriate level debt key indicators successful execution companys business strategy increase shareholder value company uses period net sales growth ebitda margin net cash provided operating activities free cash flow debt leverage ratio metrics measure operating performance financial condition liquidity ebitda margin free cash flow debt leverage ratio nongaap financial measures see definitions ebitda margin reconciliation net earnings loss attributable quadgraphics common shareholders ebitda results operations section see definitions free cash flow debt leverage ratio reconciliation net cash provided operating activities free cash flow calculation debt leverage ratio liquidity capital resources section net sales growth company uses period net sales growth key performance metric companys management assesses net sales growth based ability generate increased net sales increased sales existing clients sales new clients sales new expanded solutions existing new clients opportunities expand sales strategic investments including acquisitions ebitda margin company uses ebitda margin metrics assess operating performance companys management assesses ebitda margin based ability increase revenues controlling variable expense growth net cash provided operating activities company uses net cash provided operating activities metric assess liquidity companys management assesses net cash provided operating activities based ability meet recurring cash obligations increasing available cash fund cash restructuring requirements related cost reduction activities well fund capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal liabilities acquisitions investments future growth shareholder dividends share repurchases net cash provided operating activities significantly impacted timing nonrecurring infrequent receipts expenditures free cash flow company uses free cash flow metric assess liquidity capital deployment companys management assesses free cash flow measure quantify cash available strengthening balance sheet debt reduction strategic capital allocation deployment investments business acquisitions strategic investments returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items debt leverage ratio company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strategic investments strengthening balance sheet pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability overview trends affecting quadgraphics marketing services perspective media channel proliferation continues consumers remain control buy products services trend contributed marketers publishers need solutions efficiently effectively coordinate measure digital traditional channels printing industry perspective competition remains highly fragmented intense company believes indicators heightened competitive pressures industry excess manufacturing capacity created continued declines industry volumes turn created accelerated downward pricing pressures addition digital delivery documents data including online distribution hosting media content mobile technologies offer alternatives traditional delivery printed documents increasing consumer acceptance digital delivery content resulted marketers publishers allocating marketing advertising spend across expanding selection digital delivery options reduces printing demand contributes industry overcapacity company also faces competition print management firms look streamline processes reduce overall print spend companys clients well strategic marketing firms focused helping businesses integrate multiple channels marketing campaigns company believes disciplined approach capital management strong balance sheet critical able invest profitable growth opportunities technological advances thereby providing highest return shareholders management balances use cash deleveraging companys balance sheet reduction debt pension obligations compelling investment opportunities capital expenditures acquisitions strategic investments returns shareholders share repurchases quarterly dividend 030 per share company remains disciplined debt leverage companys consolidated debt capital leases decreased 218 million year ended december 31 2016 primarily due increase cash earnings reduction capital expenditures sustainable decrease working capital levels company redeemed 60 million senior notes master note security agreement repurchased 57 million senior unsecured notes year ended december 31 2016 total net gain 14 million recognized gain debt extinguishment consolidated statements operations repurchases primarily completed efficiently reduce debt balances debt leverage ratio well interest expense based current london interbank offered rate libor rates since company completed world color press acquisition july 2010 company reduced debt capital leases 609 million reduced obligations pension postretirement mepps 400 million total obligation reduction since july 2010 1 billion company makes continuous progress integrating streamlining aspects business thereby lowering cost structure consolidating manufacturing platform efficient facilities well realizing purchasing mailing logistics efficiencies centralizing consolidating print manufacturing volumes eliminating redundancies administrative corporate operations efforts include deployment companys smartools® systems streamline workflows improve data visibility across consolidated platform cost reductions lean manufacturing continuous improvement initiatives production floor administrative support order achieve improved efficiencies reduce waste lower overall operating costs enhance quality timeliness create safer work environment companys employees january 2016 company announced completed 100 million sustainable cost reduction program ahead schedule intended bring companys cost structure line revenues light heightened competitive pressures program included reducing excess manufacturing capacity plant closures intensifying companys focus productivity reducing selling general administrative costs implementing new streamlined organizational structure restructuring actions initiated company beginning 2010 resulted announcement 37 plant closures reduced headcount approximately 11100 employees december 31 2016 company intends continue reducing costs evidenced december 2016 announcement four plant closures first quarter 2017 integrated distribution postal service important component companys business material change current service levels provided postal service could impact demand clients print services usps continues experience financial problems without increased revenues action congress reform usps cost structure losses continue future result financial difficulties usps come increased pressure adjust postal rates service levels 43 temporary exigent postage rate increase expired april 10 2016 usps appeal maintain 43 exigent increase rejected federal court fourth quarter 2016 could future postal reform legislation rate increases company invested significantly mail preparation distribution capabilities mitigate impact increases postage costs help clients successfully navigate everchanging postal environment data analytics unique software merge mailstreams large scale advanced finishing capabilities technology inhouse transportation logistics operations company manages mail preparation distribution clients products maximize efficiency enable ontime consistent delivery partially reduce costs however net impact increasing postal costs may create decrease client demand print mail products another key aspect companys modern manufacturing platform combination footprint mega plants facilities greater 10 million square feet produce number different products one roof mega zones multiple facilities close geographic proximity managed one large facility smaller strategically located facilities company continued evolve platform equipping facilities product line agnostic enables company maximize equipment utilization quadgraphics believes large plant size certain key printing facilities allows company drive savings certain product lines publications catalogs due economies scale investments automation technology making capital investment decisions management undertakes thorough process aimed driving strongest contribution longterm profitability whether property plant equipment additions organic growth opportunities acquisitions recent examples capital investments made company include following strengthen marketing services company seeks strategic partnerships companies cutting edge marketing solutions 2016 partnered made minority investment rise interactive digital marketing agency strategic investment brings together company adept optimizing spend offline company online using robust analytics deliver highlyrelevant consistent messages consumers across print digital channels strategic investment rise interactive enable quadgraphics rise interactive accelerate growth coinnovation delivers value collective clients quadgraphics made number strategic investments 2016 strengthen core print platform create value clients highlights include • direct mail platform company announced transform westampton new jersey direct marketing production plant east coast digital print supercenter specializing personalized highresponse direct marketing solutions expansion adds new technology enhance efficiency effectiveness direct marketers efforts reach individual consumers superiorquality cost effective hyperpersonalized direct mail pieces mass scale companys east coast digital print supercenter include two new hewlettpackard indigo 12000 digital presses addition supercenter also operate several digital presses well offset presses upgraded inkjet technology install two new highspeed letter inserters enhance lettershop operations east coast digital supercenter compliments quad graphics existing midwest digital print supercenter pewaukee wisconsin recently added hewlettpackard indigo 12000 digital press quadgraphics effingham illinois direct mail production facility recently expanded personalization capabilities installation new hewlettpackard c800 fourcolor variable inkjet print module system • commercial specialty platform company announced add stateoftheart digital printing capabilities dallas texas plant two new digital presses new fuji j press digital print press offering quality reliability consistency offset printing addition full variable onetoone data management fuji j press complemented kodak nexpress shortrun quickturn workflows finishing equipment also installed including horizon stitchliner 5500 saddle stitching system two fully automated horizon perfect binders well folder flatcutter shrinkwrapper lastly dallas plant expanded kitpacking fulfillment solutions simplify management distribution finished products integrated order entry doorstep delivery transformation help quadgraphics better serve next generation marketers brand owners variety industry verticals including retail travel hospitality fast casual restaurants automotive • book platform quadgraphics invested multiple highspeed color digital web presses part strategy transform companys book platform widest productive digital web presses available marketplace today company committed helping book publishers produce deliver books demand bringing zero inventory justintime delivery closer reality company continue invest book platform match clients’ changing needs redefine book supply chain increased customization versioning capabilities faster time market reduced waste inventories obsolescence lower fixed costs 2015 2014 • company completed acquisition specialty august 25 2015 net purchase price of61 million excluding acquired cash specialty fullservice paperboard folding carton manufacturer logistics provider located omaha nebraska • company completed acquisition copac april 14 2015 net purchase price 59 million excluding acquired cash copac leading international provider innovative packaging supply chain solutions including turnkey packaging design production fulfillment services across range end markets headquartered spartanburg south carolina copac manufactures products folding cartons labels inserts tags specialty envelopes production facilities spartanburg santo domingo dominican republic well strategically sourcing packaging product manufacturing multiple end markets central america asia giving global footprint • company completed acquisition marins february 3 2015 net purchase price 21 million excluding acquired cash marins worldwide leader pointofsale display industry specializes research design display solutions headquartered paris france marins products produced global network licensees including quadgraphics well one wideformat digital print kitting fulfillment facility paris marins uses europeanbased sales force global licensees sell patented product portfolio • company completed acquisition brown printing may 30 2014 net purchase price 98 million excluding acquired cash brown printing provides magazine catalog printing distribution services integrated media solutions magazine publishers catalog marketers united states • company completed acquisition unigraphic february 5 2014 net purchase price 11 million excluding acquired cash unigraphic commercial specialty printing company based boston massachusetts metro area offering commercial specialty printing instore marketing digital fulfillment solutions wide variety industries including arts entertainment education financial food healthcare mass media pharmaceutical retail company subject seasonality quarterly results net sales operating income higher third fourth quarters calendar year compared first second quarters fourth quarter typically highest seasonal quarter cash flows operating activities free cash flow due reduction working capital requirements reach peak levels third quarter seasonality driven increased magazine advertising page counts retail inserts catalogs books primarily due backtoschool holidayrelated advertising promotions company expects seasonality impact continue future years results operations year ended december 31 2016 compared year ended december 31 2015 summary results companys operating income loss operating margin net earnings loss attributable quadgraphics common shareholders computed using 40 normalized tax rate diluted earnings loss per share attributable quadgraphics common shareholders year ended december 31 2016 changed year ended december 31 2015 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 806 million 484 million net tax incurred year ended december 31 2016 included following 129 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 268 million impairment charges including 147 million impairment charges machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois queretaro mexico well capacity reduction restructuring activities 121 million impairment charges land building related atglen pennsylvania plant closure c 22 million transactionrelated charges consisting professional service fees business acquisition divestiture activities 01 million acquisitionrelated integration costs e 386 million various restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring charges also included 112 million adjustment mepps withdrawal liability 70 million noncash pension settlement charge related lumpsum pension payments company expects incur additional restructuring integration costs future reporting periods connection eliminating excess manufacturing capacity properly aligning cost structure conjunction companys acquisitions strategic investments cost reduction programs 2 restructuring impairment transactionrelated charges 1649 million incurred year ended december 31 2015 included following 421 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 953 million impairment charges including following 1 547 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado queretaro mexico well capacity reduction restructuring initiatives 2 186 million investmentrelated impairment charges primarily related 167 million impairment charges reduce book value companys equity method investment quadgraphics chile sa chile fair value see note 8 equity method investments unconsolidated entities consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k additional details related impairment companys equity method investment chile 3 127 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 4 71 million customer relationship intangible asset impairments 5 22 million impairment charges recorded property plant equipment intangible assets result restructuring proceedings argentina companys argentina subsidiaries anselmo l morvillo sa morvillo world color argentina sa argentina subsidiaries c 67 million transactionrelated charges income including 100 million nonrecurring gain result courier corporations courier termination agreement pursuant quadgraphics acquire courier partially offset 33 million professional service fees including fees terminated acquisition courier acquisitions marins copac specialty 51 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 291 million various restructuring charges including 60 million noncash nondeductible expense recognize accumulated foreign exchange losses sale chile equity method investment lease exit charges related closed facilities well costs maintain exit closed facilities 3 pretax noncash goodwill impairment charges 8083 million 5424 million net tax recorded year ended december 31 2015 7783 million related united states print related services segment 300 million related international segment 4 interest expense decreased 112 million 67 million net tax year ended december 31 2016 772 million change due lower average debt levels year ended december 31 2016 compared year ended december 31 2015 5 nonrecurring 141 million gain debt extinguishment 85 million net tax recognized year ended december 31 2016 primarily repurchase 565 million aggregate principal amount senior unsecured notes 6 288 million benefit income taxes calculated following table primarily due following 1 133 million increased taxable income foreign jurisdictions company able use operating loss carryforwards 2 80 million increased domestic deductions 3 47 million increased state deferred tax assets see note 14 income taxes consolidated financial statements part ii item 8 annual report form 10k information income taxes 7 decrease net loss attributable investments unconsolidated entities net tax 49 million year ended december 31 2016 primarily related 41 million decrease losses unconsolidated entities companys investment plural industria gráfica ltda plural companys brazilian joint venture 08 million decrease losses companys investment chile sold july 31 2015 8 operating income loss excluding restructuring impairment transactionrelated charges goodwill impairment charges increased 598 million 359 million net tax primarily due following 1 lower costs primarily associated production cost reduction initiatives 2 482 million decrease depreciation amortization expense 3 2016 collection 104 million vendor receivable writtenoff fourth quarter 2015 due collectability concerns 4 additional earnings sales generated acquisitions impacts partially offset following 1 lower print volume pricing product lines owned year 2 63 million increase selling general administrative expenses primarily due increased incentive compensation legal expenses 3 40 million vacation expense reduction 2015 due vacation policy change repeat 2016 operating results following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased 2326 million 59 year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 1729 million decrease product sales companys core print specialty print product lines owned year predominantly due ongoing industry volume pricing pressures 2 973 million decrease passthrough paper sales 3 261 million negative foreign exchange impacts decreases partially offset 637 million sales increase acquisitions service sales primarily consist imaging logistics distribution services decreased 350 million 54 year ended december 31 2016 compared year ended december 31 2015 primarily due 250 million decrease logistics sales resulting lower print shipment volume lower fuel prices 69 million decreased sales print imaging services cost sales cost product sales decreased 2425 million 75 year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 lower costs primarily associated production cost reduction initiatives 2 lower print volume product lines owned year 3 2016 collection 104 million vendor receivable writtenoff fourth quarter 2015 due collectability concerns reductions partially offset following 1 increased cost product sales resulting acquisitions 2 40 million vacation expense reduction 2015 due vacation policy change repeat 2016 cost product sales percentage net sales decreased 686 year ended december 31 2016 699 year ended december 31 2015 primarily due reasons provided cost service sales decreased 430 million 92 year ended december 31 2016 compared year ended december 31 2015 primarily due lower logistics volume overall cost reduction initiatives cost service sales percentage net sales decreased 98 year ended december 31 2016 102 year ended december 31 2015 primarily due reasons provided selling general administrative expenses selling general administrative expenses increased 63 million 14 year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 212 million increase incentive compensation expense 2 107 million increase legal expenses due 2016 reserves established favorable settlements legal claims 2015 repeat 2016 3 46 million increase foreign currency losses 4 38 million increase bad debt expense 5 34 million decrease gains sale property plant equipment increases partially offset 301 million decrease employeerelated costs 74 million decrease general administrative expenses primarily due companys cost reduction initiatives selling general administrative expenses percentage net sales increased 97 year ended december 31 2015 105 year ended december 31 2016 primarily due lower net sales reasons stated depreciation amortization depreciation amortization decreased 482 million 148 year ended december 31 2016 compared year ended december 31 2015 due 289 million decrease amortization expense predominantly related customer relationship intangibles becoming fully amortized second quarter 2016 193 million decrease depreciation expense property plant equipment becoming fully depreciated past year restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges decreased 843 million 511 year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 685 million decrease impairment charges 2 292 million decrease employee termination charges 3 50 million decrease acquisitionrelated integration costs decreases partially offset 95 million increase restructuring charges 89 million increase transactionrelated charges restructuring impairment transactionrelated charges 806 million incurred year ended december 31 2016 included following 1 129 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 268 million impairment charges including 147 million impairment charges machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois queretaro mexico well capacity reduction restructuring activities 121 million impairment charges land building related atglen pennsylvania plant closure 3 22 million transactionrelated charges consisting professional service fees related business acquisition divestiture activities 4 01 million acquisitionrelated integration costs 5 386 million various restructuring charges including costs maintain exit closed facilities lease exit charges 112 million adjustment mepps withdrawal liability 70 million noncash pension settlement charge related lumpsum pension payments restructuring impairment transactionrelated charges 1649 million incurred year ended december 31 2015 included following 1 421 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 953 million impairment charges including 547 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado queretaro mexico well capacity reduction restructuring initiatives 186 million investmentrelated impairment charges primarily related 167 million impairment charges reduce book value companys equity method investment chile fair value see note 8 equity method investments unconsolidated entities additional details related impairment companys equity method investment chile 127 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 71 million customer relationship intangible asset impairments 22 million impairment charges recorded property plant equipment intangible assets result restructuring proceedings argentina companys argentina subsidiaries 3 67 million transactionrelated charges income includes 100 million nonrecurring gain result couriers termination agreement pursuant quadgraphics acquire courier partially offset 33 million professional service fees terminated acquisition courier acquisitions marins copac specialty 4 51 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 291 million restructuring charges including costs maintain exit closed facilities lease exit charges 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment goodwill impairment march 25 2015 due deteriorating economic conditions including inflation currency devaluation combined uncertain political conditions declining print volumes labor challenges companys argentina subsidiaries included within latin america reporting unit commenced bankruptcy restructuring proceedings goal consolidating operations company conducted interim goodwill impairment assessment latin america reporting unit included comparing carrying amount net assets including goodwill respective fair value march 31 2015 date interim assessment result interim goodwill impairment assessment well annual impairment test october 31 2015 companys international segment recorded noncash nondeductible goodwill impairment charges 300 million year ended december 31 2015 primarily including 233 million noncash goodwill impairment charge latin america reporting unit due decline companys stock price third quarter 2015 interim goodwill impairment test three reporting units united states print related services segment performed july 31 2015 result interim goodwill impairment assessment well annual impairment test october 31 2015 companys united states print related services segment recorded pretax noncash goodwill impairment charges 7783 million 5124 million tax year ended december 31 2015 included impairment charges 6408 million 1189 million 186 million core print related services reporting unit specialty print related services reporting unit united states products services reporting unit respectively total company recorded pretax noncash goodwill impairment charges 8083 million 5424 million tax year ended december 31 2015 ebitda marginconsolidated ebitda margin year ended december 31 2016 compared year ended december 31 2015 follows ebitda increased 9232 million year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 8083 million noncash goodwill impairment charge recorded 2015 repeat 2016 2 843 million decreased restructuring impairment transactionrelated charges 3 lower costs primarily associated production cost reduction initiatives 4 2016 collection 104 million vendor receivable writtenoff fourth quarter 2015 due collectability concerns 5 additional earnings sales generated acquisitions impacts partially offset following 1 lower print volume pricing product lines owned year 2 63 million increase selling general administrative expenses primarily due increase incentive compensation legal expenses 3 40 million vacation expense reduction 2015 due vacation policy change repeat 2016 ebitda represents net earnings loss attributable quadgraphics common shareholders plus 1 interest expense 2 income tax expense applicable 3 depreciation amortization less income tax benefit applicable ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net earnings loss attributable quadgraphics common shareholders years ended december 31 2016 2015 follows 1 net earnings loss attributable quadgraphics common shareholders included following restructuring impairment transactionrelated charges 806 million 1649 million years ended december 31 2016 2015 respectively b noncash goodwill impairment charge 8083 million year ended december 31 2015 c gain debt extinguishment 141 million year ended december 31 2016 equity loss unconsolidated entities 14 million 63 million years ended december 31 2016 2015 respectively united states print related services following table summarizes net sales operating income loss operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment decreased 2450 million 68 year ended december 31 2016 compared year ended december 31 2015 primarily due 1985 million decrease product sales companys core print specialty print product lines owned year predominantly due ongoing volume pricing pressures excess capacity printing industry 1089 million decrease passthrough paper sales partially offset 624 million increase net sales acquisitions service sales united states print related services segment decreased 366 million 58 year ended december 31 2016 compared year ended december 31 2015 primarily due 266 million decrease logistics sales resulting lower print shipment volume lower fuel prices 69 million decreased sales print imaging services operating income loss operating income loss united states print related services segment increased 8922 million year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 7783 million noncash goodwill impairment charge recorded 2015 repeat 2016 2 lower costs primarily associated production cost reduction initiatives 3 421 million decrease restructuring impairment transactionrelated charges 4 2016 collection 104 million vendor receivable writtenoff fourth quarter 2015 due collectability concerns 5 additional earnings sales generated acquisitions impacts partially offset following 1 lower print volume pricing product lines owned year 2 40 million vacation expense reduction 2015 due vacation policy change repeat 2016 operating margin united states print related services segment increased 47 year ended december 31 2016 negative 168 year ended december 31 2015 primarily due reasons provided restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2016 593 million consisting 1 105 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 259 million impairment charges including 138 million machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois well capacity reduction restructuring activities 121 million land building impairment related atglen pennsylvania plant closure 3 01 million acquisitionrelated integration costs 4 228 million various restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2015 1014 million consisting following 1 273 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 507 million impairment charges including 335 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado well capacity reduction restructuring initiatives 112 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 60 million customer relationship intangible asset impairments 3 46 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 4 188 million restructuring charges including costs maintain exit closed facilities well lease exit charges goodwill impairment due decline companys stock price third quarter 2015 interim goodwill impairment test three reporting units united states print related services segment performed july 31 2015 result interim goodwill impairment assessment well annual impairment test october 31 2015 companys united states print related services segment recorded pretax noncash goodwill impairment charges 7783 million 5124 million tax year ended december 31 2015 included impairment charges 6408 million 1189 million 186 million core print related services reporting unit specialty print related services reporting unit united states products services reporting unit respectively international following table summarizes net sales operating income loss operating margin certain items impacting comparability equity loss unconsolidated entities within international segment net sales product sales international segment increased 124 million 34 year ended december 31 2016 compared year ended december 31 2015 primarily due 270 million net increase price volume primarily argentina mexico colombia europe peru 115 million increase passthrough paper sales partially offset 261 million negative foreign exchange impacts primarily argentina mexico peru colombia service sales international segment increased 16 million 85 year ended december 31 2016 compared year ended december 31 2015 primarily due increase logistics revenue europe operating income loss operating income loss international segment increased 769 million year ended december 31 2016 compared year ended december 31 2015 primarily due following 1 399 million decrease restructuring impairment expenses 2 300 million noncash goodwill impairment charge recorded 2015 repeat 2016 3 70 million increase operating income primarily mexico europe restructuring impairment transactionrelated charges income restructuring impairment transactionrelated charges income international segment year ended december 31 2016 11 million consisting following 1 14 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 09 million impairment charges machinery equipment longer utilized production result facility consolidations including queretaro mexico 3 01 million transactionrelated charges 4 35 million restructuring income primarily related companys argentina subsidiaries gain settlements vendors bankruptcy proceedings gain sale pilar argentina plant restructuring impairment transactionrelated charges international segment year ended december 31 2015 388 million consisting following 1 73 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 228 million impairment charges including 167 million impairment charges reduce book value companys equity method investment chile fair value see note 8 equity method investments unconsolidated entities additional details related impairment companys equity method investment chile 22 million impairment charges primarily related restructuring proceedings argentina companys argentina subsidiaries land building machinery equipment intangible assets 15 million land building impairment charges 13 million impairment charges machinery equipment longer utilized production well capacity reduction restructuring initiatives 11 million customer relationship intangible asset impairments 3 87 million restructuring charges primarily related 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment goodwill impairment march 25 2015 due deteriorating economic conditions including inflation currency devaluation combined uncertain political conditions declining print volumes labor challenges companys argentina subsidiaries included within latin america reporting unit commenced bankruptcy restructuring proceedings goal consolidating operations company conducted interim goodwill impairment assessment latin america reporting unit included comparing carrying amount net assets including goodwill respective fair value march 31 2015 date interim assessment result interim goodwill impairment assessment well annual impairment test october 31 2015 companys international segment recorded noncash nondeductible goodwill impairment charges 300 million year ended december 31 2015 primarily including 233 million noncash goodwill impairment charge latin america reporting unit equity loss unconsolidated entities investments entities quadgraphics ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil company also held 50 interest joint venture based chile acquired part world color press acquisition july 31 2015 investment sold equity loss unconsolidated entities international segment decreased 49 million year ended december 31 2016 compared year ended december 31 2015 primarily due 41 million decrease losses unconsolidated entities companys investment plural companys brazilian joint venture 08 million decrease losses companys investment chile sold july 31 2015 unrestricted subsidiaries unrestricted subsidiaries defined senior unsecured notes indenture represented less 20 total consolidated net sales year ended december 31 2016 corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses increased 167 million 276 year ended december 31 2016 compared year ended december 31 2015 primarily due 152 million increase incentive compensation expenses 80 million increase legal expenses partially offset cost reduction initiatives 23 million decrease restructuring impairment transactionrelated charges included 100 million nonrecurring gain 2015 result couriers termination agreement pursuant quadgraphics acquire courier restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges year ended december 31 2016 224 million consisting following 1 10 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 21 million transactionrelated charges primarily included professional service fees 3 193 million restructuring charges including 112 million adjustment mepps withdrawal liability 70 million noncash pension settlement charge related lumpsum pension payments corporate restructuring impairment transactionrelated charges year ended december 31 2015 247 million consisting following 1 75 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 218 million impairment charges including 199 million impairment charges corporate equipment 19 million investment related impairment charges 3 67 million transactionrelated charges income includes 100 million nonrecurring gain courier partially offset 33 million professional service fees including fees terminated acquisition courier acquisitions marins copac specialty 4 03 million acquisitionrelated integration costs primarily related professional fees 5 18 million restructuring charges results operations year ended december 31 2015 compared year ended december 31 2014 summary results companys operating income loss operating margin net earnings loss attributable quadgraphics common shareholders computed using 40 normalized tax rate diluted earnings loss per share attributable quadgraphics common shareholders year ended december 31 2015 changed year ended december 31 2014 follows dollars millions except per share data 1 restructuring impairment transactionrelated charges 1649 million incurred year ended december 31 2015 included following 421 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 953 million impairment charges including following 1 547 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado queretaro mexico well capacity reduction restructuring initiatives 2 186 million investmentrelated impairment charges primarily related 167 million impairment charges reduce book value companys equity method investment chile fair value see note 8 equity method investments unconsolidated entities consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k additional details related impairment companys equity method investment chile 3 127 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 4 71 million customer relationship intangible asset impairments 5 22 million impairment charges recorded property plant equipment intangible assets result restructuring proceedings argentina companys argentina subsidiaries c 67 million transactionrelated charges income including 100 million nonrecurring gain result couriers termination agreement pursuant quadgraphics acquire courier partially offset 33 million professional service fees including fees terminated acquisition courier acquisitions marins copac specialty 51 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 291 million various restructuring charges including 60 million noncash nondeductible expense recognize accumulated foreign exchange losses sale chile equity method investment lease exit charges related closed facilities well costs maintain exit closed facilities company expects incur additional restructuring integration costs future reporting periods connection eliminating excess manufacturing capacity properly aligning cost structure conjunction companys acquisitions strategic investments cost reduction programs 2 restructuring impairment transactionrelated charges 673 million incurred year ended december 31 2014 included following 306 million employee termination charges related workforce reductions facility consolidations involuntary separation programs b 144 million impairment charges including following 1 80 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee mexico city mexico pomona california st cloud minnesota well capacity reduction restructuring initiatives 2 64 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures c 26 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily included professional service fees acquisitions brown printing unigraphic 112 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies e 85 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 49 million gain termination postretirement medical benefit plan 3 pretax noncash goodwill impairment charges 8083 million 5424 million net tax recorded year ended december 31 2015 7783 million related united states print related services segment 300 million related international segment 4 interest expense decreased 45 million 27 million net tax year ended december 31 2015 884 million change due lower weighted average interest rate borrowings lower average debt levels 2015 compared 2014 5 nonrecurring 72 million loss debt extinguishment 43 million net tax recognized year ended december 31 2014 primarily related 19 billion debt financing arrangements completed april 28 2014 72 million represents certain debt issuance costs expensed 6 decrease income tax benefit 144 million calculated following table primarily due 104 million reduced tax benefits 2015 reversal liability unrecognized tax benefits 2014 based expiration statutes limitations 56 million related losses foreign jurisdictions 2015 excess 2014 company receive tax benefit see note 14 income taxes consolidated financial statements part ii item 8 annual report form 10k information income taxes 7 decrease attributable investments unconsolidated entities noncontrolling interests net tax 39 million year ended december 31 2015 primarily due 28 million increase losses unconsolidated entities companys investment plural 09 million increase losses companys investment chile sold july 31 2015 8 operating income loss excluding restructuring impairment transactionrelated charges goodwill impairment charges decreased 654 million 392 million net tax primarily due following 1 38 reduction net sales predominantly ongoing industry volume pricing pressures 2 higher labor costs associated lower productivity 3 108 million charge reduce vendor receivable due collectability concerns 4 61 million net gains 2014 related favorable legal bankruptcy settlements declines partially offset following 1 operating results additional earnings sales attributed recent acquisitions 2 45 million increase net gains sale property plant equipment 3 45 million decrease foreign currency losses 4 40 million lower vacation expense due change vacation policy 5 25 million gain sale cost method investment 6 11 million favorable impact resolution certain acquisitionrelated contingencies following discussion provides additional details operating results following table sets forth certain information companys consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased 1630 million 40 year ended december 31 2015 compared year ended december 31 2014 primarily due 2563 million decrease product sales companys core print specialty print product lines owned year predominantly due ongoing volume pricing pressures 533 million negative foreign exchange impact decreases partially offset 1466 million increase acquisitions service sales primarily consist imaging logistics distribution services decreased 175 million 26 year ended december 31 2015 compared year ended december 31 2014 primarily due decrease logistics sales resulting ongoing volume pressures decrease partially offset 129 million increased sales quadmed medical services 90 million increased logistics imaging sales resulting acquisitions cost sales cost product sales decreased 1231 million 37 year ended december 31 2015 compared year ended december 31 2014 primarily due lower print paper volumes product lines owned year 40 million vacation reserve reduction due vacation policy change reductions partially offset increased cost product sales resulting acquisitions higher labor costs associated lower productivity 108 million charge reduce vendor receivable due collectability concerns cost product sales percentage net sales increased 699 year ended december 31 2015 698 year ended december 31 2014 primarily due reasons provided cost service sales decreased 37 million 08 year ended december 31 2015 compared year ended december 31 2014 primarily due lower logistics volumes partially offset additional costs resulting quadmed medical services increased sales generated acquisitions cost service sales percentage net sales increased 102 year ended december 31 2015 99 year ended december 31 2014 primarily due increased costs quadmed medical services selling general administrative expenses selling general administrative expenses increased 228 million 54 year ended december 31 2015 compared year ended december 31 2014 primarily due following 1 167 million increase employeerelated costs due acquisitions net 98 million reduction compensation expense recognized related equity incentive programs 2 61 million net gains 2014 related favorable legal bankruptcy settlements 3 35 million increase legal professional fees 4 25 million increase general administrative expenses increases partially offset following 1 45 million increase net gains sale property plant equipment 2 45 million decrease foreign currency losses 3 25 million gain sale cost investment 4 11 million favorable impact resolution certain acquisition related contingencies selling general administrative expenses percentage net sales increased 89 97 years primarily due reasons depreciation amortization depreciation amortization decreased 111 million 33 year ended december 31 2015 compared year ended december 31 2014 primarily due 148 million decrease depreciation expense decreased depreciation expense result property plant equipment becoming fully depreciated past year partially offset depreciation property plant equipment purchased acquisitions decrease depreciation expense partially offset 37 million increase amortization expense primarily due amortization customer relationship intangible assets intangible assets companies acquired 2015 restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges increased 976 million 1450 year ended december 31 2015 compared year ended december 31 2014 primarily due following 1 809 million increase impairment charges 2 206 million increase restructuring charges 3 115 million increase employee termination charges increases partially offset 93 million decrease transactionrelated charges 61 million decrease acquisitionrelated integration costs restructuring impairment transactionrelated charges 1649 million incurred year ended december 31 2015 included following 1 421 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 953 million impairment charges including 547 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado queretaro mexico well capacity reduction restructuring initiatives 186 million investmentrelated impairment charges primarily related 167 million impairment charges reduce book value companys equity method investment chile fair value see note 8 equity method investments unconsolidated entities additional details related impairment companys equity method investment chile 127 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 71 million customer relationship intangible asset impairments 22 million impairment charges recorded property plant equipment intangible assets result restructuring proceedings argentina companys argentina subsidiaries 3 67 million transaction related charges income includes 100 million nonrecurring gain result couriers termination agreement pursuant quadgraphics acquire courier partially offset 33 million professional service fees terminated acquisition courier acquisitions marins copac specialty 4 51 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 291 million restructuring charges including 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment well lease exit charges costs maintain exit closed facilities restructuring impairment transactionrelated charges 673 million incurred year ended december 31 2014 included following 1 306 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 144 million impairment charges including 80 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee mexico city mexico pomona california st cloud minnesota well capacity reduction restructuring initiatives 64 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures 3 26 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily includes professional service fees acquisitions brown printing unigraphic 4 112 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 5 85 million restructuring charges including costs maintain exit closed facilities well lease exit charges presented net 49 million gain termination postretirement medical benefit plan goodwill impairment march 25 2015 due deteriorating economic conditions including inflation currency devaluation combined uncertain political conditions declining print volumes labor challenges companys argentina subsidiaries included within latin america reporting unit commenced bankruptcy restructuring proceedings goal consolidating operations company conducted interim goodwill impairment assessment latin america reporting unit included comparing carrying amount net assets including goodwill respective fair value march 31 2015 date interim assessment result interim goodwill impairment assessment well annual impairment test october 31 2015 companys international segment recorded noncash nondeductible goodwill impairment charges 300 million year ended december 31 2015 primarily including 233 million noncash goodwill impairment charge latin america reporting unit due decline companys stock price third quarter 2015 interim goodwill impairment test three reporting units united states print related services segment performed july 31 2015 result interim goodwill impairment assessment well annual impairment test october 31 2015 companys united states print related services segment recorded pretax noncash goodwill impairment charges 7783 million 5124 million tax year ended december 31 2015 included impairment charges 6408 million 1189 million 186 million core print related services reporting unit specialty print related services reporting unit united states products services reporting unit respectively total company recorded pretax noncash goodwill impairment charges 8083 million 5424 million tax year ended december 31 2015 ebitda marginconsolidated ebitda margin year ended december 31 2015 compared year ended december 31 2014 follows ebitda decreased 9791 million year ended december 31 2015 compared year ended december 31 2014 primarily due following 1 8083 million noncash goodwill impairment charge recorded 2015 2 976 million increased restructuring impairment transactionrelated charges 3 ongoing volume pricing pressures excess capacity printing industry 4 higher labor costs associated lower productivity 5 108 million charge reduce vendor receivable due collectability concerns 6 61 million net gains 2014 related favorable legal bankruptcy settlements impacts partially offset following 1 additional earnings sales generated acquisitions 2 45 million increase net gains sale property plant equipment 3 45 million decrease foreign currency losses 4 40 million vacation reserve reduction due vacation policy change 5 25 million gain sale cost investment 6 11 million favorable impact resolution certain acquisition related contingencies ebitda represents net earnings loss attributable quadgraphics common shareholders plus 1 interest expense 2 income tax expense applicable 3 depreciation amortization less income tax benefit applicable ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quadgraphics performance important measures quadgraphics gauges profitability assesses performance business ebitda margin measures financial performance accordance gaap ebitda margin considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quadgraphics calculation ebitda margin may different calculations used companies therefore comparability may limited reconciliation ebitda net earnings loss attributable quadgraphics common shareholders years ended december 31 2015 2014 follows 1 net earnings loss attributable quadgraphics common shareholders included following restructuring impairment transactionrelated charges 1649 million 673 million years ended december 31 2015 2014 respectively b noncash goodwill impairment charges 8083 million year ended december 31 2015 c loss debt extinguishment 72 million year ended december 31 2014 equity loss unconsolidated entities 63 million 27 million years ended december 31 2015 2014 respectively united states print related services following table summarizes net sales operating income loss operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment decreased 1056 million 29 year ended december 31 2015 compared year ended december 31 2014 primarily due 2393 million decrease product sales companys core print specialty print product lines owned year predominantly due ongoing volume pricing pressures excess capacity printing industry partially offset 1337 million increase acquisitions service sales united states print related services segment decreased 167 million 26 year ended december 31 2015 compared year ended december 31 2014 primarily due decrease logistics sales resulting ongoing volume pressures decrease partially offset 129 million increased sales quadmed medical services 90 million logistics imaging sales resulting acquisitions operating income loss operating income loss united states print related services segment decreased 9040 million year ended december 31 2015 compared year ended december 31 2014 primarily due following 1 7783 million noncash goodwill impairment charge 2 493 million increased restructuring impairment transactionrelated charges 3 ongoing volume pricing pressures excess capacity printing industry 4 108 million charge reduce vendor receivable due collectability concerns 5 25 million net gains 2014 related favorable legal bankruptcy settlements decreases operating income partially offset following 1 additional earnings sales attributed recent acquisitions 2 45 million increase net gains sale property plant equipment 3 40 million vacation reserve reduction due vacation policy change 4 25 million gain sale cost investment 5 11 million favorable impact resolution certain acquisition related contingencies operating margin united states print related services segment decreased 168 year ended december 31 2015 46 year ended december 31 2014 primarily due reasons provided restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2015 1014 million consisting following 1 273 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 507 million impairment charges including 335 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado well capacity reduction restructuring initiatives 112 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 60 million customer relationship intangible asset impairments 3 46 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 4 188 million restructuring charges including costs maintain exit closed facilities well lease exit charges restructuring impairment transactionrelated charges united states print related services segment year ended december 31 2014 521 million consisting following 1 199 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 127 million impairment charges including 70 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee pomona california st cloud minnesota well capacity reduction restructuring initiatives 57 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures 3 88 million acquisitionrelated integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies 4 107 million restructuring charges including costs maintain exit closed facilities well lease exit charges goodwill impairment due decline companys stock price third quarter 2015 interim goodwill impairment test three reporting units united states print related services segment performed july 31 2015 result interim goodwill impairment assessment well annual impairment test october 31 2015 companys united states print related services segment recorded pretax noncash goodwill impairment charges 7783 million 5124 million tax year ended december 31 2015 included impairment charges 6408 million 1189 million 186 million core print related services reporting unit specialty print related services reporting unit united states products services reporting unit respectively international following table summarizes net sales operating loss operating margin certain items impacting comparability equity loss unconsolidated entities within international segment net sales product sales international segment decreased 574 million 134 year ended december 31 2015 compared year ended december 31 2014 primarily due 533 million foreign exchange losses primarily europe mexico colombia argentina 276 million lower volumes predominantly mexico colombia decreases partially offset 129 million sales marins acquisition 106 million increase europe primarily due higher volumes service sales international segment decreased 08 million 41 year ended december 31 2015 compared year ended december 31 2014 primarily due decrease logistics revenue europe operating loss operating loss international segment increased 522 million year ended december 31 2015 compared year ended december 31 2014 primarily due following 1 300 million noncash nondeductible goodwill impairment charges 2 296 million higher restructuring impairment expenses including 167 million impairment charges reduce book value companys equity method investment chile 60 million nondeductible foreign exchange losses sale equity method investment chile 3 36 million net gains 2014 related favorable legal settlements 4 36 million increase equity loss unconsolidated entities discussed increases operating loss partially offset 40 million increase operating income europe increased operating income latin america despite lower product sales latin america restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment year ended december 31 2015 388 million consisting following 1 73 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 228 million impairment charges including 167 million impairment charges reduce book value companys equity method investment chile fair value see note 8 equity method investments unconsolidated entities additional details related impairment companys equity method investment chile 22 million impairment charges primarily related restructuring proceedings argentina companys argentina subsidiaries land building machinery equipment intangible assets 15 million land building impairment charges 13 million impairment charges machinery equipment longer utilized production well capacity reduction restructuring initiatives 11 million customer relationship intangible asset impairments 3 87 million restructuring charges primarily related 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment restructuring impairment transactionrelated charges international segment year ended december 31 2014 92 million consisting following 1 60 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 17 million impairment charges including 10 million impairment charges machinery equipment longer utilized production result facility consolidations mexico city mexico well capacity reduction restructuring initiatives 07 million land building impairment charges result facility consolidations poland 3 15 million restructuring charges goodwill impairment march 25 2015 due deteriorating economic conditions including inflation currency devaluation combined uncertain political conditions declining print volumes labor challenges companys argentina subsidiaries included within latin america reporting unit commenced bankruptcy restructuring proceedings goal consolidating operations company conducted interim goodwill impairment assessment latin america reporting unit included comparing carrying amount net assets including goodwill respective fair value march 31 2015 date interim assessment result interim goodwill impairment assessment well annual impairment test october 31 2015 companys international segment recorded noncash nondeductible goodwill impairment charges 300 million year ended december 31 2016 primarily including 233 million noncash goodwill impairment charge latin america reporting unit equity loss unconsolidated entities investments entities quadgraphics ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil company also held 50 interest joint venture based chile acquired part world color press inc acquisition july 31 2015 investment sold equity loss unconsolidated entities international segment increased 36 million year ended december 31 2015 compared year ended december 31 2014 primarily due 28 million increase equity losses plural 09 million increase equity losses chile unrestricted subsidiaries unrestricted subsidiaries defined senior unsecured notes indenture represented less 20 total consolidated net sales year ended december 31 2015 corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses increased 151 million 333 year ended december 31 2015 compared year ended december 31 2014 primarily due 187 million increase restructuring impairment transactionrelated charges partially offset 73 million lower compensation expense related equity incentive programs restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges year ended december 31 2015 247 million consisting following 1 75 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 218 million impairment charges including 199 million impairment charges corporate equipment 19 million investment related impairment charges 3 67 million transactionrelated charges income includes 100 million nonrecurring gain courier partially offset 33 million professional service fees including fees terminated acquisition courier acquisitions marins copac specialty 4 03 million acquisitionrelated integration costs primarily related professional fees 5 18 million restructuring charges corporate restructuring impairment transactionrelated charges year ended december 31 2014 60 million consisting following 1 47 million employee termination charges related workforce reductions facility consolidations involuntary separation programs 2 26 million transactionrelated charges consisting professional service fees business acquisition divestiture activities primarily included professional service fees acquisitions brown printing unigraphic 3 24 million acquisitionrelated integration costs primarily related professional fees 4 37 million restructuring charges income included 49 million gain termination postretirement medical benefit plan liquidity capital resources company utilizes cash flows operating activities borrowings credit facilities satisfy liquidity capital requirements company 7831 million unused capacity revolving credit arrangement december 31 2016 net 479 million issued letters credit considering maximum allowable borrowings restrictive financial covenants available liquidity reduced 6985 million company believes expected future cash flows operating activities 6985 million available liquidity provide sufficient resources fund ongoing operating requirements cash restructuring requirements related cost reduction activities well future capital expenditures debt service requirements world color press single employer pension plan contributions world color press mepps withdrawal payments investments future growth create value shareholders shareholder dividends share repurchases borrowings 8500 million revolving credit facility 190 million december 31 2016 peak borrowings 1274 million year ended december 31 2016 net cash provided operating activities year ended december 31 2016 compared year ended december 31 2015 net cash provided operating activities 3525 million year ended december 31 2016 compared 3481 million year ended december 31 2015 resulting 44 million increase cash provided operating activities increase primarily due 126 million increase cash earnings partially offset 82 million decrease cash flows changes operating assets liabilities year ended december 31 2015 compared year ended december 31 2014 net cash provided operating activities 3481 million year ended december 31 2015 compared 2932 million year ended december 31 2014 resulting 549 million increase cash provided operating activities increase primarily due 1634 million increase cash flows changes operating assets liabilities predominantly improvements working capital 100 million nonrecurring cash receipt couriers termination agreement pursuant quadgraphics acquire courier partially offset 1185 million decrease cash earnings net cash used investing activities year ended december 31 2016 compared year ended december 31 2015 net cash used investing activities 844 million year ended december 31 2016 compared 2167 million year ended december 31 2015 resulting 1323 million decrease cash used investing activities decrease primarily due following 1 1434 million decrease cash payments related acquisitions businesses marins copac specialty acquisitions completed 2015 acquisitions businesses 2016 2 269 million decrease purchases property plant equipment decreases partially offset 133 million increased receipts restricted cash 2015 105 million proceeds received 2015 sale companys 50 ownership interest chile year ended december 31 2015 compared year ended december 31 2014 net cash used investing activities 2167 million year ended december 31 2015 compared 2242 million year ended december 31 2014 resulting 75 million decrease cash used investing activities decrease primarily due 364 million increased cash proceeds sale property plant equipment investments 2015 partially offset 309 million increased cash payments related acquisitions net cash used financing activities year ended december 31 2016 compared year ended december 31 2015 net cash used financing activities 2693 million year ended december 31 2016 compared 1279 million year ended december 31 2015 resulting 1414 million increase cash used financing activities increase primarily due 1590 million increase net repayments debt lease obligations 2016 compared 2015 88 million purchases treasury stock 2016 offset 281 million increased sales stock option exercises 2016 year ended december 31 2015 compared year ended december 31 2014 net cash used financing activities 1279 million year ended december 31 2015 compared 717 million year ended december 31 2014 resulting 562 million increase cash used financing activities increase primarily due net debt repayments 689 million 2015 compared net debt borrowings 115 million 2014 representing 804 million increase net cash used financing activities increase partially offset following 1 165 million debt issuance costs paid 2014 related april 28 2014 19 billion debt financing arrangements october 10 2014 redemption 1088 million senior notes master note security agreement november 24 2014 amendment master note security agreement compared debt issuance cost payments 2015 2 79 million reduced world color press bankruptcy claim payments free cash flow free cash flow defined net cash provided operating activities less purchases property plant equipment companys management assesses free cash flow measure quantify cash available 1 strengthening balance sheet debt reduction 2 strategic capital allocation deployment investments business acquisitions strategic investments 3 returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted companys restructuring activities unusual items free cash flow nongaap measure free cash flow considered alternative cash flows provided operating activities measure liquidity quadgraphics calculation free cash flow may different similar calculations used companies therefore comparability may limited free cash flow years ended december 31 2016 2015 2014 follows free cash flow increased 313 million year ended december 31 2016 compared year ended december 31 2015 due following 1 269 million decrease capital expenditures 2 44 million increase net cash provided operating activities primarily attributable increase cash earnings free cash flow increased 611 million year ended december 31 2015 compared year ended december 31 2014 due following 1 549 million increase net cash provided operating activities primarily attributable improvements working capital receipt 100 million courier termination fee 2 62 million decrease capital expenditures see net cash provided operating activities section explanations changes operating cash flows net cash used investing activities section explanations changes purchases property plant equipment debt leverage ratio debt leverage ratio defined total debt capital lease obligations divided sum following 1 last twelve months ebitda see definition ebitda reconciliation net earnings loss ebitda results operations section 2 restructuring impairment transactionrelated charges 3 noncash goodwill impairment charges 4 gain debt extinguishment 5 equity loss unconsolidated entities company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strategic investments strengthening balance sheet pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability debt leverage ratio nongaap measure considered alternative cash flows provided operating activities measure liquidity quadgraphics calculation debt leverage ratio may different similar calculations used companies therefore comparability may limited debt leverage ratio calculated differs total leverage ratio senior secured leverage ratio included companys debt covenant calculations see note 12 debt consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k information debt covenants total leverage ratio included companys debt covenants includes letters credit debt excludes noncash stockbased compensation expense ebitda includes equity loss unconsolidated entities certain pro forma historical results acquisitions divestitures ebitda similarly senior secured leverage ratio included companys debt covenants includes excludes adjustments total leverage ratio addition exclusion outstanding balance senior unsecured notes debt leverage ratio december 31 2016 2015 follows calculation ebitda adjusted purposes calculating debt leverage ratio years ended december 31 2016 2015 follows debt leverage ratio decreased 052x december 31 2016 compared december 31 2015 primarily due 2185 million decrease debt capital lease obligations 116 million increased ebitda adjusted purposes calculating debt leverage ratio debt leverage ratio december 31 2016 236x within managements desired target debt leverage ratio range 20x 25x however company operates times debt leverage ratio target range depending timing compelling strategic investment opportunities seasonal working capital needs description significant outstanding debt obligations december 31 2016 december 31 2016 company utilized combination debt instruments fund cash requirements including following • senior secured credit facility ◦ 8500 million revolving credit facility 190 million outstanding december 31 2016 ◦ 4500 million term loan 3769 million outstanding december 31 2016 ◦ 3000 million term loan b 2906 million outstanding december 31 2016 • senior unsecured notes 2435 million outstanding december 31 2016 • master note security agreement 1526 million outstanding december 31 2016 senior secured credit facility senior secured credit facility consists three different loan facilities first facility revolving credit facility amount 8500 million term five years maturing april 27 2019 second facility term loan aggregate amount 4500 million term five years maturing april 27 2019 subject certain required amortization third facility term loan b amount 3000 million term seven years maturing april 27 2021 subject certain required amortization borrowings revolving credit facility term loan loans made senior secured credit facility initially bear interest 200 excess reserve adjusted libor 100 excess alternate base rate weighted average interest rate revolving credit facility 260 weighted average interest rate term loan loans 259 december 31 2016 interest payable monthly term loan b loans bear interest 325 excess reserve adjusted libor floor 100 225 excess alternative base rate companys option weighted average interest rate term loan b loans 425 december 31 2016 interest payable monthly senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances february 2017 company entered interest rate swap designated cash flow hedge completed second amendment senior secured credit facility see note 25 “subsequent events” consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k detail items senior unsecured notes company received 2948 million net proceeds sale 3000 million senior unsecured notes deducting initial purchasers discounts commissions senior unsecured notes bear interest 700 interest payable semiannually senior unsecured notes due may 1 2022 company repurchased 565 million senior unsecured notes open market resulting net gain debt extinguishment 143 million year ended december 31 2016 repurchased senior unsecured notes canceled company used cash flows operating activities borrowings revolving credit facility fund repurchases primarily completed efficiently reduce debt balances interest expense based current libor rates companys existing future domestic subsidiaries borrower guarantees indebtedness companys senior secured credit facility guarantees certain companys indebtedness companys restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes guarantor subsidiaries current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including following 1 designation guarantor subsidiaries unrestricted subsidiary 2 release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries 3 sale disposition including sale substantially assets guarantor subsidiaries master note security agreement sometimes referred senior notes september 1 1995 last amended november 24 2014 company entered master note security agreement pursuant company issued time senior notes aggregate principal amount 11 billion various tranches 1526 million outstanding december 31 2016 weighted average interest rate senior notes 747 december 31 2016 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2031 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement company redeemed 601 million senior notes master note security agreement resulting net loss debt extinguishment 02 million year ended december 31 2016 tendered senior notes master note security agreement canceled company used cash flows operating activities borrowings revolving credit facility fund tender primarily completed reallocate debt lower interest rate revolving credit facility thereby reduce interest expense based current libor rates covenants compliance companys various lending arrangements include certain financial covenants financial terms numbers ratios defined companys debt agreements among covenants company required maintain following december 31 2016 • total leverage ratio rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda shall exceed 375 100 twelve months ended december 31 2016 companys total leverage ratio 234 100 • senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined senior secured debt consolidated ebitda shall exceed 350 100 twelve months ended december 31 2016 companys senior secured leverage ratio 184 100 • minimum interest coverage ratio rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2016 companys minimum interest coverage ratio 677 100 indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit companys restricted subsidiaries ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially companys consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates company compliance financial covenants debt agreements december 31 2016 company currently expects compliance future periods financial covenants assurance covenants continue met companys failure maintain compliance covenants could prevent company borrowing additional amounts could result default debt agreements default could cause outstanding indebtedness become immediately due payable virtue crossacceleration crossdefault provisions addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock including following • companys total leverage ratio greater 300 100 defined senior secured credit facility company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions • companys senior secured leverage ratio greater 300 100 companys total leverage ratio greater 350 100 ratios defined senior secured credit facility company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total leverage ratio less 350 100 restrictions net pension obligations net underfunded pension mepps obligations decreased 231 million year ended december 31 2016 1854 million december 31 2015 1623 million december 31 2016 231 million decrease overall pension obligations despite 186 million increase attributable 23 basis point decline pension discount rate 414 december 31 2015 391 december 31 2016 company able reduce pension obligations 2016 despite negative impact discount rate due following 1 facilitated lumpsum pension payments terminated vested participants 2016 company settled 926 million pension liabilities 748 million pension payouts payments eligible participants elected receive lumpsum pension payment funded existing pension plan assets constituted settlement company’s pension liabilities respect participants 2 contributed 108 million qualified pension plans included 104 million contributions minimum statutory funding requirements enabled companys free cash flow generation 2016 addition improving funded status pension plans contributions also lowered future pension benefit guaranty corporation premiums 3 achieved actual return plan assets 73 2016 exceeded expected return plan assets assumption 65 company continues focus reducing pension obligations cash contributions plans lumpsum settlements plan design changes share repurchase program september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock authorization share repurchases may made companys discretion time open market andor privately negotiated transactions permitted federal securities laws legal requirements timing manner price amount repurchase depend economic market conditions share price trading volume applicable legal requirements factors program may suspended discontinued time year ended december 31 2016 company repurchased 984190 shares class stock weighted average price 896 per share total purchase price 88 million december 31 2016 829 million authorized repurchases remaining program risk management discussion companys exposure market risks management market risks see item 7a quantitative qualitative disclosures market risk annual report form 10k offbalance sheet arrangements except set forth contractual obligations commitments table note 13 lease obligations consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k including operating leases future interest debt capital leases incurred company offbalance sheet arrangements financings special purpose entities company expects material current future effect financial condition changes financial condition results operations liquidity capital expenditures capital resources significant components sales expenses contractual obligations commitments companys contractual cash obligations december 31 2016 follows millions 1 debt obligations include 2208 million anticipated future interest payments exclude 113 million 18 million future amortization debt issuance costs original issue discount respectively respect variable interest rate portions debt interest amounts calculated applying december 31 2016 weighted average interest rate determine value future interest payments master note security agreement weighted average interest rate notes applied average principal balance outstanding time period amounts included thereafter include principal payments estimated interest expense april 2031 2 pension benefits contributions benefit payments funded company assets included table actuarially estimated five year period benefit payments benefit plans expected continue beyond 2021 company believes estimate beyond period unreasonable contractual obligations table include 481 million estimated withdrawal liability united states world color press mepps due uncertainty amount timing gciu potential withdrawal liability payments 2017 company scheduled make minimum payments 106 million pending settlement conclusion litigation gciu trustees see note 16 employee retirement plans consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k discussion mepps withdrawal 3 capital lease obligations include 29 million anticipated future interest payments 4 purchase obligations consist primarily 146 million firm commitments purchase press finishing equipment well 79 million purchase obligations 5 contractual obligations table include reserves uncertain tax positions recorded accordance accounting guidance uncertainties income taxes company taken tax positions ultimate amount years necessary payments made pertain tax positions uncertain reserve uncertain tax positions prior interest penalties 296 million december 31 2016 company also recorded accruals interest penalties related uncertain tax positions 59 million 04 million respectively december 31 2016 6 contractual obligations table include share repurchase program repurchases required program see share repurchase program section discussion including maximum potential cash payments program critical accounting policies estimates companys consolidated financial statements prepared accordance gaap companys critical accounting policies important portrayal financial condition results operations require company make difficult subjective estimates management required make judgments estimates affect reported amounts assets liabilities disclosure contingent assets liabilities date statements reported amounts revenues expenses reporting period company bases estimates historical experience various assumptions believed reasonable circumstances companys management believes judgments estimates made consistent appropriate methods based information available time reasonable deviation judgments estimates would material impact companys consolidated financial position results operations actual results may differ estimates different assumptions conditions extent estimates used differ actual results adjustments consolidated statements operations corresponding consolidated balance sheets would necessary adjustments would made future statements company identified following critical accounting policies estimates revenue recognition company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer reasonable assurance collectability agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer respect companys logistics operations include delivery printed material company recognizes revenue upon completion services certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations item 8 financial statements supplementary data annual report form 10k many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis impairment property plant equipment finitelived intangible assets company performs impairment evaluations longlived assets whenever business conditions events circumstances indicate assets may impaired including whether estimated useful life longlived assets may warrant revision whether remaining balance asset may recoverable companys significant longlived assets property plant equipment customer relationship intangible assets recorded conjunction acquisition assessing impairment longlived assets requires company make important estimates assumptions including limited expected future cash flows assets generate assets used based strategic direction company remaining useful life residual value considerable judgment also applied incorporating potential impact current economic climate customer demand selling prices cost production limited activity secondary markets assets cost capital estimated future undiscounted cash flows generated assets less carrying value longlived assets written fair value charge recorded current operations company uses internal discounted cash flow estimates quoted market prices available independent appraisals appropriate determine fair value fair value determination categorized level 3 fair value hierarchy see note 15 financial instruments fair value measurements consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k definition level 3 inputs based assessments completed years ended december 31 2016 2015 2014 company recognized property plant equipment impairment charges 268 million 695 million 144 million respectively primarily related facility consolidations well capacity reduction restructuring initiatives company recorded finitelived intangible asset impairment charges 72 million year ended december 31 2015 finitelived intangible assets impairment charges recorded years ended december 31 2016 2014 company continues monitor groups assets identify new events changes circumstances could indicate carrying values recoverable particularly light potential declines profitability may result highly competitive industry landscape continued uncertainty global economy event significant unanticipated changes circumstances significant adverse changes business climate adverse actions regulators unanticipated competition loss key customers andor changes technology markets actual results differ managements estimates provision impairment could required future period pension plans result acquisition world color press company acquired multiple underfunded pension plans pension plan costs determined using actuarial methods funded contributions determined accordance projected benefit method prorated service company records amounts relating pension plans based calculations include various actuarial assumptions company believes two critical assumptions discount rate assumed rate return assets changes assumptions primarily influenced factors outside companys control significant effect amounts reported financial statements company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets included item 8 financial statements supplementary data annual report form 10k company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 purposes calculating expected return plan assets valued fair value company determines assumption discount rate used purposes computing annual service interest costs pension plan based index highquality corporate bond yields matchedfunding yield curve analysis date 2015 company measured interest costs utilizing single weighted average discount rate derived yield curve used measure plan obligations beginning 2016 company changed approach used measure interest costs pension benefits elected measure interest costs applying specific spot rates along yield curve plans liability cash flows new method would also impact calculation service costs applicable companys pension plans due frozen status company made change provide precise measurement interest costs aligning timing plans liability cash flows corresponding spot rates yield curve change affect measurement plan obligations company reflected change accounting estimate accordingly accounted prospective basis weighted average discount rate used determine benefit obligations pension plans december 31 2016 391 23 basis point decrease december 31 2015 discount rate 414 onepercentage point change discount rate would following impact december 31 2016 projected benefit obligation company employs total return investment approach pension plans whereby diversified mix equity securities debt securities used maximize longterm pension plan assets intent strategy outperform growth plan liabilities long run plan contributions decreased balanced maintaining lower degree investment risk tolerance established careful consideration plan liabilities plan funded status corporate financial condition equity securities diversified across geography market capitalization investments united states largecapitalization stocks united states smallcapitalization stocks international securities investment risk measured monitored ongoing basis annual liability measurements periodic assetliability studies quarterly investment portfolio reviews expected longterm rate return plan assets based upon many factors including expected asset allocations historical asset returns current expected future market conditions risk current target asset allocation plan assets weighted average basis 55 equity securities 45 debt securities actual asset allocation december 31 2016 approximately 56 equity securities 44 debt securities expected return plan assets assumption december 31 2016 2015 65 companys funded united states pension plans actual return plan assets years ended december 31 2016 2015 73 01 respectively certain pension plans unfunded plans hold plan assets 25 basis point change expected return plan assets would following impact 2017 pension income company also participated mepps result acquisition world color press due significant underfunded status mepps company withdrawn significant mepps replaced union sponsored promise pay future defined benefit plans company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded estimated withdrawal liability mepps part world color press purchase price allocation process based information received mepps trustees estimated withdrawal liability updated based significant events potential new information ongoing litigation proceedings gciu final withdrawal liability determined arbitration proceedings gciu completed sides appealed arbitrators ruling litigation federal court commenced fourth quarter 2016 company gcc reached settlement agreement claims scheduled payments february 2024 exact amount withdrawal liability could higher lower estimate depending among things nature timing triggering events funded status plans time final conclusion litigation gciu trustees new accounting pronouncements see note 24 new accounting pronouncements consolidated financial statements part ii item 8 financial statements supplementary data annual report form 10k item 7aitem 7 management’s discussion analysis financial condition results operations following discussion financial condition results operations quad read together quad’s audited consolidated financial statements three years period ended december 31 2020 including notes thereto included part ii item 8 “financial statements supplementary data” annual report form 10k discussion contains forwardlooking statements reflect company’s plans estimates beliefs company’s actual results could differ materially discussed forwardlooking statements factors could cause contribute differences include limited discussed “forwardlooking statements” part item 1a “risk factors” included earlier within annual report form 10k management’s discussion analysis financial condition results operations provided supplement company’s consolidated financial statements accompanying notes help provide understanding company’s financial condition changes company’s financial condition company’s results operations discussion analysis organized follows •overview section includes general description company’s business segments overview key performance metrics company’s management measures utilizes evaluate business performance overview trends affecting company including management’s actions related trends •results operations section contains analysis company’s results operations comparing results year ended december 31 2020 year ended december 31 2019 comparability company’s results operations periods impacted acquisitions strategic investments divestitures including divestiture omaha nebraska packaging plant sold january 31 2020 additional investment rise june 2020 results operations packaging plant divestiture included company’s consolidated results date disposition results operations investment rise reflect company’s ownership interest respective dates change ownership results company’s united states book business “book buiness” reported discontinued operations periods presented forwardlooking statements providing general description recent projected industry company developments important understanding company’s results operations included section also provides discussion ebitda margin financial measures company uses assess performance business prepared accordance accounting principles generally accepted united states america “gaap” •liquidity capital resources section provides analysis company’s capitalization cash flows discussion table outstanding debt commitments forwardlooking statements important understanding company’s financial condition included section also provides discussion free cash flow debt leverage ratio nongaap financial measures company uses assess liquidity capital allocation deployment •critical accounting policies estimates section contains discussion accounting policies company’s management believes important company’s financial condition results operations well allowances reserves require significant judgment estimates part company’s management addition company’s significant accounting policies including critical accounting policies summarized note 1 “basis presentation summary significant accounting policies” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k overview business overview worldwide marketing solutions partner quad leverages 50year heritage platform excellence innovation strong culture social purpose create better way clients employees communities company’s integrated marketing platform helps brands marketers reduce complexity increase efficiency enhance marketing spend effectiveness full description company’s business overview refer part item 1 “business” annual report form 10k company’s operating reportable segments aligned chief operating decision maker company currently manages business company’s operating reportable segments including product service offerings “corporate” category summarized united states print related services segment predominantly comprised company’s united states printing operations managed one integrated platform includes retail inserts publications catalogs special interest publications journals direct mail directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement together marketing complementary services including consumer insights audience targeting personalization media planning placement process optimization campaign planning creation premedia production videography photography digital execution print execution logistics segment also includes manufacture ink united states print related services segment accounted approximately 90 company’s consolidated net sales year ended december 31 2020 international segment consists company’s printing operations europe latin america including operations england france germany poland argentina colombia mexico peru well investments printing operations brazil india segment provides printed products marketing complementary services consistent united states print related services segment international segment accounted approximately 10 company’s consolidated net sales year ended december 31 2020 corporate consists unallocated general administrative activities associated expenses including part executive legal finance well certain expenses income frozen employee retirement plans pension benefit plans key performance metrics overview company’s management believes ability generate net sales growth profit increases positive cash flow maintaining appropriate level debt key indicators successful execution company’s business strategy increase shareholder value company uses periodoverperiod net sales growth ebitda margin net cash provided operating activities free cash flow debt leverage ratio metrics measure operating performance financial condition liquidity ebitda margin free cash flow debt leverage ratio nongaap financial measures see definitions ebitda margin reconciliation net earnings loss attributable quad common shareholders ebitda “results operations” section see definitions free cash flow debt leverage ratio reconciliation net cash provided operating activities free cash flow calculation debt leverage ratio “liquidity capital resources” section net sales growth company uses periodoverperiod net sales growth key performance metric company’s management assesses net sales growth based ability generate increased net sales increased sales existing clients sales new clients sales new expanded solutions existing new clients opportunities expand sales strategic investments including acquisitions ebitda margin company uses ebitda margin metrics assess operating performance company’s management assesses ebitda margin based ability increase revenues controlling variable expense growth net cash provided operating activities company uses net cash provided operating activities metric assess liquidity company’s management assesses net cash provided operating activities based ability meet recurring cash obligations increasing available cash fund debt service requirements capital expenditures cash restructuring requirements related cost reduction activities world color press single employer pension plan contributions world color press mepps withdrawal liabilities acquisitions investments future growth shareholder dividends share repurchases net cash provided operating activities significantly impacted timing nonrecurring infrequent receipts expenditures free cash flow company uses free cash flow metric assess liquidity capital deployment company’s management assesses free cash flow measure quantify cash available strengthening balance sheet debt pension liability reduction strategic capital allocation deployment investments business acquisitions strategic investments returning capital shareholders dividends share repurchases company’s priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted company’s restructuring activities unusual items debt leverage ratio company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strengthening balance sheet debt pension liability reduction strategic capital allocation deployment investments business capital expenditures acquisitions strategic investments returning capital shareholders dividends share repurchases company’s priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability company remains disciplined debt leverage company’s consolidated debt finance lease obligations decreased 184 million year ended december 31 2020 primarily due use cash proceeds sale omaha packaging plant sale book business reduce debt obligations due redemption certain senior notes master note security agreement par outstanding principal balance date payment since company completed world color press acquisition july 2010 company reduced debt finance lease obligations 811 million reduced obligations pension postretirement mepps 470 million total obligation reduction since july 2010 approximately 13 billion overview trends affecting quad consumer media consumption habits change marketing services providers face increased demand offer endtoend marketing services strategy creative execution across channels traditional digital new marketing advertising channels emerge marketing services providers must expand services beyond traditional channels television newspapers print publications radio digital channels mobile internet search internet display video create effective multichannel campaigns clients trend greatly influences quad’s ongoing efforts redefine future integrated marketing create greater value clients looking less complexity greater transparency accountability business partners company leverages datadriven print expertise part integrated marketing platform helps clients plan produce marketing programs also deploy manage measure across media channels competition printing industry remains highly fragmented intense company believes indicators heightened competitive pressures industry excess manufacturing capacity created continued declines industry volumes compounded covid19 pandemic turn created accelerated downward pricing pressures company faces competition due increased accessibility quality digital alternatives traditional delivery printed documents online distribution hosting media content digital distribution documents data company faces competition print management marketing consulting firms look streamline processes reduce overall print spend company’s clients full description company’s industry competition overview refer part item 1 “business” annual report form 10k company believes disciplined approach capital management strong balance sheet critical able invest profitable growth opportunities technological advances thereby providing highest return shareholders management balances use cash deleveraging company’s balance sheet reduction debt pension obligations compelling investment opportunities capital expenditures acquisitions strategic investments returns shareholders quarterly dividends share repurchases company continues make progress integrating streamlining aspects business thereby lowering cost structure consolidating manufacturing platform efficient facilities well realizing purchasing mailing logistics efficiencies centralizing consolidating print manufacturing volumes eliminating redundancies administrative corporate operations company continued evolve manufacturing platform equipping facilities product line agnostic enables company maximize equipment utilization quad believes large plant size certain key printing facilities allows company drive savings certain product lines publications catalogs due economies scale investments automation technology company continues focus proactively aligning cost structure realities topline pressures faces printing industry lean manufacturing sustainable continuous improvement programs restructuring actions initiated company beginning 2010 resulted announcement 50 plant closures december 31 2020 company believes continue drive productivity improvements sustainable cost reduction initiatives future engaged workforce ongoing adoption latest manufacturing automation technology strategy company believes maintain strongest efficient print manufacturing platform remain highquality lowcost producer integrated distribution postal service important component company’s business material change current service levels provided postal service could impact demand clients print services usps continues experience financial problems without increased revenues action congress reform usps’ cost structure losses continue future result financial difficulties usps come increased pressure adjust postal rates service levels additional price increases may result clients reducing mail volumes exploring use alternative methods delivering larger portion products continued diversion internet alternative media channels order ensure stay within expected postage budgets also continued risks delivery delays due ongoing covid19 impacts daily operational staffing usps federal statute requires prc conduct reviews overall ratemaking structure usps ensure funding stability result reviews prc authorized new five year ratemaking structure would provide usps additional pricing flexibility current consumer price index cap may result substantially altered rate structure mailers newly revised rate authority effective result new rules issued prc includes higher overall rate cap usps’ ability increase rates year may lead price spikes mailers may also reduce incentive usps continue take costs instead continue rely postage cover costs outdated postal service reflect industry’s ability willingness pay uncertainty actual rate increases due competing lawsuits industry usps well much authority usps use also creates potential volume declines rate predictability respect cost timing longer known mailers result may reduced demand printed products clients may move aggressively delivery methods many digital mobile options available consumers company invested significantly mail preparation distribution capabilities mitigate impact increases postage costs help clients successfully navigate everchanging postal environment data analytics unique software merge mail streams large scale advanced finishing capabilities technology inhouse transportation logistics operations company manages mail preparation distribution clients’ products maximize efficiency enable ontime consistent delivery partially reduce costs however net impact increasing postal costs may create decrease client demand print mail products 2020 company continued focus providing brands marketers efficient effective way go market reach consumers integrated marketing platform company creates greater value clients helping reduce complexities working multiple agency partners vendors reduce process inefficiencies workflow reengineering content production process optimization improve marketing spend effectiveness demanddriving ideas integrated solutions help clients target audiences plan measure marketing strategize create activate big ideas produce content scale connect consumers multiple channels throughout 2020 company also continued make strategic investments manufacturing platform part ongoing commitment maintaining efficient automated dependable manufacturing distribution platform printing industry investments included digital press technology help clients gain competitive edge datadriven personalized print marketing quickmakeready wideweb offset press technology help quad sustain position highquality lowcost producer 2020 company also completed sale omaha packaging plant book business part ongoing process review business portfolio divest assets core transformation strategy company’s results operations continue adversely impacted result covid19 pandemic company’s crisis management team including executive operations leadership company executing business continuity plans focused protecting health wellbeing employees also continuing service clients protect longterm financial health company covid19 pandemic continues part business continuity plans company implemented cost reduction cash conservation initiatives including implementing covid19 temporary furlough program employees take unpaid leave absence length varies upon business needs temporary salary reductions leaders end july 2020 including 50 salary reduction chief executive officer 35 salary reduction named executive officers temporary 50 reduction retainer fees company’s nonemployee directors temporarily suspending use vacation payouts end june 2020 temporarily suspending production several manufacturing facilities declining client volume effects pandemic impacted company’s ability operate resumed operations end september 2020 suspending quarterly dividend payments covenant relief period delaying capital spending projects company also announced permanent closures facilities located following locations result ongoing volume declines particularly retail exacerbated covid19 pandemic year ended december 31 2020 1 taunton massachusetts 2 fernley nevada 3 nashville tennessee 4 oklahoma city oklahoma 5 charlotte north carolina addition company also amended senior secured credit facility second quarter 2020 provide certain financial covenant relief covenant relief period company continuing evaluate cost structure expects implement additional cost reduction measures necessary pandemic continues evolve extent impact company’s business financial condition cash flows results operations supply chain depend future developments still highly uncertain cannot predicted results operations year ended december 31 2020 compared year ended december 31 2019 summary results company’s operating income loss continuing operations operating margin net loss attributable quad common shareholders computed using 25 normalized tax rate items subject tax diluted loss per share attributable quad common shareholders year ended december 31 2020 changed year ended december 31 2019 follows dollars millions except per share data 1restructuring impairment transactionrelated charges increased 347 million 261 million net tax 1241 million year ended december 31 2020 included following aa 125 million increase employee termination charges 222 million year ended december 31 2019 347 million year ended december 31 2020 ba 562 million increase impairment charges 79 million year ended december 31 2019 641 million year ended december 31 2020 ca 502 million decrease transactionrelated charges 516 million year ended december 31 2019 14 million year ended december 31 2020 da 14 million decrease integrationrelated charges 33 million year ended december 31 2019 19 million year ended december 31 2020 ea 176 million increase various restructuring charges 44 million year ended december 31 2019 220 million year ended december 31 2020 company expects incur additional restructuring integration costs future reporting periods connection eliminating excess manufacturing capacity properly aligning cost structure conjunction company’s acquisitions strategic investments cost reduction programs 2interest expense decreased 212 million 159 million net tax year ended december 31 2020 688 million change due lower average debt levels lower weighted average interest rate borrowings partially offset 69 million increase interest expense related interest rate swaps year ended december 31 2020 compared year ended december 31 2019 3net pension income increased 45 million 34 million net tax year ended december 31 2020 105 million due 39 million decrease interest cost pension plan liabilities 07 million increase change expected longterm return pension plan assets 4the 18 million loss debt extinguishment 14 million net tax recognized year ended december 31 2020 relates 24 million loss debt extinguishment fourth amendment company’s april 28 2014 senior secured credit facility completed june 29 2020 partially offset 06 million gain debt extinguishment recorded first quarter 2020 primarily related repurchase company’s unsecured 70 senior notes due may 1 2022 305 million loss debt extinguishment 229 million net tax recognized year ended december 31 2019 includes 159 million relating third amendment company’s april 28 2014 senior secured credit facility completed january 31 2019 146 million relating retirement term loan b completed july 26 2019 5the 313 million decrease income tax benefit calculated following table primarily due following 1 326 million decrease increased valuation allowance reserves 2 58 million decrease equity award activity 3 33 million decrease company’s liability unrecognized tax benefits 2019 repeat 2020 decreases partially offset 143 million income tax benefit related coronavirus aid relief economic security act net operating loss carry back provisions 6the decrease loss discontinued operations net tax 787 million year ended december 31 2020 primarily due 757 million decrease restructuring impairment transactionrelated charges 7the decrease investments unconsolidated entity noncontrolling interests net tax 03 million year ended december 31 2020 primarily due 02 million increase loss attributed noncontrolling interests company’s consolidated statements operations related company’s majority ownership rise 01 million decrease earnings company’s investment plural industria gráfica ltda “plural” company’s brazilian joint venture 8operating income continuing operations excluding restructuring impairment transactionrelated charges decreased 460 million 344 million net tax primarily due following 1 lower print volume pricing print service sales 2 121 million decrease paper byproduct recoveries 3 108 million increase production hourly wages competitive labor markets decreases partially offset following 1 625 million decrease selling general administrative expenses including 39 million net benefit 2020 gains property insurance claims receipt 22 million covid19 related government subsidy poland 2 147 million net reduction cost worker’s compensation claims improved production safety procedures 3 94 million net benefit change hourly production employee vacation policy 4 savings cost reduction initiatives operating results continuing operations following table sets forth certain information company’s consolidated statements operations absolute dollar basis relative percentage total net sales noted period together relative percentage change information periods set forth net sales product sales decreased 8696 million 281 year ended december 31 2020 compared year ended december 31 2019 primarily due following 1 4024 million decrease passthrough paper sales 2 3888 million decrease sales company’s print product lines due ongoing industry volume pricing pressures including ongoing impacts covid19 pandemic 3 689 million decrease sales due divestiture company’s omaha packaging plant 4 95 million unfavorable foreign exchange impacts service sales primarily consist logistics distribution marketing services imaging medical services decreased 1242 million 151 year ended december 31 2020 compared year ended december 31 2019 primarily due following 1 720 million decrease logistics sales 2 249 million decrease sales marketing services 3 214 million decrease print imaging services cost sales cost product sales decreased 7841 million 300 year ended december 31 2020 compared year ended december 31 2019 primarily due following 1 decrease passthrough paper costs 2 lower print volume 3 impact divestiture omaha packaging plant 4 94 million net benefit change hourly production employee vacation policy 5 147 million net reduction cost worker’s compensation claims improved production safety procedures 6 cost reduction initiatives decreases partially offset 121 million decrease paper byproduct recoveries 108 million increase production hourly wages competitive labor markets cost service sales decreased 733 million 127 year ended december 31 2020 compared year ended december 31 2019 primarily due lower logistics marketing services print imaging sales selling general administrative expenses selling general administrative expenses decreased 625 million 157 year ended december 31 2020 compared year ended december 31 2019 primarily due following 1 686 million decrease employeerelated costs 2 39 million net benefit 2020 gains property insurance claims 3 savings cost reduction initiatives 4 receipt 22 million covid19 related government subsidy poland decreases partially offset 94 million increase legal expenses 35 million increase credit loss expense primarily due specific client credit reviews 32 million increase foreign translation losses selling general administrative expenses percentage net sales increased 101 year ended december 31 2019 114 year ended december 31 2020 depreciation amortization depreciation amortization decreased 279 million 133 year ended december 31 2020 compared year ended december 31 2019 due 222 million decrease depreciation expense property plant equipment becoming fully depreciated past year 57 million decrease amortization expense restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges increased 347 million 388 year ended december 31 2020 compared year ended december 31 2019 primarily due following aincludes 221 million 76 million impairment charges machinery equipment longer utilized production result facility consolidations well capacity reduction restructuring activities years ended december 31 2020 2019 respectively 420 million 03 million land building impairment charges years ended december 31 2020 2019 respectively 566 million impairment charges recorded year ended december 31 2020 related property plant equipment oklahoma city oklahoma facility bincludes 45 million reverse termination fee paid year ended december 31 2019 connection termination definitive agreement pursuant quad would acquired lsc communications inc “lsc” cincludes 08 million gain sale shakopee minnesota facility 08 million gain sale midland michigan facility year ended december 31 2020 35 million gain sale hazleton pennsylvania facility 25 million gain sale franklin kentucky facility year ended december 31 2019 dincludes 29 million loss sale business year ended december 31 2020 includes 23 million charges related valueadded tax assessment closed facility well restructuring activities net 84 million gain sale business year ended december 31 2019 ebitda marginconsolidated ebitda defined net earnings loss attributable quad common shareholders excluding 1 interest expense 2 income tax expense benefit 3 depreciation amortization ebitda margin represents ebitda percentage net sales ebitda margin presented provide additional information regarding quad’s performance important measures quad gauges profitability assesses performance business ebitda margin nongaap financial measures considered alternatives net earnings loss measure operating performance cash flows provided operating activities measure liquidity quad’s calculation ebitda margin may different calculations used companies therefore comparability may limited ebitda margin year ended december 31 2020 compared year ended december 31 2019 follows ebitda increased 36 million year ended december 31 2020 compared year ended december 31 2019 primarily due following 1 787 million decrease loss discontinued operations net tax 2 625 million decrease selling general administrative expenses including 39 million net benefit 2020 gains property insurance claims receipt 22 million covid19 related government subsidy poland 3 94 million net benefit change hourly production employee vacation policy 4 147 million net reduction cost worker’s compensation claims improved production safety procedures 5 savings cost reduction initiatives increases partially offset following 1 lower print volume pricing print service sales 2 347 million increased restructuring impairment transactionrelated charges 3 121 million decrease paper byproduct recoveries 4 108 million increase production hourly wages competitive labor markets reconciliation ebitda net loss attributable quad common shareholders years ended december 31 2020 2019 follows 1net loss attributable quad common shareholders included following arestructuring impairment transactionrelated charges 1241 million 894 million years ended december 31 2020 2019 respectively bnet pension income 105 million 60 million years ended december 31 2020 2019 respectively closs debt extinguishment 18 million 305 million years ended december 31 2020 2019 respectively dequity loss unconsolidated entity 02 million 03 million years ended december 31 2020 2019 respectively eloss discontinued operations net tax 219 million 1006 million years ended december 31 2020 2019 respectively fnet loss attributable noncontrolling interests 02 million year ended december 31 2020 united states print related services following table summarizes net sales operating income continuing operations operating margin certain items impacting comparability within united states print related services segment net sales product sales united states print related services segment decreased 7693 million 284 year ended december 31 2020 compared year ended december 31 2019 primarily due following 1 3508 million decrease passthrough paper sales 2 3496 million decrease sales company’s print product lines due ongoing industry volume pricing pressures including ongoing impacts covid19 pandemic 3 689 million decrease sales due divestiture company’s omaha packaging plant service sales united states print related services segment decreased 1241 million 154 year ended december 31 2020 compared year ended december 31 2019 primarily due following 1 722 million decrease logistics sales 2 246 million decrease sales marketing services 3 214 million decrease print imaging services operating income continuing operations operating income continuing operations united states print related services segment decreased 1284 million 987 year ended december 31 2020 compared year ended december 31 2019 primarily due following 1 lower print volume pricing due ongoing industry pressures including ongoing impacts covid19 pandemic 2 855 million increase restructuring impairment transactionrelated charges 3 121 million decrease paper byproduct recoveries 4 108 million increase production hourly wages competitive labor markets 5 lower print service sales decreases partially offset following 1 147 million net reduction cost worker’s compensation claims improved production safety procedures 2 94 million net benefit change hourly production employee vacation policy 3 39 million net benefit 2020 gains property insurance claims 4 savings cost reduction initiatives operating margin united states print related services segment decreased 01 year ended december 31 2020 37 year ended december 31 2019 primarily due reasons provided restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges united states print related services segment increased 855 million 3476 year ended december 31 2020 compared year ended december 31 2019 primarily due following aincludes 220 million 45 million impairment charges machinery equipment longer utilized production result facility consolidations well capacity reduction restructuring activities years ended december 31 2020 2019 respectively 420 million land building impairment charges year ended december 31 2020 566 million impairment charges recorded year ended december 31 2020 related property plant equipment oklahoma city oklahoma facility bincludes 08 million gain sale shakopee minnesota facility 08 million gain sale midland michigan facility year ended december 31 2020 35 million gain sale hazleton pennsylvania facility 25 million gain sale franklin kentucky facility year ended december 31 2019 cincludes 29 million loss sale business year ended december 31 2020 84 million gain sale business year ended december 31 2019 international following table summarizes net sales operating income continuing operations operating margin certain items impacting comparability equity loss unconsolidated entities within international segment net sales product sales international segment decreased 1003 million 261 year ended december 31 2020 compared year ended december 31 2019 primarily due following 1 516 million decrease passthrough paper sales 2 392 million decrease volume primarily europe peru colombia including ongoing impacts covid19 pandemic 3 95 million unfavorable foreign exchange impacts primarily argentina europe mexico service sales international segment decreased 01 million 06 year ended december 31 2020 compared year ended december 31 2019 primarily due decrease marketing services sales europe operating income continuing operations operating income continuing operations international segment decreased 94 million year ended december 31 2020 compared year ended december 31 2019 primarily due lower print volume pricing due ongoing industry pressures including ongoing impacts covid19 pandemic 22 million increase restructuring impairment transactionrelated charges partially offset receipt 22 million covid19 related government subsidy poland restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges international segment increased 22 million 220 year ended december 31 2020 compared year ended december 31 2019 primarily due following aincludes 01 million impairment charges machinery equipment longer utilized production result facility consolidations well capacity reduction restructuring activities years ended december 31 2020 2019 03 million land building impairment charges year ended december 31 2019 bincludes 59 million 28 million charges foreign currency losses result economy argentina classified highly inflationary years ended december 31 2020 2019 respectively includes 23 million charges related valueadded tax assessment closed facility year ended december 31 2019 equity loss unconsolidated entities investments entities quad ability exert significant influence control accounted using equity method accounting company holds 49 ownership interest plural commercial printer based são paulo brazil equity loss unconsolidated entity international segment decreased 01 million year ended december 31 2020 compared year ended december 31 2019 due decrease earnings company’s investment plural unrestricted subsidiaries december 31 2020 company unrestricted subsidiaries defined senior unsecured notes indenture corporate following table summarizes unallocated operating expenses presented corporate operating expenses corporate operating expenses decreased 571 million 549 year ended december 31 2020 compared year ended december 31 2019 primarily due following 1 530 million decrease restructuring impairment transactionrelated charges 2 25 million decrease employeerelated costs 3 cost reduction initiatives restructuring impairment transactionrelated charges corporate restructuring impairment transactionrelated charges decreased 530 million 967 year ended december 31 2020 compared year ended december 31 2019 primarily due following aincludes 30 million impairment charges equipment year ended december 31 2019 bincludes 450 million reverse termination fee paid year ended december 31 2019 connection termination definitive agreement pursuant quad would acquired lsc liquidity capital resources company utilizes cash flows operating activities borrowings credit facilities satisfy liquidity capital requirements company total liquidity 5166 million december 31 2020 consisted 4614 million unused capacity revolving credit arrangement net 386 million issued letters credit cash equivalents 552 million total liquidity reduced 3829 million company’s restrictive debt covenants consists 552 million cash equivalents 3277 million available revolving credit arrangement borrowings 5000 million revolving credit facility december 31 2020 peak borrowings 1500 million year ended december 31 2020 company implemented cost reduction cash conservation initiatives previously described herein response impact covid19 pandemic business actions include among many others delaying capital spending projects temporarily suspending company’s quarterly dividend company believes expected future cash flows operating activities cost reduction cash preservation initiatives current liquidity capital resources sufficient fund ongoing operating requirements service debt pension requirements net cash provided operating activities year ended december 31 2020 compared year ended december 31 2019 net cash provided operating activities 1902 million year ended december 31 2020 compared 1555 million year ended december 31 2019 resulting 347 million increase cash provided operating activities increase primarily due 374 million increase cash earnings partially offset 27 million decrease cash flows changes operating assets liabilities net cash provided used investing activities year ended december 31 2020 compared year ended december 31 2019 net cash provided investing activities 97 million year ended december 31 2020 compared 2081 million used investing activities year ended december 31 2019 resulting 2178 million increase cash provided investing activities increase primarily due following 1 1188 million decrease acquisition businesses 2 502 million increase proceeds sale businesses 3 500 million decrease purchases property plant equipment 4 50 million decrease loan unconsolidated entity 5 45 million increase proceeds property insurance claims increases partially offset 1 101 million decrease proceeds sale property plant equipment 2 05 million investment unconsolidated entity 3 01 million decrease investing activities net cash provided used financing activities year ended december 31 2020 compared year ended december 31 2019 net cash used financing activities 2236 million year ended december 31 2020 compared 618 million provided financing activities year ended december 31 2019 resulting 2854 million increase cash used financing activities increase primarily due 3364 million decrease net borrowings debt lease obligations 2020 compared 2019 224 million increase cash used changes ownership noncontrolling interests increases partially offset 1 476 million decrease payment cash dividends 2 175 million decrease payments debt issuance costs financing fees 3 56 million decrease equity awards redeemed pay employees’ tax obligations 4 27 million decrease financing activities free cash flow free cash flow defined net cash provided operating activities less purchases property plant equipment plus lscrelated payments company’s management assesses free cash flow measure quantify cash available 1 strengthening balance sheet debt reduction 2 strategic capital allocation deployment investments business acquisitions strategic investments 3 returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business free cash flow significantly impacted company’s restructuring activities unusual items free cash flow nongaap financial measure considered alternative cash flows provided operating activities measure liquidity quad’s calculation free cash flow may different similar calculations used companies therefore comparability may limited free cash flow years ended december 31 2020 2019 follows 1lscrelated payments include transactionrelated costs associated proposed terminated acquisition lsc including 450 million reverse termination fee incremental interest payments associated 2019 amended debt refinancing free cash flow increased 234 million year ended december 31 2020 compared year ended december 31 2019 primarily due 500 million decrease capital expenditures partially offset 266 million decrease net cash provided operating activities excluding 613 million lscrelated payments see “net cash provided operating activities” section explanations change operating cash flows “net cash used investing activities” section explanations changes purchases property plant equipment calculation free cash flow includes cash flows related book business periods presented debt leverage ratio debt leverage ratio defined total debt finance lease obligations less cash equivalents net debt divided trailing twelve months adjusted ebitda comprised sum following 1 last twelve months ebitda see definition ebitda reconciliation net earnings loss attributable quad common shareholders ebitda “results operations” section 2 restructuring impairment transactionrelated charges 3 earnings loss discontinued operations net tax 4 net pension income 5 employee stock ownership plan contributions 6 loss gain debt extinguishment 7 equity earnings loss unconsolidated entity 8 adjusted ebitda unconsolidated equity method investments calculated consistent manner calculation quad 9 net earnings loss attributable noncontrolling interests company uses debt leverage ratio metric assess liquidity flexibility balance sheet consistent liquidity metrics company monitors debt leverage ratio measure determine appropriate level debt company believes optimal operate business accordingly quantify debt capacity available strategic capital allocation deployment investments business capital expenditures acquisitions strategic investments strengthening balance sheet pension liability reduction returning capital shareholders dividends share repurchases priorities capital allocation deployment change circumstances dictate business debt leverage ratio significantly impacted amount timing large expenditures requiring debt financing well changes profitability debt leverage ratio nongaap measure considered alternative cash flows provided operating activities measure liquidity quad’s calculation debt leverage ratio may different similar calculations used companies therefore comparability may limited debt leverage ratio calculated differs total leverage ratio total net leverage ratio senior secured leverage ratio included company’s debt covenant calculations see note 12 “debt” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k information debt covenants total leverage ratio included company’s debt covenants includes interest rate swap liabilities letters credit surety bonds debt excludes noncash stockbased compensation expense ebitda includes net income loss attributable noncontrolling interests ebitda total net leverage ratio includes excludes adjustments total leverage ratio addition netting domestic unrestricted cash debt similarly senior secured leverage ratio includes excludes adjustments total leverage ratio addition exclusion outstanding balance senior unsecured notes surety bonds debt netting domestic unrestricted cash debt leverage ratio december 31 2020 2019 follows calculation adjusted ebitda years ended december 31 2020 2019 follows 1other comprised equity loss unconsolidated entity adjusted ebitda unconsolidated equity method investments net loss attributable noncontrolling interests debt leverage ratio december 31 2020 increased 026x 335x compared december 31 2019 primarily due 745 million decrease adjusted ebitda partially offset 1605 million decrease debt finance lease obligations debt leverage ratio december 31 2020 management’s desired target debt leverage ratio range 20x 25x however company expects operate debt leverage ratio target range due ongoing impacts covid19 pandemic company also operate times debt leverage ratio target range depending timing compelling strategic investment opportunities well seasonal working capital needs description significant outstanding debt obligations december 31 2020 december 31 2020 company utilized combination debt instruments fund cash requirements including following •senior secured credit facility ◦5000 million revolving credit facility outstanding balance december 31 2020 ◦8250 million term loan 6576 million outstanding december 31 2020 •senior unsecured notes 2387 million outstanding december 31 2020 •master note security agreement 156 million outstanding december 31 2020 senior secured credit facility april 28 2014 company entered senior secured credit facility included revolving credit facility term loan term loan b company completed third amendment senior secured credit facility january 31 2019 third amendment completed provide quad liquidity structural flexibility consummate proposed terminated acquisition lsc extend existing maturities increasing aggregate amount existing revolving credit facility 7250 million 8000 million term five years maturing january 31 2024 b increasing aggregate amount existing term loan 3750 million 8250 million delayed draw feature term five years maturing january 31 2024 c increasing aggregate amount existing term loan b 3000 million 5000 million term seven years maturing january 31 2026 company intended loans available amended revolving credit facility would used repay refinance repurchase redeem exchange otherwise terminate lsc’s existing indebtedness connection consummation merger pay transaction expenses july 26 2019 following termination proposed acquisition lsc quad fully funded 8250 million delayed draw term loan retire entire amount outstanding 5000 million term loan b reduced borrowings revolving credit facility company completed fourth amendment senior secured credit facility june 29 2020 senior secured credit facility amended provide certain financial covenant relief fiscal quarter ending september 30 2021 covenant relief period b reduce aggregate amount existing revolving credit facility 8000 million 5000 million c make certain adjustments pricing addition 075 libor floor prohibit repurchases capital stock payments cash dividends covenant relief period certain amendments also made quarterly financial covenants company subject described december 31 2020 company outstanding borrowings revolving credit facility 386 million issued letters credit leaving 4614 million available future borrowings revolving credit facility delayed draw term loan made senior secured credit facility december 31 2020 bear interest 250 excess reserve adjusted libor floor 075 150 excess alternate base rate senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances senior unsecured notes company issued 3000 million aggregate principal amount senior unsecured notes due may 1 2022 april 28 2014 2387 million outstanding december 31 2020 senior unsecured notes bear interest 70 interest payable semiannually senior unsecured notes issued extend stagger company’s debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals company received 2948 million net proceeds sale senior unsecured notes deducting initial purchasers’ discounts commissions proceeds senior unsecured notes used purposes detailed senior secured credit facility company repurchased 47 million outstanding senior unsecured notes open market resulting net gain debt extinguishment 08 million year ended december 31 2020 repurchased senior unsecured notes canceled company used cash flows operating activities borrowings revolving credit facility fund repurchases primarily completed reallocate debt lower interest rate revolving credit facility thereby reduce interest expense based current libor rates company’s existing future domestic subsidiaries borrower guarantees indebtedness company’s senior secured credit facility guarantees certain company’s indebtedness company’s restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes “guarantor subsidiaries” guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events master note security agreement september 1 1995 last amended november 24 2014 company entered master note security agreement pursuant company issued time senior notes aggregate principal amount 11 billion various tranches 156 million outstanding december 31 2020 senior notes master note security agreement weighted average interest rate 778 december 31 2020 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2026 various tranches notes collateralized certain united states press equipment terms master note security agreement company redeemed 376 million senior notes master note security agreement par outstanding principal balance date payment year ended december 31 2020 direct gain loss recognized result tender notes redeemed par however 02 million unamortized debt issuance costs related tendered notes recognized loss debt extinguishment year ended december 31 2020 tendered senior notes master note security agreement canceled company used cash flows operating activities borrowings revolving credit facility fund tender primarily completed reallocate debt lower interest rate revolving credit facility thereby reduce interest expense based current libor rates covenants compliance company’s various lending arrangements include certain financial covenants financial terms numbers ratios defined company’s debt agreements among covenants company required maintain following december 31 2020 •maximum total net leverage ratio rolling twelvemonth basis maximum total net leverage ratio defined consolidated total indebtedness net 750 million unrestricted cash consolidated ebitda shall exceed 450 100 quarters ending december 31 2020 march 31 2021 ii 425 100 quarter ending june 30 2021 iii 4125 100 quarter ending september 30 2021 twelve months ended december 31 2020 company’s maximum total net leverage ratio 329 100 covenant relief period company required comply total leverage ratio covenant defined consolidated total indebtedness consolidated ebitda shall exceed 375 100 •if amount outstanding revolving credit facility term loan lender revolving credit exposure term loan credit exposure company required maintain following ◦senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined consolidated senior secured net indebtedness consolidated ebitda shall exceed 350 100 twelve months ended december 31 2020 company’s senior secured leverage ratio 241 100 •interest coverage ratio rolling twelvemonth basis interest coverage ratio defined consolidated ebitda cash consolidated interest expense shall less 300 100 twelve months ended december 31 2020 company’s interest coverage ratio 464 100 indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit company’s restricted subsidiaries’ ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially company’s consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates company compliance financial covenants debt agreements december 31 2020 company currently expects compliance future periods financial covenants assurance covenants continue met company’s failure maintain compliance covenants could prevent company borrowing additional amounts could result default debt agreements default could cause outstanding indebtedness become immediately due payable virtue crossacceleration crossdefault provisions addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock following limitations utilize total net leverage ratio calculation rolling twelvemonth basis defined consolidated net indebtedness consolidated ebitda twelve months ended december 31 2020 company’s total net leverage ratio 330 100 •if company’s total net leverage ratio greater 275 100 company prohibited making greater 600 million annual dividend payments capital stock repurchases certain payments total net leverage ratio less 275 100 restrictions provided however restricted payments shall made covenant relief period company’s total net leverage ratio december 31 2020 330 100 covenant relief period limitations described currently applicable •if company’s senior secured leverage ratio greater 300 100 company’s total net leverage ratio greater 350 100 company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total net leverage ratio less 350 100 restrictions limitations described currently applicable company’s senior secured leverage ratio 241 100 total net leverage ratio 330 100 december 31 2020 net pension obligations net underfunded pension mepps obligations decreased 307 million year ended december 31 2020 1230 million december 31 2019 923 million december 31 2020 decrease overall pension obligations primarily due actual return pension plan assets 170 year ended december 31 2020 expected return plan assets assumption 575 payments totaling 114 million made mepps 78 million employer pension contributions year ended december 31 2020 decrease partially offset 83 basis point decrease pension discount rate 320 december 31 2019 237 december 31 2020 company continues focus reducing pension obligations cash contributions plans lumpsum settlements plan design changes share repurchase program july 30 2018 company’s board directors authorized share repurchase program 1000 million company’s outstanding class common stock authorization share repurchases may made company’s discretion time open market andor privately negotiated transactions permitted federal securities laws legal requirements timing manner price amount repurchase depend economic market conditions share price trading volume applicable legal requirements factors program may suspended discontinued time company currently prohibited repurchasing capital stock covenant relief period accordance fourth amendment april 28 2014 senior secured credit facility completed june 29 2020 shares company’s class stock repurchased years december 31 2020 2019 december 31 2020 1000 million authorized repurchases remaining program risk management discussion company’s exposure market risks management market risks see item 7a “quantitative qualitative disclosures market risk” annual report form 10k offbalance sheet arrangements except set forth contractual obligations commitments table company offbalance sheet arrangements financings special purpose entities company expects material current future effect financial condition changes financial condition results operations liquidity capital expenditures capital resources significant components sales expenses contractual obligations commitments company’s contractual cash obligations december 31 2020 follows millions 1debt obligations include 1063 million anticipated future interest payments including 147 million estimated interest payments interest rate swaps excludes 69 million future amortization debt issuance costs 2020 company paid advance full amount required amortization payments term loan totaling 671 million year ended december 31 2021 company also paid advance 436 million required amortization payments term loan year ended december 31 2022 amounts included “thereafter” include principal payments estimated interest expense april 2026 2operating lease obligations include 108 million anticipated future interest payments 3mepps withdrawal obligations include 155 million anticipated future interest payments see note 16 “employee retirement plans” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k discussion mepps withdrawal liability 4for pension benefit obligations contributions benefit payments funded company assets included table actuarially estimated five year period benefit payments benefit plans expected continue beyond 2025 company believes estimate beyond period unreasonable 5finance lease obligations include 03 million anticipated future interest payments 6purchase obligations consist primarily 87 million firm commitments purchase press finishing equipment 24 million purchase obligations 7business acquisitions represents estimated 77 million future cash payments associated acquisition ivie 8the contractual obligations table include reserves uncertain tax positions recorded accordance accounting guidance uncertainties income taxes company taken tax positions ultimate amount years necessary payments made pertain tax positions uncertain reserve uncertain tax positions prior interest penalties 116 million december 31 2020 52 million included longterm liabilities 61 million included deferred income taxes 03 million included accrued liabilities consolidated balance sheets company also recorded reserves interest penalties related uncertain tax positions 06 million 01 million respectively december 31 2020 9the contractual obligations table include share repurchase program repurchases required program see “share repurchase program” section discussion including maximum potential cash payments program critical accounting policies estimates company’s consolidated financial statements prepared accordance gaap company’s critical accounting policies important portrayal financial condition results operations require company make difficult subjective estimates management required make judgments estimates affect reported amounts assets liabilities disclosure contingent assets liabilities date statements reported amounts revenues expenses reporting period company bases estimates historical experience various assumptions believed reasonable circumstances company’s management believes judgments estimates made consistent appropriate methods based information available time reasonable deviation judgments estimates would material impact company’s consolidated financial position results operations actual results may differ estimates different assumptions conditions extent estimates used differ actual results adjustments consolidated statements operations corresponding consolidated balance sheets would necessary adjustments would made future statements company identified following critical accounting policies estimates revenue recognition performance obligations contract inception company assesses products services promised contracts customers identifies performance obligations promise transfer customer product service distinct identify performance obligations company considers goods services promised contract regardless whether explicitly stated implied customary business practices company determined following distinct products services represent separate performance obligations •prepress services •print •other services prepress services company recognizes revenue pointintime upon completion performed service acceptance customer company considers transfer control occur service performed company right payment customer legal title risk reward ownership company recognizes print revenues upon transfer title passage risk loss pointintime upon shipment customer reasonable assurance collectability revenues related company’s logistics operations includes delivery printed material included print performance obligation also recognized pointintime services completed revenues related company’s imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily company’s logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations item 8 “financial statements supplementary data” annual report form 10k many company’s operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis instances company deliver print work customer bill customer postage cases company acting agent billings recorded net basis net sales significant payment terms payment terms conditions contracts customers vary company typically offers standard terms net 30 days company’s standard business practice offer extended payment terms longer one year company may offer cash discounts prepayment extended terms depending certain facts circumstances timing company’s delivery products services differs timing payment company record either contract asset contract liability variable consideration evaluating transaction price company analyzes contract basis applicable variable considerations noncash consideration also performs constraint analysis nature company’s contracts give rise variable consideration including volume rebates credits discounts similar items generally decrease transaction price variable amounts generally credited customer based achieving certain levels sales activity contracts signed making payments within specific terms product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends transaction price requires allocation multiple performance obligations company uses estimated standalone selling prices using adjusted market assessment approach costs obtain contracts company capitalizes certain sales incentives sales compensation packages costs directly attributed awarded customer contract renewal would incurred contract obtained company also defers certain contract acquisition costs paid customer contract inception costs obtain contracts duration less one year expensed incurred contract costs contracts one year company amortizes costs obtain contracts straightline basis estimated life contract reviews quarterly impairment goodwill represents excess purchase price fair value identifiable net assets acquired business combination assigned specific reporting units changes management’s estimates judgments including changes based actual results differing estimates judgments used purchase price allocation process could result impairment charge could material adverse effect companys results operations accordance accounting guidance company performs annual impairment test goodwill october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value within united states print related services segment company identified three reporting units 1 core print related services 2 specialty print related services 3 united states products services december 31 2020 goodwill totaled 1030 million allocated core print related services specialty print related services reporting unit united states products services reporting unit goodwill allocated additionally goodwill international segment consolidated balance sheets due decline company’s stock price uncertainty impacts covid19 pandemic company global economy interim goodwill impairment test completed goodwill core print related services reporting unit first quarter 2020 result company determined fair value core print related services reporting unit exceeded carrying value therefore impairment recorded company completed annual impairment test october 31 2020 identified indicators impairment companys reporting units year ended december 31 2020 determining fair value core print related services reporting unit october 31 2020 company used equal weighting income market approaches significant assumptions used income approach included estimated future cash flows including expected future revenue growth profit margins capital expenditures working capital levels terminal value multiples 111 aftertax weighted average cost capital core print related services estimated future cash flows based companys internal projection models industry projections assumptions deemed reasonable management significant assumptions used market approach included control premium based similar transactions selection guideline public companies selected market multiples fair value determination categorized level 3 fair value hierarchy see note 15 “financial instruments fair value measurements” consolidated financial statements item 8 “financial statements supplementary data” annual report form 10k definition level 3 inputs completing annual evaluation estimated fair value core print related services reporting unit united states print related services segment determined exceed carrying value reporting unit addition company performed sensitivity analysis october 31 2020 material assumptions used discounted cash flow valuation models performing annual goodwill impairment assessment percentage estimated fair value exceeded carrying value core print related services reporting unit 50 management concluded impairment existed october 31 2020 additional indications impairment identified october 31 2020 december 31 2020 impairment property plant equipment finitelived intangible assets company performs impairment evaluations longlived assets whenever business conditions events circumstances indicate assets may impaired including whether estimated useful life longlived assets may warrant revision whether remaining balance asset may recoverable company’s significant longlived assets property plant equipment customer relationship intangible assets recorded conjunction acquisition assessing impairment longlived assets requires company make important estimates assumptions including limited expected future cash flows assets generate assets used based strategic direction company remaining useful life residual value considerable judgment also applied incorporating potential impact current economic climate customer demand selling prices cost production limited activity secondary markets assets cost capital estimated future undiscounted cash flows generated assets less carrying value longlived assets written fair value charge recorded current operations company uses internal discounted cash flow estimates quoted market prices available independent appraisals appropriate determine fair value fair value determination categorized level 3 fair value hierarchy see note 15 “financial instruments fair value measurements” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k definition level 3 inputs company classifies longlived assets sold held sale period approved plan sell asset company committed plan ii asset available immediate sale present condition iii active program locate buyer actions required sell asset initiated iv sale asset probable v asset actively marketed sale price reasonable relation current fair value vi unlikely significant changes plan made plan withdrawn assets held sale initially measured lower carrying value fair value less cost sell losses resulting measurement recognized period held sale criteria met gains recognized date sale designated held sale company stops recording depreciation expense property plant equipment fair value less cost sell longlived assets held sale assessed reporting period longer meets classification based assessments completed years ended december 31 2020 2019 company recognized property plant equipment impairment charges continuing operations 641 million 79 million respectively primarily related facility consolidations well capacity strategic reduction restructuring initiatives finitelived intangible asset impairment charges recorded years ended december 31 2020 2019 company continues monitor groups assets identify new events changes circumstances could indicate carrying values recoverable particularly light potential declines profitability may result highly competitive industry landscape continued uncertainty global economy event significant unanticipated changes circumstances significant adverse changes business climate adverse actions regulators unanticipated competition loss key customers andor changes technology markets actual results differ management’s estimates provision impairment could required future period pension plans result acquisition world color press company acquired multiple underfunded pension plans pension plan costs determined using actuarial methods funded contributions determined accordance projected benefit method prorated based service company records amounts relating pension plans based calculations include various actuarial assumptions company believes two critical assumptions discount rate assumed rate return assets changes assumptions primarily influenced factors outside company’s control significant effect amounts reported financial statements company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets included item 8 “financial statements supplementary data” annual report form 10k company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors event gives rise curtailment settlement curtailment accounted prior settlement company’s measurement date measure defined benefit plan assets projected benefit obligation december 31 purposes calculating expected return plan assets valued fair value company determines assumption discount rate used purposes computing annual service interest costs pension plan based index highquality corporate bond yields matchedfunding yield curve analysis date company measures interest costs pension benefits applying specific spot rates along yield curve plans’ liability cash flows weighted average discount rate used determine benefit obligations pension plans december 31 2020 237 83 basis point decrease discount rate 320 december 31 2019 onepercentage point change discount rate would following impact projected benefit obligation net periodic benefit cost december 31 2020 company employs total return investment approach pension plans whereby diversified mix equity securities debt securities used maximize longterm pension plan assets intent strategy outperform growth plan liabilities long run plan contributions decreased balanced maintaining lower degree investment risk tolerance established careful consideration plan liabilities plan funded status corporate financial condition equity securities diversified across geography market capitalization investments united states largecapitalization stocks united states smallcapitalization stocks international securities investment risk measured monitored ongoing basis annual liability measurements periodic assetliability studies quarterly investment portfolio reviews expected longterm rate return plan assets based upon many factors including expected asset allocations historical asset returns current expected future market conditions risk current target asset allocation plan assets weighted average basis 30 equity securities 70 debt securities actual asset allocation december 31 2020 approximately 30 equity securities 70 debt securities expected return plan assets assumption 575 625 december 31 2020 2019 respectively company’s funded united states pension plans actual return plan assets 1700 2128 years ended december 31 2020 2019 respectively certain pension plans unfunded plans hold plan assets 25 basis point change expected return plan assets would following impact net pension income year ended december 31 2020 company also participated mepps result acquisition world color press company withdrawn significant mepps replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan two mepps gciu gcc significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued estimated withdrawal liability based information provided plan’s trustee 2016 company gcc reached settlement agreement claims scheduled payments february 2024 2019 company gciu reached settlement agreement claims scheduled payments april 2032 new accounting pronouncements see note 23 “new accounting pronouncements” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k summarized financial information subsidiary guarantors indebtedness april 28 2014 quad completed offering senior unsecured notes see note 12 “debt” details senior unsecured notes company’s guarantor subsidiaries fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including following •the designation guarantor subsidiaries unrestricted subsidiary •the release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries •the sale disposition including sale substantially assets guarantor subsidiaries following tables present summarized financial information quad guarantor subsidiaries combined basis intercompany transactions eliminated including adjustments remove equity earnings nonguarantor subsidiaries year ended december 31 2020 six nonguarantor subsidiaries company became guarantor subsidiaries accordingly material supplemental financial information periods presented recast reflect subsidiaries per senior unsecured notes agreement guarantor subsidiaries december 31 2020 included longterm assets table 116 million 125 million current intercompany loan receivables due quad nonguarantor subsidiaries december 31 2020 2019 respectively also included longterm assets 4288 million 4279 million intercompany investments quad guarantor subsidiaries nonguarantor subsidiaries included current liabilities 29 million 163 million current intercompany payables due nonguarantor subsidiaries quad guarantor subsidiaries december 31 2020 2019 respectively item 7a item 7a quantitative qualitative disclosures market risk company exposed variety market risks may adversely affect companys results operations financial condition including changes interest foreign currency exchange rates changes economic environment would impact credit positions changes prices certain commodities companys management takes active role risk management process developed policies procedures require specific administrative business functions assist identification assessment control various risks acquisition world color press increased number transactions company involved expanded international scope companys operations thereby expanding market risks company subject company begun assess postacquisition market risks detail management modify companys risk management strategies based assessment modification completed company may exposure market risks aware due among things larger number transactions expanded international operations increased borrowing resulting acquisition new risk management strategies implemented moreover may fully insulate company adverse effects due market risks interest rate risk company exposed interest rate risk variable rate debt obligations price risk fixed rate debt capital leases december 31 2010 company fixed rate debt capital leases outstanding 7297 million current weighted average interest rate 74 variable rate debt outstanding 8490 million current weighted average interest rate 51 variable rate debt outstanding december 31 2010 primarily comprised variable rate debt financing agreement entered connection acquisition world color press including 7000 million term loan 570 million outstanding 530 million revolving credit facility term loan bears interest primarily based libor however subject 15 libor minimum rate thus interest rate term loan begin fluctuate libor exceeds percentage december 31 2010 libor significantly lower 15 libor minimum rate considering interest rate largest portion variable rate debt obligations would fluctuate market interest rates increased 10 hypothetical change interest rate 10 companys current weighted average interest rate variable rate debt obligations excluding term loan 356 would material impact companys interest expense hypothetical 10 change market interest rates would change fair value fixed rate debt december 31 2010 approximately 240 million foreign currency risk translation exposure company exposed impact foreign currency fluctuations certain countries operates exposure foreign currency movements limited countries operating revenues expenses various subsidiaries business units substantially local currency country operate although operating local currencies may limit impact currency rate fluctuations results operations companys nonus subsidiaries business units fluctuations rates may affect translation results companys consolidated financial statements extent revenues expenses applicable local currency company may enter foreign exchange contracts hedge currency risk companys hedging operations material gains losses operations material companys cash flows financial position results operations company use derivative financial instruments trading speculative purposes international operations subject risks typical international operations including limited differing economic conditions changes political climate potential restrictions movement funds differing tax structures regulations restrictions accordingly future results could adversely impacted changes factors credit risk credit risk possibility loss customers failure make payments according contract terms prior granting credit customer evaluated underwriting process taking consideration prospective customers financial condition past payment experience credit bureau information financial qualitative factors may affect customers ability pay specific credit reviews standard industry credit scoring models used performing evaluation customers financial condition continuously monitored part normal course business companys customers may highly leveraged otherwise subject operating regulatory risks based customer account reviews due continued uncertainty global economy company established allowance doubtful accounts 855 million december 31 2010 year ended december 31 2010 company recorded provisions doubtful accounts 37 million company large diverse customer base prior acquisition world color press however credit risk customer concentration decreased acquisition addition new customers geographies products company produces company high degree concentration single customer account year ended december 31 2010 companys largest customer accounted less 5 companys net sales even companys credit review analysis mechanisms work properly company may experience financial losses dealings customers parties increase nonpayment nonperformance customers could adversely affect companys results operations financial condition economic disruptions could result significant future charges commodity risk primary raw materials used company paper ink fuel time companys supply raw materials readily available numerous suppliers however based market conditions could change future companys united states customers provide paper printing process customers supply paper company generally include price adjustment clauses sales contracts also critical raw materials printing process result management believes hypothetical 10 change price paper raw materials would significant direct impact companys consolidated annual results operations cash flows however significant increases commodity pricing could influence future customer print volumes inflation significant impact company historically item 8item 7a quantitative qualitative disclosures market risk company exposed variety market risks may adversely impact companys results operations financial condition including changes interest foreign currency exchange rates changes economic environment would impact credit positions changes prices certain commodities companys management takes active role risk management process developed policies procedures require specific administrative business functions assist identification assessment control various risks risk management strategies may fully insulate company adverse impacts due market risks interest rate risk company exposed interest rate risk variable rate debt obligations price risk fixed rate debt capital leases december 31 2012 company fixed rate debt capital leases outstanding 5796 million current weighted average interest rate 74 variable rate debt outstanding 7711 million current weighted average interest rate 31 variable rate debt outstanding december 31 2012 primarily comprised 15 billion variable rate debt financing agreement entered july 2011 including 4444 million outstanding 4500 million term loan 1967 million outstanding 2000 million term loan b 500 million outstanding 8500 million revolving credit facility well 701 million international variable rate debt term loan b bears interest primarily based libor however subject 10 libor minimum rate thus interest rate term loan b begin fluctuate libor exceeds percentage december 31 2012 libor significantly lower 10 libor minimum rate result interest term loan b would fluctuate 10 increase market interest rate excluding term loan b hypothetical change interest rate 10 companys current weighted average interest rate variable rate debt obligations 30 would material impact companys interest expense hypothetical 10 change market interest rates would change fair value fixed rate debt december 31 2012 approximately 174 million foreign currency risk translation exposure company exposed impact foreign currency fluctuations certain countries operates exposure foreign currency movements limited countries operating revenues expenses various subsidiaries business units substantially local currency country operate although operating local currencies may limit impact currency rate fluctuations results operations companys nonus subsidiaries business units fluctuations rates may affect translation results companys consolidated financial statements extent revenues expenses applicable local currency company may enter foreign exchange forward contracts hedge currency risk companys hedging operations historically material gains losses operations material companys results operations financial position cash flows company use derivative financial instruments trading speculative purposes international operations subject risks typical international operations including limited differing economic conditions changes political climate potential restrictions movement funds differing tax structures regulations restrictions accordingly future results could adversely impacted changes factors credit risk credit risk possibility loss customers failure make payments according contract terms prior granting credit customer evaluated underwriting process taking consideration prospective customers financial condition past payment experience credit bureau information financial qualitative factors may affect customers ability pay specific credit reviews standard industry credit scoring models used performing evaluation customers financial condition continuously monitored part normal course business companys customers highly leveraged otherwise subject operating regulatory risks based customer account reviews due continued uncertainty global economy company established allowance doubtful accounts 708 million december 31 2012 year ended december 31 2012 company recorded provisions doubtful accounts 32 million company large diverse customer base prior acquisition world color press however credit risk customer concentration decreased acquisition addition new customers geographies products company produces company high degree concentration single customer account year ended december 31 2012 companys largest customer accounted less 5 companys net sales even companys credit review analysis mechanisms work properly company may experience financial losses dealings customers parties increase nonpayment nonperformance customers could adversely impact companys results operations financial condition economic disruptions could result significant future charges commodity risk primary raw materials used company paper ink energy time companys supply raw materials readily available numerous suppliers however based market conditions could change future company generally buys raw materials based upon market prices established vendor part purchase process majority paper used printing process supplied directly companys customers supply paper company generally includes price adjustment clauses sales contracts company produces majority ink used print production raw materials ink manufacturing process purchased externally variety suppliers company generally includes price adjustment clauses ink critical raw materials printing process sales contracts company generally cannot pass customers impact higher electric natural gas energy prices manufacturing costs increases energy prices result higher manufacturing costs certain operations company mitigates risk natural gas hedges appropriate logistic operations however company able pass substantial portion increase fuel prices directly customers result management believes hypothetical 10 change price paper raw materials would significant direct impact companys consolidated annual results operations cash flows however significant increases commodity pricing tight supply could influence future customers demand printed products inflation significant impact company historically item 8item 7a quantitative qualitative disclosures market risk company exposed variety market risks may adversely impact companys results operations financial condition including changes interest foreign currency exchange rates changes economic environment would impact credit positions changes prices certain commodities companys management takes active role risk management process developed policies procedures require specific administrative business functions assist identification assessment control various risks risk management strategies may fully insulate company adverse impacts due market risks interest rate risk company exposed interest rate risk variable rate debt obligations price risk fixed rate debt capital leases december 31 2013 company fixed rate debt capital leases outstanding 5201 million current weighted average interest rate 74 variable rate debt outstanding 8867 million current weighted average interest rate 31 variable rate debt outstanding december 31 2013 primarily comprised 15 billion variable rate debt financing agreement entered july 2011 including 4163 million outstanding 4500 million term loan 1948 million outstanding 2000 million term loan b 2098 million outstanding 8500 million revolving credit facility well 605 million outstanding international variable rate debt term loan b bears interest primarily based libor however subject 10 libor minimum rate thus interest rate term loan b begin fluctuate libor exceeds percentage december 31 2013 libor significantly lower 10 libor minimum rate result interest term loan b would fluctuate 10 increase market interest rate excluding term loan b hypothetical change interest rate 10 companys current weighted average interest rate variable rate debt obligations 31 would material impact companys interest expense hypothetical 10 change market interest rates would change fair value fixed rate debt december 31 2013 approximately 157 million foreign currency risk translation exposure company exposed impact foreign currency fluctuations certain countries operates exposure foreign currency movements limited countries operating revenues expenses various subsidiaries business units substantially local currency country operate although operating local currencies may limit impact currency rate fluctuations results operations companys nonus subsidiaries business units fluctuations rates may affect translation results companys consolidated financial statements extent revenues expenses applicable local currency company may enter foreign exchange forward contracts hedge currency risk companys hedging operations historically material gains losses operations material companys results operations financial position cash flows company use derivative financial instruments trading speculative purposes international operations subject risks typical international operations including limited differing economic conditions changes political climate potential restrictions movement funds differing tax structures regulations restrictions accordingly future results could adversely impacted changes factors credit risk credit risk possibility loss customers failure make payments according contract terms prior granting credit customer evaluated underwriting process taking consideration prospective customers financial condition past payment experience credit bureau information financial qualitative factors may affect customers ability pay specific credit reviews standard industry credit scoring models used performing evaluation customers financial condition continuously monitored part normal course business companys customers highly leveraged otherwise subject operating regulatory risks based customer account reviews due continued uncertainty global economy company established allowance doubtful accounts 589 million december 31 2013 company large diverse customer base credit risk customer concentration decreased acquisitions world color press vertis addition new customers geographies products company produces company high degree concentration single customer account year ended december 31 2013 companys largest customer accounted less 5 companys net sales even companys credit review analysis mechanisms work properly company may experience financial losses dealings customers parties increase nonpayment nonperformance customers could adversely impact companys results operations financial condition economic disruptions could result significant future charges commodity risk primary raw materials used company paper ink energy time companys supply raw materials readily available numerous suppliers however based market conditions could change future company generally buys raw materials based upon market prices established vendor part purchase process majority paper used printing process supplied directly companys customers supply paper company generally includes price adjustment clauses sales contracts company produces majority ink used print production raw materials ink manufacturing process purchased externally variety suppliers company generally includes price adjustment clauses ink critical raw materials printing process sales contracts company generally cannot pass customers impact higher electric natural gas energy prices manufacturing costs increases energy prices result higher manufacturing costs certain operations company mitigates risk natural gas hedges appropriate logistic operations however company able pass substantial portion increase fuel prices directly customers result management believes hypothetical 10 change price paper raw materials would significant direct impact companys consolidated annual results operations cash flows however significant increases commodity pricing tight supply could influence future customers demand printed products inflation significant impact company historically item 8item 7a quantitative qualitative disclosures market risk company exposed variety market risks may adversely impact companys results operations financial condition including changes interest foreign currency exchange rates changes economic environment would impact credit positions changes prices certain commodities companys management takes active role risk management process developed policies procedures require specific administrative business functions assist identification assessment control various risks risk management strategies may fully insulate company adverse impacts due market risks interest rate risk company exposed interest rate risk variable rate debt obligations price risk fixed rate debt capital leases december 31 2014 company fixed rate debt capital leases outstanding 6438 million current weighted average interest rate 72 variable rate debt outstanding 7818 million current weighted average interest rate 31 variable rate debt outstanding december 31 2014 primarily comprised 16 billion senior secured credit facility entered april 28 2014 including 4388 million outstanding 4500 million term loan 2958 million outstanding 3000 million term loan b 439 million outstanding 8500 million revolving credit facility term loan b bears interest primarily based libor however subject 10 libor minimum rate thus interest rate term loan b begin fluctuate libor exceeds percentage december 31 2014 libor significantly lower 10 libor minimum rate result interest term loan b would fluctuate 10 increase market interest rate excluding term loan b hypothetical change interest rate 10 companys current weighted average interest rate variable rate debt obligations 27 would material impact companys interest expense hypothetical 10 change market interest rates would change fair value fixed rate debt december 31 2014 approximately 75 million foreign currency risk translation exposure company exposed impact foreign currency fluctuations certain countries operates exposure foreign currency movements limited countries operating revenues expenses various subsidiaries business units substantially local currency country operate although operating local currencies may limit impact currency rate fluctuations results operations companys nonus subsidiaries business units fluctuations rates may affect translation results companys consolidated financial statements extent revenues expenses applicable local currency company may enter foreign exchange forward contracts hedge currency risk companys hedging operations historically material gains losses operations material companys results operations financial position cash flows company use derivative financial instruments trading speculative purposes international operations subject risks typical international operations including limited differing economic conditions changes political climate potential restrictions movement funds differing tax structures regulations restrictions accordingly future results could adversely impacted changes factors credit risk credit risk possibility loss customers failure make payments according contract terms prior granting credit customer evaluated underwriting process taking consideration prospective customers financial condition past payment experience credit bureau information financial qualitative factors may affect customers ability pay specific credit reviews standard industry credit scoring models used performing evaluation customers financial condition continuously monitored part normal course business companys customers highly leveraged otherwise subject operating regulatory risks based customer account reviews due continued uncertainty global economy company established allowance doubtful accounts 578 million december 31 2014 company large diverse customer base high degree concentration single customer account year ended december 31 2014 companys largest customer accounted less 5 companys net sales even companys credit review analysis mechanisms work properly company may experience financial losses dealings customers parties increase nonpayment nonperformance customers could adversely impact companys results operations financial condition economic disruptions could result significant future charges commodity risk primary raw materials used company paper ink energy time companys supply raw materials readily available numerous vendors however based market conditions could change future company generally buys raw materials based upon market prices established vendor part purchase process majority paper used printing process supplied directly companys customers supply paper company generally includes price adjustment clauses sales contracts company produces majority ink used print production raw materials ink manufacturing process purchased externally variety vendors company generally includes price adjustment clauses ink critical raw materials printing process sales contracts company generally cannot pass customers impact higher electric natural gas energy prices manufacturing costs increases energy prices result higher manufacturing costs certain operations company mitigates risk natural gas hedges appropriate logistic operations however company able pass substantial portion increase fuel prices directly customers result management believes hypothetical 10 change price paper raw materials would significant direct impact companys consolidated annual results operations cash flows however significant increases commodity pricing tight supply could influence future customers demand printed products inflation significant impact company historically item 8item 7a quantitative qualitative disclosures market risk company exposed variety market risks may adversely impact companys results operations financial condition including changes interest foreign currency exchange rates changes economic environment would impact credit positions changes prices certain commodities companys management takes active role risk management process developed policies procedures require specific administrative business functions assist identification assessment control various risks risk management strategies may fully insulate company adverse impacts due market risks interest rate risk company exposed interest rate risk variable rate debt obligations price risk fixed rate debt capital leases variable rate debt outstanding december 31 2017 primarily comprised 2813 million outstanding term loan 2791 million outstanding term loan b december 31 2017 outstanding balance revolving credit facility order reduce variability cash flows interest payments related portion quadgraphics variablerate debt company entered 2500 million interest rate swap february 2017 classified 2500 million companys variable rate debt fixed rate debt including impact 2500 million interest rate swap variable rate fixed rate debt quadgraphics variable rate debt outstanding 3142 million current weighted average interest rate 43 fixed rate debt capital leases outstanding 6506 million current weighted average interest rate 57 december 31 2017 term loan b bears interest primarily based libor however subject 10 libor minimum rate thus interest rate term loan b begin fluctuate libor exceeds percentage december 31 2017 libor 10 16 result interest term loan b would fluctuate 10 increase market interest rate including term loan b hypothetical 10 increase market interest rates impacting companys current weighted average interest rate variable rate debt obligations would material impact companys interest expense hypothetical 10 change market interest rates would change fair value fixed rate debt december 31 2017 approximately 9 million foreign currency risk translation exposure company exposed impact foreign currency fluctuations certain countries operates exposure foreign currency movements limited countries operating revenues expenses various subsidiaries business units substantially local currency country operate extent revenues expenses applicable local currency company may enter foreign exchange forward contracts hedge currency risk although operating local currencies may limit impact currency rate fluctuations results operations companys nonunited states subsidiaries business units rate fluctuations may impact consolidated financial position assets liabilities foreign operations translated us dollars preparing companys consolidated balance sheets december 31 2017 companys foreign subsidiaries net current assets defined current assets less current liabilities subject foreign currency translation risk 519 million potential decrease net current assets december 31 2017 hypothetical 10 adverse change quoted foreign currency exchange rates would approximately 52 million sensitivity analysis assumes parallel shift major foreign currency exchange rates versus us dollar exchange rates rarely move direction relative us dollar due positive negative correlations various global currencies assumption may overstate understate impact changing exchange rates individual assets liabilities denominated foreign currency companys hedging operations historically material gains losses operations material companys results operations financial position cash flows company use derivative financial instruments trading speculative purposes international operations subject risks typical international operations including limited differing economic conditions changes political climate potential restrictions movement funds differing tax structures regulations restrictions accordingly future results could adversely impacted changes factors credit risk credit risk possibility loss customers failure make payments according contract terms prior granting credit customer evaluated underwriting process taking consideration prospective customers financial condition past payment experience credit bureau information financial qualitative factors may affect customers ability pay specific credit reviews standard industry credit scoring models used performing evaluation customers financial condition continuously monitored part normal course business companys customers highly leveraged otherwise subject operating regulatory risks based customer account reviews due continued uncertainty global economy company established allowance doubtful accounts 289 million december 31 2017 company large diverse customer base high degree concentration single customer account year ended december 31 2017 companys largest customer accounted less 5 companys net sales even companys credit review analysis mechanisms work properly company may experience financial losses dealings customers parties increase nonpayment nonperformance customers could adversely impact companys results operations financial condition economic disruptions could result significant future charges commodity risk primary raw materials quadgraphics uses print business paper ink energy time companys supply raw materials readily available numerous vendors however based market conditions could change future company generally buys raw materials based upon market prices established vendor part procurement process majority paper used printing process supplied directly clients directly supply paper company makes use purchasing efficiencies supply paper negotiating leading paper vendors uses wide variety paper grades weights sizes rely one vendor addition company generally includes price adjustment clauses sales contracts paper critical raw materials printing process although clauses generally mitigate paper price risk higher paper prices tight paper supplies well changes us import trade regulations may impact client demand printed products companys working capital requirements including impact seasonality partially mitigated direct purchasing paper clients company produces majority ink used print production allowing control quality cost supply key inputs raw materials ink manufacturing process purchased externally variety vendors company generally cannot pass clients impact higher electric natural gas energy prices manufacturing costs increases energy prices result higher manufacturing costs certain operations company mitigates risk natural gas hedges appropriate logistic operations however company able pass substantial portion increase fuel prices directly clients result management believes hypothetical 10 change price paper raw materials would significant direct impact companys consolidated annual results operations cash flows however significant increases commodity pricing tight supply could influence future client demand printed products inflation significant impact company historically item 8item 7a quantitative qualitative disclosures market risk company exposed variety market risks may adversely impact company’s results operations financial condition including changes interest foreign currency exchange rates changes economic environment would impact credit positions changes prices certain commodities company’s management takes active role risk management process developed policies procedures require specific administrative business functions assist identification assessment control various risks risk management strategies may fully insulate company adverse impacts due market risks interest rate risk company exposed interest rate risk variable rate debt obligations price risk fixed rate debt capital leases variable rate debt outstanding december 31 2018 primarily comprised 2813 million outstanding term loan 2795 million outstanding term loan b december 31 2018 outstanding balance revolving credit facility order reduce variability cash flows interest payments related portion quad’s variablerate debt company entered 2500 million interest rate swap february 2017 classified 2500 million company’s variable rate debt fixed rate debt including impact 2500 million interest rate swap variable rate fixed rate debt quad variable rate debt outstanding 3185 million current weighted average interest rate 51 fixed rate debt capital leases outstanding 6224 million current weighted average interest rate 56 december 31 2018 term loan b bears interest primarily based libor however subject 10 libor minimum rate thus interest rate term loan b begin fluctuate libor exceeds percentage december 31 2018 libor 10 25 result interest term loan b would fluctuate 10 increase market interest rate including term loan b hypothetical 10 increase market interest rates impacting company’s current weighted average interest rate variable rate debt obligations would material impact company’s interest expense hypothetical 10 change market interest rates would change fair value fixed rate debt december 31 2018 approximately 8 million foreign currency risk translation exposure company exposed impact foreign currency fluctuations certain countries operates exposure foreign currency movements limited countries operating revenues expenses various subsidiaries business units substantially local currency country operate extent revenues expenses applicable local currency company may enter foreign exchange forward contracts hedge currency risk although operating local currencies may limit impact currency rate fluctuations results operations company’s nonunited states subsidiaries business units rate fluctuations may impact consolidated financial position assets liabilities foreign operations translated us dollars preparing company’s consolidated balance sheets december 31 2018 company’s foreign subsidiaries excluding argentina due economy’s status highly inflationary net current assets defined current assets less current liabilities subject foreign currency translation risk 245 million potential decrease net current assets december 31 2018 hypothetical 10 adverse change quoted foreign currency exchange rates would approximately 25 million sensitivity analysis assumes parallel shift major foreign currency exchange rates versus us dollar exchange rates rarely move direction relative us dollar due positive negative correlations various global currencies assumption may overstate understate impact changing exchange rates individual assets liabilities denominated foreign currency company’s hedging operations historically material gains losses operations material company’s results operations financial position cash flows company use derivative financial instruments trading speculative purposes international operations subject risks typical international operations including limited differing economic conditions changes political climate potential restrictions movement funds differing tax structures regulations restrictions accordingly future results could adversely impacted changes factors company considered economy argentina highly inflationary effective june 30 2018 accordance accounting standards codification 830 “foreign currency matters” highly inflationary economy one experienced cumulative inflation approximately 100 percent threeyear period entity required apply revised accounting guidance reporting period following economy deemed highly inflationary result classification functional currency companys argentina subsidiaries changed local currency us dollar beginning july 1 2018 impacts change value local currency monetary assets liabilities reflected consolidated statements operations total impact foreign currency losses 15 million year ended december 31 2018 recorded restructuring impairment transactionrelated charges consolidated statements operations company’s operations argentina represented less 20 total consolidated assets december 31 2018 less 20 total consolidated net sales year ended december 31 2018 credit risk credit risk possibility loss customer’s failure make payments according contract terms prior granting credit customer evaluated underwriting process taking consideration prospective customer’s financial condition past payment experience credit bureau information financial qualitative factors may affect customer’s ability pay specific credit reviews standard industry credit scoring models used performing evaluation customers’ financial condition continuously monitored part normal course business company’s customers highly leveraged otherwise subject operating regulatory risks based customer account reviews due continued uncertainty global economy company established allowance doubtful accounts 276 million december 31 2018 company large diverse customer base high degree concentration single customer account year ended december 31 2018 company’s largest customer accounted less 5 company’s net sales even company’s credit review analysis mechanisms work properly company may experience financial losses dealings customers parties increase nonpayment nonperformance customers could adversely impact company’s results operations financial condition economic disruptions could result significant future charges commodity risk primary raw materials quad uses print business paper ink energy time company’s supply raw materials readily available numerous vendors however based market conditions could change future company generally buys raw materials based upon market prices established vendor part procurement process approximately half paper used printing process supplied directly clients directly supply paper company makes use purchasing efficiencies supply paper negotiating leading paper vendors uses wide variety paper grades weights sizes rely one vendor addition company generally includes price adjustment clauses sales contracts paper critical raw materials printing process although clauses generally mitigate paper price risk higher paper prices tight paper supplies well changes united states import trade regulations may impact client demand printed products company’s working capital requirements including impact seasonality partially mitigated direct purchasing paper clients company produces majority ink used print production allowing control quality cost supply key inputs raw materials ink manufacturing process purchased externally variety vendors company generally cannot pass clients impact higher electric natural gas energy prices manufacturing costs increases energy prices result higher manufacturing costs certain operations company mitigates risk natural gas hedges appropriate logistic operations however company able pass substantial portion increase fuel prices directly clients result management believes hypothetical 10 change price paper raw materials would significant direct impact company’s consolidated annual results operations cash flows however significant increases commodity pricing tight supply could influence future client demand printed products inflation significant impact company historically item 8item 7a quantitative qualitative disclosures market risk company exposed variety market risks may adversely impact company’s results operations financial condition including changes interest foreign currency exchange rates changes economic environment would impact credit positions changes prices certain commodities company’s management takes active role risk management process developed policies procedures require specific administrative business functions assist identification assessment control various risks risk management strategies may fully insulate company adverse impacts due market risks interest rate risk company exposed interest rate risk variable rate debt obligations price risk fixed rate debt finance leases variable rate debt outstanding december 31 2019 primarily comprised 7683 million outstanding term loan december 31 2019 outstanding balance revolving credit facility order reduce variability cash flows interest payments related portion quad’s variablerate debt company entered 2500 million interest rate swap february 2017 1300 million interest rate swap march 2019 classified 3800 million company’s variable rate debt fixed rate debt including impact 3800 million interest rate swap variable rate fixed rate debt quad variable rate debt outstanding 3881 million current weighted average interest rate 45 fixed rate debt finance leases outstanding 7241 million current weighted average interest rate 56 december 31 2019 hypothetical 10 increase market interest rates impacting company’s current weighted average interest rate variable rate debt obligations would material impact company’s interest expense hypothetical 10 change market interest rates would change fair value fixed rate debt december 31 2019 approximately 6 million foreign currency risk translation exposure company exposed impact foreign currency fluctuations certain countries operates exposure foreign currency movements limited countries operating revenues expenses various subsidiaries business units substantially local currency country operate extent revenues expenses applicable local currency company may enter foreign exchange forward contracts hedge currency risk although operating local currencies may limit impact currency rate fluctuations results operations company’s nonunited states subsidiaries business units rate fluctuations may impact consolidated financial position assets liabilities foreign operations translated us dollars preparing company’s consolidated balance sheets december 31 2019 company’s foreign subsidiaries excluding argentina due economy’s status highly inflationary net current assets defined current assets less current liabilities subject foreign currency translation risk 283 million potential decrease net current assets december 31 2019 hypothetical 10 adverse change quoted foreign currency exchange rates would approximately 28 million sensitivity analysis assumes parallel shift major foreign currency exchange rates versus us dollar exchange rates rarely move direction relative us dollar due positive negative correlations various global currencies assumption may overstate understate impact changing exchange rates individual assets liabilities denominated foreign currency company’s hedging operations historically material gains losses operations material company’s results operations financial position cash flows company use derivative financial instruments trading speculative purposes international operations subject risks typical international operations including limited differing economic conditions changes political climate potential restrictions movement funds differing tax structures regulations restrictions accordingly future results could adversely impacted changes factors company considered economy argentina highly inflationary effective june 30 2018 accordance asc 830 “foreign currency matters” highly inflationary economy one experienced cumulative inflation approximately 100 percent threeyear period entity required apply revised accounting guidance reporting period following economy deemed highly inflationary result classification functional currency companys argentina subsidiaries changed local currency us dollar beginning july 1 2018 impacts change value local currency monetary assets liabilities reflected consolidated statements operations total impact foreign currency losses 28 million 15 million years ended december 31 2019 2018 respectively recorded restructuring impairment transactionrelated charges consolidated statements operations company’s operations argentina represented less 20 total consolidated assets december 31 2019 less 20 total consolidated net sales year ended december 31 2019 credit risk credit risk possibility loss customer’s failure make payments according contract terms prior granting credit customer evaluated underwriting process taking consideration prospective customer’s financial condition past payment experience credit bureau information financial qualitative factors may affect customer’s ability pay specific credit reviews standard industry credit scoring models used performing evaluation customers’ financial condition continuously monitored part normal course business company’s customers highly leveraged otherwise subject operating regulatory risks based customer account reviews due continued uncertainty global economy company established allowance doubtful accounts 250 million december 31 2019 company large diverse customer base high degree concentration single customer account year ended december 31 2019 company’s largest customer accounted less 5 company’s net sales even company’s credit review analysis mechanisms work properly company may experience financial losses dealings customers parties increase nonpayment nonperformance customers could adversely impact company’s results operations financial condition economic disruptions could result significant future charges commodity risk primary raw materials quad uses print business paper ink energy time company’s supply raw materials readily available numerous vendors however based market conditions could change future company generally buys raw materials based upon market prices established vendor part procurement process approximately half paper used printing process supplied directly clients directly supply paper company makes use purchasing efficiencies supply paper negotiating leading paper vendors uses wide variety paper grades weights sizes rely one vendor addition company generally includes price adjustment clauses sales contracts paper critical raw materials printing process although clauses generally mitigate paper price risk higher paper prices tight paper supplies well changes united states import trade regulations may impact client demand printed products company’s working capital requirements including impact seasonality partially mitigated direct purchasing paper clients company produces majority ink used print production allowing control quality cost supply key inputs raw materials ink manufacturing process purchased externally variety vendors company generally cannot pass clients impact higher electric natural gas energy prices manufacturing costs increases energy prices result higher manufacturing costs certain operations company mitigates risk natural gas hedges appropriate logistic operations however company able pass substantial portion increase fuel prices directly clients result management believes hypothetical 10 change price paper raw materials would significant direct impact company’s consolidated annual results operations cash flows however significant increases commodity pricing tight supply could influence future client demand printed products inflation significant impact company historically item 8item 7a quantitative qualitative disclosures market risk company exposed variety market risks may adversely impact companys results operations financial condition including changes interest foreign currency exchange rates changes economic environment would impact credit positions changes prices certain commodities companys management takes active role risk management process developed policies procedures require specific administrative business functions assist identification assessment control various risks risk management strategies may fully insulate company adverse impacts due market risks interest rate risk company exposed interest rate risk variable rate debt obligations price risk fixed rate debt capital leases december 31 2011 company fixed rate debt capital leases outstanding 6616 million current weighted average interest rate 74 variable rate debt outstanding 8089 million current weighted average interest rate 30 variable rate debt outstanding december 31 2011 primarily comprised 15 billion variable rate debt financing agreement entered july 2011 including 4500 million outstanding 4500 million term loan 1986 million outstanding 2000 million term loan b 850 million outstanding 8500 million revolving credit facility well 726 million international variable rate debt term loan b bears interest primarily based libor however subject 10 libor minimum rate thus interest rate term loan b begin fluctuate libor exceeds percentage december 31 2011 libor significantly lower 10 libor minimum rate result interest term loan b would fluctuate 10 increase market interest rate excluding term loan b hypothetical change interest rate 10 companys current weighted average interest rate variable rate debt obligations 296 would material impact companys interest expense hypothetical 10 change market interest rates would change fair value fixed rate debt december 31 2011 approximately 200 million foreign currency risk translation exposure company exposed impact foreign currency fluctuations certain countries operates exposure foreign currency movements limited countries operating revenues expenses various subsidiaries business units substantially local currency country operate although operating local currencies may limit impact currency rate fluctuations results operations companys nonus subsidiaries business units fluctuations rates may affect translation results companys consolidated financial statements extent revenues expenses applicable local currency company may enter foreign exchange forward contracts hedge currency risk discussed note 3 consolidated financial statements company entered shortterm foreign currency forward exchange contracts hedge exchange rate exposure related 500 million canadian dollar deposit related transcontinental mexico acquisition excluding fair value hedge entered specifically due unique transcontinental mexico acquisition companys hedging operations historically material gains losses operations material companys results operations financial position cash flows company use derivative financial instruments trading speculative purposes international operations subject risks typical international operations including limited differing economic conditions changes political climate potential restrictions movement funds differing tax structures regulations restrictions accordingly future results could adversely impacted changes factors credit risk credit risk possibility loss customers failure make payments according contract terms prior granting credit customer evaluated underwriting process taking consideration prospective customers financial condition past payment experience credit bureau information financial qualitative factors may affect customers ability pay specific credit reviews standard industry credit scoring models used performing evaluation customers financial condition continuously monitored part normal course business companys customers highly leveraged otherwise subject operating regulatory risks based customer account reviews due continued uncertainty global economy company established allowance doubtful accounts 737 million december 31 2011 year ended december 31 2011 company recorded provisions doubtful accounts 98 million respectively company large diverse customer base prior acquisition world color press however credit risk customer concentration decreased acquisition addition new customers geographies products company produces company high degree concentration single customer account year ended december 31 2011 companys largest customer accounted less 5 companys net sales even companys credit review analysis mechanisms work properly company may experience financial losses dealings customers parties increase nonpayment nonperformance customers could adversely impact companys results operations financial condition economic disruptions could result significant future charges commodity risk primary raw materials used company paper ink energy time companys supply raw materials readily available numerous suppliers however based market conditions could change future company generally buys raw materials based upon market prices established vendor part purchase process majority paper used printing process supplied directly companys customers supply paper company generally includes price adjustment clauses sales contracts company produces majority ink used print production raw materials ink manufacturing process purchased externally variety suppliers company generally includes price adjustment clauses ink critical raw materials printing process sales contracts company generally cannot pass customers impact higher electric natural gas energy prices manufacturing costs increases energy prices result higher manufacturing costs certain operations company mitigates risk natural gas hedges appropriate logistic operations however company able pass substantial portion increase fuel prices directly customers result management believes hypothetical 10 change price paper raw materials would significant direct impact companys consolidated annual results operations cash flows however significant increases commodity pricing tight supply could influence future customers demand printed products inflation significant impact company historically item 8item 7a quantitative qualitative disclosures market risk company exposed variety market risks may adversely impact companys results operations financial condition including changes interest foreign currency exchange rates changes economic environment would impact credit positions changes prices certain commodities companys management takes active role risk management process developed policies procedures require specific administrative business functions assist identification assessment control various risks risk management strategies may fully insulate company adverse impacts due market risks interest rate risk company exposed interest rate risk variable rate debt obligations price risk fixed rate debt capital leases december 31 2015 company fixed rate debt capital leases outstanding 5837 million current weighted average interest rate 71 variable rate debt outstanding 7656 million current weighted average interest rate 31 variable rate debt outstanding december 31 2015 primarily comprised 16 billion senior secured credit facility entered april 28 2014 including 4106 million outstanding 4500 million term loan 2932 million outstanding 3000 million term loan b 708 million outstanding 8500 million revolving credit facility term loan b bears interest primarily based libor however subject 10 libor minimum rate thus interest rate term loan b begin fluctuate libor exceeds percentage december 31 2015 libor significantly lower 10 libor minimum rate result interest term loan b would fluctuate 10 increase market interest rate excluding term loan b hypothetical change interest rate 10 companys current weighted average interest rate variable rate debt obligations 24 would material impact companys interest expense hypothetical 10 change market interest rates would change fair value fixed rate debt december 31 2015 approximately 23 million foreign currency risk translation exposure company exposed impact foreign currency fluctuations certain countries operates exposure foreign currency movements limited countries operating revenues expenses various subsidiaries business units substantially local currency country operate extent revenues expenses applicable local currency company may enter foreign exchange forward contracts hedge currency risk although operating local currencies may limit impact currency rate fluctuations results operations companys nonunited states subsidiaries business units rate fluctuations may impact consolidated financial position assets liabilities foreign operations translated us dollars preparing companys consolidated balance sheets december 31 2015 companys foreign subsidiaries net current assets defined current assets less current liabilities subject foreign currency translation risk 565 million potential decrease net current assets december 31 2015 hypothetical 10 adverse change quoted foreign currency exchange rates would approximately 57 million sensitivity analysis assumes parallel shift major foreign currency exchange rates verses us dollar exchange rates rarely move direction relative us dollar due positive negative correlations various global currencies assumption may overstate impact changing exchange rates individual assets liabilities denominated foreign currency companys hedging operations historically material gains losses operations material companys results operations financial position cash flows company use derivative financial instruments trading speculative purposes international operations subject risks typical international operations including limited differing economic conditions changes political climate potential restrictions movement funds differing tax structures regulations restrictions accordingly future results could adversely impacted changes factors credit risk credit risk possibility loss customers failure make payments according contract terms prior granting credit customer evaluated underwriting process taking consideration prospective customers financial condition past payment experience credit bureau information financial qualitative factors may affect customers ability pay specific credit reviews standard industry credit scoring models used performing evaluation customers financial condition continuously monitored part normal course business companys customers highly leveraged otherwise subject operating regulatory risks based customer account reviews due continued uncertainty global economy company established allowance doubtful accounts 501 million december 31 2015 company large diverse customer base high degree concentration single customer account year ended december 31 2015 companys largest customer accounted less 5 companys net sales even companys credit review analysis mechanisms work properly company may experience financial losses dealings customers parties increase nonpayment nonperformance customers could adversely impact companys results operations financial condition economic disruptions could result significant future charges commodity risk primary raw materials quadgraphics uses print business paper ink energy time companys supply raw materials readily available numerous vendors however based market conditions could change future company generally buys raw materials based upon market prices established vendor part procurement process majority paper used printing process supplied directly clients directly supply paper company makes use purchasing efficiencies supply paper negotiating leading paper vendors uses wide variety paper grades weights sizes rely one vendor addition company generally includes price adjustment clauses sales contracts paper critical raw materials printing process although clauses generally mitigate paper price risk higher paper prices tight paper supplies may impact client demand printed products companys working capital requirements including impact seasonality partially mitigated direct purchasing paper clients company produces majority ink used print production allowing control quality cost supply key inputs raw materials ink manufacturing process purchased externally variety vendors company generally cannot pass clients impact higher electric natural gas energy prices manufacturing costs increases energy prices result higher manufacturing costs certain operations company mitigates risk natural gas hedges appropriate logistic operations however company able pass substantial portion increase fuel prices directly clients result management believes hypothetical 10 change price paper raw materials would significant direct impact companys consolidated annual results operations cash flows however significant increases commodity pricing tight supply could influence future client demand printed products inflation significant impact company historically item 8item 7a quantitative qualitative disclosures market risk company exposed variety market risks may adversely impact companys results operations financial condition including changes interest foreign currency exchange rates changes economic environment would impact credit positions changes prices certain commodities companys management takes active role risk management process developed policies procedures require specific administrative business functions assist identification assessment control various risks risk management strategies may fully insulate company adverse impacts due market risks interest rate risk company exposed interest rate risk variable rate debt obligations price risk fixed rate debt capital leases december 31 2016 company variable rate debt outstanding 6860 million current weighted average interest rate 33 fixed rate debt capital leases outstanding 4448 million current weighted average interest rate 68 variable rate debt outstanding december 31 2016 primarily comprised 16 billion senior secured credit facility entered april 28 2014 including 3769 million outstanding 4500 million term loan 2906 million outstanding 3000 million term loan b 190 million outstanding 8500 million revolving credit facility term loan b bears interest primarily based libor however subject 10 libor minimum rate thus interest rate term loan b begin fluctuate libor exceeds percentage december 31 2016 libor significantly lower 10 libor minimum rate result interest term loan b would fluctuate 10 increase market interest rate excluding term loan b hypothetical change interest rate 10 companys current weighted average interest rate variable rate debt obligations 27 would material impact companys interest expense hypothetical 10 change market interest rates would change fair value fixed rate debt december 31 2016 approximately 12 million february 2017 company entered interest rate swap designated cash flow hedge see note 25 “subsequent events” consolidated financial statements part ii item 8 “financial statements supplementary data” annual report form 10k detail foreign currency risk translation exposure company exposed impact foreign currency fluctuations certain countries operates exposure foreign currency movements limited countries operating revenues expenses various subsidiaries business units substantially local currency country operate extent revenues expenses applicable local currency company may enter foreign exchange forward contracts hedge currency risk although operating local currencies may limit impact currency rate fluctuations results operations companys nonunited states subsidiaries business units rate fluctuations may impact consolidated financial position assets liabilities foreign operations translated us dollars preparing companys consolidated balance sheets december 31 2016 companys foreign subsidiaries net current assets defined current assets less current liabilities subject foreign currency translation risk 544 million potential decrease net current assets december 31 2016 hypothetical 10 adverse change quoted foreign currency exchange rates would approximately 54 million sensitivity analysis assumes parallel shift major foreign currency exchange rates versus us dollar exchange rates rarely move direction relative us dollar due positive negative correlations various global currencies assumption may overstate understate impact changing exchange rates individual assets liabilities denominated foreign currency companys hedging operations historically material gains losses operations material companys results operations financial position cash flows company use derivative financial instruments trading speculative purposes international operations subject risks typical international operations including limited differing economic conditions changes political climate potential restrictions movement funds differing tax structures regulations restrictions accordingly future results could adversely impacted changes factors credit risk credit risk possibility loss customers failure make payments according contract terms prior granting credit customer evaluated underwriting process taking consideration prospective customers financial condition past payment experience credit bureau information financial qualitative factors may affect customers ability pay specific credit reviews standard industry credit scoring models used performing evaluation customers financial condition continuously monitored part normal course business companys customers highly leveraged otherwise subject operating regulatory risks based customer account reviews due continued uncertainty global economy company established allowance doubtful accounts 535 million december 31 2016 company large diverse customer base high degree concentration single customer account year ended december 31 2016 companys largest customer accounted less 5 companys net sales even companys credit review analysis mechanisms work properly company may experience financial losses dealings customers parties increase nonpayment nonperformance customers could adversely impact companys results operations financial condition economic disruptions could result significant future charges commodity risk primary raw materials quadgraphics uses print business paper ink energy time companys supply raw materials readily available numerous vendors however based market conditions could change future company generally buys raw materials based upon market prices established vendor part procurement process majority paper used printing process supplied directly clients directly supply paper company makes use purchasing efficiencies supply paper negotiating leading paper vendors uses wide variety paper grades weights sizes rely one vendor addition company generally includes price adjustment clauses sales contracts paper critical raw materials printing process although clauses generally mitigate paper price risk higher paper prices tight paper supplies may impact client demand printed products companys working capital requirements including impact seasonality partially mitigated direct purchasing paper clients company produces majority ink used print production allowing control quality cost supply key inputs raw materials ink manufacturing process purchased externally variety vendors company generally cannot pass clients impact higher electric natural gas energy prices manufacturing costs increases energy prices result higher manufacturing costs certain operations company mitigates risk natural gas hedges appropriate logistic operations however company able pass substantial portion increase fuel prices directly clients result management believes hypothetical 10 change price paper raw materials would significant direct impact companys consolidated annual results operations cash flows however significant increases commodity pricing tight supply could influence future client demand printed products inflation significant impact company historically item 8item 7a quantitative qualitative disclosures market risk company exposed variety market risks may adversely impact company’s results operations financial condition including changes interest foreign currency exchange rates changes economic environment would impact credit positions changes prices certain commodities company’s management takes active role risk management process developed policies procedures require specific administrative business functions assist identification assessment control various risks risk management strategies may fully insulate company adverse impacts due market risks interest rate risk company exposed interest rate risk variable rate debt obligations price risk fixed rate debt finance leases variable rate debt outstanding december 31 2020 primarily comprised 6576 million outstanding term loan december 31 2020 outstanding balance revolving credit facility order reduce variability cash flows interest payments related portion quad’s variablerate debt company entered 2500 million interest rate swap february 2017 1300 million interest rate swap march 2019 classified 3800 million company’s variable rate debt fixed rate debt including impact 3800 million interest rate swap variable rate fixed rate debt quad variable rate debt outstanding 2784 million current weighted average interest rate 34 fixed rate debt finance leases outstanding 6498 million current weighted average interest rate 55 december 31 2020 hypothetical 10 increase market interest rates impacting company’s current weighted average interest rate variable rate debt obligations would material impact company’s interest expense hypothetical 10 change market interest rates would change fair value fixed rate debt december 31 2020 approximately 4 million foreign currency risk translation exposure company exposed impact foreign currency fluctuations certain countries operates exposure foreign currency movements limited countries operating revenues expenses various subsidiaries business units substantially local currency country operate extent revenues expenses applicable local currency company may enter foreign exchange forward contracts hedge currency risk although operating local currencies may limit impact currency rate fluctuations results operations company’s nonunited states subsidiaries business units rate fluctuations may impact consolidated financial position assets liabilities foreign operations translated us dollars preparing company’s consolidated balance sheets december 31 2020 company’s foreign subsidiaries excluding argentina due economy’s status highly inflationary net current assets defined current assets less current liabilities subject foreign currency translation risk 336 million potential decrease net current assets december 31 2020 hypothetical 10 adverse change quoted foreign currency exchange rates would approximately 34 million sensitivity analysis assumes parallel shift major foreign currency exchange rates versus us dollar exchange rates rarely move direction relative us dollar due positive negative correlations various global currencies assumption may overstate understate impact changing exchange rates individual assets liabilities denominated foreign currency company’s hedging operations historically material gains losses operations material company’s results operations financial position cash flows company use derivative financial instruments trading speculative purposes international operations subject risks typical international operations including limited differing economic conditions changes political climate potential restrictions movement funds differing tax structures regulations restrictions accordingly future results could adversely impacted changes factors company considered economy argentina highly inflationary effective june 30 2018 accordance accounting standards codification 830 “foreign currency matters” highly inflationary economy one experienced cumulative inflation approximately 100 percent threeyear period entity required apply revised accounting guidance reporting period following economy deemed highly inflationary result classification functional currency companys argentina subsidiaries changed local currency us dollar beginning july 1 2018 impacts change value local currency monetary assets liabilities reflected consolidated statements operations due argentina economy classification highly inflationary impact foreign currency losses 59 million 28 million years ended december 31 2020 2019 respectively recorded restructuring impairment transactionrelated charges consolidated statements operations company’s operations argentina represented less 20 total consolidated assets december 31 2020 less 20 total consolidated net sales year ended december 31 2020 credit risk credit risk possibility loss client’s failure make payments according contract terms prior granting credit client evaluated underwriting process taking consideration prospective client’s financial condition past payment experience credit bureau information financial qualitative factors may affect client’s ability pay specific credit reviews standard industry credit scoring models used performing evaluation clients’ financial condition continuously monitored part normal course business company’s clients highly leveraged otherwise subject operating regulatory risks based client account reviews continued uncertainty global economy company established allowance credit losses 338 million december 31 2020 company large diverse client base high degree concentration single client account year ended december 31 2020 company’s largest client accounted less 5 company’s net sales even company’s credit review analysis mechanisms work properly company may experience financial losses dealings clients parties increase nonpayment nonperformance clients could adversely impact company’s results operations financial condition economic disruptions including impacts covid19 pandemic could result significant future charges company continuing actively monitor situation related risks around covid19 pandemic commodity risk primary raw materials quad uses print business paper ink energy time company’s supply raw materials readily available numerous vendors however based market conditions could change future company generally buys raw materials based upon market prices established vendor part procurement process approximately half paper used printing process supplied directly company’s clients directly supply paper company makes use purchasing efficiencies supply paper negotiating leading paper vendors uses wide variety paper grades weights sizes rely one vendor addition company generally includes price adjustment clauses sales contracts paper critical raw materials printing process although clauses generally mitigate paper price risk higher paper prices tight paper supplies well changes united states import trade regulations may impact client demand printed products company’s working capital requirements including impact seasonality partially mitigated direct purchasing paper clients company produces majority ink used print production allowing control quality cost supply key inputs raw materials ink manufacturing process purchased externally variety vendors company generally cannot pass clients impact higher electric natural gas energy prices manufacturing costs increases energy prices result higher manufacturing costs certain operations company mitigates risk natural gas hedges appropriate logistic operations however company able pass substantial portion increase fuel prices directly clients result management believes hypothetical 10 change price paper raw materials would significant direct impact company’s consolidated annual results operations cash flows however significant increases commodity pricing tight supply could influence future client demand printed products inflation significant impact company historically item 8 item 8 financial statements supplementary data quarterly financial data unaudited following table sets forth selected financial information eight quarters twoyear period ended december 31 2010 unaudited information prepared company basis consolidated financial statements includes normal recurring adjustments necessary present fairly information read conjunction companys audited consolidated financial statements notes thereto unaudited interim financial information dividend summary financial summary millions except per share data 1reflects results acquired businesses relevant acquisition dates 2fullyear amounts equal sum quarters due rounding 187 million increase class stock july 2 2010 result world color press acquisition 3on july 6 2010 companys class stock commenced trading nyse prior time trading value companys class stock report independent registered public accounting firm board directors shareholders quadgraphics inc subsidiaries audited accompanying consolidated balance sheets quadgraphics inc subsidiaries company december 31 2010 2009 related consolidated statements operations redeemable equity common stock equity noncontrolling interests cash flows three years period ended december 31 2010 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness companys internal control financial reporting accordingly express opinion audit also includes examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position quadgraphics inc subsidiaries december 31 2010 2009 results operations cash flows three years period ended december 31 2010 conformity accounting principles generally accepted united states america deloitte touche llp milwaukee wisconsin march 23 2011 quadgraphics inc consolidated statements operations millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated balance sheets millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements cash flows millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements redeemable equity common stock equity noncontrolling interests millions quadgraphics inc consolidated statements redeemable equity common stock equity noncontrolling interests continued millions see accompanying notes consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies nature operationsquadgraphics inc subsidiaries company quadgraphics operates primarily commercial print portion printing industry printer catalogs consumer magazines retail inserts books directories special interest publications direct marketing materials company also provides imaging logistics services customers companys products services sold primarily throughout north america europe latin america catalogers publishers retailers additionally company manufactures printingrelated auxiliary equipment sold original equipment manufacturers printing companies throughout world principles consolidation basis presentationthe accompanying consolidated financial statements include accounts company whollyowned majorityowned controlled subsidiaries prepared accordance accounting principles generally accepted united states america gaap results operations accounts businesses acquired 2010 2009 2008 included consolidated financial statements dates acquisition see note 3 investments entities company ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting intercompany transactions balances eliminated consolidation foreign operationsassets liabilities denominated foreign currencies translated us dollars exchange rate existing respective balance sheet dates income expense items translated average rates respective periods translation adjustments resulting fluctuations exchange rates recorded separate component accumulated comprehensive income loss consolidated statements redeemable equity common stock equity noncontrolling interests transaction gains losses recorded net earnings loss consolidated statements operations companys international operations conducted europe quadwinkowski sp z oo quadwinkowski well following latin american countries argentina brazil chile colombia mexico peru company owns 85 certain operations argentina consolidates amounts companys consolidated financial statements presents 15 owned company noncontrolling interest company owns 49 certain operations brazil see note 10 discussion 50 operations chile accounts entities using equity method accounting significant noncontrolling interests unconsolidated entities use estimatesthe preparation consolidated financial statements requires use managements estimates assumptions affect reported assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenue expenses reporting periods actual results could differ estimates used accounting items matters including limited allowances doubtful accounts inventory obsolescence asset valuations useful lives goodwill pension postretirement benefits selfinsurance reserves stockbased compensation taxes restructuring provisions contingencies revenue recognitionthe company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer agreements quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies continued certain customers products may stored company future delivery situations company may receive warehouse management fees services provides certain cases delivery billing schedules outlined customer agreement product revenue recognized manufacturing complete title risk loss transfer customer reasonable assurance collectability product returns significant majority products customized however company accrues estimated amount customer credits time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer revenues related companys logistics operations includes delivery printed material recognized upon completion delivery services company also manufactures printingrelated auxiliary equipment ensure industry leading technology printing operations well sell businesses revenue recognized equipment sales time shipment services revenues related installation equipment customer sites recognized upon completion installation payments received customers manufacture equipment prior shipment case installation services prior completion installation cases payments received advance meeting applicable revenue recognition criteria deferred revenue recorded criteria subsequently met services account greater 10 companys consolidated net sales therefore net sales related costs sales products services included separate line items consolidated statements operations certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis byproduct recoveriesthe company records sale byproducts net product sales consolidated statements operations financial instrumentsthe company uses derivative financial instruments purpose hedging commodity foreign exchange exposures exist part ongoing business operations including natural gas forward purchase contracts foreign exchange contracts policy company engage speculative leveraged transactions company hold issue financial instruments trading purposes derivative instruments recorded consolidated balance sheets either assets liabilities measured fair value derivative designated fair value hedge changes quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies continued fair value derivative hedged item attributable hedged risk recognized earnings derivative designated cash flow hedge effective portion changes fair value derivative recorded component accumulated comprehensive income loss recognized consolidated statements operations hedged item affects earnings ineffective portions changes fair value hedges recognized earnings cash flows derivatives accounted cash flow fair value hedges included consolidated statements cash flows category item hedged fair value measurementeffective january 1 2008 company adopted authoritative guidance fair value measurements disclosure respect financial assets liabilities effective january 1 2009 company adopted nonfinancial assets liabilities provisions guidance clarifies definition fair value prescribes methods measuring fair value establishes fair value hierarchy based inputs used measure fair value expands disclosures fair value measurements research developmentresearch development costs related development new products adaptation existing products expensed incurred included cost sales totaled 173 million 143 million 148 million years ended december 31 2010 2009 2008 respectively cash equivalentsthe company considers highly liquid investments original maturities three months less cash equivalents receivablesreceivables stated net allowances doubtful accounts primarily include trade receivables notes receivable single customer comprised 10 companys consolidated net sales 2010 2009 2008 10 companys consolidated accounts receivable december 31 2010 2009 specific customer provisions made review significant outstanding amounts utilizing information customer creditworthiness current economic trends indicates collection doubtful addition provisions made differing rates based upon age receivable companys historical collection experience inventoriesinventories include material labor plant overhead stated lower cost market company also maintains inventory allowances excess obsolete inventories determined part future demand forecasts january 1 2010 company changed method accounting remaining inventories valued lastin lastout lifo method firstin firstout fifo method company believes change preferable fifo inventory method provides meaningful presentation financial position reflects recent costs consolidated balance sheet moreover change also conforms companys raw material work process finished goods single costing method impact inventory valuation change fifo result material impact companys consolidated financial statements december 31 2009 24 domestic paper ink inventories valued using lifo remaining inventories december 31 2009 valued using fifo consist primarily work process raw materials international inventories quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies continued property plant equipmentproperty plant equipment recorded cost depreciated estimated useful lives assets using straightline method financial reporting purposes major improvements extend useful lives existing assets capitalized charged asset accounts repairs maintenance improve extend useful lives respective assets expensed incurred leasehold improvements depreciated shorter lease term estimated useful life respective asset intangible assetsidentifiable intangible assets except intangible assets indefinite lives recognized apart goodwill amortized estimated useful lives identifiable intangible assets indefinite lives amortized impairment longlived intangible assetsthe company evaluates longlived assets intangible assets significant property plant equipment customer relationship intangible assets whenever events circumstances occurred indicate carrying value asset may recoverable determining whether impairment occurred typically requires various estimates assumptions including determining cash flows directly related potentially impaired asset useful life cash flows occur amount assets residual value turn measurement impairment loss requires determination fair value generally estimated ability recover balance assets expected future operating cash flows undiscounted basis impairment determined exist related impairment loss calculated based difference fair value carrying value asset goodwill indefinitelived intangible assetsgoodwill indefinitelived intangible assets reviewed annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value performing analysis company compares reporting units fair value estimated based comparable company market valuations andor expected future discounted cash flows generated reporting unit carrying value carrying value exceeds reporting units fair value company performs fair value measurement calculation determine impairment loss would charged operations period identified income taxesin connection july 2 2010 acquisition world color press inc world color press wcp public registration quadgraphics class stock company changed tax status remaining entities within quadgraphics legal structure c corporation status provisions internal revenue code 1986 internal revenue code amended point forward company subject federal state income taxes prior july 2 2010 majority entities within companys structure corporation company contractually required shareholders quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies continued agreement pay tax distributions shareholders connection companys election taxed corporation certain entities representing less 5 companys book taxable income c corporations administrative legal purposes c corporations taxable legal entity level also certain states impose entity level taxes corporations company recorded deferred income taxes temporary differences financial reporting income tax basis certain assets liabilities applicable income tax rates entities subject tax entity level company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit greater fiftypercent likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination companys worldwide tax provision related tax assets liabilities requires use significant judgment estimates interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain company believes appropriate support positions taken certain positions may successfully challenged taxing authorities company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions determination companys worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions pension postretirement plansthe company assumed certain defined benefit pension postretirement benefit plans part world color press acquisition pension plan costs determined using actuarial methods funded contributions company records amounts relating pension postretirement benefit plans based calculations include various actuarial assumptions including discount rates mortality assumed rates return compensation increases turnover rates health care cost trend rates company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheet generally amortized operating income future periods deferred amount recorded accumulated comprehensive income loss consolidated balance sheet company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors purposes calculating expected return plan assets valued fair value event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 addition result acquisition world color press company participates nine union multiemployer pension plans mepps company records required cash contributions mepps expenses period incurred liability recognized contributions due unpaid consistent accounting defined contribution plans however due significantly underfunded status mepps company intends withdraw mepps quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies continued replace benefits company sponsored pay go defined contribution plan estimated withdrawal liability based withdrawal liability projections received mepps trustees see note 19 discussion stockbased compensationthe company recognizes stockbased compensation expense vesting period stockbased awards made employees directors based fair value instrument time grant accumulated comprehensive income lossaccumulated comprehensive income loss consists unrecognized actuarial gains losses prior service costs pension postretirement plans changes fair value certain derivative financial instruments foreign currency translation adjustments presented consolidated statement redeemable equity common stock equity noncontrolling interests components accumulated comprehensive income loss consists following december 31 transaction gains losses recorded net earnings loss foreign exchange transactions resulted losses 63 million 2010 30 million 2009 16 million 2008 note 2 new accounting pronouncements july 2010 fasb issued accounting guidance amends existing disclosure requirements requires additional quantitative qualitative disclosures concerning financing receivables credit risk exposures allowance credit losses certain aspects accounting guidance effective adopted company fourth quarter 2010 adoption expected material impact companys consolidated financial statements january 2010 fasb issued accounting guidance requires additional disclosures regarding transfers levels 1 2 3 fair value hierarchy well detailed reconciliation recurring level 3 measurements certain aspects accounting guidance effective adopted company first quarter 2010 adoption material impact companys consolidated financial statements may 2009 fasb issued accounting guidance defines subsequent events transactions occur balance sheet date consolidated financial statements issued defines two types subsequent events recognized subsequent events provide additional evidence conditions existed balance sheet date nonrecognized subsequent events provide evidence conditions exist balance sheet date arose consolidated financial statements issued recognized subsequent events quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 2 new accounting pronouncements continued required recognized consolidated financial statements nonrecognized subsequent events required disclosed adoption accounting guidance consistent current practice impact companys consolidated financial statements june 2009 fasb issued accounting guidance introduces requirement perform ongoing assessments determine whether entity variable interest entity whether enterprise primary beneficiary variable interest entity addition accounting guidance clarifies enterprise required consolidate variable interest entity controlling financial interest evidenced 1 power direct activities significantly affect entitys economic performance 2 obligation absorb losses right receive benefits potentially significant variable interest entity additional disclosures required regarding involvement variable interest entities well methodology used determine primary beneficiary variable interest entities company adopted guidance effective january 1 2010 adoption accounting guidance impact companys consolidated financial statements note 3 acquisitions 2010 acquisitions february 28 2010 company acquired 47 interest hgi company llc hgi wisconsinbased commercial printer 100 million october 29 2010 company purchased remaining 53 hgis equity increase companys ownership 100 51 million cash 74 million company stock total purchase price hgi 225 million company also assumed 128 million debt accounted using acquisition method accounting existing gaap hgi specializes short mediumrun books manuals directories publications marketing collateral instorepointofpurchase materials hgi included within north america print related services segment accounted using equity method accounting february 28 2010 october 29 2010 consolidated subsequent october 29 2010 upon acquiring 100 ownership july 2 2010 company acquired world color press provider comprehensive print digital related services retailers catalogers publishers brandedgoods companies businesses north america latin american countries world color press products include advertising inserts circulars catalogs direct mail products magazines books directories digital premedia logistics mail list technologies operations world color press complimentary companys existing business result acquisition expected improve companys ability serve customers reduce management procurement manufacturing distribution costs connection closing acquisition company registered class stock united states securities exchange commission sec securities exchange act 1934 amended july 6 2010 quadgraphics class stock commenced trading new york stock exchange llc nyse symbol quad quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 3 acquisitions continued completion acquisition outstanding world color press common share including common shares issued upon conversion certain world color press preferred shares converted right receive 02154 shares class stock quadgraphics former world color press common shareholders received total 18734045 shares quadgraphics class stock subject fractional share cashouts immediately following completion acquisition shareholders quadgraphics shareholders prior completion acquisition owned approximately 60 outstanding common stock quadgraphics former common shareholders world color press owned approximately 40 outstanding common stock quadgraphics addition share consideration former holders world color press common shares received aggregate cash consideration 484 million approximately 056 per share quadgraphics also provided 449 million cash consideration purchase outstanding world color press warrants fund redemptions payments due equity securities converted common shares including dividends preferred shares based consideration total purchase price consummate acquisition world color press follows concurrent closing acquisition quadgraphics received 2500 million advance revolving credit facility 6892 million term loan portion 123 billion debt financing agreement discussed note 15 amounts well quadgraphics world color press cash used july 2 2010 fund 1replacement quadgraphics former revolving credit facility outstanding borrowings 1061 million including interest owed payment debt issuance costs due upon transaction new debt financing agreement 329 million 2satisfaction certain world color press debt obligations 5806 million included 80 million early repayment premiums funding 1239 million defease world color press unsecured notes 347 million returned company august 2 2010 upon unsecured notes called company resulting 892 million restricted cash related unsecured notes remaining 3transaction costs 455 million paid july 2 2010 excluding debt issuance costs transaction costs incurred quadgraphics expensed incurred accordance acquisition method accounting classified restructuring impairment transactionrelated charges consolidated statements operations quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 3 acquisitions continued 4redemption outstanding world color press equity securities consisting preferred shares warrants deferred share units restricted share units cash consideration paid former world color press common shareholders described total 885 million addition 48 million preferred dividends paid january 25 2010 execution arrangement agreement prior july 2 2010 5distribution 1400 million quadgraphics existing common shareholders 6collateralization letters credit 320 million 7payment settle capital lease 176 million 8other obligations arising acquisition 147 million following unaudited pro forma combined financial information presents companys results though quadgraphics world color press combined beginning respective period pro forma information prepared following considerations 1the unaudited pro forma consolidated financial information prepared using acquisition method accounting existing gaap quadgraphics acquirer accounting purposes 2world color press historical amounts converted canadian generally accepted accounting principles gaap 3on july 21 2009 upon emergence bankruptcy protection canada united states world color press required adopt fresh start financial accounting fresh start accounting world color press undertook comprehensive reevaluation assets liabilities world color press became new entity financial reporting purposes new entity referred successor periods prior fresh start date referred periods predecessor fresh start accounting adopted nearest monthend date july 31 2009 activity july 22 2009 july 31 2009 deemed immaterial purposes pro forma combined financial information 2009 presented predecessor activity january 1 2009 december 31 2009 adjusted reflect activity would successor basis 4the pro forma combined financial information reflect operating synergy savings combined company may achieve result acquisition costs necessary quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 3 acquisitions continued achieve operating synergy savings additional charges necessary result integration tax effects companys transition c corporation world color press acquisition accounted using acquisition method accounting existing gaap company recorded allocation purchase price world color press tangible identifiable intangible assets acquired liabilities assumed based fair values july 2 2010 goodwill recorded based amount purchase price exceeds fair value net assets acquired purchase price allocation follows millions allocation purchase price based valuations performed determine fair value net assets acquisition date company substantially completed purchase price allocation fourth quarter 2010 allocation recorded north america print related services segment international segment see note 5 2009 acquisitions january 30 2009 company acquired final 32 interest quadwinkowski increase companys ownership 100 exchange fair value consideration 89 million quadwinkowskis operations included international segment quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 4 restructuring impairment transactionrelated charges company recorded restructuring impairment transactionrelated charges year ended december 31 2010 2009 2008 follows restructuring charges recorded based restructuring plans committed management part based upon managements best estimates future events changes estimates may require future adjustments restructuring liabilities costs related restructuring activities recorded consolidated statements operations restructuring impairment transactionrelated charges restructuring impairment transactionrelated charges segment see note 24 2010 restructuring events year ended december 31 2010 company recorded 1 415 million transaction costs connection acquisitions world color press hgi 2 386 million severance 2010 plant closures various workforce reductions attributable 4222 headcount reductions 3 329 million impairment charges assets primarily related june 2010 announcement closure pila poland plant august 2010 announcement closure reno nevada plant november 2010 announcement closure fredericksburg virginia plant 4 278 million integration costs connection integration world color press operations quadgraphics 5 217 million various restructuring charges including utility contract termination costs lease termination costs maintain exit idle facilities transaction costs integration costs expensed incurred accordance applicable accounting guidance throughout 2010 company began execute various workforce reduction initiatives related certain corporate administrative functions including closure world color press corporate headquarters montreal quebec well various plant reductions part initiative company recognized 97 million severance charges attributable 424 headcount reductions year ended december 31 2010 incur additional severance charges future prior acquisition world color press implemented retention bonus plan certain employees 57 million expense recognized year ended december 31 2010 november 30 2010 company announced closure fredericksburg virginia plant workforce reductions mt morris illinois plant part closure fredericksburg plant company recognized 12 million severance charges 21 million impairment charges company incur additional severance charges fredericksburg future attributable quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 4 restructuring impairment transactionrelated charges continued 193 headcount reductions part workforce reductions mt morris company recognized 08 million severance charges attributable 441 headcount reductions year ended december 31 2010 incur additional severance charges future october 6 2010 company announced closure st jean sur richelieu st jean plant quebec canada workforce reductions edmonton alberta plant part closure st jean plant company recognized 46 million severance charges incur additional severance charges future attributable 293 headcount reductions company also incurred 06 million restructuring charges related equipment dismantling facility clean costs closure december 31 2010 part workforce reductions edmonton plant company recognized 07 million severance charges attributable 41 headcount reductions year ended december 31 2010 incur additional severance charges future august 5 2010 company announced plant closures reno nevada clarksville tennessee corinth mississippi cincinnati lebanon ohio well acceleration previously announced plant closure dyersburg tennessee operations plants consolidated existing facilities part integration efforts streamline operations company plants ceased production 2010 part closures company recognized 126 million severance charges attributable 2123 headcount reductions 64 million impairment charges 44 million facility equipment dismantling restructuring charges 40 million longterm utility contract costs 03 million lease termination costs year ended december 31 2010 addition result closure clarksville plant onetime pension curtailment credit 34 million recorded june 16 2010 company announced closure printing plant pila poland consolidation operations companys wyszkow poland printing plant company began equipment relocations july completed majority relocations end 2010 part plant closure company recognized 33 million severance charges attributable 707 headcount reductions year ended december 31 2010 company also recognized 244 million asset impairment charges 12 million equipment dismantling charges restructuring charges year ended december 31 2010 restructuring charges incurred 2010 included 90 million estimated lease termination costs 56 million facility restructuring charges 2009 restructuring events year ended december 31 2009 company recorded 1 101 million severance 2009 workforce reductions attributable 965 headcount reductions 2 11 million lease termination costs employees terminated ceased employment december 31 2009 payments associated employee terminations substantially complete end 2009 quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 4 restructuring impairment transactionrelated charges continued 2008 restructuring events year ended december 31 2008 company recorded 1 89 million impairment charges related idled property plant equipment 2 16 million severance 2008 workforce reductions attributable 100 headcount reductions 3 03 million lease termination costs employees terminated ceased employment december 31 2008 payments associated employee terminations substantially complete end 2008 restructuring reserve activity impacting companys restructuring reserve follows certain restructuring initiatives assumed company acquisition world color press related reserves included purchase price allocation initiatives related closure certain facilities north america well various workforce reductions announced prior acquisition company expects majority restructuring reserves paid within next twelve months note 5 goodwill intangible assets goodwill 7603 million recorded acquisition world color press valuation world color press balance sheet see note 3 goodwill tested annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value based assessment completed october 31 2010 indications impairment companys goodwill indefinitelived intangible assets fair value reporting units substantially excess carrying value goodwill december 2010 2009 2008 include accumulated impairment losses quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 5 goodwill intangible assets continued goodwill december 31 2010 2009 follows components intangible assets december 31 2010 2009 follows year ended december 31 2010 gross carrying amount intangible assets increased 3936 million primarily due 3867 million intangible assets customer relationships acquisition world color press discussed note 3 quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 5 goodwill intangible assets continued amortization expense intangible assets 352 million 21 million 22 million years ended december 31 2010 2009 2008 respectively following table outlines estimated future amortization expense related intangible assets december 31 2010 note 6 receivables transactions affecting allowance doubtful accounts years ended december 31 2010 2009 2008 follows note 7 inventories components companys inventories december 31 2010 2009 follows company recognized lifo benefit expense 35 million 10 million years ended december 31 2009 2008 respectively lifo benefit expense 2010 due changing accounting method january 1 2010 discussed note 1 quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 8 property plant equipment components companys property plant equipment december 31 2010 2009 follows consists computer equipment vehicles furniture fixtures leasehold improvements communication related equipment result certain restructuring integration activities 2010 company recorded impairment charge 300 million 2010 reduce carrying amount certain buildings production equipment fair value primarily related closure pila poland reno nevada manufacturing facilities 2009 events changes circumstances indicate carrying value property plant equipment may recoverable 2008 company recorded impairment charge 89 million reduce carrying amount certain production equipment fair value company recognized depreciation expense 2393 million 1946 million 2021 million years ended december 31 2010 2009 2008 respectively 2009 fire companys west virginia location damaged equipment property within facility company received 33 million 192 million insurance carrier relating equipment related repair costs 2010 2009 respectively casualty gains 71 million 122 million recorded selling general administrative expenses equipment years ended december 31 2010 2009 respectively assets held sale certain closed world color press facilities considered held sale net book value assets held sale 200 million december 31 2010 assets valued fair value determined part world color press purchase price allocation reflects ordinary liquidation value less estimated costs sell assets held sale included prepaid expenses current assets consolidated balance sheets assets considered held sale december 31 2009 note 9 restricted cash restricted cash included december 31 2010 consolidated balance sheet primarily relates required transaction payments assumed acquisition world color press see note 3 restricted cash december 31 2009 quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 9 restricted cash continued following table summarizes details restricted cash december 31 2010 note 10 equity method investments unconsolidated entities company 49 ownership interest plural editora e gráfica plural commercial printer based são paulo brazil 50 ownership interest world color chile sa chile commercial printer based santiago chile companys ownership interest plural accounted using equity method accounting periods presented companys ownership interest chile accounted using equity method accounting since july 2 2010 company acquired ownership interest chile part world color press acquisition companys percentage plurals chiles net results operations recorded line item entitled equity earnings unconsolidated entities companys condensed consolidated statements operations included within international segment combined condensed balance sheet plural chile december 31 2010 2009 presented combined condensed statements operations plural chile years ended december 31 2010 2009 2008 presented quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 11 accrued liabilities components companys accrued liabilities december 31 2010 2009 follows employeerelated liabilities consist primarily payroll bonus profit sharing vacation health workers compensation note 12 commitments contingencies commitments company firm commitments 484 million purchase press finishing equipment december 31 2010 addition december 31 2010 company commitments 261 million severance payments related announced employee restructuring activities litigation normal course business company named defendant various lawsuits claims asserted company opinion management liabilities ultimately result lawsuits expected material adverse effect consolidated financial statements company environmental reserves company subject various laws regulations government policies relating health safety generation storage transportation disposal hazardous substances environment protection general company provides expenses associated environmental remediation obligations amounts probable reasonably estimated accruals adjusted new information develops circumstances change discounted company believes compliance laws regulations government policies material respects furthermore company anticipate maintaining compliance environmental statutes material adverse effect upon companys competitive consolidated financial position quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 13 world color press insolvency proceedings january 20 2008 quebecor world inc qwi 53 subsidiaries filed creditor protection companies creditors arrangement act ccaa canada following day quebecor world usa inc 52 domestic indirect subsidiaries us debtors filed voluntary petitions relief chapter 11 us bankruptcy code united states connection insolvency proceedings canada us qwi formulated canadian plan reorganization compromise pursuant ccaa us debtors formulated plan reorganization pursuant u bankruptcy code respective plans reorganization provided coordinated restructuring qwi debtor subsidiaries compromise certain claims respective creditors reorganization qwis capital structure plans sanctioned quebec superior court confirmed us bankruptcy court respectively became effective july 21 2009 result qwi us debtors emerged bankruptcy protection qwi changed name world color press inc although qwi us debtors emerged respective insolvency proceedings ongoing primarily purpose resolving claims filed proceedings extent claims allowed holders claims entitled receive recovery plans nature recovery dependent upon type classification claims regard respect certain types claims holders thereof entitled receive cash andor unsecured notes holders certain types claims entitled receive combination world color press common shares preferred shares warrants however acquisition world color press company world color press common shares preferred shares warrants exchanged quadgraphics common stock cash described note 3 respect claims asserted holders thereof entitled priority cash recovery company estimated 261 million recorded claims yet paid december 31 2010 obligation classified consolidated balance sheet amounts owing satisfaction bankruptcy claims respect unsecured claims held creditors operating subsidiary debtors quebecor world usa inc class 3 claims us plan provides upon allowance claim creditor holding allowed class 3 claim entitled receive unsecured note amount exceed 50 creditors allowed class 3 claim provided however aggregate principal amount unsecured notes cannot exceed 750 million event total allowed class 3 claims exceeds 1500 million creditor holding allowed class 3 claim receive pro rata share 750 million unsecured notes issued together accrued interest thereon connection companys acquisition world color press unsecured notes defeased pursuant terms conditions applicable unsecured notes indenture 1239 million representing maximum principal amount notes could issued ie 750 million together interest would accrue unsecured notes maturity date july 15 2013 5 prepayment redemption premium deposited trustee unsecured notes indenture upon companys acquisition world color press defeasance unsecured notes company elected redeem unsecured notes end provided requisite thirty day notice trustee unsecured notes indenture upon expiration thirty day notice period unsecured notes quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 13 world color press insolvency proceedings continued redeemed trustee retaining 892 million account principal amount redeemed unsecured notes together accrued interest redemption date august 2 2010 5 prepayment redemption premium balance 347 million returned company 892 million held trustee unsecured notes indenture classified restricted cash consolidated balance sheet december 31 2010 company recorded 525 million representing 446 million principal 57 million accrued interest 22 million prepayment penalties 892 million unsecured notes issued consolidated balance sheet event excess remains allowance payment class 3 claims amount revert company liabilities recorded bankruptcy matters based managements current assessment amount likely paid possible identify final amount priority cash claims amount class 3 claims ultimately allowed us bankruptcy court therefore amounts owing satisfaction bankruptcy claims consolidated balance sheet could materially higher amounts estimated amounts payable account unsecured notes could reach maximum aggregate principal amount 750 million light substantial number amount claims filed claims resolution process may take considerable time complete note 14 income taxes connection july 2 2010 acquisition world color press see note 3 public registration quadgraphics class stock company changed tax status certain entities within quadgraphics legal structure c corporation status provisions internal revenue code point forward entities subject federal state income taxes impact conversion c corporation status resulted recognition net shortterm deferred tax assets 236 million net longterm deferred tax liabilities 2233 million increase accumulated comprehensive loss due impact foreign currency translation 08 million recognition income tax expense year ended 2010 2005 million january 1 2005 july 1 2010 quadgraphics contractually required shareholders agreement pay tax distributions shareholders connection companys election taxed corporation result companys issuance shares class stock pursuant acquisition world color press termination corporation election shareholders agreement amended terminate obligation pay tax distributions periods following july 1 2010 revise certain provisions concerning adjustments tax distributions related corporation periods prior july 1 2010 shareholders corporation years receive adjusting payments ultimately increased tax liability required reimburse company tax liability decreases previously estimated distributed prior periods adjustments could required 1 finalization unfiled tax year 2010 2 audits necessary adjustments prior periods adjustments made recorded retained earnings consolidated balance sheet quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 14 income taxes continued income taxes based following components earnings income taxes equity earnings unconsolidated entities years ended december 31 2010 2009 2008 components income tax expense consist following years ended december 31 2010 2009 2008 following table outlines reconciliation differences federal statutory tax rate companys effective tax rate quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 14 income taxes continued deferred income taxes significant deferred tax assets liabilities december 31 2010 july 2 2010 including impacts purchase price allocation december 31 2009 follows net deferred tax assets liabilities classified consolidated balance sheets follows december 31 2010 company foreign net operating loss carry forwards 3780 million state net operating loss carry forwards 5528 million foreign net operating loss carry forwards 965 million available without expiration remainder expires 2030 state net operating loss carry forwards expire varying amounts beginning 2010 continuing 2030 company also 623 million various state foreign credit quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 14 income taxes continued carry forwards 321 million available without expiration remainder expires beginning 2010 2025 december 31 2010 company recorded valuation allowance 2277 million deferred tax assets expected realized july 2 2010 december 31 2010 companys icelandic subsidiary gross net operating loss carry forwards 6257 million 9589 million respectively net operating losses expire varying amounts 2020 july 2 2010 december 31 2010 company recorded full valuation allowance deferred tax assets expected realized company process winding liquidating subsidiary result forfeit iceland net operating losses due full valuation allowance recorded impact future financial statements upon final liquidation subsidiary companys policy remit earnings foreign subsidiaries extent resultant foreign income taxes creditable united states company considers earnings permanently invested accordingly company currently provide additional united states foreign income taxes would become payable upon remission undistributed earnings foreign subsidiaries cumulative undistributed earnings subsidiaries december 31 2010 material uncertain tax positions following table summarizes activity companys liability unrecognized tax benefits 578 million would impact companys effective tax rate recognized december 31 2010 reasonably possible 46 million total amount unrecognized tax benefits decrease within 12 months due resolution audits statute expirations company classifies interest expense related penalties related income tax uncertainties component income tax expense total interest expense related tax uncertainties recognized consolidated statements operations years ended december 31 2010 2009 2008 00 million 05 million 01 million respectively penalties quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 14 income taxes continued amount 00 million 00 million 01 million recognized years ended december 31 2010 2009 2008 respectively accrued interest 64 million 33 million related income tax uncertainties reported component longterm liabilities consolidated balance sheets december 31 2010 2009 respectively accrued penalties 08 million 03 million related income tax uncertainties reported longterm liabilities consolidated balance sheets december 31 2010 2009 respectively company tax years 2007 2010 remain open subject examination internal revenue service tax years 1995 2010 remain open subject examination companys various major state jurisdictions within united states canada poland company longer subject nonus income tax examinations tax authorities years prior 2005 note 15 debt longterm debt consists following december 31 2010 2009 athese senior notes weightedaverage interest rate 752 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2036 various tranches notes collateralized certain us land buildings press finishing equipment terms master note security agreement bon april 23 2010 company entered 123 billion debt financing agreement certain lenders consisting 7000 million term loan net 108 million original issue discount 5300 million revolving credit facility fund transactionrelated payments world color press acquisition refinance quadgraphics existing revolving credit facilities refinance certain world color press debt obligations outstanding 123 billion financing guaranteed certain subsidiaries company secured substantially companys subsidiary guarantors us certain extent canadian assets unencumbered quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 15 debt continued prior date new debt financing agreement 7000 million term loan matures july 1 2016 requires variable quarterly principal payments bears interest variable interest rate primarily based libor subject 15 libor minimum rate 5300 million revolving credit facility matures july 1 2014 bears interest variable interest rate primarily based libor issued letters credit decrease borrowing availability revolving credit facility december 31 2010 company borrowings 570 million revolving credit agreement well 304 million issued letters credit leaving 4426 million available future borrowings cthe companys unsecured revolving credit agreement 2000 million replaced 5300 million revolving credit agreement described b december 16 2008 debt related companys international operations refinanced entering secured credit agreement facilities agreement facilities agreement includes euro denominated term loan multicurrency revolving credit facility term loan principal payments commenced december 2009 matures december 16 2015 multicurrency revolving credit facility used financing working capital general business needs expire december 16 2011 december 31 2010 companys international operations borrowings 149 million multicurrency revolving credit facility leaving 18 million available future borrowing december 31 2009 companys international operations borrowings 155 million multicurrency revolving credit facility leaving 20 million available future borrowing terms facilities agreement include certain financial covenants guarantee facilities agreement company security agreement includes collateralizing substantially quadwinkowski assets facilities bear interest aggregate warsaw interbank offered rate wibor euro interbank offered rate euribor margin ethe company domestic term note 120 million principal payments commenced august 2010 extend june 2012 remaining outstanding principal accrued interest due obligations bear interest one month libor plus 300 note collateralized personal property terms security agreement fthe company revolving line credit agreement 40 million maturity date june 2011 obligations bear interest prime rate december 31 2010 company borrowings 10 million unsecured revolving credit agreement leaving 30 million available future borrowing revolving credit agreement collateralized personal property terms security agreement based upon interest rates available company borrowings similar terms maturities fair value companys debt approximately 15 billion december 31 2010 companys various lending arrangements include certain financial covenants financial terms numbers ratios defined respective debt agreements among covenants quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 15 debt continued company must maintain following covenant restrictive measurement included •on rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda shall exceed 375 100 twelve months ended december 31 2010 companys leverage ratio 236 100 ratio step 350 100 december 31 2012 step 325 100 december 31 2013 •on rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 300 100 twelve months ended december 31 2010 companys interest coverage ratio 601 100 ratio step 325 100 december 31 2011 step 350 100 december 31 2012 •on rolling twelvemonth basis fixed charge coverage ratio defined consolidated ebitda rent expense interest rent expense shall less 150 100 twelve months ended december 31 2010 companys fixed charge coverage ratio 294 100 •consolidated net worth least 7458 million plus 40 positive consolidated net income cumulatively year december 31 2010 companys consolidated net worth 141 billion covenants also include certain limitations acquisitions indebtedness liens dividends repurchases capital stock pursuant companys 123 billion debt financing agreement company prohibited paying dividends repurchasing capital stock making distributions among limited situations annual dividends distributions exceed 600 million 2011 2012 starting january 1 2013 company additional dividend restrictions based free cash flow defined debt financing agreement companys total leverage ratio greater 275 100 restrictions companys total leverage ratio less 275 100 total leverage ratio defined debt financing agreement december 31 2010 quadgraphics compliance debt covenants complete 123 billion debt financing agreement company incurred total 458 million debt issuance costs debt issuance costs amortized straightline basis six four year maturities term loan revolving credit facility respectively classified longterm assets consolidated balance sheet quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 15 debt continued approximate annual principal amounts due longterm debt follows years ending december 31 note 16 lease obligations company entered various master lease agreements press finishing equipment leases provide company options purchase related equipment termination value defined various early buyout dates term lease leases accounted capital leases consolidated balance sheets assets recorded capital leases follows december 31 2010 2009 december 31 2010 future maturities capitalized leases consisted following quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 16 lease obligations continued company various operating lease agreements future minimum rental commitments noncancelable leases follows rent expense operating lease agreements totaled 300 million 107 million 90 million years ended december 31 2010 2009 2008 respectively note 17 financial instruments fair value measurements certain assets liabilities required recorded fair value recurring basis assets liabilities recorded fair value nonrecurring basis generally result acquisitions impairment charges fair value determined based exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants company records fair value forward contracts pension plans postretirement plans recurring basis assets measured fair value nonrecurring basis include property plant equipment assets held sale goodwill intangible assets fair value cash equivalents receivables restricted cash accounts payable accrued liabilities amounts owing satisfaction bankruptcy claims approximate carrying values december 31 2010 2009 see note 15 discussion fair value companys debt note 19 details level 1 level 2 inputs related employee retirement plans gaap also classifies inputs used measure fair value following hierarchy level 1 quoted prices active markets identical assets liabilities level 2 quoted prices active markets similar assets liabilities quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability level 3 unobservable inputs asset liability level 3 assets liabilities december 31 2010 quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 17 financial instruments fair value measurements continued company operations countries transactions outside functional currencies periodically enters foreign exchange contracts used hedge net exposures changes foreign currency exchange rates designated either cash flow hedges fair value hedges gains losses net foreign currency hedges intended offset losses gains underlying net exposures effort reduce earnings volatility resulting fluctuating foreign currency exchange rates company also periodically enters foreign exchange contracts firm equipment purchase contracts denominated foreign currencies natural gas forward purchase contracts hedge increases costs estimated market values determined based upon quoted market prices open foreign currency exchange contracts december 31 2010 companys commodity contracts qualified exception related normal purchases sales company takes delivery normal course business years ended december 31 2010 2009 2008 hedge ineffectiveness material note 18 longterm liabilities longterm liabilities consist following december 31 2010 2009 note 19 employee retirement plans company assumed multiple defined benefit pension plans postretirement benefit plans became participant multiemployer pension plans part world color press acquisition prior acquisition company defined contribution plan referred personal enrichment plan pep plan effective july 2 2010 company split pep plan two separate plans formally established quadgraphics employee stock ownership plan esop plan quadgraphics diversified plan diversified plan defined contribution plans diversified plan comprised participant directed 401k contributions company match profit sharingcontributions company 401k matching contributions 62 million 60 million 68 million years ended december 31 2010 2009 2008 respectively esop plan holds profit sharing contributions company stock made discretion quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 19 employee retirement plans continued companys board directors annual profit sharing contributions totaled 148 million 00 220 million years ended december 31 2010 2009 2008 respectively 2010 company loaned 96 million pep plan fund annual common stock purchases employees retired terminated employment company loan made anticipation companys public registration quadgraphics common shares owned pep plan part companys overall public registration class stock loan settled december 31 2010 79 million loan repaid cash remaining 17 million applied prepayment 2010 profit sharing contribution approved companys board directors company assumed multiple defined contribution plans us canada part acquisition wcp company match us plan frozen prior acquisition cash contributions made 2010 plan merged pep plan january 1 2011 matching contributions canadian plans material year ended december 31 2010 defined benefit plans postretirement benefit plans company sponsors various funded unfunded pension plans portion fulltime employees us canada benefits generally based upon years service compensation plans funded conformity applicable government regulations company funds least minimum amount required qualified plans using actuarial cost methods assumptions acceptable government regulations addition pension benefits company provides certain healthcare life insurance benefits retired employees pension postretirement obligations calculated using generally accepted actuarial methods measured december 31 components net periodic pension postretirement benefit expense follows quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 19 employee retirement plans continued changes pension postretirement benefit obligations recognized comprehensive income loss follows following provides reconciliation benefit obligation plan assets funded status pension postretirement plans december 31 2010 quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 19 employee retirement plans continued summary underfunded unfunded pension benefit plans projected benefit obligation excess plan assets december 31 2010 follows summary pension plans accumulated benefit obligations excess plan assets december 31 2010 follows amounts recognized consolidated balance sheets december 31 2010 follows amounts accumulated comprehensive income loss consolidated balance sheets yet recognized components net periodic pension postretirement benefit expense december 31 2010 follows actuarial gains losses excess 10 greater projected benefit obligation marketrelated value plan assets recognized component net periodic benefit costs average remaining service period plans active employees unrecognized prior service costs credit also recognized component net periodic benefit cost average remaining service period plans active employees amounts accumulated comprehensive income quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 19 employee retirement plans continued loss expected recognized components net periodic pension postretirement benefit expense next year follows weighted average assumptions separately pension postretirement benefit plans follows company determines assumed discount rate based index highquality corporate bond yields matchedfunding yield curve analysis measurement date assumed health care cost trend rate used measuring accumulated postretirement benefit obligation 85 end 2010 expected gradually decline 2024 ultimate trend rate 49 remains level thereafter onepercentage point change assumed health care cost trend rates would following effects march 2010 comprehensive health care reform legislation passed patient protection affordable care act hr 3590 health care education affordability reconciliation act hr 4872 acts impact provisions remeasurement retiree plan liabilities resulted 39 million increase postretirement plans benefit obligation quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 19 employee retirement plans continued estimated contributions benefit payments company expects make cash contributions 537 million excluding benefit payments defined benefit pension plans 2011 actual pension contributions may differ based funding calculations company may choose make additional discretionary contributions estimate future benefit payments made plans follows plan assets investment strategy company follows disciplined investment strategy provides diversification investments asset class foreign currency sector company pension committee approved investment policies different pension plans establish longterm asset mix targets based several factors including historical returns achieved worldwide investment markets time horizon pension plans obligations investment risk plans allocation range asset class developed whereby mix equities fixedincome investments used provide appropriate riskadjusted longterm return plan assets third party investment managers employed invest assets passivelyindexed activelymanaged strategies investment returns risks monitored ongoing basis addition companys canadian pension plans partly hedge exposure foreign currency risk derivatives used hedge 50 exposure us dollar euro british pound japanese yen gains losses derivatives offset corresponding change canadian dollar value hedged assets derivatives strictly used hedging purposes speculative purposes target allocations plan assets weightedaverage basis 65 equity securities 35 fixedincome including cash equivalents actual asset allocation december 31 2010 approximately 64 equity 35 debt securities 1 equity investments diversified country issuer industry sector fixed income securities consist government bonds corporate bonds diversified industries types investments consist currency forward contracts fixed income futures contracts real estate funds expected longterm rate return assets assumption selected first identifying expected range longterm rates return major asset class expected longterm rates return developed based longterm historical averages current expectations future returns anticipated inflation rates expected longterm rate return plan assets calculated quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 19 employee retirement plans continued weighting asset class extent individual pension plans different target asset mixes expected longterm rate return assets may differ across plans fair values companys pension plan assets december 31 2010 asset category follows level 3 assets liabilities december 31 2010 company segregated plan assets following major categories levels determining fair value december 31 2010 cash equivalentscarrying value approximates fair value assets classified level 1 fixed incomethis category consists bonds shortterm fixed income securities fair valued based compilation primarily observable market information broker quotes overthecounter markets classified level 2 equitiesthis category consists equity investments equity pooled funds assets classified level 1 level 2 fair value equity investments based quoted prices active market fair value equity pooled funds based funds net asset value nav established funds administrator othersthis category consists mainly currency forward contracts classified level 1 level 2 currency forwards categorized level 2 valued based compilation primarily observable market information valuation methodologies described may generate fair value calculation may indicative net realizable value future fair values company believes valuation methodologies used appropriate use different methodologies assumptions calculating fair value could result different amounts company invests various assets valuation determined nav company believes nav representative fair value reporting date significant restrictions redemption investments reasons indicate investment would redeemed amount different nav quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 19 employee retirement plans continued risk management directly invested funds concentration risk monitored specific guidelines investment manager mandates investment manager mandates developed companys external investment advisor specify diversification standards maximum exposure per issuer concentration limits per type security industry country applicable investments made pooled funds investment mandates funds reviewed companys external investment advisor determine investment objectives guidelines consistent companys overall pension plan risk management objectives managing plan assets review manage risk associated funded status risk interest rate risk market risk counterparty risk liquidity risk operational risk liability management asset class diversification central risk management approach integral overall investment strategy given process place ensure proper diversification portfolio management believes company pension plan assets exposed significant concentration risk multiemployer pension plans result acquisition world color press company participates number mepps company records required cash contributions mepps expenses period incurred liability recognized contributions due unpaid exception recognition withdrawal liability recorded longterm liabilities since july 2 2010 acquisition date december 31 2010 benefit expense recorded mepps 24 million due significantly underfunded status mepps company intends withdraw mepps replace pension benefits company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded 1001 million withdrawal liability part purchase price allocation mepps based withdrawal estimates provided plans trustees note 20 earnings loss per share attributable quadgraphics common shareholders basic earnings loss per share attributable quadgraphics common shareholders computed dividing net earnings loss attributable quadgraphics common shareholders weighted average common shares outstanding 375 million 283 million 287 million shares years ended december 31 2010 2009 2008 respectively diluted earnings loss per share attributable quadgraphics common shareholders includes effect dilutive stock options company uses treasury stock method calculate effect outstanding stock options requires company compute total proceeds sum 1 amount employee must pay upon exercise award 2 amount unearned stockbased compensation costs attributed future services 3 amount tax benefits would credited additional paidin capital assuming exercise award stock options total employee proceeds exercise stock options exceed average fair value stock options period quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 20 earnings loss per share attributable quadgraphics common shareholders continued antidilutive effect earnings per share accordingly company excludes calculation due net loss attributable quadgraphics common shareholders incurred year ended december 31 2010 assumed exercise stock options antidilutive therefore included diluted loss per share attributable quadgraphics common shareholders calculation antidilutive stock options purchase 15 million shares class stock excluded computations diluted net earnings per share 2009 2008 reconciliations numerator denominator basic diluted per share computations companys common stock summarized follows note 21 stock incentive programs company nonqualified stock option plans allow granting options key employees directors stock options generally vest rate 5 10 per year expire 90 days respective employees termination company accounts sharebased compensation measuring recognizing compensation expense based estimated fair values sharebased awards june 24 2010 shareholders company approved quadgraphics inc 2010 omnibus incentive plan omnibus plan two complimentary purposes 1 attract retain outstanding individuals serve officers directors employees consultants 2 increase shareholder value concurrent july 2 2010 closing world color press acquisition 23 million shares class stock approved issuance companys omnibus plan quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 21 stock incentive programs continued december 31 2010 company authorized 61 million shares class stock grant incentive plans 23 million shares available future grants companys incentive plans company granted 495000 options 395000 options january 1 2010 2009 respectively grant date fair value options 1878 1624 2313 per share grants years ended december 31 2010 2009 2008 respectively assumed forfeitures fair value stock option grant estimated date grant using blackscholes option pricing model following weighted average assumptions company determined expected volatility based volatility comparable company stock average riskfree interest rate based united states treasury security rate effect grant date term expected life expected life based term vesting period grant adjusted historical experience vesting dividend yield included dividends credited option holders company recognizes compensation expense stock options requisite service period vesting award recorded total stockbased compensation expense selling general administrative expenses 51 million 44 million 39 million years ended december 31 2010 2009 2008 respectively total future compensation expense stock options granted december 31 2010 310 million expected recognized weightedaverage vesting period 40 years following table summary companys stock option activity year ended december 31 2010 quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 21 stock incentive programs continued intrinsic value options exercisable options outstanding december 31 2010 2009 2008 based fair value stock price sharebased compensation activity years ended december 31 2010 2009 2008 noted note 22 shareholders equity company three classes common stock 800 million shares 0025 par value class stock authorized 400 million shares including 74 million shares treasury stock issued december 31 2010 213 million shares including 85 million shares treasury stock issued december 31 2009 213 million shares including 83 million shares treasury stock issued december 31 2008 discussed note 3 increase 2010 187 million shares class stock issued represents consideration provided world color press common shareholders exchange world color press common shares 800 million shares 0025 par value class b stock authorized 150 million shares including 807800 shares treasury stock december 31 2010 592 shares treasury december 31 2009 2008 issued december 31 2010 2009 2008 200 million shares 0025 par value class c stock authorized 05 million shares including 02 million shares treasury stock issued december 31 2010 2009 2008 companys class c stock held esop plan owned transferred company employee benefit plan intended satisfy qualification requirements section 401 internal revenue code company also 05 million shares 001 par value preferred stock authorized none issued december 31 2010 2009 2008 company present plans issue preferred stock accordance articles incorporation dividends paid equally class b class c shares january 2 2010 board directors declared 050 cash dividend share class b class c stock outstanding shareholders record january 2 2010 paid january 22 2010 july 2 2010 part acquisition world color press cash distribution 1400 million quadgraphics preacquisition common shareholders december 18 2009 board directors declared 050 cash dividend share class b class c stock outstanding shareholders record december 18 2009 paid december 22 2009 december 19 2008 board directors declared 050 cash dividend share class b class c stock outstanding shareholders record december 19 2008 paid december 23 2008 accordance articles incorporation share class stock one vote per share class b class c common share ten votes per share matters voted upon companys shareholders liquidation rights three classes stock quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 22 shareholders equity continued redeemable equity company follows applicable gaap sec authoritative guidance redeemable stock requires company record class c stock full redemption value balance sheet date extent redemption securities solely within control company terms articles incorporation class c shares required owned qualified employee retirement plan company holder class c stock continuous right class c stock repurchased company beginning july 6 2010 fair value companys class c redeemable common stock based trading price class stock nyse prior date fair value companys class c redeemable common stock established last day year price adjusted throughout following year dividends declared year value reduced dividend declaration date forward year end fair value adjusted current valuation methodology based variety qualitative quantitative factors including nature business history enterprise economic outlook general condition specific industries company operates financial condition business companys ability generate cash flow determination fair market value employed comparable public company analysis examined valuation multiples companies deemed comparable whole part company discounted cash flow analysis determined present value projected future cash flows business company regularly assessed underlying assumptions used valuation methodologies result company utilized annual fair value common stock transactions required terms company equity documents redemption value class c qualified employee retirement plan shares december 31 2010 2009 2008 totaled 106 million 84 million 83 million respectively class c shares redeemed company years ended december 31 2010 2008 year ended december 31 2009 redemption features eliminated 4362 redeemable class c shares weighted average price 3175 per share prior january 24 2010 terms company pep plan class stock held participant accounts associated profit sharing contributions made prior december 31 1999 pre2000 accounts could distributed participant upon retirement termination form stock subject automatic call provision pep plan amended january 24 2010 change forms distribution pre2000 accounts result pep plan amendment class shares pre2000 accounts required classified redeemable june 30 2010 class stock resulting exercised stock options vested stock options also classified redeemable equity result commencement july 6 2010 trading companys class stock nyse shares related companys nonqualified stock option plans registered sec third quarter 2010 readily tradable market exists companys class shares thereby eliminating put right applicable stock option agreements combination events resulted 1299 million reclassified redeemable equity common stock equity consolidated balance sheet 2010 quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 22 shareholders equity continued redemption value class shares december 31 2010 readily tradable market redemption value class shares december 31 2009 2008 totaled 1331 million 1582 million respectively included 243 million 257 million respectively aggregate intrinsic value outstanding unexercised vested stock options redemption features eliminated 33 million 11 million 06 million redeemable class shares held former employees weighted average price 3936 3175 4625 per share years ended december 31 2010 2009 2008 respectively subsequent changes redemption value securities due changes stock valuation charged retained earnings decreases redemption value due elimination redemption features credited additional paidin capital retained earnings year ended december 31 2010 balance redeemable equity decreased 1309 million 1299 million result elimination redemption features class stock discussed additional information regarding changes redeemable equity years ended december 31 2010 2009 2008 provided table quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 23 comprehensive income loss following table summarizes companys comprehensive income loss years ended december 31 2010 2009 note 24 segment information company operates primarily commercial print portion printing industry related product service offerings designed offer customers complete solutions communicating messages target audiences companys operating reportable segments aligned chief operating decision maker company currently manages business result world color press acquisition discussed note 3 united states print related services segment expanded include world color press canadian operations referred north america print related services segment world color press latin american operations included within international segment companys reportable operating segments product service offerings summarized north america print related services north america print related services segment includes companys united states canada printing operations managed one integrated platform segments products include catalogs consumer magazines special interest publications direct marketing materials retail inserts related service offerings include digital photography digital imaging binding mailing distribution data optimization analytics services segment also includes design development manufacture service printingrelated auxiliary equipment well manufacture ink international segment includes companys printing operations europe latin america segment provides printed products related services consistent north america print related services segment exception printingrelated auxiliary equipment quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 24 segment information continued corporate consists unallocated general administrative activities associated expenses including part executive legal finance information technology human resources restructuring impairment transactionrelated charges years ended december 31 2010 2009 2008 described note 4 included operating incomeloss segment results quadgraphics inc notes consolidated financial statements continued millions except share per share data unless otherwise indicated note 25 geographic area product information table presents net sales longlived assets geographic region amounts table differ segment data presented segment information footnote operating segment includes operations multiple geographic regions based companys management reporting structure table presents consolidated net sales products services item 9item 8 financial statements supplementary data quarterly financial data unaudited following table sets forth selected financial information eight quarters twoyear period ended december 31 2012 unaudited information prepared company basis consolidated financial statements includes normal recurring adjustments necessary present information fairly read conjunction companys audited consolidated financial statements notes thereto 1 reflects results acquired businesses relevant acquisition dates 2 results operations companys canadian operations included loss discontinued operations see note 4 discontinued operations consolidated financial statements item 8 annual report form 10k companys canadian operations originally acquired company part world color press acquisition july 2 2010 march 1 2012 company completed sale canadian operations transcontinental resulting gain disposal discontinued operations see note 3 description business exchange transaction report independent registered public accounting firm board directors shareholders quadgraphics inc subsidiaries audited accompanying consolidated balance sheets quadgraphics inc subsidiaries company december 31 2012 2011 related consolidated statements operations comprehensive income loss redeemable equity common stock equity noncontrolling interests cash flows three years period ended december 31 2012 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position quadgraphics inc subsidiaries december 31 2012 2011 results operations cash flows three years period ended december 31 2012 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states companys internal control financial reporting december 31 2012 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission report dated march 8 2013 expressed unqualified opinion companys internal control financial reporting deloitte touche llp milwaukee wisconsin march 8 2013 report independent registered public accounting firm board directors shareholders quadgraphics inc subsidiaries audited internal control financial reporting quadgraphics inc subsidiaries company december 31 2012 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission companys management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying managements report internal control financial reporting responsibility express opinion companys internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion companys internal control financial reporting process designed supervision companys principal executive principal financial officers persons performing similar functions effected companys board directors management personnel provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting including possibility collusion improper management override controls material misstatements due error fraud may prevented detected timely basis also projections evaluation effectiveness internal control financial reporting future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion company maintained material respects effective internal control financial reporting december 31 2012 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states consolidated financial statements year ended december 31 2012 company report dated march 8 2013 expressed unqualified opinion consolidated financial statements deloitte touche llp milwaukee wisconsin march 8 2013 quadgraphics inc consolidated statements operations millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements comprehensive income loss millions see accompanying notes consolidated financial statements quadgraphics inc consolidated balance sheets millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements cash flows millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements redeemable equity common stock equity noncontrolling interests millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements redeemable equity common stock equity noncontrolling interests continued millions see accompanying notes consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies nature operationsquadgraphics inc subsidiaries company quadgraphics operates primarily commercial print portion printing industry printer catalogs consumer magazines retail inserts books directories special interest publications direct marketing materials company also provides imaging logistics services customers companys products services sold primarily throughout united states europe latin america catalogers publishers retailers additionally company manufactures printingrelated auxiliary equipment sold original equipment manufacturers printing companies throughout world principles consolidation basis presentationthe accompanying consolidated financial statements include accounts company whollyowned majorityowned controlled subsidiaries prepared accordance accounting principles generally accepted united states america gaap results operations accounts businesses acquired included consolidated financial statements dates acquisition see note 3 investments entities company ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting investments entities company exert significant influence control ownership interest less 20 accounted using cost method accounting intercompany transactions balances eliminated consolidation discontinued operationsthe results operations companys canadian operations reported discontinued operations periods presented sale canadian operations completed march 1 2012 corresponding canadian assets liabilities longer included consolidated balance sheet december 31 2012 december 31 2011 canadian assets liabilities presented accordance authoritative literature assets held sale accordance authoritative literature company elected separately disclose cash flows related canadian discontinued operations see note 4 information companys sale canadian operations foreign operationsassets liabilities denominated foreign currencies translated us dollars exchange rate existing respective balance sheet dates income expense items translated average rates respective periods translation adjustments resulting fluctuations exchange rates recorded separate component accumulated comprehensive income loss consolidated statements redeemable equity common stock equity noncontrolling interests transaction gains losses recorded selling general administrative expenses consolidated statements operations companys international operations conducted europe quadwinkowski sp z oo quadwinkowski well following latin american countries argentina brazil chile colombia mexico peru company owns 85 certain operations argentina consolidates amounts companys consolidated financial statements presents 15 owned company noncontrolling interest company owns 49 certain operations brazil 50 operations chile accounts entities using equity method accounting see note 11 discussion significant noncontrolling interests unconsolidated entities use estimatesthe preparation consolidated financial statements requires use managements estimates assumptions affect reported assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenue expenses reporting periods actual results could differ estimates used accounting items matters including limited allowances doubtful accounts inventory obsolescence asset valuations useful lives goodwill pension postretirement benefits selfinsurance reserves stockbased compensation taxes restructuring provisions contingencies quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated revenue recognitionthe company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides certain cases delivery billing schedules outlined customer agreement product revenue recognized manufacturing complete title risk loss transfer customer reasonable assurance collectibility product returns significant majority products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer revenues related companys logistics operations includes delivery printed material recognized upon completion delivery services company also manufactures printingrelated auxiliary equipment ensure industry leading technology printing operations well sell businesses revenue generally recognized equipment sales time shipment revenue services related installation equipment customer sites recognized upon completion installation payments received customers manufacture equipment prior shipment case installation services prior completion installation cases payments received advance meeting applicable revenue recognition criteria deferred revenue recorded criteria revenue recognition subsequently met services account greater 10 companys consolidated net sales therefore net sales related costs sales products services included separate line items consolidated statements operations certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis byproduct recoveriesthe company records sale byproducts net product sales consolidated statements operations financial instrumentsthe company uses derivative financial instruments purpose hedging commodity foreign exchange exposures exist part ongoing business operations including natural gas forward purchase contracts foreign exchange contracts policy company engage speculative leveraged transactions company hold issue financial instruments trading purposes derivative instruments recorded consolidated balance sheets either assets liabilities measured fair value derivative designated fair value hedge changes fair value derivative hedged item attributable hedged risk recognized earnings derivative designated cash flow hedge effective portion changes fair value derivative recorded component accumulated comprehensive income loss recognized consolidated statements operations hedged item affects earnings quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated ineffective portions changes fair value hedges recognized earnings cash flows derivatives accounted cash flow fair value hedges included consolidated statements cash flows category item hedged fair value measurementthe company applies fair value accounting assets liabilities recognized disclosed fair value consolidated financial statements recurring basis fair value represents amount would received selling asset paid transfer liability orderly transaction market participants measurement date determining fair value measurements assets liabilities required recorded fair value company considers principal advantageous market marketbased risk measurements assumptions market participants would use pricing asset liability research developmentresearch development costs related development new products adaptation existing products expensed incurred included cost sales totaled 132 million 169 million 173 million years ended december 31 2012 2011 2010 respectively cash equivalentsthe company considers highly liquid investments original maturities three months less cash equivalents receivablesreceivables stated net allowances doubtful accounts single customer comprised 10 companys consolidated net sales 2012 2011 2010 10 companys consolidated accounts receivable december 31 2012 2011 specific customer provisions made review significant outstanding amounts utilizing information customer creditworthiness current economic trends indicates collection doubtful addition provisions made differing rates based upon age receivable companys historical collection experience inventoriesinventories include material labor plant overhead stated lower cost market company also maintains inventory reserves excess obsolete inventories determined part future demand forecasts december 31 2012 2011 inventories valued using firstin firstout fifo method property plant equipmentproperty plant equipment recorded cost depreciated estimated useful lives assets using straightline method financial reporting purposes major improvements extend useful lives existing assets capitalized charged asset accounts repairs maintenance significantly improve extend useful lives respective assets expensed incurred leasehold improvements depreciated shorter lease term estimated useful life respective asset intangible assetsidentifiable intangible assets except intangible assets indefinite lives recognized apart goodwill amortized estimated useful lives identifiable intangible assets indefinite lives amortized impairment longlived intangible assetsthe company evaluates longlived assets intangible assets significant property plant equipment customer relationship intangible assets whenever events circumstances occurred indicate carrying value asset may recoverable determining whether impairment occurred typically requires various estimates assumptions quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated including determining cash flows directly related potentially impaired asset useful life cash flows occur amount assets residual value turn measurement impairment loss requires determination recoverability generally estimated ability recover balance assets expected future operating cash flows undiscounted basis impairment determined exist related impairment loss calculated based difference fair value carrying value asset goodwill indefinitelived intangible assetsgoodwill indefinitelived intangible assets reviewed annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value performing analysis company compares reporting units fair value estimated based comparable company market valuations andor expected future discounted cash flows generated reporting unit carrying value carrying value exceeds reporting units fair value company performs fair value measurement calculation determine impairment loss would charged operations period identified see note 6 discussion income taxesin connection july 2 2010 acquisition world color press inc world color press public registration quadgraphics class stock company changed tax status remaining entities within quadgraphics legal structure c corporation status provisions internal revenue code 1986 amended internal revenue code point forward company subject federal state income taxes prior july 2 2010 majority entities within companys structure corporation company contractually required shareholders agreement pay tax distributions shareholders connection companys election taxed corporation certain entities representing less 5 companys book taxable income c corporations administrative legal purposes c corporations taxable legal entity level also certain states impose entity level taxes corporations company recorded deferred income taxes temporary differences financial reporting income tax basis certain assets liabilities applicable income tax rates entities subject tax entity level company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations company determines deferred income tax assets realized future excess net recorded amount adjustment valuation allowance made would reduce companys provision income taxes company regularly audited foreign domestic tax authorities audits occasionally result proposed assessments ultimate resolution might result company owing additional taxes including cases penalties interest company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit greater fiftypercent likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated determination companys worldwide tax provision related tax assets liabilities requires use significant judgment estimates interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain company believes appropriate support positions taken certain positions may successfully challenged taxing authorities company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions determination companys worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions year ended december 31 2012 company recorded adjustment correct deferred tax liabilities related property plant equipment associated 2010 acquisition world color press company believes correction material consolidated financial statements year ended december 31 2012 prior period consolidated financial statements impact adjustment decrease longterm deferred income tax liabilities goodwill 425 million 192 million respectively increase longterm liabilities 233 million impact consolidated statements operations consolidated statements comprehensive income consolidated statements cash flows consolidated statements redeemable equity common stock equity noncontrolling interests pension postretirement plansthe company assumed certain defined benefit pension postretirement benefit plans part world color press acquisition pension plan costs determined using actuarial methods funded contributions company records amounts relating pension postretirement benefit plans based calculations include various actuarial assumptions including discount rates mortality assumed rates return compensation increases turnover rates health care cost trend rates company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheet generally amortized operating income future periods deferred amount recorded accumulated comprehensive income loss consolidated balance sheet company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors purposes calculating expected return plan assets valued fair value event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 addition result acquisition world color press company participated six union multiemployer pension plans mepps company records required cash contributions mepps expenses period incurred liability recognized contributions due unpaid consistent accounting defined contribution plans due significantly underfunded status mepps time world color press acquisition company withdrew significant mepps replaced benefits company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded estimated withdrawal liability mepps part purchase price allocation process based information received mepps trustees estimated withdrawal liability updated new withdrawal liability projections provided plans trustees final withdrawal liability determined paid exact amount withdrawal liability could higher lower estimate depending among things nature timing triggering events funded status plans time see note 20 discussion stockbased compensationthe company recognizes stockbased compensation expense vesting period stockbased awards made employees directors based fair value instrument time grant quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated accumulated comprehensive income lossaccumulated comprehensive income loss consists unrecognized actuarial gains losses prior service costs pension postretirement plans foreign currency translation adjustments presented consolidated statements redeemable equity common stock equity noncontrolling interests components accumulated comprehensive income loss consist following december 31 2012 2011 2010 transaction gains losses included selling general administrative expenses consolidated statements operations foreign exchange transactions resulted gainslosses 04 million 2012 45 million 2011 68 million 2010 supplemental cash flow informationcertain supplemental cash flow information related company consists following december 31 2012 2011 2010 note 2 new accounting pronouncements may 2011 financial accounting standards board fasb issued new guidance fair value measurements new guidance amends definition fair value measurement principles disclosure requirements eliminate differences gaap international financial reporting standards new guidance requires new quantitative qualitative disclosures sensitivity recurring level 3 measurement disclosures well transfers level 1 level 2 fair value hierarchy company adopted guidance effective january 1 2012 adoption guidance impacted companys disclosures impact companys consolidated financial position results operations cash flows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 3 acquisitions strategic investments 2012 acquisitions strategic investments march 28 2012 company entered strategic partnership indiabased manipal technologies limited manipaltech whereby quadgraphics paid 181 million minority equity ownership interest manipaltech one indias largest providers printing services supports clients marketing branding communication needs print services technology solutions companys investment manipaltech accounted cost method investment recorded within longterm assets consolidated balance sheet october 10 2012 company vertis holdings inc “vertis” announced execution asset purchase agreement asset agreement pursuant quadgraphics marketing llc wholly owned subsidiary company would acquire substantially assets comprising vertis businesses vertis leading provider retail advertising inserts direct marketing instore marketing solutions accordance terms asset agreement company made 259 million deposit held escrow applied purchase price upon closure deal december 31 2012 deposit classified prepaid expenses current assets consolidated balance sheet facilitate intended sale vertis along subsidiaries filed voluntary petitions relief chapter 11 united states bankruptcy code time filed documents seeking us bankruptcy courts approval proposed asset agreement company completion acquisition subject us bankruptcy court approval well customary conditions regulatory approvals including expiration termination applicable waiting period hartscottrodino antitrust improvements act 1976 asset agreement company comprised initial stalking horse bid us bankruptcy courtsupervised auction process section 363 united states bankruptcy code vertis advisors evaluated competing bids submitted order ensure received highest best offer assets november 26 2012 vertis filed notice us bankruptcy court naming quadgraphics successful bidder december 6 2012 us bankruptcy court approved sale agreement vertis acquisition completed january 16 2013 information regarding acquisition see note 26 2011 acquisitions strategic investments july 12 2011 company transcontinental inc transcontinental entered definitive agreement whereby quadgraphics acquired 100 transcontinentals mexican operations exchange companys canadian operations transcontinentals mexican operations printed magazines catalogs retail inserts books printed materials employed approximately 900 people among three facilities azcapotzalco toluca xochimilco mexico transcontinental mexican operations included within international segment company completed acquisition transcontinentals mexican operations september 8 2011 completed sale companys canadian operations march 1 2012 see note 4 discussion sale canadian discontinued operations connection acquisition transcontinentals mexican operations definitive agreement required company deposit 500 million canadian dollars transcontinental canadian operations sale completed company elected hedge foreign currency exchange rate exposure related 500 million canadian dollar deposit entering shortterm foreign currency forward exchange contracts company hedged foreign currency exposure march 1 2012 sale canadian net assets refund 500 million quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated canadian dollar deposit occurred year ended december 31 2012 16 million realized marktomarket losses derivative contracts offset 16 million transaction gains translation foreign currency denominated deposit within selling general administrative expenses year ended december 31 2011 05 million unrealized marktomarket loss 22 million realized marktomarket gain derivative contracts offset 17 million transaction losses translation foreign currency denominated deposit within selling general administrative expenses fair value determination foreign currency forward exchange contracts categorized level 2 fair value hierarchy see note 18 definition level 2 inputs companys determination mexican acquired operations fair value 636 million 636 million purchase price 61 million paid cash 12 million paid 2011 49 million paid 2012 remaining purchase price 575 million satisfied exchange transaction companys canadian business acquisition accounted using acquisition method accounting company recorded allocation purchase price acquired tangible identifiable intangible assets liabilities assumed based fair values acquisition date goodwill recorded based amount purchase price exceeds fair value net assets acquired final purchase price allocation follows purchase price allocation based valuations performed determine fair value net assets acquisition date purchase price 636 million estimated utilizing discounted cash flow model following income approach incorporates various assumptions including expected future revenue growth profit margins capital expenditures working capital levels weightedaverage cost capital nonrecurring fair value measurement classified level 3 valuation hierarchy see note 18 definition level 3 inputs purchased identifiable intangible assets amortized straightline basis six years results operations acquired businesses included since respective dates acquisition accompanying consolidated financial statements pro forma information related acquisition included impact companys consolidated results operations considered immaterial 2010 acquisitions strategic investments february 28 2010 company acquired 47 interest hgi company llc hgi wisconsinbased commercial printer 100 million october 29 2010 company purchased remaining 53 hgis equity increase companys ownership 100 51 million cash 74 million company stock total purchase price hgi 225 million company also assumed 128 million debt acquisition accounted using acquisition method accounting hgi specializes short mediumrun books manuals directories publications marketing collateral instorepointofpurchase materials hgi included within quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated united states print related services segment hgi accounted using equity method accounting february 28 2010 october 29 2010 consolidated subsequent october 29 2010 upon acquiring 100 ownership july 2 2010 company acquired world color press provider comprehensive print digital related services retailers catalogers publishers brandedgoods companies businesses north america latin american countries world color press products include advertising inserts catalogs direct mail products magazines books directories digital premedia logistics mail list technologies world color press operations included within united states print related services international segments connection closing acquisition company registered class stock united states securities exchange commission sec securities exchange act 1934 amended july 6 2010 quadgraphics class stock commenced trading new york stock exchange llc nyse symbol quad completion acquisition outstanding world color press common share including common shares issued upon conversion certain world color press preferred shares converted right receive 02154 shares class stock quadgraphics former world color press common shareholders received total 18734045 shares quadgraphics class stock subject fractional share cashouts immediately following completion acquisition shareholders quadgraphics shareholders prior completion acquisition owned approximately 60 outstanding common stock quadgraphics former common shareholders world color press owned approximately 40 outstanding common stock quadgraphics addition share consideration former holders world color press common shares received aggregate cash consideration 484 million approximately 056 per share quadgraphics also provided 449 million cash consideration purchase outstanding world color press warrants fund redemptions payments due equity securities converted common shares including dividends preferred shares based consideration total purchase price consummate acquisition world color press follows concurrent closing acquisition quadgraphics received 2500 million advance existing revolving credit facility 6892 million term loan portion companys former 123 billion debt financing agreement amounts well quadgraphics world color press cash used july 2 2010 fund 1 replacement quadgraphics former revolving credit facility outstanding borrowings 1061 million including interest owed payment debt issuance costs due upon transaction new debt financing agreement 329 million 2 satisfaction certain world color press debt obligations 5806 million included 80 million early repayment premiums funding 1239 million defease world color press unsecured notes quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 347 million returned company august 2 2010 upon unsecured notes called company resulting 892 million restricted cash related unsecured notes remaining 3 transaction costs 455 million paid july 2 2010 excluding debt issuance costs transaction costs incurred quadgraphics expensed incurred accordance acquisition method accounting classified restructuring impairment transactionrelated charges consolidated statements operations 4 redemption outstanding world color press equity securities consisting preferred shares warrants deferred share units restricted share units cash consideration paid former world color press common shareholders described total 885 million addition 48 million preferred dividends paid january 25 2010 execution arrangement agreement prior july 2 2010 5 distribution 1400 million quadgraphics existing common shareholders 6 collateralization letters credit 320 million 7 payment settle capital lease 176 million 8 obligations arising acquisition 147 million following unaudited pro forma combined financial information presents companys results though quadgraphics world color press combined january 1 2010 pro forma information prepared following considerations 1 unaudited pro forma consolidated financial information prepared using acquisition method accounting quadgraphics acquirer accounting purposes 2 world color press historical amounts converted canadian generally accepted accounting principles gaap 3 pro forma combined financial information reflect operating synergy savings combined company may achieve result acquisition costs necessary achieve operating synergy savings additional charges necessary result integration tax effects companys transition c corporation 4 pro forma amounts restated exclude canadian discontinued operations see note 4 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 4 discontinued operations march 1 2012 company completed sale canadian operations transcontinental see note 3 description business exchange transaction transcontinental assumed pension postretirement obligations pertaining approximately 1500 canadian employees located among seven facilities sold transcontinental gain disposal discontinued operations net tax finalized 2012 determined follows 1 tax purposes disposal discontinued operations resulted longterm capital loss deferred tax asset recorded offsetting valuation allowance deferred tax asset recorded reflect expected value asset recovered following table summarizes results operations canadian operations included loss discontinued operations consolidated statements operations years ended december 31 2012 2011 2010 results 2010 july 2 2010 december 31 2010 period time company owned canadian operations prior march 1 2012 closing company continued execute restructuring events related plant closures workforce reductions restructuring initiatives well transaction costs related sale canadian operations due initiatives company recognized 17 million 451 million 150 million restructuring impairment transactionrelated costs years ended december 31 2012 2011 2010 respectively within discontinued operations consolidated statements operations 2011 restructuring expense included 179 million charge recognize pension curtailment loss 139 million goodwill impairment charge third quarter 2011 pending sale canadian discontinued operations due carrying value canadian net assets exceeding estimated fair value mexican net assets acquired transcontinental due yearend benefit plan actuarial valuation canadian pension liability increased 346 million december 31 2011 result net assets canadian operations sold decreased fair value mexican operations acquired quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summarized current noncurrent assets liabilities held sale discontinued canadian operations included consolidated balance sheet december 31 2011 note 5 restructuring impairment transactionrelated charges company recorded restructuring impairment transactionrelated charges years ended december 31 2012 2011 2010 follows costs related activities recorded consolidated statements operations restructuring impairment transactionrelated charges see note 24 restructuring impairment transactionrelated charges segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated restructuring charges company began restructuring program 2010 related eliminating excess manufacturing capacity properly aligning cost structure part integration july 2 2010 world color press acquisition company since expanded restructuring program include cost reduction programs associated september 8 2011 transcontinental acquisition well cost reduction programs since 2010 company announced total 16 plant closures reduced headcount approximately 6300 year ended december 31 2012 company announced closures dubuque iowa jonesboro arkansas limerick ireland two plants mexico city mexico result restructuring programs company recorded following charges year ended december 31 2012 • employee termination charges 272 million recorded company year ended december 31 2012 company reduced workforce facility consolidations involuntary separation programs • integration costs 446 million recorded company year ended december 31 2012 integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 194 million recorded company year ended december 31 2012 consisted 1 193 million vacant facility carrying costs 2 73 million equipment infrastructure removal costs closed plants 3 80 million lease exit charges restructuring charges presented net 128 million curtailment gain resulting amendment postretirement medical benefit plan 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable year ended december 31 2012 year ended december 31 2011 company announced closures richmond virginia stillwater oklahoma buffalo new york mt morris illinois plants result restructuring programs company recorded following charges year ended december 31 2011 • employee termination charges 295 million recorded company year ended december 31 2011 company reduced workforce facility consolidations involuntary separation programs • integration costs 457 million recorded company year ended december 31 2011 integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies integration costs include 64 million stockbased compensation expense related termination liquidation stock options grant new options see note 22 included integration costs 156 million gain collection note receivable june 2008 sale world color press european operations december 31 2011 • restructuring charges 221 million recorded company year ended december 31 2011 consisted 1 151 million vacant facility carrying costs 2 77 million equipment infrastructure removal costs closed plants 3 63 million lease exit charges restructuring charges presented net postretirement benefit obligation curtailment gain 70 million year ended december 31 2011 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated year ended december 31 2010 company announced closures dyersburg tennessee fredericksburg virginia reno nevada clarksville tennessee corinth mississippi cincinnati lebanon ohio pila poland result restructuring programs company recorded following charges year ended december 31 2010 • employee termination charges 267 million recorded company year ended december 31 2010 company reduced workforce facility consolidations involuntary separation programs • integration costs 278 million recorded company year ended december 31 2010 integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related acquisition world color press • restructuring charges 191 million recorded company year ended december 31 2010 consisted 1 135 million vacant facility carrying costs 2 16 million equipment infrastructure removal costs closed plants 3 74 million lease exit charges restructuring charges presented net pension curtailment gain 34 million year ended december 31 2010 restructuring charges recorded based plans committed management part based upon managements best estimates future events changes estimates may require future restructuring charges adjustments restructuring liabilities company expects incur additional restructuring charges related initiatives impairment charges result plant closures related capacity reduction restructuring initiatives certain buildings equipment longer utilized production company recognized impairment charges 230 million 138 million 329 million years ended december 31 2012 2011 2010 respectively fair values impaired assets determined company level 3 fair value hierarchy estimated based broker quotes internal expertise related current marketplace conditions see note 18 definition level 3 inputs assets written estimated fair values time impairment transactionrelated charges company incurs transactionrelated charges primarily consisting professional service fees related business acquisition divestiture activities including acquisition vertis 2011 business exchange transaction transcontinental 2010 acquisition world color press company recognized transactionrelated charges 41 million 29 million 410 million years ended december 31 2012 2011 2010 respectively transaction costs expensed incurred accordance applicable accounting guidance business combinations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reserves restructuring impairment transactionrelated charges activity impacting companys reserves restructuring impairment transactionrelated charges years ended december 31 2012 2011 follows reserves classified current liabilities consolidated balance sheets company expects reserves paid within next twelve months note 6 goodwill intangible assets goodwill tested annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value one indicators change business climate may evidenced among things decline companys market capitalization book value sustained period time third quarter 2012 companys market capitalization remained companys carrying value equity approximately one year company considered sustained period time result company conducted interim goodwill impairment assessment united states latin american reporting units included comparing carrying amount net assets including goodwill reporting unit respective fair value july 31 2012 date interim assessment european reporting unit goodwill associated fair value determined using equal weighting income market approaches fair value determination categorized level 3 fair value hierarchy income approach company determined fair value based estimated future cash flows discounted estimated weightedaverage cost capital reflects overall level inherent risk rate return outside investor would expect earn market approach company derived fair value reporting units based market multiples comparable publiclytraded companies management concluded impairment existed july 31 2012 estimated fair value companys united states latin american reporting units exceeded respective carrying amounts quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company completed annual goodwill impairment assessment october 31 2012 utilizing approach performed interim impairment assessment estimated fair value companys united states latin american reporting units exceeded respective carrying amounts result management concluded impairment existed october 31 2012 fair value reporting units exceed respective carrying values greater ten percent additional indications impairment identified october 31 2012 december 31 2012 goodwill related continuing operations december 31 2012 2011 include accumulated impairment losses goodwill impairment recorded related continuing operations years ended december 31 2012 2011 however 139 million goodwill impairment recorded related canadian discontinued operations year ended december 31 2011 see note 4 activity impacting companys goodwill years ended december 31 2012 2011 follows components intangible assets december 31 2012 2011 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated amortization expense intangible assets 663 million 658 million 340 million years ended december 31 2012 2011 2010 respectively following table outlines estimated future amortization expense related intangible assets december 31 2012 note 7 receivables transactions affecting allowance doubtful accounts years ended december 31 2012 2011 2010 follows note 8 inventories components companys inventories december 31 2012 2011 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 9 property plant equipment components companys property plant equipment december 31 2012 2011 follows consists computer equipment vehicles furniture fixtures leasehold improvements communication related equipment company recorded impairment charges 230 million 138 million 300 million years ended december 31 2012 2011 2010 respectively reduce carrying amounts certain buildings production equipment longer utilized fair value see note 5 year ended december 31 2010 company received 33 million insurance carrier repair costs damaged equipment property related 2009 fire companys west virginia facility casualty gains 71 million recorded selling general administrative expenses consolidated statements operations equipment year ended december 31 2010 company recognized depreciation expense 2723 million 2788 million 2334 million years ended december 31 2012 2011 2010 respectively assets held sale continuing operations certain closed facilities considered held sale net book value assets held sale continuing operations 42 million 143 million december 31 2012 2011 respectively assets valued fair value less estimated costs sell fair values determined company level 3 fair value hierarchy estimated based broker quotes internal expertise related current marketplace conditions assets held sale continuing operations included prepaid expenses current assets consolidated balance sheets quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 10 restricted cash components companys restricted cash december 31 2012 2011 follows note 11 equity method investments unconsolidated entities company 49 ownership interest plural editora e gráfica plural commercial printer based são paulo brazil 50 ownership interest world color chile sa chile commercial printer based santiago chile companys ownership interest plural accounted using equity method accounting periods presented companys ownership interest chile accounted using equity method accounting since july 2 2010 company acquired ownership interest chile part world color press acquisition companys equity earnings plurals chiles operations recorded line item entitled equity earnings unconsolidated entities companys consolidated statements operations included within international segment combined condensed balance sheets plural chile december 31 2012 2011 presented combined condensed statements operations plural chile years ended december 31 2012 2011 2010 presented quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 12 accrued liabilities components companys accrued liabilities december 31 2012 2011 follows employeerelated liabilities consist primarily payroll bonus profit sharing vacation health workers compensation note 13 commitments contingencies commitments company firm commitments 122 million purchase press finishing equipment december 31 2012 litigation normal course business company named defendant various lawsuits claims asserted company opinion management liabilities ultimately result lawsuits expected material impact consolidated financial statements company environmental reserves company subject various laws regulations government policies relating health safety generation storage transportation disposal hazardous substances environment protection general company provides expenses associated environmental remediation obligations amounts probable reasonably estimated reserves adjusted new information develops circumstances change environmental reserves discounted company believes compliance laws regulations government policies material respects furthermore company anticipate maintaining compliance environmental statutes material impact upon companys competitive consolidated financial position note 14 world color press insolvency proceedings company continues manage bankruptcy claim settlement process quebecor world inc qwi bankruptcy proceedings united states canada qwi changed name world color press inc upon emerging bankruptcy july 21 2009 extent claims allowed holders claims entitled receive recovery nature recovery dependent upon type classification claims regard respect certain types claims holders thereof entitled receive cash andor unsecured notes holders certain types claims entitled receive combination quadgraphics common stock cash accordance terms world color press acquisition agreement quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated respect claims asserted holders thereof entitled priority cash recovery company estimated approximately 93 million 195 million recorded claims yet paid december 31 2012 december 31 2011 respectively obligation classified amounts owing satisfaction bankruptcy claims consolidated balance sheets respect unsecured claims held creditors operating subsidiary debtors quebecor world usa inc class 3 claims allowed class 3 claim entitled receive unsecured note amount exceed 50 creditors allowed class 3 claim provided however aggregate principal amount unsecured notes cannot exceed 750 million event total allowed class 3 claims exceeds 1500 million creditor holding allowed class 3 claim receive pro rata share 750 million unsecured notes issued together accrued interest 5 prepayment redemption premium thereon total 892 million connection world color press acquisition company required deposit maximum potential payout class 3 claim creditors 892 million trustee amount remain trustee either 1 paid creditor allowed class 3 claim 2 upon class 3 claims resolved excess amount revert company year ended december 31 2012 149 million paid class 3 claim creditors december 31 2012 605 million remains classified restricted cash consolidated balance sheets see note 10 based companys analysis outstanding claims company recorded liability classified unsecured notes issued consolidated balance sheet 238 million december 31 2012 liabilities recorded bankruptcy matters based managements current assessment amount likely paid possible identify final amount priority cash claims amount class 3 claims ultimately allowed us bankruptcy court therefore amounts owing satisfaction bankruptcy claims consolidated balance sheet could materially higher amounts estimated would require additional cash payments made amount exceeding companys estimate amounts payable related unsecured notes could reach maximum aggregate principal amount 750 million would require additional cash payment maximum potential exposure already funded trust would require additional liability expense recorded companys estimate total class 3 claim payments made 525 million 287 million paid 238 million remaining estimated liability december 31 2012 light substantial number amount claims filed claims resolution process take considerable time complete note 15 income taxes connection july 2 2010 acquisition world color press see note 3 public registration quadgraphics class stock company changed tax status certain entities within quadgraphics legal structure c corporation status provisions internal revenue code point forward entities subject federal state income taxes impact conversion c corporation status resulted recognition net shortterm deferred tax assets 236 million net longterm deferred tax liabilities quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 2233 million increase accumulated comprehensive loss due impact foreign currency translation 08 million recognition income tax expense year ended december 31 2010 2005 million january 1 2005 july 1 2010 quadgraphics contractually required shareholders agreement pay tax distributions shareholders connection companys election taxed corporation result companys issuance shares class stock pursuant acquisition world color press termination corporation election shareholders agreement amended terminate obligation pay tax distributions periods following july 1 2010 revise certain provisions concerning adjustments tax distributions related corporation periods prior july 1 2010 shareholders corporation years receive adjusting payments ultimately increased tax liability required reimburse company tax liability decreases previously estimated distributed prior periods adjustments could required audits necessary adjustments prior periods adjustments made recorded retained earnings consolidated balance sheet income taxes based following components earnings loss continuing operations income taxes equity earnings unconsolidated entities years ended december 31 2012 2011 2010 components income tax expense benefit consists following years ended december 31 2012 2011 2010 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table outlines reconciliation differences federal statutory tax rate companys effective tax rate years ended december 31 2012 2011 2010 1 2012 company settled preacquisition world color press income tax examinations internal revenue service resulting 300 million income tax benefit quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated deferred income taxes significant deferred tax assets liabilities december 31 2012 2011 follows net deferred tax assets liabilities classified consolidated balance sheets december 31 2012 2011 follows december 31 2012 company federal net operating loss carry forwards 38 million foreign net operating loss carry forwards 1900 million state net operating loss carry forwards 6264 million federal net operating loss carry forward expires 2029 foreign net operating loss carry forwards 1050 million available without expiration remainder expire 2027 state net operating loss carry forwards expire varying amounts 2032 company also 490 million various state credit carry forwards 308 million available without expiration remainder expire 2027 december 31 2012 company recorded valuation allowance 1740 million deferred tax assets expected realized quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company considers foreign earnings indefinitely invested accordingly company currently provide additional united states foreign income taxes would become payable upon remission undistributed earnings foreign subsidiaries cumulative undistributed earnings subsidiaries december 31 2012 material uncertain tax provisions following table summarizes activity companys liability unrecognized tax benefits december 31 2012 2011 2010 december 31 2012 465 million unrecognized tax benefits would impact companys effective tax rate recognized amount reasonably possible 49 million total amount unrecognized tax benefits decrease within 12 months due resolution audits statute expirations 2012 company settled preacquisition world color press income tax examinations internal revenue service resulting net income tax benefit 300 million included net benefit 757 million related reduction uncertain tax positions prior years addition impact companys uncertain tax positions settlement examinations required adjustment certain tax attributes company impact adjustments tax attributes resulted net income tax expense 467 million company classifies interest expense related penalties related income tax uncertainties component income tax expense total interest income expense related tax uncertainties recognized consolidated statements operations years ended december 31 2012 2011 2010 11 million 07 million 0 respectively penalties amount 0 01 million 0 recognized years ended december 31 2012 2011 2010 respectively accrued interest 23 million 11 million related income tax uncertainties reported component current liabilities accrued interest 28 million 47 million related income tax uncertainties reported component longterm liabilities consolidated balance sheets december 31 2012 2011 respectively accrued penalties 05 million 02 million related income tax uncertainties reported current liabilities accrued penalties 04 million 07 million related income tax uncertainties reported longterm liabilities consolidated balance sheets december 31 2012 2011 respectively company tax years 2009 2012 remain open subject examination internal revenue service tax years 2003 2012 remain open subject examination companys quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated various major state jurisdictions within united states poland company longer subject income tax examinations tax authorities years prior 2007 note 16 debt longterm debt consisted following december 31 2012 2011 1 senior notes weightedaverage interest rate 749 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2036 various tranches notes collateralized certain us land buildings press finishing equipment terms master note security agreement 2 july 26 2011 last amended december 19 2012 company entered 15 billion debt financing agreement certain lenders reduce companys borrowing costs lower interest rates create flexibility higher revolving credit capacity improvement financial terms 15 billion debt financing agreement includes three different loan facilities term loan term loan b revolving credit facility revolving credit facility amount 8500 million term loan aggregate amount 4500 million initial term five years extended additional year part december 19 2012 amendment mature july 25 2017 term loan b amount 2000 million net 10 million original issue discount term seven years maturing july 25 2018 subject certain required amortization borrowings revolving facility term loan loans made 15 billion debt financing agreement bear interest london interbank offered rate libor plus 225 125 excess alternate base rate term loan b loans bear interest libor plus 300 libor floor 100 200 excess alternative base rate companys option december 31 2012 company borrowings 500 million revolving credit agreement well 453 million issued letters credit leaving 7547 million available future borrowings proceeds term loan term loan b revolving credit facility used repay outstanding balances terminate companys previous 123 billion debt financing agreement included 7000 million term loan 5300 million revolving credit facility well pay new debt issuance costs incurred refinancing 15 billion debt financing agreement secured substantially assets united states encumbered companys financing agreements 3 december 16 2008 debt related companys international operations refinanced entering secured credit agreement facilities agreement facilities agreement includes euro denominated term loan multicurrency revolving credit facility term loan principal payments commenced december 2009 matures december 16 2015 multicurrency revolving credit facility used financing working capital general business needs renewed 2012 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated expire december 13 2013 december 31 2012 companys international operations borrowings 68 million multicurrency revolving credit facility leaving 94 million available future borrowing terms facilities agreement include certain financial covenants guarantee facilities agreement company security agreement includes collateralizing substantially quadwinkowski assets facilities bear interest aggregate warsaw interbank offered rate wibor euro interbank offered rate euribor margin based upon interest rates available company borrowings similar terms maturities fair value companys total debt approximately 13 billion 14 billion december 31 2012 2011 respectively fair value determination companys total debt categorized level 2 fair value hierarchy see note 18 definition level 2 inputs december 31 2012 approximately 29 billion companys assets pledged security various loans agreements debt issuance costs activity impacting companys debt issuance costs years ended december 31 2012 2011 follows 1 company incurred 115 million debt issuance costs connection july 26 2011 15 billion debt financing agreement accordance accounting guidance treatment debt issuance costs debt extinguishment 73 million costs accounted capitalized debt issuance costs 42 million recorded loss debt extinguishment capitalized debt issuance costs classified longterm assets consolidated balance sheet costs amortized straightline basis five seven year lives related debt instruments addition new original issue discount 10 million related term loan b classified reduction longterm debt 2 prior execution 15 billion debt financing agreement 357 million remaining unamortized debt issuance costs terminated 123 billion debt financing agreement accordance accounting guidance treatment debt issuance costs debt extinguishment 148 million remaining unamortized debt issuance costs accounted capitalized debt issuance costs 209 million recorded loss debt extinguishment capitalized debt issuance costs classified longterm assets consolidated balance sheet costs amortized straightline basis five seven year lives related debt instruments 3 company recognized 340 million loss debt extinguishment year ended december 31 2011 connection july 26 2011 15 billion debt financing agreement loss comprised 1 209 million debt issuance costs terminated 123 billion debt financing agreement 2 89 million remaining original issue discount terminated 123 billion debt financing agreement 3 42 million debt issuance costs 15 billion debt financing agreement 340 million loss classified loss debt extinguishment consolidated statements operations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 4 company incurred 21 million debt issuance costs connection december 19 2012 15 billion debt financing agreement amendment extension maturity dates 8500 million revolving credit facility 4500 million term loan debt issuance costs accounted capitalized debt issuance costs classified longterm assets consolidated balance sheet costs amortized straightline basis five year lives related debt instruments amortization expense debt issuance costs 44 million 73 million 47 million years ended december 31 2012 2011 2010 respectively covenants compliance december 31 2012 companys various lending arrangements included certain financial covenants financial terms numbers ratios defined companys debt agreements among covenants company required maintain following december 31 2012 covenant restrictive measurement included • rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda defined debt agreement shall exceed 350 100 twelve months ended december 31 2012 companys leverage ratio 237 100 • rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2012 companys interest coverage ratio 727 100 • rolling twelvemonth basis fixed charge coverage ratio defined consolidated ebitda rent expense interest rent expense shall less 150 100 twelve months ended december 31 2012 companys fixed charge coverage ratio 435 100 • consolidated net worth least 7458 million plus 40 positive consolidated net income cumulatively year december 31 2012 companys consolidated net worth restrictive covenant per various debt agreements 116 billion addition covenants 15 billion debt financing agreement also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock companys total leverage ratio greater 300 100 total leverage ratio defined debt financing agreement company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated approximate annual principal amounts due longterm debt follows years ending december 31 note 17 lease obligations company entered various master lease agreements press finishing equipment leases provide company options purchase related equipment termination value defined various early buyout dates term lease leases accounted capital leases consolidated balance sheets assets recorded capital leases follows december 31 2012 2011 december 31 2012 future maturities capitalized leases consisted following quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company various operating lease agreements future minimum rental commitments noncancelable leases follows rent expense operating lease agreements totaled 332 million 228 million 259 million years ended december 31 2012 2011 2010 respectively note 18 financial instruments fair value measurements certain assets liabilities required recorded fair value recurring basis assets liabilities recorded fair value nonrecurring basis generally result acquisitions impairment charges fair value determined based exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants gaap also classifies inputs used measure fair value following hierarchy level 1 quoted prices active markets identical assets liabilities level 2 quoted prices active markets similar assets liabilities quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability level 3 unobservable inputs asset liability level 3 assets liabilities december 31 2012 measured recurring basis company records fair value forward contracts pension plan assets recurring basis fair value cash equivalents receivables inventories restricted cash accounts payable accrued liabilities amounts owing satisfaction bankruptcy claims approximate carrying values december 31 2012 2011 see note 16 discussion fair value companys debt note 20 details level 1 level 2 inputs related employee retirement plans addition assets liabilities recorded fair value recurring basis company required record certain assets liabilities fair value nonrecurring basis generally result acquisitions remeasurement assets resulting impairment charges see note 5 discussion impairment charges recorded result remeasurement certain longlived assets december 31 2012 2011 company operations countries transactions outside functional currencies periodically enters foreign exchange contracts used hedge net exposures changes foreign currency exchange rates designated either cash flow hedges fair value hedges gains losses net foreign currency hedges intended offset losses gains underlying net exposures effort reduce earnings volatility resulting fluctuating foreign currency exchange rates quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company periodically enters natural gas forward purchase contracts hedge increases commodity costs years ended december 31 2012 2011 companys commodity contracts qualified exception related normal purchases sales company takes delivery normal course business company held open shortterm foreign currency forward exchange contracts hedge exchange rate exposure 500 million canadian dollars deposit related transcontinental mexico acquisition december 31 2011 settled march 1 2012 see note 3 open foreign currency exchange contracts december 31 2012 years ended december 31 2012 2011 2010 impact hedge ineffectiveness consolidated statements operations note 19 longterm liabilities longterm liabilities consisted following december 31 2012 2011 note 20 employee retirement plans defined contribution plans quadgraphics diversified plan comprised participant directed 401k contributions company match profit sharingcontributions company 401k matching contributions 119 million 128 million 62 million years ended december 31 2012 2011 2010 respectively quadgraphics employee stock ownership plan holds profit sharing contributions company stock made discretion companys board directors profit sharing contributions year ended december 31 2012 annual profit sharing contributions totaled 134 million 148 million years ended december 31 2011 2010 respectively company assumed defined contribution plan united states part acquisition world color press plan comprised participant directed 401k contributions prior years also included employer match contributions employer match frozen world color press prior july 2 2010 acquisition company made cash contributions plan 2010 plan merged companys defined contribution plan referred personal enrichment plan pep plan january 1 2011 defined benefit plans postretirement benefit plans company sponsors various funded unfunded pension plans portion fulltime employees us canada benefits generally based upon years service compensation plans funded conformity applicable government regulations company funds least minimum amount required qualified plans using actuarial cost methods assumptions acceptable government regulations addition pension benefits company provides certain healthcare life insurance benefits retired employees quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated components net periodic pension postretirement benefit expense income years ended december 31 2012 2011 follows pension postretirement obligations calculated using generally accepted actuarial methods measured december 31 following provides reconciliation projected benefit obligation fair value plan assets funded status pension postretirement plans december 31 2012 2011 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated amounts recognized consolidated balance sheets december 31 2012 2011 follows following table provides reconciliation companys accumulated comprehensive income loss prior deferred tax effects december 31 2012 2011 follows 2012 company announced elimination life insurance coverage current future retirees locations elimination reimbursement medical costs certain retirees resulted reduction plan obligations 57 million addition company also announced elimination postretirement medical benefit coverage future retirees retire december 31 2012 resulted reduction plan obligations 169 million recognition curtailment gain 128 million curtailment gain recorded restructuring impairment transactionrelated charges consolidated statement operations actuarial gains losses excess 10 greater projected benefit obligation marketrelated value plan assets recognized component net periodic benefit costs average remaining service period plans active employees unrecognized prior service costs credit also recognized component net periodic benefit cost average remaining service period plans active employees amounts accumulated comprehensive income loss expected recognized components net periodic pension postretirement benefit expense next year follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated weighted average assumptions separately pension postretirement benefit plans follows company determines assumed discount rate based index highquality corporate bond yields matchedfunding yield curve analysis measurement date assumed health care cost trend rate used measuring accumulated postretirement benefit obligation 78 end 2012 expected gradually decline 2024 ultimate trend rate 50 onepercentage point change assumed health care cost trend rates would following effects estimated company contributions benefit payments 2013 company expects make cash contributions 432 million qualified defined benefit pension plans make estimated benefit payments 20 million nonqualified defined benefit pension postretirement plans actual pension contributions may differ based funding calculations company may choose make additional discretionary contributions estimated benefit payments may differ based actual claim experience quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated estimated future benefit payments plans behalf plan participants estimate future benefit payments qualified nonqualified postretirement plans made follows plan assets investment strategy company follows disciplined investment strategy provides diversification investments asset class foreign currency sector company pension committee approved investment policies different pension plans establish longterm asset mix targets based several factors including historical returns achieved worldwide investment markets time horizon pension plans obligations investment risk plans allocation range asset class developed whereby mix equities fixedincome investments used provide appropriate riskadjusted longterm return plan assets third party investment managers employed invest assets passivelyindexed activelymanaged strategies investment returns risks monitored ongoing basis derivatives used hedge 50 exposure us dollar euro british pound japanese yen gains losses derivatives offset corresponding change canadian dollar value hedged assets derivatives strictly used hedging purposes speculative purposes target allocations plan assets weightedaverage basis 65 equity securities 35 fixedincome including cash equivalents actual asset allocation december 31 2012 approximately 64 equity 35 debt securities 1 equity investments diversified country issuer industry sector fixed income securities consist government bonds corporate bonds diversified industries types investments consist currency forward contracts fixed income futures contracts real estate funds expected longterm rate return assets assumption selected first identifying expected range longterm rates return major asset class expected longterm rates return developed based longterm historical averages current expectations future returns anticipated inflation rates expected longterm rate return plan assets calculated weighting asset class extent individual pension plans different target asset mixes expected longterm rate return assets may differ across plans quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair values companys pension plan assets december 31 2012 2011 asset category follows level 3 assets liabilities december 31 2012 2011 company segregated plan assets following major categories levels determining fair value december 31 2012 cash equivalents carrying value approximates fair value assets classified level 1 fixed income category consists bonds shortterm fixed income securities fair valued based compilation primarily observable market information broker quotes overthecounter markets classified level 2 equities category consists equity investments equity pooled funds assets classified level 1 level 2 fair value equity investments based quoted prices active market fair value equity pooled funds based funds net asset value nav established funds administrator others category consists mainly currency forward contracts classified level 1 level 2 currency forwards categorized level 2 valued based compilation primarily observable market information valuation methodologies described may generate fair value calculation may indicative net realizable value future fair values company believes valuation methodologies used appropriate use different methodologies assumptions calculating fair value could result different amounts company invests various assets valuation determined nav company believes nav representative fair value reporting date significant restrictions redemption investments reasons indicate investment would redeemed amount different nav risk management directly invested funds concentration risk monitored specific guidelines investment manager mandates investment manager mandates developed companys external investment advisor specify diversification standards maximum exposure per issuer concentration limits per type security industry country applicable investments made pooled funds investment mandates funds reviewed companys external investment advisor determine investment objectives guidelines consistent companys overall pension plan risk management objectives managing plan assets review quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated manage risk associated funded status risk interest rate risk market risk counterparty risk liquidity risk operational risk liability management asset class diversification central risk management approach integral overall investment strategy given process place ensure proper diversification portfolio management believes company pension plan assets exposed significant concentration risk multiemployer pension plans company participates number mepps terms collective bargaining agreements cover number employees risks participating mepps different single employer plans following aspects • assets contributed mepps one company may used provide benefits employees participating companies • participating company stops contributing plan unfunded obligations plan may borne remaining participating companies • company stops participating mepps continues business company would required pay amount referred withdrawal liability based unfunded status plan company withdrawn significant mepps 2011 replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan two mepps graphic communications international union employer retirement fund “gciu” graphic communications conference international brotherhood teamsters national pension fund “gcc” significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued 986 million estimated withdrawal liability based information provided plans trustee part purchase price allocation world color press respective withdrawal dates gciu gcc company longer making cash contributions mepps exception required interim payments made companys liability withdrawal gciu gcc prior withdrawing mepps 2011 company made cash contributions 03 million gciu made cash contributions gcc year ended december 31 2011 gciu plan defined benefit plan provides retirement benefits total permanent disability benefits preretirement death benefits participating union employees company funded status gciu plan classified critical based gciu plans 2011 certification united states department labor funded percentage plan less 65 projected accumulated funding deficit next four plan years result gciu plan implemented rehabilitation plan improve plans funded status company paid surcharge contributions made gciu plan company estimates contributions made gciu plan company world color press represent greater 5 total contributions made participating employers 2010 plan year plan year ended december 31 2010 latest available financial information provided gciu plan gcc plan defined benefit plan provides retirement benefits disability benefits early retirement benefits participating union employees company funded status gcc plan classified critical based gcc plans 2011 certification united states department labor funded percentage plan less 65 projected accumulated funding deficit next four plan quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated years result gcc plan implemented rehabilitation plan improve plans funded status company paid surcharge contributions made gcc plan company received notices withdrawal demand payment letters gciu gcc plans total excess 986 million reserves established company withdrawals company process determining final withdrawal payment mepps administrators withdrawal liability reserved company within range companys estimated potential outcomes process company began making monthly payments totaling 112 million 2012 requested mepps required employee retirement income security act although payments waive companys rights object withdrawal liabilities submitted gciu gcc plan administrators december 31 2012 company reserved 874 million estimate total mepps withdrawal liability 743 million recorded longterm liabilities 76 million recorded accrued liabilities 55 million recorded unsecured notes issued consolidated balance sheet estimate may increase decrease depending final agreement mepps administrators note 21 earnings loss per share attributable quadgraphics common shareholders basic earnings loss per share attributable quadgraphics common shareholders computed dividing net earnings loss attributable quadgraphics common shareholders income excluding allocation participating securities weighted average common shares outstanding 468 million 471 million 375 million shares years ended december 31 2012 2011 2010 respectively calculation diluted earnings per share amount includes effect dilutive equity incentive instruments company uses treasury stock method calculate effect outstanding dilutive equity incentive instruments requires company compute total proceeds sum 1 amount employee must pay upon exercise award 2 amount unearned stockbased compensation costs attributed future services 3 amount tax benefits would credited additional paidin capital assuming exercise award equity incentive instruments total employee proceeds exercise exceed average fair value equity incentive instrument period antidilutive effect earnings per share net earnings continuing operations accordingly company excludes calculation antidilutive equity instruments 32 million class common shares excluded computations diluted net earnings per share 2012 unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid required treated participating securities included computation earnings per share pursuant twoclass method companys participating securities composed unvested stock options granted november 18 2011 reduced basic diluted earnings per share attributable quadgraphics common shareholders 007 per diluted share due net loss continuing operations attributable quadgraphics common shareholders incurred years ended december 31 2011 2010 assumed exercise equity incentive instruments antidilutive therefore included diluted loss per share attributable quadgraphics common shareholders calculation quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reconciliations numerator denominator basic diluted per share computations companys common stock including impact discontinued operations years ended december 31 2012 2011 2010 summarized follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 22 stock incentive programs stock incentive grants made prior january 1 2011 made companys 1999 nonqualified stock option plan 1990 stock option plan grants beginning january 1 2011 shareholders company approved quadgraphics inc 2010 omnibus incentive plan omnibus plan two complimentary purposes 1 attract retain outstanding individuals serve directors officers employees 2 increase shareholder value concurrent july 2 2010 closing world color press acquisition additional 2300000 shares class stock approved issuance companys omnibus plan omnibus plan replaced 1999 nonqualified stock option plan 1990 stock option plan january 1 2011 equity grants made omnibus plan may 2012 additional 3571652 shares approved issuance omnibus plan making 5871652 shares class stock reserved issuance omnibus plan within framework omnibus plan companys board directors approved form new stock option award agreement restricted stock award agreement restricted stock unit award agreement deferred stock unit award agreement stock option granted exercise price less 100 fair market value class stock date grant december 31 2012 969713 shares available issuance omnibus plan company recognizes compensation expense based estimated grant date fair values sharebased awards issued employees nonemployee directors including stock options restricted stock restricted stock units deferred stock units company recognizes compensation costs awards expected vest straightline basis requisite service period award generally vesting term three four years restricted stock awards stock options company estimated number awards expected vest based part historical forfeiture rates also based managements expectations employee turnover within specific employee groups receiving type award forfeitures estimated time grant revised necessary subsequent periods actual forfeitures differ estimates equity incentive compensation expense total compensation expense recognized related equity incentive programs 134 million 149 million 51 million years ended december 31 2012 2011 2010 respectively recorded selling general administrative expenses restructuring impairment transactionrelated charges consolidated statements operations total future compensation expense equity incentive related equity incentive program granted december 31 2012 approximately 249 million estimated future compensation expense 132 million 2013 115 million 2014 02 million 2015 stock options november 18 2011 company announced board directors approved termination outstanding stock options companys 1990 stock option plan 1999 nonqualified stock option plan “409a options” accordance authoritative literature termination modification stock options december 31 2011 company recorded 200 million liability termination payment based number 409a options held option holders companys weighted volume adjusted stock price 1347 november 18 2011 exercise price 409a options termination payment paid december 2012 addition 2011 company recorded 64 million incremental stock option expense recorded restructuring impairment transactionrelated charges consolidated statements operations company also recorded 51 million reduction additional paid capital reduce deferred tax asset associated termination 409a options quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated option holders granted new options omnibus plan equal number terminated 409a options held new options granted exercise price equal greater fair market value 1347 per share exercise price option holders 409a options greater 1347 new options issued greater price therefore none new options granted exercise price fair market value new options granted exercise price equal greater corresponding 409a option canceled prior termination 409a options granted prior 2011 generally vested rate 5 10 per year expired 90 days respective employees termination company new option grants beginning january 1 2011 options vest four years vesting first year onethird vesting upon second third fourth anniversary dates defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee new option grants beginning january 1 2011 options expire later tenth anniversary grant date twentyfour months termination death thirtysix months termination normal retirement disability 90 days termination employment reason stock options granted prior 2011 credited dividend declarations new option grants time credited dividend declarations excluding november 18 2011 grants stock options granted employees granted new option grant terms january 1 2011 forward company granted 448154 stock options omnibus plan 2012 excluding 3571652 new options granted november 18 2011 company granted 451029 stock options omnibus plan 2011 company granted 495000 options pre2011 stock option plans january 1 2010 since terminated november 18 2011 grant date weighted average fair value options 225 1317 1878 grants years ended december 31 2012 2011 2010 respectively excluding 3571652 new options granted november 18 2011 fair value stock option grant estimated date grant following weighted average assumptions years ended december 31 2012 2011 2010 company determined expected volatility based volatility comparable company stock average riskfree interest rate based united states treasury security rate effect grant date term expected life expected life based term vesting period grant adjusted historical experience vesting prior 2011 dividend yield included dividends credited option holders compensation expense recognized related stock options 101 million 127 million 51 million years ended december 31 2012 2011 2010 respectively total future compensation expense stock options granted december 31 2012 approximately 205 million estimated future compensation expense 102 million 2013 101 million 2014 02 million 2015 cash received option exercises 01 million 16 million 11 million years ended december 31 2012 2011 2010 respectively quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summary stock option activity year ended december 31 2012 intrinsic value options exercisable options outstanding december 31 2012 2011 2010 based fair value stock price sharebased compensation activity years ended december 31 2012 2011 2010 noted restricted stock restricted stock units deferred stock units restricted stock rs restricted stock unit rsu awards consist shares rights shares companys class stock awarded employees company awards restricted subject substantial risk forfeiture restrictions sale transfer employee rsu awards typically granted eligible employees outside united states defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving rs grants able exercise full voting rights receive full credit dividends vesting period dividends paid rs grantee within 45 days full vesting grantees receiving rsus granted prior january 1 2012 entitled vote earn dividends grantees receiving rsus january 1 2012 entitled vote earn dividends upon vesting rsus settled either cash payment equal fair market value rsus vesting date issuance company class stock quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summary rs rsu award activity year ended december 31 2012 january 1 2012 rs awards 310651 shares rsu awards 15760 units granted grant date fair value 1434 january 1 2011 rs awards 119315 shares rsu awards 14625 units granted grant date fair value 4126 3886 respectively august 1 2011 rs awards 709 shares rsu awards 1177 units granted grant date fair value 3232 3001 respectively rs shares rsus vest third anniversary grant date provided holder share continuously employed company vesting date compensation expense recognized rs rsus 29 million 16 million years ended december 31 2012 2011 respectively total future compensation expense rs rsus granted december 31 2012 approximately 44 million estimated future compensation expense 30 million 2013 14 million 2014 company granted 31525 13704 deferred stock units dsu january 1 2012 2011 respectively grant date fair value 1434 4126 respectively deferred stock units fully vested grant date dsu entitles grantee receive one share class stock upon earlier separation date grantee second anniversary grant date could subject acceleration change control death disability defined individual dsu grant agreement grantees dsus may exercise voting rights credited dividends converted additional dsus based closing price class stock dividend equivalents units 7440 354 granted years ended december 31 2012 2011 respectively december 31 2012 2011 50705 11740 deferred stock units outstanding respectively compensation expense recognized dsus 04 million 06 million years ended december 31 2012 2011 respectively awards fully vested grant date compensation expense recognized date grant information authorized unissued shares treasury shares may used issuance companys equity incentive programs company intends use treasury shares class stock meet stock requirements awards future quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 23 shareholders equity company three classes common stock follows share data millions accordance articles incorporation class common share one vote per share class b class c common share ten votes per share matters voted upon companys shareholders liquidation rights three classes stock companys class c stock held quadgraphics employee ownership plan owned transferred company employee benefit plan intended satisfy qualification requirements section 401 internal revenue code august 2012 companys outstanding class c common shares previously classified redeemable equity converted class common shares company also 05 million shares 001 par value preferred stock authorized none issued december 31 2012 2011 2010 company present plans issue preferred stock quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated accordance articles incorporation dividends paid equally class b class c common shares following table details dividend activity related companys outstanding shares class b class c stock years ended december 31 2012 2011 2010 addition part july 2010 acquisition world color press cash distribution 1400 million paid quadgraphics preacquisition common shareholders september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock company repurchased shares year ended december 31 2012 company repurchased 04 million shares class stock open market 82 million year ended december 31 2011 918 million authorized repurchases remaining program december 31 2012 redeemable equity company followed applicable gaap sec authoritative guidance redeemable stock required company record class c stock full redemption value balance sheet date extent redemption securities solely within control company terms articles incorporation class c common shares required owned qualified employee retirement plan company holder class c stock continuous right class c stock repurchased company redemption value class c qualified employee retirement plan shares december 31 2012 redemption value class c qualified employee retirement plan shares december 31 2011 2010 totaled 35 million 106 million respectively august 2012 remaining 03 million outstanding class c common shares owned quadgraphics employee stock ownership plan exchanged class common shares held treasury stock exchange eliminated redemption value class c common stock class c common shares redeemed company years ended december 31 2011 2010 prior january 24 2010 terms company pep plan class stock held participant accounts associated profit sharing contributions made prior december 31 1999 pre2000 accounts could quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated distributed participant upon retirement termination form stock subject automatic call provision pep plan amended january 24 2010 change forms distribution pre2000 accounts result pep plan amendment class common shares pre2000 accounts required classified redeemable june 30 2010 class stock resulting exercised stock options vested stock options also classified redeemable equity result commencement trading companys class stock nyse july 6 2010 shares related companys nonqualified stock option plans registered sec third quarter 2010 readily tradable market exists companys class common shares thereby eliminating put right applicable stock option agreements combination events resulted 1299 million reclassified redeemable equity common stock equity consolidated balance sheet 2010 redemption value class common shares december 31 2012 2011 2010 readily tradable market redemption features eliminated 33 million redeemable class common shares held former employees weighted average price 3936 per share year ended december 31 2010 subsequent changes redemption value securities due changes stock valuation dividend declarations charged retained earnings decreases redemption value due elimination redemption features credited additional paidin capital retained earnings year ended december 31 2012 balance redeemable equity decreased 35 million result conversion outstanding class c common shares class common shares additional information regarding changes redeemable equity years ended december 31 2012 2011 2010 provided table quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 24 segment information company operates primarily commercial print portion printing industry related product service offerings designed offer customers complete solutions communicating messages target audiences result divestiture companys canadian operations transcontinental march 1 2012 see note 4 former north america print related services segment referred united states print related services segment united states print related services segment amounts restated exclude canadian discontinued operations unless otherwise noted companys operating reportable segments aligned chief operating decision maker company currently manages business companys reportable operating segments product service offerings summarized united states print related services united states print related services segment predominantly comprised companys united states printing operations managed one integrated platform includes retail inserts catalogs consumer magazines special interest publications journals direct mail books directories instore marketing packaging commercial specialty printed products together related service offerings including marketing strategy media planning placement data insights creative services videography photography workflow solutions digital imaging digital publishing interactive print solutions image recognition augmented reality near field communication response data analytics services mailing distribution logistics data optimization hygiene services segment also includes design development manufacture service printingrelated auxiliary equipment well manufacture ink international segment consists companys printing operations europe latin america including acquired transcontinental mexican operations see note 3 segment provides printed products related services consistent united states print related services segment exception printingrelated auxiliary equipment included united states print related services segment corporate segment consists unallocated general administrative activities associated expenses including part executive legal finance information technology human resources quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated restructuring impairment transactionrelated charges years ended december 31 2012 2011 2010 described note 5 included operating incomeloss results segment total assets canadian discontinued operations 1775 million december 31 2011 capital expenditures canadian discontinued operations 72 million year ended december 31 2011 included united states print related services segment reconciliation operating income earnings loss continuing operations income taxes equity earnings unconsolidated entities reported consolidated statements operations years ended december 31 2012 2011 2010 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 25 geographic area product information table presents net sales longlived assets geographic region years ended december 31 2012 2011 2010 amounts table differ segment data presented note 24 operating segment includes operations multiple geographic regions based companys management reporting structure table presents consolidated net sales products services years ended december 31 2012 2011 2010 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 26 subsequent events acquisition vertis january 16 2013 company completed acquisition substantially assets vertis leading provider retail advertising inserts direct marketing instore marketing solutions asset acquisition company assume certain assets liabilities vertis subsidiaries transaction including among liabilities underfunded pension retirement obligations purchase price 2674 million includes payment 974 million current assets excess normalized working capital requirements final working capital settlement occur 2013 may adjust purchase price company used cash hand drew revolving credit facility finance acquisition following unaudited pro forma combined financial information presents companys results though quadgraphics vertis combined january 1 2012 pro forma information prepared following considerations 1 unaudited pro forma condensed consolidated financial information prepared using acquisition method accounting existing gaap quadgraphics acquirer accounting purposes 2 pro forma combined financial information reflect operating cost synergy savings combined company may achieve result acquisition costs necessary achieve operating synergy savings additional charges necessary result integration company recorded preliminary allocation purchase price vertis tangible identifiable intangible assets acquired liabilities assumed based fair values january 16 2013 acquisition date preliminary purchase price allocation follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated preliminary allocation purchase price unaudited pro forma condensed consolidated financial information based preliminary valuations performed determine fair value net assets acquisition date purchase price 2674 million classified level 3 valuation hierarchy see note 18 definition level 3 inputs purchased identifiable customer relationship intangible assets amortized straightline basis six years company expects complete purchase price allocation 2013 may adjust amounts recorded january 16 2013 reflect final valuation final valuation assets liabilities could material impact pro forma condensed combined statement operations preliminary purchase price allocation disclosed declaration quarterly dividend march 4 2013 company declared quarterly dividend 030 per share paid march 29 2013 shareholders record march 18 2013 item 9item 8 financial statements supplementary data quarterly financial data unaudited following table sets forth selected financial information eight quarters twoyear period ended december 31 2013 unaudited information prepared company basis consolidated financial statements includes normal recurring adjustments necessary present information fairly read conjunction companys audited consolidated financial statements notes thereto 1 reflects results acquired businesses relevant acquisition dates primarily related acquisition vertis january 16 2013 see note 3 acquisitions strategic investments consolidated financial statements item 8 annual report form 10k information acquisition 2 results operations companys canadian operations included loss discontinued operations net tax see note 4 discontinued operations consolidated financial statements item 8 annual report form 10k companys canadian operations originally acquired company part world color press acquisition july 2 2010 march 1 2012 company completed sale canadian operations transcontinental resulting gain disposal discontinued operations net tax see note 3 acquisitions strategic investments consolidated financial statements item 8 annual report form 10k description business exchange transaction report independent registered public accounting firm board directors shareholders quadgraphics inc subsidiaries sussex wi audited accompanying consolidated balance sheets quadgraphics inc subsidiaries company december 31 2013 2012 related consolidated statements operations comprehensive income loss redeemable equity common stock equity noncontrolling interests cash flows three years period ended december 31 2013 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position quadgraphics inc subsidiaries december 31 2013 2012 results operations cash flows three years period ended december 31 2013 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states companys internal control financial reporting december 31 2013 based internal controlintegrated framework 1992 issued committee sponsoring organizations treadway commission report dated february 27 2014 expressed unqualified opinion companys internal control financial reporting deloitte touche llp milwaukee wisconsin february 27 2014 report independent registered public accounting firm board directors shareholders quadgraphics inc subsidiaries sussex wi audited internal control financial reporting quadgraphics inc subsidiaries company december 31 2013 based internal controlintegrated framework 1992 issued committee sponsoring organizations treadway commission described management’s report internal control financial reporting management excluded assessment internal control financial reporting business units acquired vertis holdings inc “vertis acquired january 16 2013 business activities excluded assessment constitute approximately 15 consolidated total current assets approximately 20 consolidated net sales consolidated cost sales year ended december 31 2013 accordingly audit include internal control financial reporting business activities vertis companys management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting responsibility express opinion companys internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion companys internal control financial reporting process designed supervision companys principal executive principal financial officers persons performing similar functions effected companys board directors management personnel provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting including possibility collusion improper management override controls material misstatements due error fraud may prevented detected timely basis also projections evaluation effectiveness internal control financial reporting future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion company maintained material respects effective internal control financial reporting december 31 2013 based criteria established internal control integrated framework 1992 issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states consolidated financial statements year ended december 31 2013 company report dated february 27 2014 expressed unqualified opinion financial statements deloitte touche llp milwaukee wisconsin february 27 2014 quadgraphics inc consolidated statements operations millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements comprehensive income loss millions see accompanying notes consolidated financial statements quadgraphics inc consolidated balance sheets millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements cash flows millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements redeemable equity common stock equity noncontrolling interests millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements redeemable equity common stock equity noncontrolling interests continued millions see accompanying notes consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies nature operationsquadgraphics inc subsidiaries company quadgraphics operates primarily commercial print portion printing industry printer consumer magazines catalogs retail inserts special interest publications journals direct mail books directories instore marketing packaging commercial specialty printed products company also provides media solutions logistics services customers companys products services sold primarily throughout united states europe latin america catalogers publishers retailers additionally company manufactures printingrelated auxiliary equipment sold original equipment manufacturers printing companies throughout world principles consolidation basis presentationthe accompanying consolidated financial statements include accounts company whollyowned majorityowned controlled subsidiaries prepared accordance accounting principles generally accepted united states america gaap results operations accounts businesses acquired included consolidated financial statements dates acquisition see note 3 acquisitions strategic investments entities company ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting investments entities company exert significant influence control ownership interest less 20 accounted using cost method accounting intercompany transactions balances eliminated consolidation discontinued operationsthe results operations companys canadian operations reported discontinued operations periods presented sale canadian operations completed march 1 2012 corresponding canadian assets liabilities longer included consolidated balance sheets december 31 2013 2012 accordance authoritative literature company elected separately disclose cash flows related canadian discontinued operations see note 4 discontinued operations information companys sale canadian operations foreign operationsassets liabilities denominated foreign currencies translated us dollars exchange rate existing respective balance sheet dates income expense items translated average rates respective periods translation adjustments resulting fluctuations exchange rates recorded separate component accumulated comprehensive income loss consolidated statements redeemable equity common stock equity noncontrolling interests transaction gains losses recorded selling general administrative expenses consolidated statements operations foreign exchange transactions resulted gainslosses 57 million 04 million 45 million years ended december 31 2013 2012 2011 respectively companys international operations conducted europe quadwinkowski sp z oo quadwinkowski well following latin american countries argentina brazil chile colombia mexico peru company owns 85 certain operations argentina consolidates amounts companys consolidated financial statements presents 15 owned company noncontrolling interest company owns 49 operations brazil 50 operations chile accounts entities using equity method accounting see note 11 equity method investments unconsolidated entities discussion significant noncontrolling interests unconsolidated entities use estimatesthe preparation consolidated financial statements requires use managements estimates assumptions affect reported assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenue expenses reporting periods actual results could differ estimates used accounting items matters including limited allowances doubtful accounts inventory obsolescence asset valuations useful lives goodwill pension postretirement benefits selfinsurance reserves stockbased compensation taxes restructuring provisions contingencies quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated revenue recognitionthe company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides certain cases delivery billing schedules outlined customer agreement product revenue recognized manufacturing complete title risk loss transfer customer reasonable assurance collectability product returns significant majority products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer revenues related companys logistics operations includes delivery printed material recognized upon completion delivery services company also manufactures printingrelated auxiliary equipment ensure industryleading technology printing operations well sell businesses revenue generally recognized equipment sales time shipment revenue services related installation equipment customer sites recognized upon completion installation payments received customers manufacture equipment prior shipment case installation services prior completion installation cases payments received advance meeting applicable revenue recognition criteria deferred revenue recorded criteria revenue recognition subsequently met services account greater 10 companys consolidated net sales therefore net sales related costs sales products services included separate line items consolidated statements operations certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis byproduct recoveriesthe company records sale byproducts net product sales consolidated statements operations financial instrumentsthe company uses derivative financial instruments purpose hedging commodity foreign exchange exposures exist part ongoing business operations including natural gas forward purchase contracts foreign exchange contracts policy company engage speculative leveraged transactions company hold issue financial instruments trading purposes derivative instruments recorded consolidated balance sheets either assets liabilities measured fair value derivative designated fair value hedge changes fair value derivative hedged item attributable hedged risk recognized earnings derivative designated cash flow hedge effective portion changes fair value derivative recorded component accumulated comprehensive income loss recognized consolidated statements operations hedged item affects earnings quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated ineffective portions changes fair value hedges recognized earnings cash flows derivatives accounted cash flow fair value hedges included consolidated statements cash flows category item hedged fair value measurementthe company applies fair value accounting assets liabilities recognized disclosed fair value consolidated financial statements recurring basis fair value represents amount would received selling asset paid transfer liability orderly transaction market participants measurement date determining fair value measurements assets liabilities required recorded fair value company considers principal advantageous market marketbased risk measurements assumptions market participants would use pricing asset liability see note 18 financial instruments fair value measurements discussion research developmentresearch development costs related development new products adaptation existing products expensed incurred included cost sales totaled 134 million 132 million 169 million years ended december 31 2013 2012 2011 respectively cash equivalentsthe company considers highly liquid investments original maturities three months less cash equivalents receivablesreceivables stated net allowances doubtful accounts single customer comprised 5 companys consolidated net sales 2013 2012 2011 5 companys consolidated receivables december 31 2013 2012 specific customer provisions made review significant outstanding amounts utilizing information customer creditworthiness current economic trends indicates collection doubtful addition provisions made differing rates based upon age receivable companys historical collection experience see note 7 receivables discussion transactions affecting allowances doubtful accounts inventoriesinventories include material labor plant overhead stated lower cost market december 31 2013 2012 inventories valued using firstin firstout fifo method see note 8 inventories breakdown components companys inventories property plant equipmentproperty plant equipment recorded cost depreciated estimated useful lives assets using straightline method financial reporting purposes see note 9 property plant equipment breakdown components companys property plant equipment major improvements extend useful lives existing assets capitalized charged asset accounts repairs maintenance significantly improve extend useful lives respective assets expensed incurred leasehold improvements depreciated shorter lease term estimated useful life respective asset intangible assetsidentifiable intangible assets recognized apart goodwill amortized estimated useful lives quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated impairment longlived intangible assetsthe company evaluates longlived assets intangible assets significant property plant equipment customer relationship intangible assets whenever events circumstances occurred indicate carrying value asset may recoverable determining whether impairment occurred typically requires various estimates assumptions including determining cash flows directly related potentially impaired asset useful life cash flows occur amount assets residual value turn measurement impairment loss requires determination recoverability generally estimated ability recover balance assets expected future operating cash flows undiscounted basis impairment determined exist related impairment loss calculated based difference fair value carrying value asset goodwillgoodwill reviewed annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value performing analysis company compares reporting units fair value estimated based comparable company market valuations andor expected future discounted cash flows generated reporting unit carrying value carrying value exceeds reporting units fair value company performs fair value measurement calculation determine impairment loss would charged operations period identified see note 6 goodwill intangible assets discussion income taxesthe company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations company determines deferred income tax asset fully realized future valuation allowance established increased reflect amount asset likely realized would increase companys provision income taxes period valuation allowance established company determines related deferred income tax assets realized future excess net recorded amount adjustment reduce related valuation allowance made would reduce companys provision income taxes company regularly audited foreign domestic tax authorities audits occasionally result proposed assessments ultimate resolution might result company owing additional taxes including cases penalties interest company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit greater fiftypercent likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination companys worldwide tax provision related tax assets liabilities requires use significant judgment estimates interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain company believes appropriate support positions taken certain positions may successfully challenged taxing authorities company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions determination quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated companys worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions see note 15 income taxes discussion pension postretirement plansthe company assumed certain underfunded defined benefit pension postretirement benefit plans part 2010 world color press acquisition pension plan costs determined using actuarial methods funded contributions company records amounts relating pension postretirement benefit plans based calculations include various actuarial assumptions including discount rates mortality assumed rates return compensation increases turnover rates health care cost trend rates company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive income loss consolidated balance sheets company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors purposes calculating expected return plan assets valued fair value event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 addition result acquisition world color press company participated multiemployer pension plans mepps due significant underfunded status mepps company withdrawn significant mepps replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded estimated withdrawal liability mepps part purchase price allocation process based information received mepps trustees estimated withdrawal liability updated new withdrawal liability projections provided plans trustees final withdrawal liability determined paid exact amount withdrawal liability could higher lower estimate depending among things nature timing triggering events funded status plans time see note 20 employee retirement plans discussion stockbased compensationthe company recognizes stockbased compensation expense vesting period stockbased awards made employees directors based fair value instrument time grant see note 22 equity incentive programs discussion accumulated comprehensive income lossaccumulated comprehensive income loss consists unrecognized actuarial gains losses prior service costs pension postretirement plans foreign currency translation adjustments presented consolidated statements redeemable equity common stock equity noncontrolling interests see note 24 accumulated comprehensive income loss discussion quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated supplemental cash flow informationcertain supplemental cash flow information related company consists following december 31 2013 2012 2011 note 2 new accounting pronouncements march 2013 financial accounting standards board fasb issued new guidance accounting cumulative translation adjustment upon derecognition certain subsidiaries group assets within foreign entity investment foreign entity new guidance release cumulative translation adjustments net income required entity ceases controlling financial interest resulting complete substantially complete liquidation subsidiary group assets within foreign entity guidance effective prospectively fiscal years beginning december 15 2013 early adoption permitted company adopted guidance effective january 1 2013 determined material impact companys consolidated financial position results operations cash flows february 2013 fasb issued new guidance disclosure requirements items reclassified accumulated comprehensive income new guidance entity required provide information amounts reclassified accumulated comprehensive income component addition entity required present either face financial statements notes significant amounts reclassified accumulated comprehensive income respective line items net income amount reclassified required reclassified entirety reporting period amounts required reclassified entirety net income entity required crossreference disclosures provide additional details amounts company adopted guidance effective january 1 2013 adoption guidance change current requirements reporting net income comprehensive income material impact companys consolidated financial position results operations cash flows see note 24 accumulated comprehensive income loss required disclosure quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 3 acquisitions strategic investments 2013 acquisitions strategic investments december 18 2013 company completed acquisition wisconsinbased proteus packaging “proteus” well sister company transpak corporation “transpak” 491 million payments 431 million made close date remaining 60 million purchase price represents companys current estimate deferred payment made 2014 based upon finalization valuation net assets 60 million deferred payment recorded accrued liabilities consolidated balance sheet proteus designer manufacturer highend paperboard packaging offering packaging solutions wide variety industries including automotive biotechnology food personal care pharmaceuticals software electronics transpak fullservice industrial packaging company offering crating packaging warehousing distribution logistics services destinations worldwide acquisition accounted using acquisition method accounting company recorded preliminary allocation purchase price acquired tangible identifiable intangible assets liabilities assumed based fair values acquisition date goodwill resulting acquisition deductible tax purposes recorded within united states print related services segment based amount purchase price exceeds fair value net assets acquired preliminary purchase price allocation follows preliminary purchase price allocation based valuations performed determine fair value net assets acquisition date valuation net assets acquired 491 million classified level 3 valuation hierarchy see note 18 financial instruments fair value measurements definition level 3 inputs identifiable customer relationship intangible assets amortized straightline basis six years results operations acquired businesses included since acquisition date accompanying consolidated financial statements pro forma information related acquisition included impact companys consolidated results operations considered immaterial proteus transpaks operations included united states print related services segment november 7 2013 company completed 135 million acquisition novia careclinics llc novia indianapolis indiana healthcare solutions company novia develops manages onsite shared primary care clinics small medium sized companies public sector school districts city county governments 135 million purchase price 130 million recorded identifiable customer relationship intangible assets preliminary purchase price allocation identifiable customer relationship intangible assets amortized straightline basis six years pro forma information related acquisition quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated included impact companys consolidated results operations considered immaterial novias operations included united states print related services segment january 16 2013 company completed acquisition substantially assets vertis holdings inc “vertis” 2654 million pursuant terms asset purchase agreement “asset agreement” vertis leading provider retail advertising inserts direct marketing instore marketing solutions acquisition vertis enhanced companys position leader production retail advertising inserts direct marketing instore marketing solutions company provide clients enhanced integrated offerings purchase vertis accounted using acquisition method accounting gaap asset acquisition company acquire certain assets assume certain liabilities vertis subsidiaries transaction including among liabilities underfunded pension retirement obligations company used cash hand borrowings revolving credit facility finance acquisition october 2012 company made 259 million deposit held escrow accordance terms asset agreement december 31 2012 deposit classified prepaid expenses current assets consolidated balance sheets deposit applied purchase price upon january 16 2013 consummation acquisition facilitate intended sale vertis along subsidiaries filed voluntary petitions relief chapter 11 united states bankruptcy code time filed documents seeking us bankruptcy courts approval proposed asset agreement company completion acquisition subject us bankruptcy court approval well customary conditions regulatory approvals including expiration termination applicable waiting period hartscottrodino antitrust improvements act 1976 asset agreement company comprised initial stalking horse bid us bankruptcy courtsupervised auction process section 363 united states bankruptcy code vertis advisors evaluated competing bids submitted order ensure received highest best offer assets november 26 2012 vertis filed notice us bankruptcy court naming quadgraphics successful bidder december 6 2012 us bankruptcy court approved sale agreement vertis acquisition completed january 16 2013 following unaudited pro forma combined financial information presents companys results company acquired vertis january 1 2012 unaudited pro forma information prepared following considerations 1 unaudited pro forma condensed consolidated financial information prepared using acquisition method accounting existing gaap company acquirer accounting purposes 2 pro forma combined financial information reflect operating cost synergy savings combined company may achieve result acquisition costs necessary achieve operating synergy savings additional charges necessary result integration quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated period quadgraphics ownership vertis financial results included consolidated statements operations vertis operations included united states print related services segment disclosure financial results vertis since acquisition date practicable operated standalone business combined companys existing operations company recorded allocation purchase price tangible identifiable assets acquired liabilities assumed including certain contingent liabilities based fair values january 16 2013 acquisition date final purchase price allocation follows allocation purchase price unaudited pro forma condensed consolidated financial information based valuations performed determine fair value net assets acquisition date valuation net assets acquired 2654 million classified level 3 valuation hierarchy see note 18 financial instruments fair value measurements definition level 3 inputs identifiable customer relationship intangible assets amortized straightline basis six years 2012 acquisitions strategic investments march 28 2012 company entered strategic partnership indiabased manipal technologies limited manipaltech whereby quadgraphics paid 181 million minority equity ownership interest manipaltech one indias largest providers printing services supports clients marketing branding communication needs print services technology solutions companys investment manipaltech accounted cost method investment recorded within longterm assets consolidated balance sheets quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 2011 acquisitions strategic investments july 12 2011 company transcontinental inc transcontinental entered definitive agreement whereby quadgraphics acquired 100 transcontinentals mexican operations exchange companys canadian operations transcontinentals mexican operations printed magazines catalogs retail inserts books printed materials employed approximately 900 people among three facilities azcapotzalco toluca xochimilco mexico transcontinental mexican operations included within international segment company completed acquisition transcontinentals mexican operations september 8 2011 completed sale companys canadian operations march 1 2012 see note 4 discontinued operations discussion sale canadian discontinued operations connection acquisition transcontinentals mexican operations definitive agreement required company deposit 500 million canadian dollars transcontinental canadian operations sale completed company elected hedge foreign currency exchange rate exposure related 500 million canadian dollar deposit entering shortterm foreign currency forward exchange contracts company hedged foreign currency exposure march 1 2012 sale canadian net assets refund 500 million canadian dollar deposit occurred year ended december 31 2012 16 million realized marktomarket losses derivative contracts offset 16 million transaction gains translation foreign currency denominated deposit within selling general administrative expenses year ended december 31 2011 05 million unrealized marktomarket loss 22 million realized marktomarket gain derivative contracts offset 17 million transaction losses translation foreign currency denominated deposit within selling general administrative expenses fair value determination foreign currency forward exchange contracts categorized level 2 fair value hierarchy see note 18 financial instruments fair value measurements definition level 2 inputs companys determination mexican acquired operations fair value 636 million 636 million purchase price 61 million paid cash 12 million paid 2011 49 million paid 2012 remaining purchase price 575 million satisfied exchange transaction companys canadian business quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated acquisition accounted using acquisition method accounting company recorded allocation purchase price acquired tangible identifiable intangible assets liabilities assumed based fair values acquisition date goodwill resulting acquisition none deductible tax purposes recorded within international segment based amount purchase price exceeds fair value net assets acquired final purchase price allocation follows purchase price allocation based valuations performed determine fair value net assets acquisition date purchase price 636 million estimated utilizing discounted cash flow model following income approach incorporates various assumptions including expected future revenue growth profit margins capital expenditures working capital levels weightedaverage cost capital nonrecurring fair value measurement classified level 3 valuation hierarchy see note 18 financial instruments fair value measurements definition level 3 inputs purchased identifiable intangible assets amortized straightline basis six years results operations acquired businesses included since respective dates acquisition accompanying consolidated financial statements pro forma information related acquisition included impact companys consolidated results operations considered immaterial quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 4 discontinued operations march 1 2012 company completed sale canadian operations transcontinental see note 3 acquisitions strategic investments description business exchange transaction transcontinental assumed pension postretirement obligations pertaining approximately 1500 canadian employees located among seven facilities sold transcontinental gain disposal discontinued operations net tax finalized 2012 determined follows 1 tax purposes disposal discontinued operations resulted longterm capital loss deferred tax asset recorded offsetting valuation allowance deferred tax asset recorded reflect expected value asset recovered sale canadian operations completed march 1 2012 results operations canadian operations year ended december 31 2013 following table summarizes results operations canadian operations included loss discontinued operations consolidated statements operations years ended december 31 2012 2011 prior march 1 2012 closing company continued execute restructuring events related plant closures workforce reductions restructuring initiatives well transaction costs related sale canadian operations due initiatives company recognized 17 million 451 million restructuring impairment transactionrelated costs years ended december 31 2012 2011 respectively within discontinued operations consolidated statements operations 2011 restructuring expense included 179 million charge recognize pension curtailment loss 139 million goodwill impairment charge third quarter 2011 pending sale canadian discontinued operations due carrying value canadian net assets exceeding estimated fair value mexican net assets acquired transcontinental quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 5 restructuring impairment transactionrelated charges company recorded restructuring impairment transactionrelated charges years ended december 31 2013 2012 2011 follows costs related activities recorded consolidated statements operations restructuring impairment transactionrelated charges see note 25 segment information restructuring impairment transactionrelated charges segment restructuring charges company began restructuring program 2010 related eliminating excess manufacturing capacity properly aligning cost structure since 2010 including two plant closures announced january 2014 discussed company announced total 21 plant closures reduced headcount approximately 6800 year ended december 31 2013 company announced closures bristol pennsylvania dubuque iowa pittsburg california vancouver british columbia canada plants addition marengo iowa pomona california plants announced closure january 10 2014 result restructuring programs company recorded following charges year ended december 31 2013 • employee termination charges 157 million recorded company year ended december 31 2013 company reduced workforce facility consolidations involuntary separation programs • integration costs 252 million recorded company year ended december 31 2013 integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 286 million recorded company year ended december 31 2013 consisted 1 144 million vacant facility carrying costs 2 62 million equipment infrastructure removal costs closed plants 3 101 million lease exit charges restructuring charges presented net 21 million pension plan settlement gain quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated year ended december 31 2012 company announced closures jonesboro arkansas limerick ireland two plants mexico city mexico result restructuring programs company recorded following charges year ended december 31 2012 • employee termination charges 272 million recorded company year ended december 31 2012 company reduced workforce facility consolidations involuntary separation programs • integration costs 446 million recorded company year ended december 31 2012 integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 194 million recorded company year ended december 31 2012 consisted 1 193 million vacant facility carrying costs 2 73 million equipment infrastructure removal costs closed plants 3 80 million lease exit charges restructuring charges presented net 128 million curtailment gain resulting amendment postretirement medical benefit plan 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable year ended december 31 2012 year ended december 31 2011 company announced closures richmond virginia stillwater oklahoma buffalo new york mt morris illinois plants result restructuring programs company recorded following charges year ended december 31 2011 • employee termination charges 295 million recorded company year ended december 31 2011 company reduced workforce facility consolidations involuntary separation programs • integration costs 457 million recorded company year ended december 31 2011 integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies integration costs include 64 million stockbased compensation expense related termination liquidation stock options grant new options see note 22 equity incentive programs included integration costs 156 million gain collection note receivable june 2008 sale world color press european operations december 31 2011 • restructuring charges 221 million recorded company year ended december 31 2011 consisted 1 151 million vacant facility carrying costs 2 77 million equipment infrastructure removal costs closed plants 3 63 million lease exit charges restructuring charges presented net postretirement benefit obligation curtailment gain 70 million year ended december 31 2011 restructuring charges recorded based plans committed management part based upon managements best estimates future events changes estimates may require future restructuring charges adjustments restructuring liabilities company expects incur additional restructuring charges related initiatives quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated impairment charges company recognized impairment charges 218 million year ended december 31 2013 consisting 1 101 million land building impairment charges primarily related corinth mississippi marengo iowa mexico city mexico plant closures 2 117 million machinery equipment impairment charges related facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives company recognized impairment charges 230 million year ended december 31 2012 consisting 1 131 million land building impairment charges primarily related limerick ireland mt morris illinois pila poland richmond virgina stillwater oklahoma plant closures 2 99 million machinery equipment impairment charges related facility consolidations including jonesboro arkansas mexico city mexico pila poland stillwater oklahoma well capacity reduction restructuring initiatives company recognized impairment charges 138 million year ended december 31 2011 consisting 1 36 million land building impairment charges related stillwater oklahoma plant closure 2 102 million machinery equipment impairment charges related facility consolidations including corinth mississippi mt morris illinois pila poland well capacity reduction restructuring initiatives fair values impaired assets determined company level 3 fair value hierarchy see note 18 financial instruments fair value measurements definition level 3 inputs estimated based broker quotes internal expertise related current marketplace conditions assets adjusted estimated fair values time impairment transactionrelated charges company incurs transactionrelated charges primarily consisting professional service fees related business acquisition divestiture activities company recognized transactionrelated charges 40 million year ended december 31 2013 primarily includes fees acquisitions vertis proteus transpak company recognized transactionrelated charges 41 million year ended december 31 2012 primarily includes fees acquisition vertis business exchange transaction transcontinental company recognized transactionrelated charges 29 million year ended december 31 2011 primarily includes fees business exchange transaction transcontinental transactionrelated charges expensed incurred accordance applicable accounting guidance business combinations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reserves restructuring impairment transactionrelated charges activity impacting companys reserves restructuring impairment transactionrelated charges years ended december 31 2013 2012 follows companys restructuring impairment transactionrelated reserves december 31 2013 included shortterm longterm component shortterm portion comprised 151 million included accrued liabilities see note 12 accrued liabilities 14 million included accounts payable consolidated balance sheets company expects reserves paid within next twelve months longterm portion 115 million included longterm liabilities see note 19 longterm liabilities consolidated balance sheets 85 million classified restructuring reserves 30 million classified mepps withdrawal liability note 6 goodwill intangible assets goodwill tested annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value company completed annual goodwill impairment assessment united states latin america reporting units included comparing carrying amount net assets including goodwill reporting unit respective fair value october 31 2013 annual assessment date european reporting unit goodwill associated fair value determined using equal weighting income market approaches fair value determination categorized level 3 fair value hierarchy see note 18 financial instruments fair value measurements definition level 3 inputs income approach company determined fair value based estimated future cash flows discounted estimated weightedaverage cost capital reflects overall level inherent risk rate return outside investor would expect earn market approach company derived fair value reporting units based market multiples comparable publiclytraded companies management concluded impairment existed october 31 2013 estimated fair value companys united states latin america reporting units exceeded respective carrying amounts fair value reporting units exceed respective carrying values greater ten percent additional indications impairment identified october 31 2013 december 31 2013 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated goodwill december 31 2013 2012 include accumulated impairment losses goodwill impairment recorded related continuing operations years ended december 31 2013 2012 2011 however 139 million goodwill impairment recorded related canadian discontinued operations year ended december 31 2011 see note 4 discontinued operations information activity impacting companys goodwill years ended december 31 2013 2012 follows 1 company recorded adjustment correct deferred tax liabilities related property plant equipment associated acquisition world color press resulting 192 million reduction goodwill components intangible assets december 31 2013 2012 follows year ended december 31 2013 gross carrying amount intangible assets increased primarily due 630 million customer relationship intangible assets related acquisitions discussed note 3 acquisitions strategic investments gross carrying amount accumulated amortization within intangible assetsnet consolidated balance sheets december 31 2013 2012 differs value originally recorded purchase due effects currency fluctuations purchase date december 31 2013 2012 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated amortization expense intangible assets 703 million 663 million 658 million years ended december 31 2013 2012 2011 respectively following table outlines estimated future amortization expense related intangible assets december 31 2013 note 7 receivables transactions affecting allowances doubtful accounts years ended december 31 2013 2012 2011 follows note 8 inventories components companys inventories december 31 2013 2012 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 9 property plant equipment components companys property plant equipment december 31 2013 2012 follows consists computer equipment vehicles furniture fixtures leasehold improvements communication related equipment year ended december 31 2013 1411 million increase property plant equipment related acquisitions vertis proteus transpak see note 3 acquisitions strategic investments company recorded impairment charges 218 million 230 million 138 million years ended december 31 2013 2012 2011 respectively reduce carrying amounts certain buildings production equipment longer utilized fair value see note 5 restructuring impairment transactionrelated charges company recognized depreciation expense 2702 million 2723 million 2788 million years ended december 31 2013 2012 2011 respectively assets held sale certain closed facilities considered held sale net book value assets held sale 56 million 42 million december 31 2013 2012 respectively assets valued fair value less estimated costs sell fair values determined company level 3 fair value hierarchy see note 18 financial instruments fair value measurements definition level 3 inputs estimated based broker quotes internal expertise related current marketplace conditions assets held sale included prepaid expenses current assets consolidated balance sheets note 10 restricted cash components companys restricted cash december 31 2013 2012 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 11 equity method investments unconsolidated entities company 49 ownership interest plural editora e gráfica plural commercial printer based são paulo brazil 50 ownership interest quadgraphics chile sa chile commercial printer based santiago chile companys ownership interest plural chile accounted using equity method accounting periods presented january 1 2013 company sold 100 ownership interest two whollyowned brazilian entities quadgraphics nordeste industria gráfica ltda quadgraphics são paulo industria gráfica sa plural purchase price 55 million recorded receivables companys consolidated balance sheet december 31 2013 quadgraphics retained ownership land building leased plural year ended december 31 2013 company recorded 28 million gain sale within selling general administrative expenses companys consolidated statements operations result sale plural company longer controls entities company owns 49 entities ownership interest plural thus assets liabilities entities sold deconsolidated accordance gaap since sale plural companys ownership interest results operations entities included equity earnings loss unconsolidated entities consolidated statements operations companys equity earnings plurals chiles operations recorded line item entitled equity earnings loss unconsolidated entities companys consolidated statements operations included within international segment combined condensed balance sheets plural chile december 31 2013 2012 presented combined condensed statements operations plural chile years ended december 31 2013 2012 2011 presented quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 12 accrued liabilities components companys accrued liabilities december 31 2013 2012 follows employeerelated liabilities consist primarily payroll bonus profit sharing vacation health workers compensation pension obligations note 13 commitments contingencies commitments company firm commitments 302 million purchase press finishing equipment litigation normal course business company named defendant various lawsuits claims asserted company opinion management liabilities ultimately result lawsuits expected material impact consolidated financial statements company environmental reserves company subject various laws regulations government policies relating health safety generation storage transportation disposal hazardous substances environment protection general company provides expenses associated environmental remediation obligations amounts probable reasonably estimated reserves adjusted new information develops circumstances change environmental reserves discounted company believes compliance laws regulations government policies material respects furthermore company anticipate maintaining compliance environmental statutes material impact upon companys competitive consolidated financial position note 14 world color press insolvency proceedings company continues manage bankruptcy claim settlement process quebecor world inc qwi bankruptcy proceedings united states canada qwi changed name world color press inc upon emerging bankruptcy july 21 2009 extent claims allowed holders claims entitled receive recovery nature recovery dependent upon type classification claims regard respect certain types claims holders thereof entitled receive cash andor unsecured notes holders certain types claims entitled receive combination quadgraphics common stock cash accordance terms world color press acquisition agreement quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated respect claims asserted holders thereof entitled priority cash recovery company estimated approximately 25 million 93 million recorded claims yet paid december 31 2013 december 31 2012 respectively obligation classified amounts owing satisfaction bankruptcy claims consolidated balance sheets respect unsecured claims held creditors operating subsidiary debtors quebecor world usa inc class 3 claims allowed class 3 claim entitled receive unsecured note amount exceed 50 creditors allowed class 3 claim provided however aggregate principal amount unsecured notes cannot exceed 750 million event total allowed class 3 claims exceeds 1500 million creditor holding allowed class 3 claim receive pro rata share 750 million unsecured notes issued together accrued interest 5 prepayment redemption premium thereon total 892 million connection world color press acquisition company required deposit maximum potential payout class 3 claim creditors 892 million trustee amount remain trustee either 1 paid creditor allowed class 3 claim 2 upon class 3 claims resolved excess amount revert company year ended december 31 2013 45 million paid class 3 claim creditors december 31 2013 560 million remains classified restricted cash consolidated balance sheets see note 10 restricted cash based companys analysis outstanding claims company liability 180 million december 31 2013 classified unsecured notes issued condensed consolidated balance sheets liabilities recorded bankruptcy matters based managements current assessment amount likely paid possible identify final amount priority cash claims amount class 3 claims ultimately allowed us bankruptcy court therefore amounts owing satisfaction bankruptcy claims consolidated balance sheets could materially higher amounts estimated would require additional cash payments made amount exceeding companys estimate amounts payable related unsecured notes could reach maximum aggregate principal amount 750 million would require additional cash payment maximum potential exposure already funded trust would require additional liability expense recorded companys estimate total class 3 claim liability 512 million 332 million paid plus 180 million remaining estimated liability december 31 2013 light substantial number amount claims filed claims resolution process take considerable time complete quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 15 income taxes income taxes based following components earnings continuing operations income taxes equity earnings loss unconsolidated entities years ended december 31 2013 2012 2011 components income tax expense benefit consists following years ended december 31 2013 2012 2011 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table outlines reconciliation differences federal statutory tax rate companys effective tax rate years ended december 31 2013 2012 2011 1 2012 company settled preacquisition world color press income tax examinations internal revenue service irs resulting 300 million income tax benefit quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated deferred income taxes significant deferred tax assets liabilities december 31 2013 2012 follows 1 result sale companys two whollyowned brazilian subsidiaries discussed note 11 equity method investments unconsolidated entities company reduced valuation allowance 213 million amount previously established subsidiaries deferred tax assets expected realized net deferred tax assets liabilities classified consolidated balance sheets december 31 2013 2012 follows december 31 2013 company foreign net operating loss carry forwards 1419 million state net operating loss carry forwards 6423 million foreign net operating loss carry forwards 466 million available without expiration remainder expire 2023 state net operating loss carry forwards quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated expire varying amounts 2033 company also 451 million various state credit carry forwards 308 million available without expiration remainder expire 2028 december 31 2013 company recorded valuation allowance 1515 million 603 million 415 million 497 million federal foreign state deferred tax assets respectively expected realized september 13 2013 irs released final tangible property regulations sections 162a 263a internal revenue code proposed regulations section 168 internal revenue code regulations generally apply taxpayers acquire produce improve tangible property based upon preliminary analysis company expect adoption regulations material impact consolidated financial statements company considers foreign earnings indefinitely invested accordingly company currently provide additional united states foreign income taxes would become payable upon remission undistributed earnings foreign subsidiaries cumulative undistributed earnings subsidiaries december 31 2013 material uncertain tax positions following table summarizes activity companys liability unrecognized tax benefits december 31 2013 2012 2011 december 31 2013 445 million unrecognized tax benefits would impact companys effective tax rate recognized amount reasonably possible 134 million total amount unrecognized tax benefits decrease within 12 months due resolution audits statute expirations 2012 company settled preacquisition world color press income tax examinations irs resulting net income tax benefit 300 million included net benefit 757 million related reduction uncertain tax positions prior years addition impact companys uncertain tax positions settlement examinations required adjustment certain tax attributes company impact adjustments tax attributes resulted net income tax expense 467 million company classifies interest expense related penalties related income tax uncertainties component income tax expense total interest income expense related tax uncertainties recognized consolidated statements operations years ended december 31 2013 2012 2011 10 million 11 million 07 million respectively penalties amount 02 million 0 01 million recognized years ended december 31 2013 2012 2011 respectively accrued interest 01 million 23 million related income tax uncertainties reported component current liabilities accrued quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated interest 40 million 28 million related income tax uncertainties reported component longterm liabilities consolidated balance sheets december 31 2013 2012 respectively accrued penalties related income tax uncertainties reported current liabilities consolidated balance sheet december 31 2013 accrued penalties 05 million related income tax uncertainties reported current liabilities consolidated balance sheet december 31 2012 accrued penalties 05 million 04 million related income tax uncertainties reported longterm liabilities consolidated balance sheets december 31 2013 2012 respectively company tax years 2010 2013 remain open subject examination irs tax years 2003 2013 remain open subject examination companys various major state jurisdictions within united states note 16 debt longterm debt consisted following december 31 2013 2012 1 senior notes weightedaverage interest rate 747 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2036 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement 2 july 26 2011 last amended december 19 2012 company entered 15 billion debt financing agreement certain lenders reduce companys borrowing costs lower interest rates create flexibility higher revolving credit capacity improvement financial terms 15 billion debt financing agreement includes three different loan facilities term loan term loan b revolving credit facility revolving credit facility amount 8500 million term loan aggregate amount 4500 million initial term five years extended additional year part december 19 2012 amendment mature july 25 2017 term loan b amount 2000 million net 10 million original issue discount term seven years maturing july 25 2018 subject certain required amortization borrowings revolving facility term loan loans made 15 billion debt financing agreement bear interest london interbank offered rate libor plus 225 125 excess alternate base rate term loan b loans bear interest libor plus 300 libor floor 100 200 excess alternative base rate quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated companys option december 31 2013 company borrowings 2098 million revolving credit agreement well 440 million issued letters credit leaving 5962 million available future borrowings proceeds term loan term loan b revolving credit facility used repay outstanding balances terminate companys previous 123 billion debt financing agreement included 7000 million term loan 5300 million revolving credit facility well pay new debt issuance costs incurred refinancing 15 billion debt financing agreement secured substantially assets united states encumbered companys financing agreements company recognized 340 million loss debt extinguishment year ended december 31 2011 connection july 26 2011 15 billion debt financing agreement loss comprised 1 209 million debt issuance costs terminated 123 billion debt financing agreement 2 89 million remaining original issue discount terminated 123 billion debt financing agreement 3 42 million debt issuance costs 15 billion debt financing agreement 340 million loss classified loss debt extinguishment consolidated statements operations 3 december 16 2008 debt related companys international operations refinanced entering secured credit agreement facilities agreement facilities agreement includes euro denominated term loan multicurrency revolving credit facility term loan principal payments commenced december 2009 matures december 16 2015 multicurrency revolving credit facility used financing working capital general business needs renewed 2013 expire december 16 2014 december 31 2013 companys international operations borrowings 23 million multicurrency revolving credit facility leaving 143 million available future borrowing terms facilities agreement include certain financial covenants guarantee facilities agreement company security agreement includes collateralizing substantially quadwinkowski assets facilities bear interest aggregate warsaw interbank offered rate wibor euro interbank offered rate euribor margin 4 2013 company refinanced certain equipment leases 171 million equipment term loans secured formerly leased equipment term loans bear interest fixed rate 475 require quarterly payments five year terms expiring 2018 purchase assets resulted 128 million noncash investing financing activities represents 171 million equipment term loans net 43 million eliminated capital lease obligations see note 1 basis presentation summary significant accounting policies based upon interest rates available company borrowings similar terms maturities fair value companys total debt approximately 14 billion 13 billion december 31 2013 2012 respectively fair value determination companys total debt categorized level 2 fair value hierarchy see note 18 financial instruments fair value measurements definition level 2 inputs december 31 2013 approximately 30 billion companys assets pledged security various loans agreements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated debt issuance costs activity impacting companys debt issuance costs years ended december 31 2013 2012 follows 1 company incurred 21 million debt issuance costs connection december 19 2012 15 billion debt financing agreement amendment extension maturity dates 8500 million revolving credit facility 4500 million term loan debt issuance costs accounted capitalized debt issuance costs classified longterm assets consolidated balance sheets costs amortized straightline basis five year lives related debt instruments amortization expense debt issuance costs 40 million 44 million 73 million years ended december 31 2013 2012 2011 respectively covenants compliance december 31 2013 companys various lending arrangements included certain financial covenants financial terms numbers ratios defined companys debt agreements among covenants company required maintain following december 31 2013 covenant restrictive measurement included • rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda defined debt agreement shall exceed 350 100 twelve months ended december 31 2013 companys leverage ratio 239 100 • rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2013 companys interest coverage ratio 734 100 • rolling twelvemonth basis fixed charge coverage ratio defined consolidated ebitda rent expense interest rent expense shall less 150 100 twelve months ended december 31 2013 companys fixed charge coverage ratio 426 100 • consolidated net worth least 7458 million plus 40 positive consolidated net income cumulatively year december 31 2013 consolidated net worth must least 7939 million december 31 2013 companys consolidated net worth restrictive covenant per various debt agreements 121 billion quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated addition covenants 15 billion debt financing agreement also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock companys total leverage ratio greater 300 100 total leverage ratio defined debt financing agreement company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions approximate annual principal amounts due longterm debt follows years ending december 31 note 17 lease obligations company entered various master lease agreements press finishing equipment leases provide company options purchase related equipment termination value defined various early buyout dates term lease leases accounted capital leases consolidated balance sheets assets recorded capital leases follows december 31 2013 2012 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated december 31 2013 future maturities capitalized leases consisted following company various operating lease agreements future minimum rental commitments noncancelable leases follows rent expense operating lease agreements totaled 369 million 332 million 228 million years ended december 31 2013 2012 2011 respectively note 18 financial instruments fair value measurements certain assets liabilities required recorded fair value recurring basis assets liabilities recorded fair value nonrecurring basis generally result acquisitions impairment charges fair value determined based exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants gaap also classifies inputs used measure fair value following hierarchy level 1 quoted prices active markets identical assets liabilities level 2 quoted prices active markets similar assets liabilities quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability level 3 unobservable inputs asset liability level 3 recurring measurements assets liabilities december 31 2013 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company records fair value forward contracts pension plan assets recurring basis fair value cash equivalents receivables inventories restricted cash accounts payable accrued liabilities amounts owing satisfaction bankruptcy claims approximate carrying values december 31 2013 2012 see note 16 debt discussion fair value companys debt note 20 employee retirement plans details level 1 level 2 inputs related employee retirement plans addition assets liabilities recorded fair value recurring basis company required record certain assets liabilities fair value nonrecurring basis generally result acquisitions remeasurement assets resulting impairment charges see note 3 acquisitions strategic investments discussion acquisitions note 5 restructuring impairment transactionrelated charges discussion impairment charges recorded result remeasurement certain longlived assets december 31 2013 2012 company operations countries transactions outside functional currencies periodically enters foreign exchange contracts used hedge net exposures changes foreign currency exchange rates designated either cash flow hedges fair value hedges gains losses net foreign currency hedges intended offset losses gains underlying net exposures effort reduce earnings volatility resulting fluctuating foreign currency exchange rates company periodically enters natural gas forward purchase contracts hedge increases commodity costs years ended december 31 2013 2012 companys commodity contracts qualified exception related normal purchases sales company takes delivery normal course business company settled shortterm foreign currency forward exchange contract hedge exchange rate exposure 500 million canadian dollars deposit related transcontinental mexico acquisition march 1 2012 see note 3 acquisitions strategic investments open foreign currency exchange contracts december 31 2013 years ended december 31 2013 2012 2011 impact hedge ineffectiveness consolidated statements operations note 19 longterm liabilities longterm liabilities consisted following december 31 2013 2012 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 20 employee retirement plans defined contribution plans quadgraphics diversified plan comprised participant directed 401k contributions company match profit sharingcontributions company 401k matching contributions 132 million 119 million 128 million years ended december 31 2013 2012 2011 respectively quadgraphics employee stock ownership plan holds profit sharing contributions company stock made discretion companys board directors profit sharing contributions years ended december 31 2013 2012 annual profit sharing contributions totaled 134 million year ended december 31 2011 defined benefit plans postretirement benefit plans company sponsors various funded unfunded pension plans portion fulltime employees us canada benefits generally based upon years service compensation plans funded conformity applicable government regulations company funds least minimum amount required qualified plans using actuarial cost methods assumptions acceptable government regulations addition pension benefits company provides certain healthcare life insurance benefits retired employees components net periodic pension postretirement benefit expense income years ended december 31 2013 2012 2011 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated underfunded pension postretirement obligations calculated using generally accepted actuarial methods measured december 31 following provides reconciliation projected benefit obligation fair value plan assets funded status pension postretirement plans december 31 2013 2012 amounts recognized consolidated balance sheets december 31 2013 2012 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table provides reconciliation companys accumulated comprehensive income loss prior deferred tax effects december 31 2013 2012 follows 2013 company paid lump sums participants exceeded threshold settlement accounting resulted acceleration recognition accumulated comprehensive income settlement gain 21 million settlement gain recorded restructuring impairment transactionrelated charges consolidated statement operations 2012 company announced elimination life insurance coverage current future retirees locations elimination reimbursement medical costs certain retirees resulted reduction plan obligations 57 million addition company also announced elimination postretirement medical benefit coverage future retirees retire december 31 2012 resulted reduction plan obligations 169 million recognition curtailment gain 128 million curtailment gain recorded restructuring impairment transactionrelated charges consolidated statement operations actuarial gains losses excess 10 greater projected benefit obligation marketrelated value plan assets recognized component net periodic benefit costs average remaining service period plans active employees unrecognized prior service costs credit also recognized component net periodic benefit cost average remaining service period plans active employees amounts accumulated comprehensive income loss expected recognized components net periodic pension postretirement benefit expense income next year follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated weightedaverage assumptions separately pension postretirement benefit plans used determine net periodic benefit costs years ended december 31 2013 2012 2011 follows weightedaverage assumptions separately pension postretirement benefit plans used determine benefit obligations december 31 2013 2012 follows company determines assumed discount rate based index highquality corporate bond yields matchedfunding yield curve analysis measurement date assumed health care cost trend rate used measuring accumulated postretirement benefit obligation 75 end 2013 expected gradually decline 2024 ultimate trend rate 50 onepercentage point change assumed health care cost trend rates would following effects estimated company contributions benefit payments 2014 company expects make cash contributions 397 million qualified defined benefit pension plans make estimated benefit payments 49 million nonqualified defined benefit pension postretirement plans actual pension contributions may differ based funding calculations company may choose make additional discretionary contributions estimated benefit payments may differ based actual claim experience quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated estimated future benefit payments plans behalf plan participants estimate plans future benefit payments made funded qualified plans unfunded nonqualified postretirement plans plan participants follows plan assets investment strategy company follows disciplined investment strategy provides diversification investments asset class foreign currency sector company pension committee approved investment policies different pension plans establish longterm asset mix targets based several factors including historical returns achieved worldwide investment markets time horizon pension plans obligations investment risk plans allocation range asset class developed whereby mix equities fixedincome investments used provide appropriate riskadjusted longterm return plan assets thirdparty investment managers employed invest assets passivelyindexed activelymanaged strategies investment returns risks monitored ongoing basis derivatives used certain times hedge foreign currency exposure gains losses derivatives offset corresponding change value hedged assets derivatives strictly used hedging purposes speculative purposes target allocations plan assets weightedaverage basis 65 equity securities 35 fixedincome including cash equivalents actual asset allocation december 31 2013 approximately 67 equity securities 33 debt securities actual asset allocation december 31 2012 approximately 64 equity securities 35 debt securities 1 equity investments diversified country issuer industry sector fixed income securities primarily consist government bonds corporate bonds diversified industries expected longterm rate return assets assumption selected first identifying expected range longterm rates return major asset class expected longterm rates return developed based longterm historical averages current expectations future returns anticipated inflation rates expected longterm rate return plan assets calculated weighting asset class extent individual pension plans different target asset mixes expected longterm rate return assets may differ across plans quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair values companys pension plan assets december 31 2013 2012 asset category follows level 3 assets liabilities december 31 2013 2012 company segregated plan assets following major categories levels determining fair value december 31 2013 cash equivalents carrying value approximates fair value assets classified level 1 fixed income category consists bonds shortterm fixed income securities fair valued based compilation primarily observable market information broker quotes overthecounter markets classified level 2 equities category consists equity investments equity pooled funds assets classified level 1 level 2 respectively fair value equity investments based quoted prices active market fair value equity pooled funds based funds net asset value nav established funds administrator valuation methodologies described may generate fair value calculation may indicative net realizable value future fair values company believes valuation methodologies used appropriate use different methodologies assumptions calculating fair value could result different amounts company invests various assets valuation determined nav company believes nav representative fair value reporting date significant restrictions redemption investments reasons indicate investment would redeemed amount different nav risk management directly invested funds concentration risk monitored specific guidelines investment manager mandates investment manager mandates developed companys external investment advisor specify diversification standards maximum exposure per issuer concentration limits per type security industry country applicable investments made pooled funds investment mandates funds reviewed companys external investment advisor determine investment objectives guidelines consistent companys overall pension plan risk management objectives managing plan assets management reviews manages risk associated funded status risk interest rate risk market risk counterparty risk liquidity risk operational risk liability management asset class diversification central companys risk management approach integral overall investment strategy quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated given process place ensure proper diversification portfolio management believes company pension plan assets exposed significant concentration risk multiemployer pension plans company participates number mepps terms collective bargaining agreements cover number employees risks participating mepps different single employer plans following aspects • assets contributed mepps one company may used provide benefits employees participating companies • participating company stops contributing plan unfunded obligations plan may borne remaining participating companies • company stops participating mepps continues business company would required pay amount referred withdrawal liability based unfunded status plan company withdrawn significant mepps replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan two mepps graphic communications international union employer retirement fund “gciu” graphic communications conference international brotherhood teamsters national pension fund “gcc” significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued 986 million estimated withdrawal liability based information provided plans trustee part purchase price allocation world color press company making required interim payments mepps companys withdrawal liability gciu gcc plans gciu plan defined benefit plan provides retirement benefits total permanent disability benefits preretirement death benefits participating union employees company funded status gciu plan classified critical based gciu plans 2013 certification united states department labor funded percentage plan less 65 projected accumulated funding deficit next four plan years result gciu plan implemented rehabilitation plan improve plans funded status company estimates contributions made gciu plan company represent greater 5 total contributions made participating employers 2012 plan year plan year ended december 31 2012 latest available financial information provided gciu plan gcc plan defined benefit plan provides retirement benefits disability benefits early retirement benefits participating union employees company funded status gcc plan classified critical based gcc plans 2013 certification united states department labor funded percentage plan less 65 projected accumulated funding deficit next four plan years result gcc plan implemented rehabilitation plan improve plans funded status company estimates contributions made gcc plan company represent greater 5 total contributions made participating employers 2011 plan year plan year ended april 30 2012 latest available financial information provided gcc plan company received notices withdrawal demand payment letters gciu gcc plans total excess 986 million original reserves established company withdrawals company process determining final withdrawal payment mepps quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated administrators withdrawal liability reserved company within range companys estimated potential outcomes process company began making monthly payments totaling 144 million 112 million years ended december 31 2013 2012 respectively requested mepps required employee retirement income security act although payments waive companys rights object withdrawal liabilities submitted gciu gcc plan administrators december 31 2013 company reserved 730 million estimate total mepps withdrawal liability 531 million recorded longterm liabilities 144 million recorded accrued liabilities 55 million recorded unsecured notes issued consolidated balance sheets estimate may increase decrease depending final agreement mepps administrators note 21 earnings loss per share attributable quadgraphics common shareholders basic earnings loss per share attributable quadgraphics common shareholders computed net earnings loss attributable quadgraphics common shareholders less allocation participating securities divided basic weighted average common shares outstanding 470 million 468 million 471 million shares years ended december 31 2013 2012 2011 respectively calculation diluted earnings per share amount includes effect dilutive equity incentive instruments company uses treasury stock method calculate effect outstanding dilutive equity incentive instruments requires company compute total proceeds sum 1 amount employee must pay upon exercise award 2 amount unearned stockbased compensation costs attributed future services 3 amount tax benefits would credited additional paidin capital assuming exercise award equity incentive instruments total employee proceeds exercise exceed average fair value equity incentive instrument period antidilutive effect earnings per share periods net earnings continuing operations accordingly company excludes calculation antidilutive equity incentive instruments 16 million 32 million class common shares excluded computations diluted net earnings per share years ended december 31 2013 2012 respectively due net loss continuing operations attributable quadgraphics common shareholders incurred year ended december 31 2011 assumed exercise equity incentive instruments antidilutive therefore included diluted loss per share attributable quadgraphics common shareholders calculation period unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid required treated participating securities included computation earnings loss per share pursuant twoclass method companys participating securities composed unvested stock options granted november 18 2011 reduced basic diluted earnings per share attributable quadgraphics common shareholders 002 007 per diluted share years ended december 31 2013 2012 respectively impact basic diluted earnings per share attributable quadgraphics common shareholders 2011 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reconciliations numerator denominator basic diluted per share computations companys common stock including impact discontinued operations years ended december 31 2013 2012 2011 summarized follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 22 equity incentive programs shareholders company approved quadgraphics inc 2010 omnibus incentive plan omnibus plan two complimentary purposes 1 attract retain outstanding individuals serve directors officers employees 2 increase shareholder value omnibus plan replaced 1999 nonqualified stock option plan 1990 stock option plan january 1 2011 equity grants made omnibus plan may 2012 2013 additional 3571652 2000000 shares respectively approved issuance omnibus plan making 7871652 shares class stock reserved issuance omnibus plan awards omnibus plan may consist incentive awards stock options stock appreciation rights performance shares performance share units shares class stock restricted stock restricted stock units deferred stock units stockbased awards determined companys board directors stock option granted exercise price less 100 fair market value class stock date grant december 31 2013 2400763 shares available issuance omnibus plan company recognizes compensation expense based estimated grant date fair values sharebased awards issued employees nonemployee directors including stock options performance shares performance share units restricted stock restricted stock units deferred stock units company recognizes compensation costs awards expected vest straightline basis requisite service period award generally vesting term three four years performance share performance share unit awards restricted stock restricted stock unit awards stock options company estimated number awards expected vest based part historical forfeiture rates also based managements expectations employee turnover within specific employee groups receiving type award forfeitures estimated time grant revised necessary subsequent periods actual forfeitures differ estimates equity incentive compensation expense total compensation expense recognized related equity incentive programs 186 million 134 million 149 million years ended december 31 2013 2012 2011 respectively recorded selling general administrative expenses restructuring impairment transactionrelated charges consolidated statements operations total future compensation expense related equity incentive programs granted december 31 2013 approximately 195 million estimated future compensation expense 141 million 2014 54 million 2015 stock options november 18 2011 company announced board directors approved termination outstanding stock options companys 1990 stock option plan 1999 nonqualified stock option plan “409a options” accordance authoritative literature termination modification stock options december 31 2011 company recorded 200 million liability termination payment based number 409a options held option holders companys weighted volume adjusted stock price 1347 november 18 2011 exercise price 409a options termination payment paid december 2012 addition 2011 company recorded 64 million incremental stock option expense recorded restructuring impairment transactionrelated charges consolidated statements operations option holders granted new options omnibus plan equal number terminated 409a options held new options granted exercise price equal greater fair market value 1347 per share exercise price option holders 409a options greater 1347 new options issued greater price therefore none new options granted exercise price fair market value new options granted exercise price equal greater corresponding 409a option canceled quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated new option grants beginning january 1 2011 options vest four years vesting first year onethird vesting upon second third fourth anniversary dates defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee new option grants beginning january 1 2011 options expire later tenth anniversary grant date twentyfour months termination death thirtysix months termination normal retirement disability 90 days termination employment reason stock options granted prior 2011 credited dividend declarations new option grants time credited dividend declarations excluding november 18 2011 grants stock options granted employees granted new option grant terms january 1 2011 forward stock options granted omnibus plan year ended december 31 2013 448154 stock options granted grant date weighted average fair value 225 year ended december 31 2012 451029 stock options granted grant date weighted average fair value 1317 year ended december 31 2011 excluding 3571652 new options granted november 18 2011 fair market value stock options determined using blackscholesmerton option pricing module fair market value stock options determined using following weighted average assumptions years ended december 31 2012 2011 company determined expected volatility based volatility comparable company stock average riskfree interest rate based united states treasury security rate effect grant date term expected life expected life based term vesting period grant adjusted historical experience vesting compensation expense recognized related stock options 108 million 101 million 127 million years ended december 31 2013 2012 2011 respectively total future compensation expense stock options granted december 31 2013 approximately 78 million estimated future compensation expense 76 million 2014 02 million 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summary stock option activity year ended december 31 2013 intrinsic value options exercisable options outstanding december 31 2013 2012 2011 based fair value stock price sharebased compensation activity years ended december 31 2013 2012 2011 noted net tax benefits stock option activity shown tax benefit stock option activity financing section consolidated statements cash flows 22 million 41 million 09 million years ended december 31 2013 2012 2011 respectively performance share performance share units performance share ps performance share unit psu awards consist shares rights shares companys class stock awarded employees company shares payable upon determination company achieved certain established performance targets range 0 200 targeted payout based actual results shares awarded 2013 performance period three years ending december 31 2015 set forth individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving ps psu grants receive full credit dividends vesting period dividends paid grantee within 45 days full vesting upon vesting psus settled either cash payment equal fair market value psus vesting date issuance company class stock voting rights instruments vesting occurs share stock issued quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summary ps psu award activity year ended december 31 2013 year ended december 31 2013 ps awards 389930 shares psu awards 16208 units granted weightedaverage grant date fair value 2039 2050 respectively ps psu awards granted years ended december 31 2012 2011 grant dates target number shares target shares granted performance period target shares earned forfeited additional shares maximum number shares may granted end performance period potential payouts nonvested awards december 31 2013 range zero 736112 ps psu awards certain performance targets achieved general ps psu awards vest end performance period provided holder share continuously employed company vesting date compensation expense awards granted recognized based targeted payout 100 net estimated forfeitures compensation expense recognized related ps psus 23 million year ended december 31 2013 compensation expense recognized related ps psus years ended december 31 2012 2011 total future compensation expense ps psus granted december 31 2013 estimated 48 million estimated future compensation expense 24 million 2014 24 million 2015 restricted stock restricted stock units restricted stock rs restricted stock unit rsu awards consist shares rights shares companys class stock awarded employees company awards restricted subject substantial risk forfeiture restrictions sale transfer employee rsu awards typically granted eligible employees outside united states defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving rs grants able exercise full voting rights receive full credit dividends vesting period dividends paid rs grantee within 45 days full vesting grantees receiving rsus granted prior january 1 2012 entitled vote earn dividends grantees receiving rsus january 1 2012 entitled vote earn dividends upon vesting rsus settled either cash payment equal fair market value rsus vesting date issuance company class stock quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summary rs rsu award activity year ended december 31 2013 year ended december 31 2013 rs awards 408146 shares rsu awards 32671 units granted weightedaverage grant date fair value 2039 2072 respectively year ended december 31 2012 rs awards 310651 shares rsu awards 15760 units granted weightedaverage grant date fair value 1434 january 1 2011 rs awards 119315 shares rsu awards 14625 units granted grant date fair value 4126 3886 respectively august 1 2011 rs awards 709 shares rsu awards 1177 granted grant date fair value 3232 3001 respectively general rs rsu awards vest third anniversary grant date provided holder share continuously employed company vesting date compensation expense recognized rs rsus 48 million 29 million 16 million years ended december 31 2013 2012 2011 respectively total future compensation expense rs rsus granted december 31 2013 approximately 69 million estimated future compensation expense 41 million 2014 28 million 2015 deferred stock units following table summary deferred stock units dsu award activity year ended december 31 2013 years ended december 31 2013 2012 dsus 33115 31525 granted weightedaverage grant date fair value 2039 1434 respectively dsus fully vested grant date dsu entitles grantee receive one share class stock upon earlier separation date grantee second anniversary grant date could subject acceleration change control death disability quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated defined individual dsu grant agreement grantees dsus may exercise voting rights credited dividends converted additional dsus based closing price class stock dividend equivalents units 3529 7440 granted years ended december 31 2013 2012 respectively compensation expense recognized dsus 07 million 04 million 06 million years ended december 31 2013 2012 2011 respectively awards fully vested grant date compensation expense recognized date grant information authorized unissued shares treasury shares may used issuance companys equity incentive programs company intends use treasury shares class stock meet stock requirements awards future note 23 shareholders equity company three classes common stock follows share data millions accordance articles incorporation class common share one vote per share class b class c common share ten votes per share matters voted upon companys shareholders liquidation rights three classes stock companys class c stock held quadgraphics employee ownership plan owned transferred company employee benefit plan intended satisfy qualification requirements section 401 internal revenue code august 2012 companys outstanding class c common shares previously classified redeemable equity converted class common shares company also 05 million shares 001 par value preferred stock authorized none issued december 31 2013 2012 2011 company present plans issue preferred stock quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated accordance articles incorporation dividends paid equally class b class c common shares following table details dividend activity related companys outstanding shares class b class c stock years ended december 31 2013 2012 2011 september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock company repurchased shares years ended december 31 2013 2012 company repurchased 04 million shares class stock open market 82 million year ended december 31 2011 918 million authorized repurchases remaining program december 31 2013 redeemable equity company followed applicable gaap sec authoritative guidance redeemable stock required company record class c stock full redemption value balance sheet date extent redemption securities solely within control company terms articles incorporation class c common shares required owned qualified employee retirement plan company holder class c stock continuous right class c stock repurchased company redemption value class c qualified employee retirement plan shares december 31 2013 2012 redemption value class c qualified employee retirement plan shares december 31 2011 totaled 35 million redemption value class common shares december 31 2013 2012 2011 readily tradable market august 2012 remaining 03 million outstanding class c common shares owned quadgraphics employee stock ownership plan exchanged class common shares held treasury stock exchange eliminated redemption value class c common stock class c common shares redeemed company year ended december 31 2011 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated subsequent changes redemption value securities due changes stock valuation dividend declarations charged retained earnings decreases redemption value due elimination redemption features credited additional paidin capital retained earnings year ended december 31 2012 balance redeemable equity decreased 35 million result conversion outstanding class c common shares class common shares information regarding changes redeemable equity years ended december 31 2012 2011 provided table note 24 accumulated comprehensive income loss changes accumulated comprehensive income loss component net tax years ended december 31 2013 2012 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated details reclassifications accumulated comprehensive income loss net earnings loss years ended december 31 2013 2012 2011 follows note 25 segment information company operates primarily commercial print portion printing industry related product service offerings designed offer clients complete solutions communicating messages target audiences companys operating reportable segments aligned chief operating decision maker company currently manages business companys reportable operating segments product service offerings summarized united states print related services united states print related services segment predominantly comprised companys united states printing operations managed one integrated platform includes consumer magazines catalogs retail inserts special interest publications journals direct mail books directories instore marketing packaging commercial specialty printed products together related service offerings including marketing strategy media planning placement data insights response analytics services creative services videography photography workflow solutions digital imaging facilities management services digital publishing interactive print solutions including image recognition near field communication technology mailing distribution logistics data quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated optimization hygiene services segment also includes design development manufacture service printingrelated auxiliary equipment well manufacture ink result divestiture companys canadian operations transcontinental march 1 2012 see note 4 discontinued operations united states print related services segment amounts restated exclude canadian discontinued operations international segment consists companys printing operations europe latin america including operations poland argentina brazil chile colombia mexico peru segment provides printed products related services consistent united states print related services segment exception printingrelated auxiliary equipment included united states print related services segment corporate consists unallocated general administrative activities associated expenses including part executive legal finance restructuring impairment transactionrelated charges years ended december 31 2013 2012 2011 described note 5 restructuring impairment transactionrelated charges included operating incomeloss results segment total assets canadian discontinued operations 1775 million december 31 2011 capital expenditures canadian discontinued operations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 72 million year ended december 31 2011 included united states print related services segment reconciliation operating income continuing operations earnings continuing operations income taxes equity earnings loss unconsolidated entities reported consolidated statements operations years ended december 31 2013 2012 2011 follows note 26 geographic area product information table presents companys net sales property plant equipment geographic region years ended december 31 2013 2012 2011 amounts table differ segment data presented note 25 segment information operating segment includes operations multiple geographic regions based companys management reporting structure quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated table presents companys consolidated net sales products services years ended december 31 2013 2012 2011 note 27 subsequent events declaration quarterly dividend february 26 2014 company declared quarterly dividend 030 per share paid march 21 2014 shareholders record march 12 2014 item 9item 8 financial statements supplementary data quarterly financial data unaudited following table sets forth selected financial information eight quarters twoyear period ended december 31 2014 unaudited information prepared company basis consolidated financial statements includes normal recurring adjustments necessary present information fairly read conjunction companys audited consolidated financial statements notes thereto 1 reflects results acquired businesses relevant acquisition dates primarily related acquisitions brown printing may 30 2014 vertis january 16 2013 see note 2 acquisitions strategic investments consolidated financial statements item 8 annual report form 10k information acquisitions report independent registered public accounting firm board directors shareholders quadgraphics inc subsidiaries sussex wi audited accompanying consolidated balance sheets quadgraphics inc subsidiaries company december 31 2014 2013 related consolidated statements operations comprehensive income loss redeemable equity common stock equity noncontrolling interests cash flows three years period ended december 31 2014 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position quadgraphics inc subsidiaries december 31 2014 2013 results operations cash flows three years period ended december 31 2014 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states companys internal control financial reporting december 31 2014 based criteria established internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission report dated march 2 2015 expressed unqualified opinion companys internal control financial reporting deloitte touche llp milwaukee wisconsin march 2 2015 report independent registered public accounting firm board directors shareholders quadgraphics inc subsidiaries sussex wi audited internal control financial reporting quadgraphics inc subsidiaries company december 31 2014 based criteria established internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission described managements report internal control financial reporting management excluded assessment internal control financial reporting business units acquired brown printing company brown printing acquired may 30 2014 business activities excluded assessment constitute approximately 6 consolidated total current assets approximately 3 consolidated net sales approximately 4 consolidated cost sales year ended december 31 2014 accordingly audit include internal control financial reporting business activities brown printing companys management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying managements report internal control financial reporting responsibility express opinion companys internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion companys internal control financial reporting process designed supervision companys principal executive principal financial officers persons performing similar functions effected companys board directors management personnel provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting including possibility collusion improper management override controls material misstatements due error fraud may prevented detected timely basis also projections evaluation effectiveness internal control financial reporting future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion company maintained material respects effective internal control financial reporting december 31 2014 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states consolidated financial statements year ended december 31 2014 company report dated march 2 2015 expressed unqualified opinion financial statements deloitte touche llp milwaukee wisconsin march 2 2015 quadgraphics inc consolidated statements operations millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements comprehensive income loss millions see accompanying notes consolidated financial statements quadgraphics inc consolidated balance sheets millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements cash flows millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements redeemable equity common stock equity noncontrolling interests millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements redeemable equity common stock equity noncontrolling interests continued millions see accompanying notes consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies nature operationsquadgraphics inc subsidiaries company quadgraphics operates primarily commercial print portion printing industry printer consumer magazines catalogs retail inserts special interest publications journals direct mail books directories instore marketing packaging commercial specialty printed products company also provides media solutions logistics services customers companys products services sold primarily throughout north america south america europe catalogers publishers retailers additionally company manufactures printingrelated auxiliary equipment sold original equipment manufacturers printing companies throughout world principles consolidation basis presentationthe accompanying consolidated financial statements include accounts company whollyowned majorityowned controlled subsidiaries prepared accordance accounting principles generally accepted united states america gaap results operations accounts businesses acquired included consolidated financial statements dates acquisition see note 2 acquisitions strategic investments entities company ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting investments entities company exert significant influence control ownership interest less 20 accounted using cost method accounting intercompany transactions balances eliminated consolidation discontinued operationsthe results operations companys canadian operations reported discontinued operations periods presented sale canadian operations completed march 1 2012 corresponding canadian assets liabilities longer included consolidated balance sheets december 31 2014 2013 accordance authoritative literature company elected separately disclose cash flows related canadian discontinued operations see note 3 discontinued operations information companys sale canadian operations foreign operationsassets liabilities denominated foreign currencies translated us dollars exchange rate existing respective balance sheet dates income expense items translated average rates respective periods translation adjustments resulting fluctuations exchange rates recorded separate component accumulated comprehensive income loss consolidated statements redeemable equity common stock equity noncontrolling interests transaction gains losses recorded selling general administrative expenses consolidated statements operations foreign exchange transactions resulted realized unrealized gainslosses 59 million 57 million 04 million years ended december 31 2014 2013 2012 respectively companys international operations conducted europe quadwinkowski sp z oo quadwinkowski well following latin american countries argentina brazil chile colombia mexico peru company owns 49 operations brazil 50 operations chile accounts entities using equity method accounting see note 9 equity method investments unconsolidated entities discussion significant unconsolidated entities use estimatesthe preparation consolidated financial statements requires use managements estimates assumptions affect reported assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenue expenses reporting periods actual results could differ estimates used accounting items matters including limited allowances doubtful accounts inventory obsolescence asset valuations useful lives goodwill pension postretirement benefits selfinsurance reserves stockbased compensation taxes restructuring provisions contingencies quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated revenue recognitionthe company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides certain cases delivery billing schedules outlined customer agreement product revenue recognized manufacturing complete title risk loss transfer customer reasonable assurance collectability product returns significant majority products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer revenues related companys logistics operations includes delivery printed material recognized upon completion services company also manufactures printingrelated auxiliary equipment ensure industryleading technology printing operations well sell businesses revenue generally recognized equipment sales time shipment revenue services related installation equipment customer sites recognized upon completion installation payments received customers manufacture equipment prior shipment case installation services prior completion installation cases payments received advance meeting applicable revenue recognition criteria deferred revenue recorded criteria revenue recognition subsequently met services account greater 10 companys consolidated net sales therefore net sales related costs sales products services included separate line items consolidated statements operations certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis byproduct recoveriesthe company records sale byproducts net product sales consolidated statements operations financial instrumentsthe company uses derivative financial instruments purpose hedging commodity foreign exchange exposures exist part ongoing business operations including natural gas forward purchase contracts foreign exchange contracts policy company engage speculative leveraged transactions company hold issue financial instruments trading purposes derivative instruments recorded consolidated balance sheets either assets liabilities measured fair value derivative designated fair value hedge changes fair value derivative hedged item attributable hedged risk recognized earnings derivative designated cash flow hedge effective portion changes fair value derivative recorded component accumulated comprehensive income loss recognized consolidated statements operations hedged item affects earnings quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated ineffective portions changes fair value hedges recognized earnings cash flows derivatives accounted cash flow fair value hedges included consolidated statements cash flows category item hedged fair value measurementthe company applies fair value accounting assets liabilities recognized disclosed fair value consolidated financial statements recurring basis fair value represents amount would received selling asset paid transfer liability orderly transaction market participants measurement date determining fair value measurements assets liabilities required recorded fair value company considers principal advantageous market marketbased risk measurements assumptions market participants would use pricing asset liability see note 16 financial instruments fair value measurements discussion research developmentresearch development costs related development new products adaptation existing products expensed incurred included cost sales totaled 113 million 134 million 132 million years ended december 31 2014 2013 2012 respectively cash equivalentsthe company considers highly liquid investments original maturities three months less cash equivalents receivablesreceivables stated net allowances doubtful accounts single customer comprised 5 companys consolidated net sales 2014 2013 2012 5 companys consolidated receivables december 31 2014 2013 specific customer provisions made review significant outstanding amounts utilizing information customer creditworthiness current economic trends indicates collection doubtful addition provisions made differing rates based upon age receivable companys historical collection experience see note 6 receivables discussion transactions affecting allowances doubtful accounts inventoriesinventories include material labor plant overhead stated lower cost market december 31 2014 2013 inventories valued using firstin firstout fifo method see note 7 inventories breakdown components companys inventories property plant equipmentproperty plant equipment recorded cost depreciated estimated useful lives assets using straightline method financial reporting purposes see note 8 property plant equipment breakdown components companys property plant equipment major improvements extend useful lives existing assets capitalized charged asset accounts repairs maintenance significantly improve extend useful lives respective assets expensed incurred leasehold improvements depreciated shorter lease term estimated useful life respective asset intangible assetsidentifiable intangible assets recognized apart goodwill amortized estimated useful lives quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated impairment longlived intangible assetsthe company evaluates longlived assets intangible assets significant property plant equipment customer relationship intangible assets whenever events circumstances occurred indicate carrying value asset may recoverable determining whether impairment occurred typically requires various estimates assumptions including determining cash flows directly related potentially impaired asset useful life cash flows occur amount assets residual value turn measurement impairment loss requires determination recoverability generally estimated ability recover balance assets expected future operating cash flows undiscounted basis impairment determined exist related impairment loss calculated based difference fair value carrying value asset goodwillgoodwill reviewed annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value performing analysis company compares reporting units fair value estimated based comparable company market valuations andor expected future discounted cash flows generated reporting unit carrying value carrying value exceeds reporting units fair value company performs fair value measurement calculation determine impairment loss would charged operations period identified see note 5 goodwill intangible assets discussion income taxesthe company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations company determines deferred income tax asset fully realized future valuation allowance established increased reflect amount asset likely realized would increase companys provision income taxes period valuation allowance established company determines related deferred income tax assets realized future excess net recorded amount adjustment reduce related valuation allowance made would reduce companys provision income taxes company regularly audited foreign domestic tax authorities audits occasionally result proposed assessments ultimate resolution might result company owing additional taxes including cases penalties interest company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit greater fiftypercent likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination companys worldwide tax provision related tax assets liabilities requires use significant judgment estimates interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain company believes appropriate support positions taken certain positions may successfully challenged taxing authorities company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions determination quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated companys worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions see note 15 income taxes discussion pension postretirement plansthe company assumed certain frozen underfunded defined benefit pension postretirement benefit plans part 2010 world color press inc world color press acquisition pension plan costs determined using actuarial methods funded contributions company records amounts relating pension postretirement benefit plans based calculations include various actuarial assumptions including discount rates mortality assumed rates return compensation increases turnover rates health care cost trend rates company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors purposes calculating expected return plan assets valued fair value event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 2014 company announced elimination postretirement medical benefit coverage retirees see note 18 employee retirement plans details plan termination financial statement impacts addition result acquisition world color press company participated multiemployer pension plans mepps due significant underfunded status mepps company withdrawn significant mepps replaced union sponsored promise pay future defined benefit plans company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded estimated withdrawal liability mepps part purchase price allocation process based information received mepps trustees estimated withdrawal liability updated new withdrawal liability projections provided plans trustees final withdrawal liability determined paid exact amount withdrawal liability could higher lower estimate depending among things nature timing triggering events funded status plans time see note 18 employee retirement plans discussion stockbased compensationthe company recognizes stockbased compensation expense vesting period stockbased awards made employees directors based fair value instrument time grant see note 20 equity incentive programs discussion accumulated comprehensive income lossaccumulated comprehensive income loss consists unrecognized actuarial gains losses prior service costs pension postretirement plans foreign currency translation adjustments presented consolidated statements redeemable equity common stock equity noncontrolling interests see note 22 accumulated comprehensive income loss discussion quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated supplemental cash flow informationcertain supplemental cash flow information related company consists following december 31 2014 2013 2012 note 2 acquisitions strategic investments 2014 brown printing company acquisition company completed acquisition brown printing company brown printing may 30 2014 1000 million brown printing provides magazine catalog printing distribution services integrated media solutions magazine publishers catalog marketers united states purchase brown printing accounted using acquisition method accounting gaap company recorded preliminary allocation purchase price acquired tangible identifiable intangible assets liabilities assumed based estimated fair values acquisition date company used cash hand borrowings revolving credit facility finance acquisition brown printings operations included united states print related services segment disclosure financial results brown printing since acquisition date practicable operated standalone business combined companys existing operations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company recorded preliminary allocation purchase price tangible identifiable intangible assets acquired liabilities assumed including certain contingent liabilities based fair values may 30 2014 acquisition date preliminary purchase price allocation follows preliminary purchase price allocation unaudited pro forma condensed combined financial information based valuations performed determine fair value net assets acquisition date final purchase price well purchase price allocation subject final determination acquired working capital completion final valuation net assets acquired valuation net assets acquired 1000 million classified level 3 valuation hierarchy see note 16 financial instruments fair value measurements definition level 3 inputs identifiable customer relationship intangible assets amortized estimated useful lives six years 2014 anselmo l morvillo sa investment company invested additional 65 million anselmo l morvillo sa morvillo argentina increased ownership share morvillo 85 100 year ended december 31 2014 company historically consolidated results morvillo companys consolidated financial statements presented 15 portion morvillos results owned company noncontrolling interest company longer present noncontrolling interest going forward morvillos results fully consolidated companys consolidated financial statements 2014 unigraphic inc acquisition company completed acquisition unigraphic inc unigraphic commercial specialty printing company based boston metro area february 5 2014 unigraphic offers commercial specialty printing instore marketing digital fulfillment solutions wide variety industries including arts entertainment education financial food healthcare mass media pharmaceutical retail net purchase price 112 million unigraphic includes 91 million net cash paid year ended december 31 2014 estimated 21 million future cash payments related acquisition identifiable customer relationship intangible assets 72 million recorded preliminary purchase price allocation amortized estimated useful lives six years preliminary purchase price allocation based valuations performed determine fair value net assets acquisition date final purchase price well purchase price allocation subject final determination acquired working capital completion final valuation net assets acquired unigraphics operations included united states print related services segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 2013 proteus packaging transpak corporation acquisitions company completed acquisition wisconsinbased proteus packaging proteus well sister company transpak corporation transpak december 18 2013 487 million payments 431 million made december 18 2013 upon completion acquisition 2014 50 million paid leaving 06 million estimated future cash payments related acquisition proteus designer manufacturer highend paperboard packaging offering packaging solutions wide variety industries including automotive biotechnology food personal care pharmaceuticals software electronics transpak fullservice industrial packaging company offering crating packaging warehousing distribution logistics services destinations worldwide acquisition accounted using acquisition method accounting gaap company recorded allocation purchase price acquired tangible identifiable intangible assets liabilities assumed based fair values december 18 2013 acquisition date goodwill resulting acquisition deductible tax purposes recorded within united states print related services segment based amount purchase price exceeds fair value net assets acquired final purchase price allocation follows purchase price allocation based valuations performed determine fair value net assets acquisition date valuation net assets acquired 487 million classified level 3 valuation hierarchy see note 16 financial instruments fair value measurements definition level 3 inputs identifiable customer relationship intangible assets amortized straightline basis estimated useful lives six years proteus transpaks operations included united states print related services segment 2013 novia careclinics llc acquisition company completed acquisition novia careclinics llc novia indianapolis indiana healthcare solutions company november 7 2013 133 million novia develops manages onsite shared primary care clinics small medium sized companies public sector school districts city county governments identifiable customer relationships 135 million recorded final purchase price allocation identifiable customer relationship intangible assets amortized estimated useful lives six years final purchase price allocation based valuations performed determine fair value net assets acquisition date valuations net assets acquired 133 million classified level 3 valuation hierarchy see note 16 financial instruments fair value measurements definition level 3 inputs novias operations included united states print related services segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 2013 vertis holdings inc acquisition company completed acquisition substantially assets vertis holdings inc vertis january 16 2013 2654 million pursuant terms asset purchase agreement asset agreement vertis leading provider retail inserts direct marketing instore marketing solutions acquisition vertis enhanced companys position leader production retail inserts direct marketing instore marketing solutions company provide clients enhanced integrated offerings purchase vertis accounted using acquisition method accounting gaap company acquire certain assets assume certain liabilities vertis subsidiaries asset acquisition including among liabilities underfunded pension postretirement obligations company used cash hand borrowings revolving credit facility finance acquisition october 2012 company made 259 million deposit held escrow accordance terms asset agreement december 31 2012 deposit classified prepaid expenses current assets consolidated balance sheets deposit applied purchase price upon january 16 2013 consummation acquisition facilitate intended sale vertis along subsidiaries filed voluntary petitions relief chapter 11 united states bankruptcy code time filed documents seeking us bankruptcy courts approval proposed asset agreement company completion acquisition subject us bankruptcy court approval well customary conditions regulatory approvals including expiration termination applicable waiting period hartscottrodino antitrust improvements act 1976 asset agreement company comprised initial stalking horse bid us bankruptcy courtsupervised auction process section 363 united states bankruptcy code vertis advisors evaluated competing bids submitted order ensure received highest best offer assets november 26 2012 vertis filed notice us bankruptcy court naming quadgraphics successful bidder december 6 2012 us bankruptcy court approved sale agreement vertis acquisition completed january 16 2013 vertis operations included united states print related services segment disclosure financial results vertis since acquisition date practicable operated standalone business combined companys existing operations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company recorded allocation purchase price tangible identifiable assets acquired liabilities assumed including certain contingent liabilities based fair values january 16 2013 acquisition date final purchase price allocation follows purchase price allocation unaudited pro forma condensed consolidated financial information based valuations performed determine fair value net assets acquisition date valuation net assets acquired 2654 million classified level 3 valuation hierarchy see note 16 financial instruments fair value measurements definition level 3 inputs identifiable customer relationship intangible assets amortized straightline basis estimated useful lives six years 2012 manipal technologies limited strategic partnership company entered strategic partnership indiabased manipal technologies limited manipaltech march 28 2012 whereby quadgraphics paid 181 million minority equity ownership interest manipaltech one indias largest providers printing services supports clients marketing branding communication needs print services technology solutions companys investment manipaltech accounted cost method investment recorded within longterm assets consolidated balance sheets quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated unaudited pro forma condensed combined financial information following unaudited pro forma condensed combined financial information presents companys results company acquired brown printing january 1 2013 vertis january 1 2012 unaudited pro forma information prepared following considerations 1 unaudited pro forma condensed combined financial information prepared using acquisition method accounting existing gaap company acquirer accounting purposes 2 unaudited pro forma condensed combined financial information reflect operating cost synergy savings combined companies may achieve result acquisition costs necessary achieve operating synergy savings additional charges necessary result integration note 3 discontinued operations july 12 2011 company transcontinental inc transcontinental entered definitive agreement whereby quadgraphics acquired 100 transcontinentals mexican operations exchange companys canadian operations company completed acquisition transcontinentals mexican operations september 8 2011 completed sale companys canadian operations march 1 2012 companys determination mexican acquired operations fair value 636 million 636 million purchase price 61 million paid cash 12 million paid 2011 49 million paid 2012 remaining purchase price 575 million satisfied exchange transaction companys canadian business connection acquisition transcontinentals mexican operations definitive agreement required company deposit 500 million canadian dollars transcontinental canadian operations sale completed company elected hedge foreign currency exchange rate exposure related 500 million canadian dollar deposit entering shortterm foreign currency forward exchange contracts company hedged foreign currency exposure march 1 2012 sale canadian net assets refund 500 million canadian dollar deposit occurred year ended december 31 2012 16 million realized marktomarket losses derivative contracts offset 16 million transaction gains translation foreign currency denominated deposit within selling general administrative expenses fair value determination foreign currency forward exchange contracts categorized level 2 fair value hierarchy see note 16 financial instruments fair value measurements definition level 2 inputs quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated transcontinental assumed pension postretirement obligations pertaining approximately 1500 canadian employees located among seven facilities sold transcontinental gain disposal discontinued operations net tax finalized 2012 determined follows 1 tax purposes disposal discontinued operations resulted longterm capital loss deferred tax asset recorded offsetting valuation allowance deferred tax asset recorded reflect expected value asset recovered sale canadian operations completed march 1 2012 results operations canadian operations years ended december 31 2014 2013 following table summarizes results operations canadian operations included loss discontinued operations consolidated statements operations year ended december 31 2012 prior march 1 2012 closing company continued execute restructuring events related plant closures workforce reductions restructuring initiatives well transaction costs related sale canadian operations due initiatives company recognized 17 million restructuring impairment transactionrelated costs year ended december 31 2012 within discontinued operations consolidated statements operations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 4 restructuring impairment transactionrelated charges company recorded restructuring impairment transactionrelated charges years ended december 31 2014 2013 2012 follows costs related activities recorded consolidated statements operations restructuring impairment transactionrelated charges see note 23 segment information restructuring impairment transactionrelated charges segment restructuring charges company began restructuring program 2010 related eliminating excess manufacturing capacity properly aligning cost structure since 2010 company announced total 25 plant closures reduced headcount approximately 8300 year ended december 31 2014 company announced closures atlanta georgia dickson tennessee marengo iowa pomona california st cloud minnesota woodstock illinois plants result restructuring programs company recorded following charges year ended december 31 2014 • employee termination charges 306 million recorded company year ended december 31 2014 company reduced workforce facility consolidations involuntary separation programs • integration costs 112 million recorded company year ended december 31 2014 integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 85 million recorded company year ended december 31 2014 consisted 1 77 million vacant facility carrying costs 2 24 million legal fees 3 18 million equipment infrastructure removal costs closed plants 4 15 million lease exit charges restructuring charges presented net 49 million gain termination postretirement medical benefit plan see note 18 employee retirement plans details postretirement medical benefit plan termination quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated year ended december 31 2013 company announced closures bristol pennsylvania dubuque iowa pittsburg california vancouver british columbia canada plants result restructuring programs company recorded following charges year ended december 31 2013 • employee termination charges 157 million recorded company year ended december 31 2013 company reduced workforce facility consolidations involuntary separation programs • integration costs 252 million recorded company year ended december 31 2013 integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 286 million recorded company year ended december 31 2013 consisted 1 144 million vacant facility carrying costs 2 62 million equipment infrastructure removal costs closed plants 3 101 million lease exit charges restructuring charges presented net 21 million pension plan settlement gain year ended december 31 2012 company announced closures jonesboro arkansas limerick ireland two plants mexico city mexico result restructuring programs company recorded following charges year ended december 31 2012 • employee termination charges 272 million recorded company year ended december 31 2012 company reduced workforce facility consolidations involuntary separation programs • integration costs 446 million recorded company year ended december 31 2012 integration costs primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 194 million recorded company year ended december 31 2012 consisted 1 193 million vacant facility carrying costs 2 73 million equipment infrastructure removal costs closed plants 3 80 million lease exit charges restructuring charges presented net 128 million curtailment gain resulting amendment postretirement medical benefit plan 24 million gain collection note receivable related settlement disputed preacquisition world color press note receivable year ended december 31 2012 restructuring charges recorded based plans committed management part based upon managements best estimates future events changes estimates may require future restructuring charges adjustments restructuring liabilities company expects incur additional restructuring charges related initiatives quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated impairment charges company recognized impairment charges 144 million year ended december 31 2014 consisting 1 80 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee mexico city mexico pomona california st cloud minnesota well capacity reduction restructuring initiatives 2 64 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures company recognized impairment charges 218 million year ended december 31 2013 consisting 1 117 million impairment charges machinery equipment longer utilized production result facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives 2 101 million land building impairment charges primarily related corinth mississippi marengo iowa mexico city mexico plant closures company recognized impairment charges 230 million year ended december 31 2012 consisting 1 131 million land building impairment charges primarily related limerick ireland mt morris illinois pila poland richmond virginia stillwater oklahoma plant closures 2 99 million impairment charges machinery equipment longer utilized production result facility consolidations including jonesboro arkansas mexico city mexico pila poland stillwater oklahoma well capacity reduction restructuring initiatives fair values impaired assets determined company level 3 fair value hierarchy see note 16 financial instruments fair value measurements definition level 3 inputs estimated based broker quotes internal expertise related current marketplace conditions assets adjusted estimated fair values time impairment transactionrelated charges company incurs transactionrelated charges primarily consisting professional service fees related business acquisition divestiture activities company recognized transactionrelated charges 26 million year ended december 31 2014 primarily includes professional service fees acquisitions brown printing unigraphic company recognized transactionrelated charges 40 million year ended december 31 2013 primarily includes professional service fees acquisitions vertis proteus transpak company recognized transactionrelated charges 41 million year ended december 31 2012 primarily includes professional service fees acquisition vertis business exchange transaction transcontinental transactionrelated charges expensed incurred accordance applicable accounting guidance business combinations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reserves restructuring impairment transactionrelated charges activity impacting companys reserves restructuring impairment transactionrelated charges years ended december 31 2014 2013 follows companys restructuring impairment transactionrelated reserves december 31 2014 included shortterm longterm component shortterm portion comprised 169 million included accrued liabilities see note 10 accrued liabilities 22 million included accounts payable consolidated balance sheets company expects reserves paid within next twelve months longterm portion 68 million included longterm liabilities see note 17 longterm liabilities consolidated balance sheets 61 million classified restructuring reserves 07 million classified mepps withdrawal liability note 5 goodwill intangible assets goodwill tested annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value fourth quarter 2014 companys financial reporting structure changed align launch companys five primary strategic goals support objectives transform company drive performance innovation discussed strategy section part item 1 business annual report form 10k result company reevaluated reporting units within united states print related services operating segment concluded three reporting units compared one reporting unit prior year carrying value goodwill companys united states reporting unit allocated based relative fair value companys core print related services specialty print related services united states products services businesses therefore company completed annual goodwill impairment assessment core print related services specialty print related services united states products services latin america european reporting units included comparing carrying amount net assets including goodwill reporting unit respective fair value october 31 2014 annual assessment date european reporting unit goodwill associated impairment tests prior change performed based goodwill balances cash flows previous reporting unit structure quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair value determined using equal weighting income market approaches except united states products services reporting unit income approach used fair value determination categorized level 3 fair value hierarchy see note 16 financial instruments fair value measurements definition level 3 inputs income approach company determined fair value based estimated future cash flows discounted estimated weightedaverage cost capital reflects overall level inherent risk rate return outside investor would expect earn market approach company derived fair value reporting units based market multiples comparable publiclytraded companies management concluded impairment existed october 31 2014 estimated fair value companys core print related services specialty print related services united states products services latin america reporting units exceeded respective carrying amounts fair value reporting units exceed respective carrying values greater ten percent additional indications impairment identified october 31 2014 december 31 2014 goodwill december 31 2014 2013 include accumulated impairment losses goodwill impairment recorded years ended december 31 2014 2013 2012 activity impacting companys goodwill years ended december 31 2014 2013 follows components intangible assets december 31 2014 2013 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated gross carrying amount accumulated amortization within intangible assetsnet consolidated balance sheets december 31 2014 2013 differs value originally recorded purchase due effects currency fluctuations purchase date december 31 2014 2013 amortization expense intangible assets 759 million 703 million 663 million years ended december 31 2014 2013 2012 respectively following table outlines estimated future amortization expense related intangible assets december 31 2014 note 6 receivables transactions affecting allowances doubtful accounts years ended december 31 2014 2013 2012 follows note 7 inventories components companys inventories december 31 2014 2013 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 8 property plant equipment components companys property plant equipment december 31 2014 2013 follows 1 consists computer equipment vehicles furniture fixtures leasehold improvements communication related equipment property plant equipment increased 708 million year ended december 31 2014 related brown printing acquisition see note 2 acquisitions strategic investments discussion acquisition brown printing company recorded impairment charges 144 million 218 million 230 million years ended december 31 2014 2013 2012 respectively reduce carrying amounts certain land buildings machinery equipment longer utilized production fair value see note 4 restructuring impairment transactionrelated charges discussion impairment charges company recognized depreciation expense 2605 million 2702 million 2723 million years ended december 31 2014 2013 2012 respectively assets held sale certain closed facilities considered held sale net book value assets held sale 18 million 56 million december 31 2014 2013 respectively assets valued fair value less estimated costs sell fair values determined company level 3 fair value hierarchy see note 16 financial instruments fair value measurements definition level 3 inputs estimated based broker quotes internal expertise related current marketplace conditions assets held sale included prepaid expenses current assets consolidated balance sheets note 9 equity method investments unconsolidated entities company 49 ownership interest plural editora e gráfica plural commercial printer based são paulo brazil 50 ownership interest quadgraphics chile sa chile commercial printer based santiago chile companys ownership interest plural chile accounted using equity method accounting periods presented quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated january 1 2013 company sold 100 ownership interest two whollyowned brazilian entities quadgraphics nordeste industria gráfica ltda quadgraphics são paulo industria gráfica sa plural purchase price 55 million recorded receivables companys consolidated balance sheet december 31 2013 quadgraphics retained ownership land building leased plural year ended december 31 2013 company recorded 28 million gain sale within selling general administrative expenses companys consolidated statements operations result sale plural company longer controls entities company owns 49 entities ownership interest plural thus assets liabilities entities sold deconsolidated accordance gaap since sale plural companys ownership interest results operations entities included equity earnings loss unconsolidated entities consolidated statements operations companys equity earnings plurals chiles operations recorded line item entitled equity earnings loss unconsolidated entities companys consolidated statements operations included within international segment combined condensed balance sheets plural chile december 31 2014 2013 presented combined condensed statements operations plural chile years ended december 31 2014 2013 2012 presented quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 10 accrued liabilities components companys accrued liabilities december 31 2014 2013 follows employeerelated liabilities consist primarily payroll bonus profit sharing vacation health workers compensation pension obligations note 11 commitments contingencies commitments company firm commitments 411 million purchase press finishing equipment litigation company named defendant various lawsuits claims asserted company normal course business liabilities ultimately result lawsuits expected management material impact consolidated financial statements company environmental reserves company subject various laws regulations government policies relating health safety generation storage transportation disposal hazardous substances environment protection general company provides expenses associated environmental remediation obligations amounts probable reasonably estimated reserves adjusted new information develops circumstances change environmental reserves discounted company believes compliance laws regulations government policies material respects furthermore company anticipate maintaining compliance environmental statutes material impact upon companys competitive consolidated financial position note 12 world color press insolvency proceedings company continues manage bankruptcy claim settlement process quebecor world inc qwi bankruptcy proceedings united states canada qwi changed name world color press inc upon emerging bankruptcy july 21 2009 extent claims allowed holders claims entitled receive recovery nature recovery dependent upon type classification claims regard respect certain types claims holders thereof entitled receive cash andor unsecured notes holders certain types claims entitled receive combination quadgraphics common stock cash accordance terms world color press acquisition agreement quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated respect claims asserted holders thereof entitled priority cash recovery company estimated approximately 14 million 25 million recorded claims yet paid december 31 2014 december 31 2013 respectively obligation classified amounts owing satisfaction bankruptcy claims consolidated balance sheets respect unsecured claims held creditors operating subsidiary debtors quebecor world usa inc class 3 claims allowed class 3 claim entitled receive unsecured note equaling 50 creditors allowed class 3 claim provided however aggregate principal amount unsecured notes cannot exceed 750 million allowed class 3 claim also receive accrued interest 5 prepayment redemption premium thereon total aggregate maximum principal interest prepayment redemption premium class 3 claims 892 million connection world color press acquisition company required deposit maximum potential payout class 3 claim creditors 892 million trustee amount remain trustee either 1 paid creditor allowed class 3 claim 2 excess amounts required class 3 claim payments revert company year ended december 31 2014 80 million paid class 3 claim creditors company also received refund 189 million restricted cash year ended december 31 2014 restriction released amounts longer required held deposit class 3 claims december 31 2014 291 million maximum potential payout class 3 claim creditors remains classified restricted cash consolidated balance sheets based companys analysis outstanding claims company liability 90 million december 31 2014 classified unsecured notes issued consolidated balance sheets activity impacting companys restricted cash unsecured notes issued year ended december 31 2014 2013 follows components companys restricted cash december 31 2014 december 31 2013 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated liabilities recorded bankruptcy matters based managements current assessment amount likely paid possible identify final amount priority cash claims amount class 3 claims ultimately allowed us bankruptcy court therefore payments amounts owing satisfaction bankruptcy claims could materially higher amounts accrued consolidated balance sheets would require additional cash payments made expense recorded amount exceeding companys estimate amounts payable related unsecured notes could exceed current estimates would require additional expense recorded company resolved majority claims since acquiring world color press 2010 ultimate timing completion bankruptcy process depends resolution remaining claims note 13 debt longterm debt consisted following december 31 2014 2013 1 senior notes weightedaverage interest rate 755 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2031 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement company redeemed 1088 million senior notes master note security agreement 1096 million october 10 2014 resulting 08 million loss plus applicable transaction fees 02 million total 10 million included loss debt extinguishment consolidated statements operations company used revolving credit facility effect redemption primarily completed reduce interest expense based current london interbank offered rate libor rates company certain subsidiaries entered fourth amendment master note security agreement november 24 2014 amendment among things amended financial covenants removing consolidated net worth requirement removed periods december 31 2014 fixed charge coverage ratio well adding minimum interest coverage ratio maximum total leverage ratio maximum senior secured leverage ratio quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated amendments align financial covenants master note security agreement closely financial covenants senior secured credit facility discussed detail 2 company completed 19 billion debt financing arrangements april 28 2014 included refinancing extending expanding existing revolving credit facility term loan term loan b 16 billion senior secured credit facility senior secured credit facility issuance 3000 million aggregate principal amount unsecured 70 senior notes due may 1 2022 senior unsecured notes senior secured credit facility senior unsecured notes entered extend stagger companys debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals proceeds senior secured credit facility senior unsecured notes used repay companys previous revolving credit facility term loan term loan b international term loan b fund acquisition brown printing c general corporate purposes senior secured credit facility consists three different loan facilities first facility revolving credit facility amount 8500 million term five years maturing april 27 2019 second facility term loan aggregate amount 4500 million term five years maturing april 27 2019 subject certain required amortization third facility term loan b amount 3000 million term seven years maturing april 27 2021 subject certain required amortization december 31 2014 company borrowings 439 million revolving credit facility well 520 million issued letters credit leaving 7541 million available future borrowings revolving credit facility term loan loans made senior secured credit facility initially bear interest 200 excess reserve adjusted libor 100 excess alternate base rate term loan b loans bear interest 325 excess reserve adjusted libor floor 100 225 excess alternative base rate companys option senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances company entered amendment senior secured credit facility december 18 2014 eliminated net debt concept calculation total leverage ratio senior secured leverage ratio provides elimination consolidated net worth covenant removed periods december 31 2014 company received 2948 million net proceeds sale senior unsecured notes deducting initial purchasers discounts commissions senior unsecured notes bear interest 70 interest payable semiannually senior unsecured notes due may 1 2022 companys existing future domestic subsidiaries borrower guarantees indebtedness companys senior secured credit facility guarantees certain companys indebtedness companys restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes guarantor subsidiaries current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including designation guarantor subsidiaries unrestricted subsidiary b release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries c sale disposition including sale substantially assets guarantor subsidiaries 3 companys former 15 billion debt financing agreement included revolving credit facility amount 8500 million term loan aggregate amount 4500 million term loan b amount 2000 million replaced senior secured credit facility discussed detail 2 4 debt related companys international operations refinanced december 16 2008 entering secured credit agreement facilities agreement facilities agreement includes euro denominated term loan multicurrency revolving credit facility euro denominated term loan repaid part 19 billion debt financing arrangements discussed detail 2 multicurrency revolving credit facility used financing working capital general business needs renewed 2014 expire september 30 2015 december 31 2014 companys international operations borrowings 02 million multicurrency revolving credit facility leaving 141 million available future borrowing terms facilities agreement include certain financial covenants guarantee facilities agreement company security agreement includes collateralizing substantially quad quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated winkowski assets facilities bear interest aggregate warsaw interbank offered rate wibor euro interbank offered rate euribor margin 5 company refinanced certain equipment leases 2013 171 million equipment term loans secured formerly leased equipment term loans bear interest fixed rate 475 require quarterly payments five year terms expiring 2018 purchase assets resulted 128 million noncash investing financing activities represents 171 million equipment term loans net 43 million eliminated capital lease obligations see note 1 basis presentation summary significant accounting policies required supplemental cash flow information fair value debt based upon interest rates available company borrowings similar terms maturities fair value companys total debt approximately 13 billion 14 billion december 31 2014 2013 respectively fair value determination companys total debt categorized level 2 fair value hierarchy see note 16 financial instruments fair value measurements definition level 2 inputs december 31 2014 approximately 30 billion companys assets pledged security various loans agreements debt issuance costs original issue discount company incurred 143 million debt issuance costs conjunction 19 billion debt financing arrangement completed april 28 2014 accordance accounting guidance treatment debt issuance costs debt extinguishment 143 million new debt issuance costs 110 million capitalized classified longterm assets consolidated balance sheets 33 million expensed classified loss debt extinguishment consolidated statements operations addition new original issue discount 30 million related term loan b senior secured credit facility classified reduction longterm debt consolidated balance sheets company incurred 10 million debt issuance costs conjunction redemption 1088 million senior notes master note security agreement october 10 2014 accordance accounting guidance treatment debt issuance costs debt extinguishment 10 million expensed classified loss debt extinguishment consolidated statements operations company incurred 12 million debt issuance costs conjunction amendment master note security agreement november 24 2014 accordance accounting guidance treatment debt issuance costs debt extinguishment 12 million new debt issuance costs 10 million capitalized classified longterm assets consolidated balance sheets 02 million expensed classified loss debt extinguishment consolidated statements operations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated loss debt extinguishment recorded consolidated statements operations year ended december 31 2014 comprised following activity impacting companys capitalized debt issuance costs years ended december 31 2014 2013 follows activity impacting companys original issue discount years ended december 31 2014 2013 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated amortization expense debt issuance costs 38 million 40 million 44 million years ended december 31 2014 2013 2012 respectively amortization expense original issue discount 04 million 01 million 01 million three years ended december 31 2014 2013 2012 respectively debt issuance costs original issue discount amortized straightline basis five seven eight year lives related debt instruments covenants compliance companys various lending arrangements include certain financial covenants financial terms numbers ratios defined companys debt agreements among covenants company required maintain following december 31 2014 • total leverage ratio rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda shall exceed 375 100 twelve months ended december 31 2014 companys total leverage ratio 257 100 • senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined senior secured debt consolidated ebitda shall exceed 350 100 twelve months ended december 31 2014 companys senior secured leverage ratio 204 100 • minimum interest coverage ratio rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2014 companys minimum interest coverage ratio 589 100 • consolidated net worth december 31 2014 companys consolidated net worth must least 8024 million december 31 2014 companys consolidated net worth restrictive covenant per various debt agreements 108 billion covenant removed periods december 31 2014 due recent debt agreement amendments addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock including • companys total leverage ratio greater 300 100 defined senior secured credit facility company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions • companys senior secured leverage ratio greater 300 100 companys total leverage ratio greater 350 100 ratios defined senior secured credit facility company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total leverage ratio less 350 100 restrictions indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit companys restricted subsidiaries ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially companys consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates estimated principal payments approximate annual principal amounts due longterm debt follows years ending december 31 note 14 lease obligations company entered various master lease agreements press finishing equipment leases provide company options purchase related equipment termination value defined various early buyout dates term lease leases accounted capital leases consolidated balance sheets assets recorded capital leases follows december 31 2014 2013 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated december 31 2014 future maturities capitalized leases consisted following company various operating lease agreements future minimum rental commitments noncancelable leases follows rent expense operating lease agreements totaled 396 million 369 million 332 million years ended december 31 2014 2013 2012 respectively note 15 income taxes income taxes based following components earnings continuing operations income taxes equity earnings loss unconsolidated entities years ended december 31 2014 2013 2012 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated components income tax expense benefit consists following years ended december 31 2014 2013 2012 following table outlines reconciliation differences federal statutory tax rate companys effective tax rate years ended december 31 2014 2013 2012 1 2012 company settled preacquisition world color press income tax examinations internal revenue service irs resulting 300 million income tax benefit quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated deferred income taxes significant deferred tax assets liabilities december 31 2014 2013 follows net deferred tax assets liabilities classified consolidated balance sheets december 31 2014 2013 follows december 31 2014 company foreign net operating loss carry forwards 1366 million state net operating loss carry forwards 6792 million foreign net operating loss carry forwards 419 million available without expiration remainder expire 2034 state net operating loss carry forwards expire varying amounts 2034 company also 448 million various state credit carry forwards 309 million available without expiration remainder expire 2029 december 31 2014 company recorded valuation allowance 1561 million 553 million 562 million 446 million federal foreign state deferred tax assets respectively expected realized quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company considers foreign earnings indefinitely invested accordingly company currently provide additional united states foreign income taxes would become payable upon remission undistributed earnings foreign subsidiaries cumulative undistributed earnings subsidiaries december 31 2014 material uncertain tax positions following table summarizes activity companys liability unrecognized tax benefits december 31 2014 2013 2012 december 31 2014 311 million unrecognized tax benefits would impact companys effective tax rate recognized amount reasonably possible 18 million total amount unrecognized tax benefits decrease within 12 months due resolution audits statute expirations 2012 company settled preacquisition world color press income tax examinations irs resulting net income tax benefit 300 million included net benefit 757 million related reduction uncertain tax positions prior years addition impact companys uncertain tax positions settlement examinations required adjustment certain tax attributes company impact adjustments tax attributes resulted net income tax expense 467 million company classified interest expense related penalties related income tax uncertainties component income tax expense following table summarizes companys interest expense income related tax uncertainties penalties recognized years ended december 31 2014 2013 2012 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated accrued interest penalties related income tax uncertainties reported components current liabilities longterm liabilities consolidated balance sheets following table summarizes companys liabilities accrued interest penalties related income tax uncertainties december 31 2014 2013 company tax years 2010 2014 remain open subject examination irs tax years 2007 2014 remain open subject examination companys various major state jurisdictions within united states note 16 financial instruments fair value measurements certain assets liabilities required recorded fair value recurring basis assets liabilities recorded fair value nonrecurring basis generally result acquisitions impairment charges fair value determined based exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants gaap also classifies inputs used measure fair value following hierarchy level 1 quoted prices active markets identical assets liabilities level 2 quoted prices active markets similar assets liabilities quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability level 3 unobservable inputs asset liability level 3 recurring measurements assets liabilities december 31 2014 company records fair value forward contracts pension plan assets recurring basis fair value cash equivalents receivables inventories restricted cash accounts payable accrued liabilities amounts owing satisfaction bankruptcy claims approximate carrying values december 31 2014 2013 see note 13 debt discussion fair value companys debt note 18 employee retirement plans details level 1 level 2 inputs related employee retirement plans quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated addition assets liabilities recorded fair value recurring basis company required record certain assets liabilities fair value nonrecurring basis generally result acquisitions remeasurement assets resulting impairment charges see note 2 acquisitions strategic investments discussion acquisitions note 4 restructuring impairment transactionrelated charges discussion impairment charges recorded result remeasurement certain longlived assets december 31 2014 2013 company operations countries transactions outside functional currencies periodically enters foreign exchange contracts used hedge net exposures changes foreign currency exchange rates designated either cash flow hedges fair value hedges gains losses net foreign currency hedges intended offset losses gains underlying net exposures effort reduce earnings volatility resulting fluctuating foreign currency exchange rates company periodically enters natural gas forward purchase contracts hedge increases commodity costs companys commodity contracts qualified exception related normal purchases sales years ended december 31 2014 2013 company takes delivery normal course business company settled shortterm foreign currency forward exchange contract hedge exchange rate exposure 500 million canadian dollars deposit related transcontinental mexico acquisition march 1 2012 see note 2 acquisitions strategic investments open foreign currency exchange contracts december 31 2014 years ended december 31 2014 2013 2012 impact hedge ineffectiveness consolidated statements operations note 17 longterm liabilities longterm liabilities consisted following december 31 2014 2013 note 18 employee retirement plans defined contribution plans quadgraphics diversified plan comprised participant directed 401k contributions company match profit sharing contributions total participant assets 18 billion december 31 2014 company 401k matching contributions 146 million 132 million 119 million years ended december 31 2014 2013 2012 respectively quadgraphics employee stock ownership plan holds profit sharing contributions company stock made discretion companys board directors profit sharing contributions years ended december 31 2014 2013 2012 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated defined benefit plans postretirement benefit plans company assumed various funded unfunded frozen pension plans portion fulltime employees united states part acquisition world color press 2010 benefits generally based upon years service compensation plans funded conformity applicable government regulations company funds least minimum amount required qualified plans using actuarial cost methods assumptions acceptable government regulations addition pension benefits company provided certain healthcare life insurance benefits retired employees components net periodic pension postretirement benefit expense income years ended december 31 2014 2013 2012 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated underfunded pension postretirement obligations calculated using generally accepted actuarial methods measured annually december 31 following provides reconciliation projected benefit obligation fair value plan assets funded status pension postretirement plans december 31 2014 2013 amounts recognized consolidated balance sheets december 31 2014 2013 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table provides reconciliation companys accumulated comprehensive income loss prior deferred tax effects december 31 2014 2013 follows 2014 company announced elimination postretirement medical benefit coverage retirees resulted reduction plan obligations 37 million recognition termination gain 49 million termination gain recorded restructuring impairment transactionrelated charges consolidated statement operations 2013 company paid lump sums participants exceeded threshold settlement accounting resulted acceleration recognition accumulated comprehensive income settlement gain 21 million settlement gain recorded restructuring impairment transactionrelated charges consolidated statement operations 2012 company announced elimination life insurance coverage current future retirees locations elimination reimbursement medical costs certain retirees resulted reduction plan obligations 57 million addition company also announced elimination postretirement medical benefit coverage future retirees retire december 31 2012 resulted reduction plan obligations 169 million recognition curtailment gain 128 million curtailment gain recorded restructuring impairment transactionrelated charges consolidated statement operations actuarial gains losses excess 10 greater projected benefit obligation marketrelated value plan assets recognized component net periodic benefit costs average remaining service period plans active employees unrecognized prior service costs credit also recognized component net periodic benefit cost average remaining service period plans active employees amortization amounts accumulated comprehensive income loss expected recognized components net periodic pension expense income 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated weightedaverage assumptions separately pension postretirement benefit plans used determine net periodic benefit costs years ended december 31 2014 2013 2012 follows weightedaverage assumptions separately pension postretirement benefit plans used determine benefit obligations december 31 2014 2013 follows company determines assumed discount rate based index highquality corporate bond yields matchedfunding yield curve analysis measurement date estimated company contributions benefit payments 2015 company expects make cash contributions 114 million qualified defined benefit pension plans make estimated benefit payments 12 million nonqualified defined benefit pension plans actual pension contributions may differ based funding calculations company may choose make additional discretionary contributions estimated benefit payments may differ based actual experience estimated future benefit payments plans behalf plan participants estimate plans future benefit payments made funded qualified plans unfunded nonqualified plans plan participants follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated plan assets investment strategy company follows disciplined investment strategy provides diversification investments asset class foreign currency sector company pension committee approved investment policies different pension plans establish longterm asset mix targets based several factors including historical returns achieved worldwide investment markets time horizon pension plans obligations investment risk plans allocation range asset class developed whereby mix equity securities debt securities used provide appropriate riskadjusted longterm return plan assets thirdparty investment managers employed invest assets passivelyindexed activelymanaged strategies investment returns risks monitored ongoing basis derivatives used certain times hedge foreign currency exposure gains losses derivatives offset corresponding change value hedged assets derivatives strictly used hedging purposes speculative purposes target allocations plan assets weightedaverage basis 67 equity securities 33 debt securities including cash equivalents actual asset allocation december 31 2014 approximately 66 equity securities 34 debt securities actual asset allocation december 31 2013 approximately 67 equity securities 33 debt securities equity investments diversified country issuer industry sector debt securities primarily consist government bonds corporate bonds diversified industries expected longterm rate return assets assumption selected first identifying expected range longterm rates return major asset class expected longterm rates return developed based longterm historical averages current expectations future returns anticipated inflation rates expected longterm rate return plan assets calculated weighting asset class extent individual pension plans different target asset mixes expected longterm rate return assets may differ across plans fair values companys pension plan assets december 31 2014 2013 asset category follows level 3 assets liabilities december 31 2014 2013 company segregated plan assets following major categories levels determining fair value december 31 2014 cash equivalents carrying value approximates fair value assets classified level 1 debt securities category consists bonds shortterm fixed income securities fixed income pooled funds fair valued based compilation primarily observable market information broker quotes overthecounter markets classified level 2 equity securities category consists equity investments equity pooled funds assets classified level 1 level 2 respectively fair value equity investments based quoted prices quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated active market fair value equity pooled funds based funds net asset value nav established funds administrator valuation methodologies described may generate fair value calculation may indicative net realizable value future fair values company believes valuation methodologies used appropriate use different methodologies assumptions calculating fair value could result different amounts company invests various assets valuation determined nav company believes nav representative fair value reporting date significant restrictions redemption investments reasons indicate investment would redeemed amount different nav risk management directly invested funds concentration risk monitored specific guidelines investment manager mandates investment manager mandates developed companys external investment advisor specify diversification standards maximum exposure per issuer concentration limits per type security industry country applicable investments made pooled funds investment mandates funds reviewed companys external investment advisor determine investment objectives guidelines consistent companys overall pension plan risk management objectives managing plan assets management reviews manages risk associated funded status risk interest rate risk market risk counterparty risk liquidity risk operational risk liability management asset class diversification central companys risk management approach integral overall investment strategy given process place ensure proper diversification portfolio management believes company pension plan assets exposed significant concentration risk multiemployer pension plans company participates number mepps terms collective bargaining agreements cover number employees risks participating mepps different single employer plans following aspects • assets contributed mepps one company may used provide benefits employees participating companies • participating company stops contributing plan unfunded obligations plan may borne remaining participating companies • company stops participating mepps continues business company would required pay amount referred withdrawal liability based unfunded status plan company withdrawn significant mepps replaced union sponsored promise pay future defined benefit plans company sponsored pay go defined contribution plan two mepps graphic communications international union employer retirement fund gciu graphic communications conference international brotherhood teamsters national pension fund gcc significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued 986 million estimated withdrawal liability based information provided plans trustee quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated part purchase price allocation world color press company making required interim payments mepps companys withdrawal liability gciu gcc plans gciu plan defined benefit plan provides retirement benefits total permanent disability benefits preretirement death benefits participating union employees company funded status gciu plan classified critical based gciu plans 2014 certification united states department labor funded percentage plan less 65 projected accumulated funding deficit next four plan years result gciu plan implemented rehabilitation plan improve plans funded status gcc plan defined benefit plan provides retirement benefits disability benefits early retirement benefits participating union employees company funded status gcc plan classified critical based gcc plans 2014 certification united states department labor funded percentage plan less 65 projected accumulated funding deficit next four plan years result gcc plan implemented rehabilitation plan improve plans funded status company received notices withdrawal demand payment letters gciu gcc plans total excess 986 million original reserves established company withdrawals company process determining final withdrawal payment mepps administrators currently arbitration proceedings mepps trustees withdrawal liability reserved company within range companys estimated potential outcomes process company made monthly payments totaling 139 million 144 million 112 million years ended december 31 2014 2013 2012 respectively requested mepps required employee retirement income security act although payments waive companys rights object withdrawal liabilities submitted gciu gcc plan administrators december 31 2014 company reserved 590 million estimate total mepps withdrawal liability 391 million recorded longterm liabilities 144 million recorded accrued liabilities 55 million recorded unsecured notes issued consolidated balance sheets estimate may increase decrease depending final agreement mepps administrators note 19 earnings per share attributable quadgraphics common shareholders basic earnings per share attributable quadgraphics common shareholders computed net earnings attributable quadgraphics common shareholders less allocation participating securities divided basic weighted average common shares outstanding 475 million 470 million 468 million shares years ended december 31 2014 2013 2012 respectively calculation diluted earnings per share includes effect dilutive equity incentive instruments company uses treasury stock method calculate effect outstanding dilutive equity incentive instruments requires company compute total proceeds sum 1 amount employee must pay upon exercise award 2 amount unearned stockbased compensation costs attributed future services 3 amount tax benefits would credited additional paidin capital assuming exercise award equity incentive instruments total employee proceeds exercise exceed average fair value equity incentive instrument period antidilutive effect earnings per share periods net earnings accordingly company excludes calculation antidilutive equity incentive instruments 18 million 16 million 32 million class common shares excluded computations diluted net earnings per share years ended december 31 2014 2013 2012 respectively unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid required treated participating securities included computation earnings loss per share pursuant twoclass method company unvested participating securities december 31 2014 stock options granted november 18 2011 became fully vested november 18 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated companys participating securities reduced basic diluted earnings per share attributable quadgraphics common shareholders 001 002 007 years ended december 31 2014 2013 2012 respectively reconciliations numerator denominator basic diluted per share computations companys common stock including impact discontinued operations years ended december 31 2014 2013 2012 summarized follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 20 equity incentive programs shareholders company approved quadgraphics inc 2010 omnibus incentive plan omnibus plan two complimentary purposes 1 attract retain outstanding individuals serve directors officers employees 2 increase shareholder value omnibus plan replaced 1999 nonqualified stock option plan 1990 stock option plan january 1 2011 equity grants made omnibus plan may 2012 2013 additional 3571652 2000000 shares respectively authorized issuance omnibus plan making 7871652 shares class stock authorized issuance omnibus plan awards omnibus plan may consist incentive awards stock options stock appreciation rights performance shares performance share units shares class stock restricted stock restricted stock units deferred stock units stockbased awards determined companys board directors stock option granted exercise price less 100 fair market value class stock date grant december 31 2014 1775556 remaining shares authorized issuance omnibus plan company recognizes compensation expense based estimated grant date fair values sharebased awards issued employees nonemployee directors including stock options performance shares performance share units restricted stock restricted stock units deferred stock units company recognizes compensation costs awards expected vest straightline basis requisite three four year service period awards except deferred stock units fully vested expensed grant date company estimated number awards expected vest based part historical forfeiture rates also based managements expectations employee turnover within specific employee groups receiving type award forfeitures estimated time grant revised necessary subsequent periods actual forfeitures differ estimates equity incentive compensation expense total compensation expense recognized related equity incentive programs 173 million 186 million 134 million years ended december 31 2014 2013 2012 respectively recorded selling general administrative expenses consolidated statements operations total future compensation expense related equity incentive programs granted december 31 2014 estimated 181 million estimated future compensation expense 109 million 2015 63 million 2016 09 million 2017 stock options november 18 2011 company announced board directors approved termination outstanding stock options companys 1990 stock option plan 1999 nonqualified stock option plan 409a options accordance authoritative literature termination modification stock options december 31 2011 company recorded 200 million liability termination payment based number 409a options held option holders companys weighted volume adjusted stock price 1347 november 18 2011 exercise price 409a options termination payment paid december 2012 option holders granted new options omnibus plan equal number terminated 409a options held new options granted exercise price equal greater fair market value 1347 per share exercise price option holders 409a options greater 1347 new options issued greater price therefore none new options granted exercise price fair market value new options granted exercise price equal greater corresponding 409a option canceled november 18 2014 new options issued fully vested quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated options vest four years vesting first year onethird vesting upon second third fourth anniversary dates defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee options expire later tenth anniversary grant date 24 months termination death 36 months termination normal retirement disability 90 days termination employment reason options credited dividend declarations except november 18 2011 grants stock options granted employees stock options granted years ended december 31 2014 2013 448154 stock options granted grant date weighted average fair value 225 year ended december 31 2012 excluding 3571652 new options granted november 18 2011 fair market value stock options determined using blackscholesmerton option pricing module fair market value stock options determined using following weighted average assumptions year ended december 31 2012 company determined expected volatility based volatility comparable company stock average riskfree interest rate based united states treasury security rate effect grant date term expected life expected life based term vesting period grant adjusted historical experience vesting compensation expense recognized related stock options 72 million 108 million 101 million years ended december 31 2014 2013 2012 respectively total future compensation expense stock options granted december 31 2014 recognized 2015 estimated 02 million following table summary stock option activity year ended december 31 2014 intrinsic value options exercisable december 31 2014 intrinsic value options outstanding december 31 2014 2013 based fair value stock price outstanding options either vested expected vest december 31 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summary stock option exercises vesting activity years ended december 31 2014 2013 2012 net tax benefit stock option activity shown tax benefit equity award activity financing section consolidated statements cash flows 08 million 22 million 41 million years ended december 31 2014 2013 2012 respectively performance share performance share units performance share ps performance share unit psu awards consist shares rights shares companys class common stock awarded employees company shares payable upon determination company achieved certain established performance targets range 0 200 targeted payout based actual results shares awarded 2013 performance period three years ending december 31 2015 set forth individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving ps psu grants receive full credit dividends vesting period dividends paid grantee within 45 days full vesting upon vesting psus settled either cash payment equal fair market value psus vesting date issuance company class common stock voting rights instruments vesting occurs share stock issued following table summary ps psu award activity year ended december 31 2014 ps psu awards granted year ended december 31 2014 year ended december 31 2013 ps awards 389930 shares psu awards 16208 units granted weightedaverage grant date fair value 2039 2050 respectively ps psu awards granted year ended december 31 2012 grant dates target number shares target shares granted performance period target shares earned forfeited additional shares maximum number shares may granted end performance period potential payouts nonvested awards december 31 2014 range zero 719552 ps psu awards certain performance targets achieved ps psu awards vest march 1 2016 provided holder share continuously employed company vesting date quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated compensation expense awards granted recognized based targeted payout 100 net estimated forfeitures compensation expense recognized related ps psus 22 million 23 million years ended december 31 2014 2013 respectively compensation expense recognized related ps psus year ended december 31 2012 total future compensation expense ps psus granted december 31 2014 estimated 28 million estimated future compensation expense 24 million 2015 04 million 2016 restricted stock restricted stock units restricted stock rs restricted stock unit rsu awards consist shares rights shares companys class common stock awarded employees company awards restricted subject substantial risk forfeiture restrictions sale transfer employee rsu awards typically granted eligible employees outside united states defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving rs grants able exercise full voting rights receive full credit dividends vesting period dividends paid rs grantee within 45 days full vesting grantees receiving rsus granted prior january 1 2012 entitled vote earn dividends grantees receiving rsus january 1 2012 entitled vote earn dividends upon vesting rsus settled either cash payment equal fair market value rsus vesting date issuance company class common stock following table summary rs rsu award activity year ended december 31 2014 year ended december 31 2014 rs awards 706490 shares rsu awards 17767 units granted weightedaverage grant date fair value 2344 2345 respectively year ended december 31 2013 rs awards 408146 shares rsu awards 32671 units granted weightedaverage grant date fair value 2039 2072 respectively year ended december 31 2012 rs awards 310651 shares rsu awards 15760 units granted weightedaverage grant date fair value 1434 general rs rsu awards vest third anniversary grant date provided holder share continuously employed company vesting date quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated compensation expense recognized rs rsus 73 million 48 million 29 million years ended december 31 2014 2013 2012 respectively total future compensation expense rs rsus granted december 31 2014 approximately 151 million estimated future compensation expense 83 million 2015 59 million 2016 09 million 2017 deferred stock units deferred stock units dsu awards rights shares companys class common stock awarded nonemployee directors company following table summary dsu award activity year ended december 31 2014 years ended december 31 2014 2013 2012 dsus 26316 33115 31525 granted weightedaverage grant date fair value 2345 2039 1434 respectively dsus fully vested grant date dsu award entitles grantee receive one share class common stock upon earlier separation date grantee second anniversary grant date could subject acceleration change control death disability defined individual dsu grant agreement grantees dsu awards may exercise voting rights credited dividend equivalents dividend equivalents converted additional dsu awards based closing price class common stock dividend equivalents granted years ended december 31 2014 2013 2012 5392 3529 7440 units respectively compensation expense recognized dsus 06 million 07 million 04 million years ended december 31 2014 2013 2012 respectively awards fully vested grant date compensation expense recognized date grant information authorized unissued shares treasury shares may used issuance companys equity incentive programs company intends use treasury shares class common stock meet stock requirements awards future quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 21 shareholders equity company three classes common stock follows share data millions accordance articles incorporation class common share one vote per share class b class c common share ten votes per share matters voted upon companys shareholders liquidation rights three classes stock companys class c stock held quadgraphics employee ownership plan owned transferred company employee benefit plan intended satisfy qualification requirements section 401 internal revenue code august 2012 companys outstanding class c common shares previously classified redeemable equity converted class common shares company also 05 million shares 001 par value preferred stock authorized none issued december 31 2014 2013 2012 company present plans issue preferred stock quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated accordance articles incorporation dividends paid equally class b class c common shares following table details dividend activity related companys outstanding shares class b class c common stock years ended december 31 2014 2013 2012 companys board directors authorized share repurchase program 1000 million companys outstanding class stock 918 million authorized repurchases remain program december 31 2014 company repurchased shares years ended december 31 2014 2013 2012 redeemable equity company followed applicable gaap sec authoritative guidance redeemable stock required company record class c stock full redemption value balance sheet date extent redemption securities solely within control company terms articles incorporation class c common shares required owned qualified employee retirement plan company holder class c stock continuous right class c stock repurchased company redemption value class c qualified employee retirement plan shares december 31 2014 2013 2012 redemption value class common shares december 31 2014 2013 2012 readily tradable market august 2012 remaining 03 million outstanding class c common shares owned quadgraphics employee stock ownership plan exchanged class common shares held treasury stock exchange eliminated redemption value class c common stock quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated subsequent changes redemption value securities due changes stock valuation dividend declarations charged retained earnings decreases redemption value due elimination redemption features credited additional paidin capital retained earnings year ended december 31 2012 balance redeemable equity decreased 35 million result conversion outstanding class c common shares class common shares information regarding changes redeemable equity year ended december 31 2012 provided table note 22 accumulated comprehensive income loss changes accumulated comprehensive income loss component net tax years ended december 31 2014 2013 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated details reclassifications accumulated comprehensive income loss net earnings years ended december 31 2014 2013 2012 follows note 23 segment information company operates primarily commercial print portion printing industry related product service offerings designed offer clients complete solutions communicating messages target audiences companys operating reportable segments aligned chief operating decision maker company currently manages business companys reportable operating segments product service offerings summarized quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated united states print related services united states print related services segment predominantly comprised companys united states printing operations managed one integrated platform includes consumer magazines catalogs retail inserts special interest publications journals direct mail books directories instore marketing packaging commercial specialty printed products together related service offerings including marketing strategy media planning placement data insights response analytics services creative services videography photography workflow solutions digital imaging facilities management services digital publishing interactive print solutions including image recognition near field communication technology mailing distribution logistics data optimization hygiene services segment also includes design development manufacture service printingrelated auxiliary equipment well manufacture ink result divestiture companys canadian operations transcontinental march 1 2012 see note 3 discontinued operations united states print related services segment amounts restated exclude canadian discontinued operations international segment consists companys printing operations europe latin america including operations poland argentina brazil chile colombia mexico peru segment provides printed products related services consistent united states print related services segment exception printingrelated auxiliary equipment included entirely united states print related services segment unrestricted subsidiaries defined senior unsecured notes indenture represent less 20 total consolidated assets december 31 2014 less 20 year ended december 31 2014 corporate consists unallocated general administrative activities associated expenses including part executive legal finance addition 2014 certain expenses income frozen employee retirement plans pension postretirement benefits plans included corporate allocated operating segments quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following summary segment information years ended december 31 2014 2013 2012 restructuring impairment transactionrelated charges years ended december 31 2014 2013 2012 described note 4 restructuring impairment transactionrelated charges included operating incomeloss results segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reconciliation operating income continuing operations earnings continuing operations income taxes equity earnings loss unconsolidated entities reported consolidated statements operations years ended december 31 2014 2013 2012 follows note 24 geographic area product information table presents companys net sales years ended december 31 2014 2013 2012 companys property plant equipment intangible assets december 31 2014 2013 geographic region amounts table differ segment data presented note 23 segment information operating segment includes operations multiple geographic regions based companys management reporting structure quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated table presents companys consolidated net sales products services years ended december 31 2014 2013 2012 company recast products services disclosure include books directories net sales catalogs magazines retail inserts net sales years ended december 31 2013 2012 present consistent basis current year note 25 separate financial information subsidiary guarantors indebtedness senior unsecured notes see note 13 debt details senior unsecured notes fully unconditionally guaranteed joint several basis companys guarantor subsidiaries following condensed consolidating financial information reflects summarized financial information quadgraphics guarantor subsidiaries combined basis companys nonguarantor subsidiaries combined basis quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2014 condensed consolidating statement comprehensive income loss year ended december 31 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2013 condensed consolidating statement comprehensive income loss year ended december 31 2013 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2012 condensed consolidating statement comprehensive income loss year ended december 31 2012 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating balance sheet december 31 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating balance sheet december 31 2013 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2013 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2012 note 26 new accounting pronouncements november 2014 financial accounting standards board fasb issued new guidance providing companies option apply pushdown accounting acquired entities separate financial statements upon occurrence event acquirer obtains control acquired entity acquired entity option elect apply pushdown accounting reporting period changeincontrol event occurs pushdown accounting applied reporting period changeincontrol event occurs acquired entity option elect apply pushdown accounting subsequent reporting period change accounting principle pushdown accounting applied individual changeincontrol event election irrevocable additional disclosures required enable users financial statements evaluate effect pushdown accounting guidance effective upon issuance november 18 2014 company adopted new guidance effective november 18 2014 company believe adoption guidance material impact consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated august 2014 fasb issued new guidance required disclosures related entitys ability continue going concern guidance requires management evaluate interim annual reporting period whether conditions events raise substantial doubt entitys ability continue going concern within one year date financial statements issued provide related disclosures guidance effective annual periods ending december 15 2016 annual interim period thereafter early adoption permitted company plans adopt new guidance effective december 31 2016 company believe adoption guidance material impact consolidated financial statements june 2014 fasb issued new guidance certain sharebased payment awards clarifies treatment performance targets met requisite service period sharebased payment award new guidance entity treat performance targets met requisite period service performance conditions affect vesting guidance effective interim annual periods beginning december 15 2015 early adoption permitted company plans adopt new guidance effective january 1 2016 company believe adoption guidance material impact consolidated financial statements may 2014 fasb issued new guidance recognizing revenue contracts customers guidance entity recognize revenue transfers promised goods services customer amount reflects expects exchange goods services guidance also requires detailed disclosures enable users financial statements understand nature amount timing uncertainty revenue cash flow arising contracts customers guidance effective interim annual periods beginning december 15 2016 early adoption permitted guidance allows option either full retrospective adoption meaning guidance applied periods presented modified retrospective adoption meaning guidance applied current period company currently evaluating impact guidance consolidated financial statements determining transition method use april 2014 fasb issued new guidance presentation discontinued operations modifies requirements disposals qualify discontinued operations expands related disclosure requirements guidance effective prospectively interim annual periods beginning december 15 2014 early adoption permitted disposals reported financial statements previously issued available issuance company plans adopt new guidance effective january 1 2015 adoption guidance may impact whether future disposals qualify discontinued operations therefore could impact companys financial statement presentation disclosures note 27 subsequent events acquisition marins international february 3 2015 quadgraphics completed acquisition marins international marins worldwide leader pointofsale display industry headquartered paris france 295 million marins specializes research design display solutions manufacturing facilities wideformat digital print kitting fulfillment facility paris manufactures marins products marins uses european based sales force well global network licensees consultatively sell patented product portfolio termination agreement acquire courier corporation february 5 2015 agreement pursuant quadgraphics acquire courier corporation courier terminated terms agreement signed courier january 16 2015 quadgraphics would paid courier shareholders equivalent total purchase price 2050 per share january 27 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated courier received unsolicited offer another bidder 2300 per share cash stock subject pro ration quadgraphics declined negotiate accordingly courier terminated agreement quadgraphics paid quadgraphics 100 million termination fee february 5 2015 declaration quarterly dividend february 23 2015 company declared quarterly dividend 030 per share paid march 20 2015 shareholders record march 9 2015 item 9item 8 financial statements supplementary data quarterly financial data unaudited following table sets forth selected financial information eight quarters twoyear period ended december 31 2017 unaudited information prepared company basis consolidated financial statements includes normal recurring adjustments necessary present information fairly read conjunction companys audited consolidated financial statements notes thereto 1 operating income increased 406 million three months ended march 31 2017 compared three months ended march 31 2016 primarily due following 1 197 million decrease restructuring impairment transactionrelated charges 2 194 million decrease depreciation amortization expense 3 154 million vacation reserve reduction employee vacation policy change 4 63 million lower legal expenses impacts partially offset lower print volume pricing due ongoing industry pressures 104 million benefit 2016 repeat 2017 related collection previously writtenoff vendor receivable operating income increased 194 million three months ended june 30 2017 compared three months ended june 30 2016 primarily due following 1 191 million decrease depreciation amortization expense 2 50 million gain property insurance claim 3 21 million decrease restructuring impairment transactionrelated charges 4 savings cost reduction initiatives impacts partially offset lower print volume pricing due ongoing industry pressures operating income increased 156 million three months ended september 30 2017 compared three months ended september 30 2016 primarily due following 1 181 million decrease restructuring impairment transactionrelated charges 2 34 million decrease depreciation amortization expense 3 savings cost reduction initiatives impacts partially offset lower print volume pricing due ongoing industry pressures operating income decreased 331 million three months ended december 31 2017 compared three months ended december 31 2016 primarily due increase 205 million restructuring impairment transactionrelated charges lower print volume pricing due ongoing industry pressures partially offset savings cost reduction initiatives report independent registered public accounting firm shareholders board directors quadgraphics inc opinion financial statements audited accompanying consolidated balance sheets quadgraphics inc subsidiaries company december 31 2017 2016 related consolidated statements operations comprehensive income loss shareholders equity cash flows three years period ended december 31 2017 related notes collectively referred financial statements opinion financial statements present fairly material respects financial position company december 31 2017 2016 results operations cash flows three years period ended december 31 2017 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states pcaob companys internal control financial reporting december 31 2017 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission report dated february 21 2018 expressed unqualified opinion companys internal control financial reporting basis opinion financial statements responsibility companys management responsibility express opinion companys financial statements based audits public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement whether due error fraud audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation financial statements believe audits provide reasonable basis opinion deloitte touche llp milwaukee wisconsin february 21 2018 served companys auditor since 2002 report independent registered public accounting firm shareholders board directors quadgraphics inc opinion internal control financial reporting audited internal control financial reporting quadgraphics inc subsidiaries company december 31 2017 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion company maintained material respects effective internal control financial reporting december 31 2017 based criteria established internal control integrated framework 2013 issued coso also audited accordance standards public company accounting oversight board united states pcaob consolidated financial statements year ended december 31 2017 company report dated february 21 2018 expressed unqualified opinion financial statements basis opinion company’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting responsibility express opinion company’s internal control financial reporting based audit public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audit accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate deloitte touche llp milwaukee wisconsin february 21 2018 quadgraphics inc consolidated statements operations millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements comprehensive income loss millions see accompanying notes consolidated financial statements quadgraphics inc consolidated balance sheets millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements cash flows millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements shareholders equity millions see accompanying notes consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies nature operationsquadgraphics leading marketing solutions provider leverages strong print foundation part much larger robust integrated marketing platform helps marketers content creators improve efficiency effectiveness marketing spend across offline online media channels company provides marketing complementary services customers company operates primarily commercial print portion printing industry printer retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement companys products services variety industries sold primarily throughout north america south america europe addition company strategically sources packaging product manufacturing multiple end markets central america asia principles consolidation basis presentationthe accompanying consolidated financial statements include accounts company whollyowned subsidiaries prepared accordance gaap results operations accounts businesses acquired included consolidated financial statements dates acquisition see note 2 acquisitions strategic investments entities company ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting investments entities company exert significant influence control ownership interest less 20 accounted using cost method accounting intercompany transactions balances eliminated consolidation foreign operationsassets liabilities denominated foreign currencies translated united states dollars exchange rate existing respective balance sheet dates income expense items translated average rates respective periods translation adjustments resulting fluctuations exchange rates recorded separate component accumulated comprehensive income loss consolidated statements shareholders equity transaction gains losses recorded selling general administrative expenses consolidated statements operations foreign exchange transactions resulted gains 15 million year ended december 31 2017 losses 60 million 14 million years ended december 31 2016 2015 respectively company 49 interest plural commercial printer based brazil formerly owned 50 commercial printer chile company sold ownership interest chile july 31 2015 company accounts entities using equity method accounting see note 8 equity method investments unconsolidated entities discussion companys equity loss plurals chiles operations recorded equity loss unconsolidated entities companys consolidated statements operations included within international segment distributions received equity method investees follow nature distribution approach distribution evaluated basis source payment classified either operating cash inflows investing cash inflows significant unconsolidated entities use estimatesthe preparation consolidated financial statements requires use managements estimates assumptions affect reported assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenue expenses reporting periods actual results could differ estimates used accounting items matters including limited allowances doubtful accounts inventory obsolescence asset valuations useful lives pension postretirement benefits selfinsurance reserves stockbased compensation taxes restructuring provisions contingencies quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated revenue recognitionthe company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer reasonable assurance collectability agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer revenues related companys logistics operations includes delivery printed material recognized upon completion services certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis byproduct recoveriesthe company presents byproduct recoveries reduction cost salesproducts consolidated statements operations classification byproduct recoveries reduction cost sales aligns proceeds byproduct recoveries corresponding manufacturing costs financial instrumentsthe company uses derivative financial instruments purpose hedging interest rate commodity foreign exchange exposures exist part ongoing business operations including interest rate swap agreements natural gas forward purchase contracts foreign exchange contracts policy company engage speculative leveraged transactions company hold issue financial instruments trading purposes derivative instruments recorded consolidated balance sheets either assets liabilities measured fair value derivative designated fair value hedge changes fair value derivative hedged item attributable hedged risk recognized earnings derivative designated cash flow hedge effective portion changes fair value derivative recorded component accumulated comprehensive income loss recognized consolidated statements operations hedged item affects earnings ineffective portions changes fair value hedges insignificant recognized earnings cash flows derivatives accounted cash flow fair value hedges included consolidated statements cash flows category item hedged fair value measurementthe company applies fair value accounting assets liabilities recognized disclosed fair value consolidated financial statements recurring basis fair value represents amount would received selling asset paid transfer liability orderly transaction market participants measurement date determining fair value measurements assets liabilities required recorded fair value company considers principal advantageous market marketbased risk measurements assumptions market participants would use pricing asset liability see note 15 financial instruments fair value measurements discussion quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated research developmentresearch development costs related development new products adaptation existing products expensed incurred included cost sales totaled 90 million 93 million 103 million years ended december 31 2017 2016 2015 respectively cash equivalentsthe company considers highly liquid investments original maturities three months less cash equivalents receivablesreceivables stated net allowances doubtful accounts single customer comprised 5 companys consolidated net sales 2017 2016 2015 5 companys consolidated receivables december 31 2017 2016 specific customer provisions made review significant outstanding amounts utilizing information customer creditworthiness current economic trends indicates collection doubtful addition provisions made differing rates based upon age receivable companys historical collection experience accounts deemed uncollectible written reasonable collection efforts exhausted see note 5 receivables discussion transactions affecting allowances doubtful accounts inventoriesinventories include material labor plant overhead stated lower cost net realizable value december 31 2017 2016 inventories valued using firstin firstout fifo method see note 6 inventories components companys inventories property plant equipmentproperty plant equipment recorded cost depreciated estimated useful lives assets using straightline method financial reporting purposes see note 7 property plant equipment components companys property plant equipment major improvements extend useful lives existing assets capitalized charged asset accounts repairs maintenance significantly improve extend useful lives respective assets expensed incurred leasehold improvements depreciated shorter lease term estimated useful life respective asset retired disposed associated costs accumulated depreciation eliminated resulting gain loss recognized companys consolidated statements operations intangible assetsidentifiable intangible assets recognized apart goodwill amortized estimated useful lives impairment longlived intangible assetsthe company evaluates longlived assets intangible assets significant property plant equipment customer relationship intangible assets whenever events circumstances occurred indicate carrying value asset may recoverable determining whether impairment occurred typically requires various estimates assumptions including determining cash flows directly related potentially impaired asset useful life cash flows occur amount assets residual value turn assessing whether impairment loss requires determination recoverability generally estimated ability recover balance assets expected future operating cash flows undiscounted basis impairment determined exist related impairment loss calculated based difference fair value carrying value asset quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated goodwillwhen applicable goodwill reviewed annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value performing analysis company compares reporting units fair value estimated based comparable company market valuations andor expected future discounted cash flows generated reporting unit carrying value carrying value exceeds reporting units fair value company performs fair value measurement calculation determine impairment loss would charged operations period identified see note 4 goodwill intangible assets discussion income taxesthe company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations company determines deferred income tax asset fully realized future valuation allowance established increased reflect amount asset likely realized would increase companys provision income taxes period valuation allowance established company determines related deferred income tax assets realized future excess net recorded amount adjustment reduce related valuation allowance made would reduce companys provision income taxes company regularly audited foreign domestic tax authorities audits occasionally result proposed assessments ultimate resolution might result company owing additional taxes including cases penalties interest company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination companys worldwide tax provision related tax assets liabilities requires use significant judgment estimating impact uncertainties application gaap interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain fair market value required measure tax asset liability gaap purposes company periodically obtains independent third party assistance validate value determined conformity internal revenue service fair market value guidelines company believes appropriate support positions taken certain positions may successfully challenged taxing authorities resolution uncertainties manner inconsistent managements expectations could material impact companys financial condition operating results company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions determination companys worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions see note 14 income taxes discussion pension plansthe company assumed certain frozen underfunded defined benefit pension plans part 2010 world color press acquisition pension plan costs determined using actuarial methods funded contributions company records amounts relating pension plans based calculations include various actuarial assumptions including discount rates assumed rates return mortality compensation increases turnover quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated rates company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors purposes calculating expected return plan assets valued fair value event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 company previously participated mepps result acquisition world color press due significant underfunded status mepps company withdrawn significant mepps replaced union sponsored promise pay future defined benefit plans company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded estimated withdrawal liability mepps part world color press purchase price allocation process based information received mepps trustees estimated withdrawal liability updated based significant events potential new information litigation proceedings mepps final withdrawal liability determined exact amount withdrawal liability could higher lower estimate see note 16 employee retirement plans discussion stockbased compensationthe company recognizes stockbased compensation expense vesting period stockbased awards made employees directors based fair value instrument time grant see note 18 equity incentive programs discussion accumulated comprehensive income lossaccumulated comprehensive income loss consists primarily unrecognized actuarial gains losses prior service costs pension plans foreign currency translation adjustments interest rate swap adjustments presented consolidated statements shareholders equity see note 20 accumulated comprehensive loss discussion supplemental cash flow informationthe following table summarizes certain supplemental cash flow information years ended december 31 2017 2016 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 2 acquisitions strategic investments 2015 specialty finishing inc acquisition company completed acquisition specialty august 25 2015 610 million specialty fullservice paperboard folding carton manufacturer logistics provider located omaha nebraska purchase price 610 million included 03 million acquired cash net purchase price 607 million included purchase price allocation 96 million identifiable intangible assets amortized estimated useful lives ranging three six years 35 million goodwill final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs specialtys operations included united states print related services segment 2015 copac global packaging inc acquisition company completed acquisition copac april 14 2015 594 million copac leading international provider innovative packaging supply chain solutions including turnkey packaging design production fulfillment services across range end markets copac manufactures products folding cartons labels inserts tags specialty envelopes production facilities spartanburg south carolina santo domingo dominican republic well strategically sourcing packaging product manufacturing multiple end markets central america asia giving global footprint purchase price 594 million included 09 million acquired cash net purchase price 585 million included purchase price allocation 222 million identifiable intangible assets amortized estimated useful lives six years 235 million goodwill final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs copacs operations included united states print related services segment 2015 marins international acquisition company completed acquisition marins february 3 2015 311 million marins headquartered paris france worldwide leader pointofsale display industry specializes research design display solutions marins products produced global network licensees including quadgraphics well one wideformat digital print kitting fulfillment facility paris marins uses europeanbased sales force global licensees sell patented product portfolio purchase price 311 million included 101 million acquired cash net purchase price 210 million included purchase price allocation 179 million identifiable intangible assets amortized estimated useful lives ranging three eight years 68 million goodwill final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs marins operations included international segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 3 restructuring impairment transactionrelated charges company recorded restructuring impairment transactionrelated charges years ended december 31 2017 2016 2015 follows costs related activities recorded consolidated statements operations restructuring impairment transactionrelated charges see note 21 segment information restructuring impairment transactionrelated charges segment restructuring charges company began restructuring program 2010 related eliminating excess manufacturing capacity properly aligning cost structure company announced total 41 plant closures reduced headcount approximately 11800 employees since 2010 company announced closures waseca minnesota columbus ohio taunton massachusetts dallas texas plants year ended december 31 2017 company recorded following charges result plant closures restructuring programs year ended december 31 2017 • employee termination charges 269 million recorded company result workforce reductions facility consolidations voluntary involuntary separation programs • restructuring charges 192 million recorded company consisted following 1 142 million vacant facility carrying costs 2 67 million loss sale business 3 39 million lease exit charges including lease termination huntington beach california manassas virginia plants 4 19 million equipment infrastructure removal costs closed plants 5 08 million noncash pension settlement charge related lumpsum pension payments year ended december 31 2017 see note 16 employee retirement plans additional details restructuring charges presented net 71 million gains sale atglen pennsylvania dickson tennessee lenexa kansas east greenville pennsylvania marengo iowa facilities 12 million gain settlements vendors bankruptcy proceedings companys argentina subsidiaries quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company announced closures atglen pennsylvania huntington beach california lenexa kansas manassas virginia monroe new jersey york pennsylvania plants year ended december 31 2016 company recorded following charges result plant closures restructuring programs year ended december 31 2016 • employee termination charges 129 million recorded company result workforce reductions facility consolidations involuntary separation programs • integration costs 01 million recorded company primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 386 million recorded company consisted following 1 136 million vacant facility carrying costs 2 112 million adjustment mepps withdrawal liability 3 70 million noncash pension settlement charge related lumpsum pension payments year ended december 31 2017 see note 16 employee retirement plans additional details 4 49 million equipment infrastructure removal costs closed plants 5 45 million lease exit charges including lease termination pittsburg california facility restructuring charges presented net following 1 13 million gain settlements vendors due companys argentina subsidiaries emerging bankruptcy fourth quarter 2016 2 13 million gain sale pilar argentina building company announced closures augusta georgia east greenville pennsylvania enfield connecticut loveland colorado pilar argentina queretaro mexico plants year ended december 31 2015 company recorded following charges result plant closures restructuring programs year ended december 31 2015 • employee termination charges 421 million recorded company result workforce reductions facility consolidations involuntary separation programs • integration costs 51 million recorded company primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 291 million recorded company consisted following 1 117 million vacant facility carrying costs 2 28 million equipment infrastructure removal costs closed plants 3 86 million lease exit charges primarily related closure atlanta georgia loveland colorado facilities company also recorded 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment see note 8 equity method investments unconsolidated entities additional details restructuring charges recorded based plans committed management part based upon managements best estimates future events changes estimates may require future restructuring charges adjustments restructuring liabilities company expects incur additional restructuring charges related initiatives quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated impairment charges company recognized impairment charges 120 million year ended december 31 2017 consisting following 1 67 million impairment charges primarily machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity reduction restructuring initiatives 2 53 million land building impairment charges related waseca minnesota taunton massachusetts plant closures company recognized impairment charges 268 million year ended december 31 2016 consisting following 1 121 million land building impairment charges related atglen pennsylvania plant closure 2 147 million impairment charges primarily machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois queretaro mexico well capacity reduction restructuring activities company recognized impairment charges 953 million year ended december 31 2015 consisting following 1 547 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado queretaro mexico well capacity reduction restructuring initiatives 2 186 million investmentrelated impairment charges primarily related 167 million impairment charges reduce book value companys equity method investment chile fair value see note 8 equity method investments unconsolidated entities additional details related impairment companys equity method investment chile 3 127 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 4 71 million customer relationship intangible asset impairments 5 22 million impairment charges primarily related restructuring proceedings argentina companys argentina subsidiaries land building machinery equipment intangible assets fair values impaired assets determined company level 3 fair value hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs estimated based broker quotes internal expertise related current marketplace conditions estimated future discounted cash flows assets adjusted estimated fair values time impairment noncash goodwill impairment charges included line item entitled goodwill impairment companys consolidated statements operations discussed note 4 goodwill intangible assets transactionrelated charges income company incurs transactionrelated charges income primarily consisting professional service fees related business acquisition divestiture activities company recognized transactionrelated charges 31 million 22 million years ended december 31 2017 2016 respectively including 10 million related sale business year ended december 31 2017 company recognized transactionrelated income 67 million year ended december 31 2015 included 100 million nonrecurring gain result couriers termination agreement pursuant quadgraphics acquire courier partially offset 33 million professional service fees including fees terminated acquisition courier acquisitions marins copac specialty quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated restructuring reserves activity impacting companys restructuring reserves years ended december 31 2017 2016 follows companys restructuring reserves december 31 2017 included shortterm longterm component shortterm portion included 246 million accrued liabilities see note 9 accrued liabilities longterm liabilities 07 million accounts payable consolidated balance sheets company expects reserves paid within next twelve months longterm portion 42 million included longterm liabilities see note 9 accrued liabilities longterm liabilities consolidated balance sheets note 4 goodwill intangible assets goodwill represents excess purchase price fair value identifiable net assets acquired business combination goodwill assigned specific reporting units tested annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value united states print related services segment due decline companys stock price third quarter 2015 interim goodwill impairment test three reporting units united states print related services segment performed july 31 2015 reporting units include core print related services reporting unit specialty print related services reporting unit united states products services reporting unit goodwill 6408 million 1156 million 186 million respectively july 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated result interim goodwill impairment assessment well annual impairment test october 31 2015 companys united states print related services segment recorded pretax noncash goodwill impairment charges 7783 million year ended december 31 2015 included impairment charges 6408 million 1189 million 186 million core print related services reporting unit specialty print related services reporting unit united states products services reporting unit respectively goodwill impairment charges resulted reduction estimated fair value reporting unit based lower expectations future revenue profitability cash flows due volume pricing pressures compared expectations previous annual goodwill impairment assessment performed october 31 2014 international segment march 25 2015 due deteriorating economic conditions including inflation currency devaluation combined uncertain political conditions declining print volumes labor challenges companys argentina subsidiaries included within latin america reporting unit commenced bankruptcy restructuring proceedings goal consolidating operations result company conducted interim goodwill impairment assessment latin america reporting unit included comparing carrying amount net assets including goodwill respective fair value march 31 2015 date interim assessment result interim goodwill impairment assessment well annual impairment test october 31 2015 companys international segment recorded noncash nondeductible goodwill impairment charges 300 million year ended december 31 2015 primarily including 233 million noncash goodwill impairment charge latin america reporting unit goodwill impairment charges resulted reduction estimated fair value reporting unit based lower expectations future revenue profitability cash flows due volume pricing pressures compared expectations previous annual goodwill impairment assessment performed october 31 2014 noncash goodwill impairment charges 8083 million recorded year ended december 31 2015 goodwill impairment charges recorded years ended december 31 2017 2016 accumulated goodwill impairment losses carrying value goodwill december 31 2017 2016 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated activity impacting goodwill year ended december 31 2015 follows components intangible assets december 31 2017 2016 follows gross carrying amount accumulated amortization within intangible assetsnet consolidated balance sheets december 31 2017 december 31 2016 differs value originally recorded acquisition due impairment charges recorded prior years effects currency fluctuations since purchase date intangible assets evaluated potential impairment whenever events circumstances indicate carrying value may recoverable impairment charges recorded finitelived intangible assets years ended december 31 2017 2016 company recorded finitelived intangible asset impairment charges 72 million primarily related customer relationships year ended december 31 2015 see note 3 restructuring impairment transactionrelated charges discussion impairment charges quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated amortization expense intangible assets 183 million 507 million 796 million years ended december 31 2017 2016 2015 respectively following table outlines estimated future amortization expense related intangible assets december 31 2017 note 5 receivables activity impacting allowances doubtful accounts years ended december 31 2017 2016 2015 follows 1 writeoffs year ended december 31 2017 primarily consisted fully reserved receivables note 6 inventories components inventories december 31 2017 2016 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 7 property plant equipment components property plant equipment december 31 2017 2016 follows 1 consists computer equipment vehicles furniture fixtures leasehold improvements communication related equipment company recorded impairment charges 120 million 268 million 695 million years ended december 31 2017 2016 2015 respectively reduce carrying amounts certain property plant equipment longer utilized production fair value see note 3 restructuring impairment transactionrelated charges discussion impairment charges company recognized depreciation expense 2142 million 2264 million 2457 million years ended december 31 2017 2016 2015 respectively assets held sale company considered certain closed facilities held sale classification consolidated balance sheets assets held sale december 31 2017 net book value assets held sale 52 million december 31 2016 assets carried lesser original cost fair value less estimated costs sell fair values determined company level 3 fair value hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs estimated based internal discounted cash flow estimates quoted market prices available independent appraisals appropriate assets held sale included prepaid expenses current assets consolidated balance sheets note 8 equity method investments unconsolidated entities company 49 ownership interest plural commercial printer based são paulo brazil company 50 ownership interest chile commercial printer based santiago chile company sold ownership interest chile july 31 2015 companys ownership interest plural chile period ownership accounted using equity method accounting companys equity loss plurals chiles operations recorded equity loss unconsolidated entities companys consolidated statements operations included within international segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company reviews equity method investments regularly indicators temporary impairment second quarter 2015 company recorded 167 million impairment charge reduce book value 50 ownership interest chile fair value based intent sell investment impairment recorded restructuring impairment transactionrelated charges consolidated statement operations included within international segment fair value measurement investment classified level 3 fair value hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs determined using internal expertise current marketplace conditions july 31 2015 company sold 50 ownership interest chile 105 million company recorded 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment year ended december 31 2015 recorded within restructuring impairment transactionrelated charges consolidated statements operations condensed balance sheets plural december 31 2017 2016 follows condensed statements operations plural years ended december 31 2017 2016 combined condensed statements operations plural chile year ended december 31 2015 presented results chile equity method investment included following table july 31 2015 sale date quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 9 accrued liabilities longterm liabilities components accrued longterm liabilities december 31 2017 2016 follows 1 employeerelated liabilities consist primarily payroll bonus vacation health workers compensation note 10 commitments contingencies commitments company firm commitments 223 million december 31 2017 purchase press finishing equipment litigation company named defendant various lawsuits claims asserted company normal course business liabilities ultimately result lawsuits expected management material impact consolidated financial statements company quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated april 2016 company selfreported sec department justice doj certain foreign corrupt practices act fcpa issues resulting internal investigation related operations managed peru operations approximate annual sales ranging 950 million 1350 million date company acquired operations july 2010 date issues discovered selfreported issues identified companys financial internal controls company oversight audit committee board directors proactively initiated investigation matter assistance external legal counsel external forensic accountants additional compliance issues arising peru subsidiary identified course investigation known sec doj course internal investigation company also identified selfreported doj sec transactions raising similar issues involving certain sales made quadtech china operations period 2011 2015 approximate annual sales china operations ranged 20 million 30 million course internal investigation company also identified informed office foreign assets control ofac doj sec certain transactions involving cuba continues investigate propriety transactions united states trade sanctions connection investigation company made continues evaluate certain enhancements compliance program company fully cooperating ofac sec doj time company anticipate material adverse effect business financial condition result matter environmental reserves company subject various laws regulations government policies relating health safety generation storage transportation disposal hazardous substances environment protection general company provides expenses associated environmental remediation obligations amounts probable reasonably estimated reserves adjusted new information develops circumstances change environmental reserves discounted company believes compliance laws regulations government policies material respects furthermore company anticipate maintaining compliance environmental statutes material impact upon companys consolidated financial position note 11 world color press insolvency proceedings company managed bankruptcy claim resolution settlement process quebecor world inc qwi united states canada since 2010 company acquired world color press qwi changed name world color press connection emerging bankruptcy july 21 2009 december 2017 united states bankruptcy court southern district new york entered order closing qwi bankruptcy united states addition december 2017 quebec superior court commercial division judicial district montreal canadian court entered discharge order providing upon final distributions completed final certificate filed canadian court canadian bankruptcy proceedings would terminated final distributions qwi bankruptcy proceedings underway december 31 2017 distribution process conclude 2018 company 12 million total bankruptcy claims reserves december 31 2017 address future contingencies distribution process recorded accrued liabilities consolidated balance sheet company received refunds restricted cash offset certain bankruptcyrelated payments december 31 2017 01 million restricted cash remains refunded company quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated activity impacting restricted cash years ended december 31 2017 2016 follows note 12 debt components longterm debt december 31 2017 2016 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated description debt obligations master note security agreement september 1 1995 last amended november 24 2014 quadgraphics entered master note security agreement december 31 2017 borrowings outstanding master note security agreement 1236 million senior notes master note security agreement weighted average interest rate 743 december 31 2017 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2031 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement company redeemed 601 million senior notes master note security agreement resulting net loss debt extinguishment 02 million year ended december 31 2016 tendered senior notes master note security agreement canceled company used cash flows operating activities borrowings revolving credit facility fund tender primarily completed reallocate debt lower interest rate revolving credit facility thereby reduce interest expense based current libor rates senior secured credit facility april 28 2014 last amended february 10 2017 company entered senior secured credit facility includes revolving credit facility term loan term loan b senior secured credit facility originally entered extend stagger companys debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals proceeds senior secured credit facility used repay companys previous debt financing arrangements fund acquisitions well general corporate purposes senior secured credit facility consists three different loan facilities first facility revolving credit facility amount 7250 million term four years maturing january 4 2021 second facility term loan aggregate amount 3750 million term four years maturing january 4 2021 subject certain required amortization third facility term loan b amount 3000 million term seven years maturing april 27 2021 subject certain required amortization december 31 2017 company outstanding borrowings revolving credit facility 389 million issued letters credit leaving 6861 million available future borrowings revolving credit facility term loan made senior secured credit facility december 31 2017 bear interest 175 excess reserve adjusted libor 075 excess alternate base rate borrowings term loan b december 31 2017 bear interest 325 excess reserve adjusted libor floor 100 225 excess alternative base rate companys option senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company completed second amendment companys senior secured credit facility february 10 2017 second amendment completed reduce size revolving credit facility term loan extend companys debt maturity profile maintaining companys current cost borrowing covenant structure revolving credit facility lowered maximum borrowing amount 7250 million 8500 million term loan lowered aggregate amount 3750 million 4500 million amendment senior secured credit facility impact companys quarterly financial covenant requirements resulted loss debt extinguishment 26 million year ended december 31 2017 senior unsecured notes company completed issuance 3000 million aggregate principal amount senior unsecured notes due may 1 2022 april 28 2014 senior unsecured notes bear interest 700 interest payable semiannually senior unsecured notes issued extend stagger companys debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals company received 2948 million net proceeds sale senior unsecured notes deducting initial purchasers discounts commissions proceeds senior unsecured notes used purposes detailed april 28 2014 senior secured credit facility company repurchased 565 million senior unsecured notes open market resulting net gain debt extinguishment 143 million year ended december 31 2016 repurchased senior unsecured notes canceled company used cash flows operating activities borrowings revolving credit facility fund repurchases primarily completed efficiently reduce debt balances interest expense based current libor rates companys existing future domestic subsidiaries borrower guarantees indebtedness companys senior secured credit facility guarantees certain companys indebtedness companys restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes guarantor subsidiaries guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events see note 23 separate financial information subsidiary guarantors indebtedness details guarantor subsidiaries international debt obligations company entered fixed rate euro denominated international term loan december 28 2015 purposes financing certain capital expenditures general business needs 213 million term loan fully funded 2016 149 million outstanding weighted average interest rate 172 december 31 2017 term loan term six years maturing december 28 2021 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company two multicurrency international revolving credit facilities used financing working capital general business needs company 98 million borrowings outstanding weighted average interest rate 241 international revolving credit facilities december 31 2017 leaving 74 million available future borrowing terms international revolving credit facilities includes certain financial covenants guarantee international revolving credit facilities company security agreement includes collateralizing substantially quadgraphics europe sp zoo assets first multicurrency international revolving credit facility expires october 31 2018 bears interest aggregate warsaw interbank offered rate wibor plus 090 polish zloty denominated borrowings aggregate euro interbank offered rate euribor plus 095 euro denominated borrowings second multicurrency international revolving credit facility expires november 20 2018 bears interest aggregate wibor plus 070 polish zloty denominated borrowings aggregate euribor plus 070 euro denominated borrowings fair value debt based upon interest rates available company borrowings similar terms maturities fair value companys total debt approximately 10 billion 11 billion december 31 2017 2016 respectively fair value determination companys total debt categorized level 2 fair value hierarchy see note 15 financial instruments fair value measurements definition level 2 inputs december 31 2017 approximately 23 billion companys assets pledged security various loans agreements debt issuance costs original issue discount activity impacting companys capitalized debt issuance costs years ended december 31 2017 2016 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated activity impacting companys original issue discount years ended december 31 2017 2016 follows amortization expense debt issuance costs 31 million 38 million 39 million years ended december 31 2017 2016 2015 respectively amortization expense original issue discount 04 million 04 million 05 million years ended december 31 2017 2016 2015 respectively debt issuance costs original issue discount amortized straightline basis four seven eight year lives related debt instruments loss gain debt extinguishment 2017 loss debt extinguishment company incurred 47 million debt issuance costs conjunction second amendment companys senior secured credit facility accordance accounting guidance treatment debt issuance costs debt extinguishment 47 million new debt issuance costs 32 million classified reduction longterm debt consolidated balance sheets 15 million expensed classified loss debt extinguishment consolidated statements operations loss debt extinguishment recorded consolidated statements operations year ended december 31 2017 comprised following 2016 gain debt extinguishment company recorded net gain debt extinguishment 141 million year ended december 31 2016 141 million comprised 143 million gain incurred conjunction repurchase 565 million companys senior unsecured notes offset net loss debt extinguishment 02 million resulting redemption 601 million companys senior notes master note security agreement quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated gain debt extinguishment recorded consolidated statements operations year ended december 31 2016 comprised following covenants compliance companys various lending arrangements include certain financial covenants financial terms numbers ratios defined companys debt agreements among covenants company required maintain following december 31 2017 • total leverage ratio rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda shall exceed 375 100 twelve months ended december 31 2017 companys total leverage ratio 206 100 • senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined senior secured debt consolidated ebitda shall exceed 350 100 twelve months ended december 31 2017 companys senior secured leverage ratio 155 100 • minimum interest coverage ratio rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2017 companys minimum interest coverage ratio 703 100 indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit companys restricted subsidiaries ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially companys consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock including following • companys total leverage ratio greater 300 100 defined senior secured credit facility company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions • companys senior secured leverage ratio greater 300 100 companys total leverage ratio greater 350 100 ratios defined senior secured credit facility company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total leverage ratio less 350 100 restrictions estimated principal payments approximate annual principal amounts due longterm debt excluding 103 million future amortization debt issuance costs 14 million future amortization original issue discount december 31 2017 follows note 13 lease obligations company enters various master lease agreements press finishing transportation equipment leases provide company options purchase related equipment termination value defined various early buyout dates term lease leases accounted capital leases consolidated balance sheets components capital lease assets december 31 2017 2016 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated future maturities capitalized leases december 31 2017 follows company various operating lease agreements future minimum rental commitments noncancelable leases december 31 2017 follows rent expense operating lease agreements totaled 373 million 437 million 448 million years ended december 31 2017 2016 2015 respectively note 14 income taxes income taxes based following components earnings loss income taxes equity loss unconsolidated entities years ended december 31 2017 2016 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated components income tax benefit expense years ended december 31 2017 2016 2015 follows company recorded 8083 million noncash goodwill impairment charges year ended december 31 2015 7430 million nondeductible income tax purposes tax benefit related goodwill impairment charges 2659 million composed following 1 2414 million deferred tax benefit associated reduction deferred tax liability related investments united states subsidiaries due lower estimated fair value united states print related services segment 2 245 million tax benefit 653 million deductible goodwill deferred tax liability related investments united states subsidiaries originally established former world color press entities emerged bankruptcy 2009 following table outlines reconciliation differences federal statutory tax rate companys effective tax rate years ended december 31 2017 2016 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 220 adjustment valuation allowances primarily relates income tax credit utilized companys polish subsidiaries due sustainable profitability company determined utilization credit sufficient record reduction valuation allowance order reflect current net realizable value related deferred tax assets based estimated credit utilization 2026 year credit expires deferred income taxes significant deferred tax assets liabilities december 31 2017 2016 follows company recorded deferred income tax liabilities 419 million 353 million december 31 2017 2016 respectively included deferred income taxes consolidated balance sheets december 31 2017 company also recorded deferred income tax assets 212 million included longterm assets consolidated balance sheets december 31 2017 company following gross amounts taxrelated carryforwards • net operating loss carryforwards 1088 million 4816 million foreign state respectively foreign net operating loss carryforwards 384 million available without expiration remainder expire 2037 state net operating loss carryforwards expire varying amounts 2037 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated • capital loss carryforwards 208 million 107 million federal state respectively federal capital loss carryforwards 62 million expires 2019 11 million expires 2021 135 million expires 2022 state capital loss carryforwards 39 million expires 2019 05 million expires 2021 63 million expires 2022 • various credit carryforwards 323 million 470 million foreign state respectively foreign credit carryforward expires 2026 state credit carryforwards include 319 million available without expiration remainder expire 2032 december 31 2017 company recorded valuation allowance 1269 million consolidated balance sheet primarily related taxaffected amounts carryforwards valuation allowance includes 44 million 645 million 580 million federal foreign state deferred tax assets respectively expected realized uncertain tax positions following table summarizes activity companys liability unrecognized tax benefits december 31 2017 2016 2015 december 31 2017 216 million unrecognized tax benefits would impact companys effective tax rate recognized amount reasonably possible 75 million total amount unrecognized tax benefits decrease within next twelve months due resolution income tax audits statute expirations company classified interest income expense related penalties related income tax uncertainties component income tax benefit expense following table summarizes companys interest income expense related tax uncertainties penalties recognized years ended december 31 2017 2016 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated accrued interest penalties related income tax uncertainties reported components current liabilities longterm liabilities consolidated balance sheets following table summarizes companys liabilities accrued interest penalties related income tax uncertainties december 31 2017 2016 company tax years 2014 2017 remain open subject examination internal revenue service tax years 2012 2017 remain open subject examination companys various major state jurisdictions within united states december 22 2017 us government enacted comprehensive tax legislation commonly referred tax cuts jobs act tax act tax act makes broad complex changes us tax code including limited following 1 reducing us federal corporate tax rate 35 percent 21 percent 2 requiring companies pay onetime transition tax certain unrepatriated earnings foreign subsidiaries 3 generally eliminating us federal income taxes dividends foreign subsidiaries 4 requiring current inclusion us federal taxable income certain earnings controlled foreign corporations also referred global intangible low taxed income gilti 5 creating new limitation deductible interest expense 6 creating base erosion antiabuse tax beat new minimum tax 7 repealing domestic production activity deduction 8 establishing bonus depreciation allow full expensing qualified property sec staff issued staff accounting bulletin 118 sab 118 provides guidance accounting tax effects tax act sab 118 provides measurement period extend beyond one year tax act enactment date companies complete accounting standards codification 740 asc 740 accordance sab 118 period tax act enacted company must reflect income tax effects aspects tax act accounting asc 740 complete extent companys accounting certain income tax effects tax act incomplete able determine reasonable estimate must record provisional estimate financial statements company cannot determine provisional estimate included financial statements continue apply asc 740 basis provisions tax laws effect immediately enactment tax act connection initial analysis impact tax act company recorded discrete net tax benefit 288 million corporate rate reduction december 31 2017 assessment income tax effects tax act ongoing company recorded provisional adjustment certain elements tax act reasonable estimates tax effects determinable adjustments recorded elements company unable reasonably estimate impact company continued accounting items accordance asc 740 basis tax laws effect tax act quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company able reasonably estimate certain effects tax act recorded provisional adjustments follows • reduction us federal corporate rate tax act reduces corporate tax rate 21 percent effective january 1 2018 company recorded provisional decrease 237 million deferred income taxes corresponding net adjustment deferred income tax expense 51 million decrease uncertain tax positions corresponding net adjustment current income tax expense year ended december 31 2017 company able make reasonable estimate impact reduction corporate rate may affected analyses related tax act yet able completed indicated • deemed repatriation transition tax deemed repatriation transition tax transition tax previously untaxed accumulated current earnings profits ep certain foreign subsidiaries determine amount transition tax company must determine addition factors amount post1986 ep relevant subsidiaries well amount nonus income taxes paid earnings company able make reasonable estimate transition tax zero based estimated aggregate post1986 foreign earnings profits deficit relevant subsidiaries company able make reasonable estimate transition tax company continuing gather additional information precisely compute amount aggregate foreign earnings profits related amount transition tax • cost recovery company yet completed computations necessary completed inventory 2017 expenditures qualify immediate expensing company recorded provisional benefit temporary difference based current intent fully expense qualifying expenditures company unable reasonably estimate certain effects tax act recorded provisional adjustments following elements tax act • global intangible low taxed income tax act creates new requirement certain income ie gilti earned controlled foreign corporations cfcs must included currently gross income cfcs us shareholder gilti excess shareholders net cfc tested income net deemed tangible income return complexity new gilti tax rules company continuing evaluate provision tax act application asc 740 gaap company allowed make accounting policy choice either 1 treating taxes due future us inclusions beginning january 1 2018 taxable income related gilti currentperiod expense incurred period cost method 2 factoring amounts companys measurement deferred taxes deferred method december 31 2017 companys election accounting policy respect new gilti tax rules depend part analyzing global income determine whether future us inclusions taxable income related gilti expected impact expected whether company expects future us inclusions taxable income related gilti depends companys current structure estimated future results global operations also intent ability modify structure andor business company yet able reasonably estimate effect provision tax act therefore company made adjustments related potential gilti tax financial statements made policy decision regarding whether record deferred taxes gilti quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated • valuation allowances company must assess whether valuation allowances assessments affected various aspects tax act eg gilti inclusions since discussed herein company recorded amounts related certain portions tax act corresponding determination need change valuation allowance completed changes valuation allowances result tax act recorded result tax act historical earnings certain foreign subsidiaries became subject us transition tax described however actual repatriation subsidiaries could subject additional foreign us state income taxes company considers foreign earnings indefinitely invested accordingly company provide expect incur significant additional taxes could become payable upon repatriation amounts note 15 financial instruments fair value measurements certain assets liabilities required recorded fair value recurring basis assets liabilities recorded fair value nonrecurring basis generally result acquisitions impairment charges fair value determined based exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants gaap also classifies inputs used measure fair value following hierarchy level 1 quoted prices active markets identical assets liabilities level 2 quoted prices active markets similar assets liabilities quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability level 3 unobservable inputs asset liability level 3 recurring measurements assets liabilities december 31 2017 interest rate swap company entered 2500 million interest rate swap february 7 2017 swap designated cash flow hedge purpose reduce variability cash flows interest payments related portion quadgraphics variablerate debt swap effectively converts 2500 million companys variablerate debt based onemonth libor fixed rate 364 including 175 spread underlying debt december 31 2017 variable interest rate resets monthly swap five year arrangement maturing february 28 2022 company classifies interest rate swap level 2 inputs valuation model observable derived corroborated utilizing observable market data commonly quoted intervals interest rate swap highly effective december 31 2017 therefore increase fair value 21 million 2017 included accumulated comprehensive loss consolidated balance sheets shown change comprehensive income consolidated statements comprehensive income loss amount ineffectiveness recorded earnings related cash flow hedge fair value interest rate swap december 31 2017 asset 21 million recorded prepaid expenses current assets consolidated balance sheets net payment interest terms interest rate swap totaled expense 16 million 2017 recognized adjustment interest expense consolidated statements operations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated foreign exchange contracts company operations countries transactions outside functional currencies periodically enters foreign exchange contracts used hedge net exposures changes foreign currency exchange rates designated either cash flow hedges fair value hedges gains losses net foreign currency hedges intended offset losses gains underlying net exposures effort reduce earnings volatility resulting fluctuating foreign currency exchange rates open foreign currency exchange contracts december 31 2017 natural gas forward contracts company periodically enters natural gas forward purchase contracts hedge increases commodity costs companys commodity contracts qualified exception related normal purchases sales years ended december 31 2017 2016 company takes delivery normal course business debt company measures fair value debt instruments using interest rates available company borrowings similar terms maturities categorized level 2 see note 12 debt fair value companys debt december 31 2017 nonrecurring fair value measurements addition assets liabilities recorded fair value recurring basis company required record certain assets liabilities fair value nonrecurring basis generally result acquisitions remeasurement assets resulting impairment charges see note 2 acquisitions strategic investments discussion acquisitions see note 3 restructuring impairment transactionrelated charges note 4 goodwill intangible assets note 7 property plant equipment note 8 equity method investments unconsolidated entities discussion impairment charges recorded result remeasurement certain longlived assets estimated fair value measurements company records fair value forward contracts pension plan assets recurring basis fair value cash equivalents receivables inventories restricted cash accounts payable accrued liabilities approximate carrying values december 31 2017 2016 see note 16 employee retirement plans details level 1 level 2 inputs related employee retirement plans note 16 employee retirement plans defined contribution plans quadgraphics diversified plan comprised participantdirected 401k contributions company match profit sharing contributions total participant assets 21 billion december 31 2017 company 401k matching contributions 72 million 133 million 166 million years ended december 31 2017 2016 2015 respectively quadgraphics employee stock ownership plan holds profit sharing contributions company stock made discretion companys board directors profit sharing contributions years ended december 31 2017 2016 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated defined benefit plans company assumed various funded unfunded frozen pension plans portion fulltime employees united states part acquisition world color press 2010 benefits generally based upon years service compensation plans funded conformity applicable government regulations company funds least minimum amount required qualified plans using actuarial cost methods assumptions acceptable government regulations components net pension income years ended december 31 2017 2016 2015 follows underfunded pension obligations calculated using generally accepted actuarial methods measured annually december 31 following table provides reconciliation projected benefit obligation fair value plan assets funded status pension plans december 31 2017 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated amounts recognized consolidated balance sheets december 31 2017 2016 follows following table provides reconciliation companys accumulated comprehensive loss prior deferred tax effects december 31 2017 2016 july 1 2017 company provided option receive lumpsum pension payment select group terminated vested participants total lump sum payments 214 million paid 2017 84 million paid october 2017 lumpsum program 2017 company settled 233 million pension liabilities 214 million pension payments april 1 2016 company provided option receive lumpsum pension payment select group terminated vested participants total lumpsum payments 748 million paid 2016 564 million paid july 2016 lumpsum program 2016 company settled 926 million pension liabilities 748 million pension payouts payments eligible participants elected receive lumpsum pension payment funded existing pension plan assets constituted settlement companys pension liabilities respect participants result lumpsums paid participants noncash settlement charges 08 million 70 million recognized years ended december 31 2017 2016 respectively settlement charges classified restructuring impairment transactionrelated charges consolidated statement operations charges resulted recognition earnings portion actuarial losses recorded accumulated comprehensive loss based proportion obligation settled actuarial gains losses excess 10 greater projected benefit obligation marketrelated value plan assets recognized component net periodic benefit costs average remaining service period plans active employees unrecognized prior service costs credits also recognized component net periodic benefit cost average remaining service period plans active employees amortization amounts accumulated comprehensive loss expected recognized component net periodic pension income 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated weighted average assumptions used determine net periodic benefit costs years ended december 31 2017 2016 2015 follows weighted average assumptions used determine pension benefit obligations december 31 2017 2016 follows company determines assumed discount rate based index highquality corporate bond yields matchedfunding yield curve analysis measurement date 2015 company measured interest costs utilizing single weighted average discount rate derived yield curve used measure plan obligations beginning 2016 company changed approach used measure interest costs pension benefits elected measure interest costs applying specific spot rates along yield curve plans liability cash flows new method would also impact calculation service costs applicable companys pension plans due frozen status company made change provide precise measurement interest costs aligning timing plans liability cash flows corresponding spot rates yield curve change affect measurement plan obligations company reflected change accounting estimate accordingly accounted prospective basis estimated company contributions benefit payments 2018 company expects make cash contributions 67 million qualified benefit pension plans expects make estimated benefit payments 17 million nonqualified defined benefit pension plans actual pension contributions may differ based funding calculations company may choose make additional discretionary contributions estimated benefit payments may differ based actual experience quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated estimated future benefit payments plans behalf plan participants estimate plans future benefit payments made funded qualified plans unfunded nonqualified plans plan participants december 31 2017 follows plan assets investment strategy company follows disciplined investment strategy provides diversification investments asset class foreign currency sector company pension committee approved investment policy pension plan establishes longterm asset mix targets based several factors including following funded status historical returns achieved worldwide investment markets time horizon pension plans obligations investment risk allocation range asset class developed whereby mix equity securities debt securities used provide appropriate riskadjusted longterm return plan assets thirdparty investment managers employed invest assets passivelyindexed activelymanaged strategies investment returns risks monitored ongoing basis derivatives used certain times hedge foreign currency exposure gains losses derivatives offset corresponding change value hedged assets derivatives strictly used hedging purposes speculative purposes current target allocations plan assets weighted average basis 42 equity securities 58 debt securities including cash equivalents actual asset allocation december 31 2017 approximately 41 equity securities 59 debt securities actual asset allocation december 31 2016 approximately 56 equity securities 44 debt securities equity investments diversified country issuer industry sector debt securities primarily consist government bonds corporate bonds diversified industries expected longterm rate return assets assumption selected first identifying expected range longterm rates return major asset class expected longterm rates return developed based longterm historical averages current expectations future returns anticipated inflation rates expected longterm rate return plan assets calculated weighting asset class quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair values companys pension plan assets december 31 2017 2016 asset category follows 1 investments consist privately placed funds valued based nav funds based fair value funds underlying investments accordance asc subtopic 82010 certain investments measured fair value using nav per share equivalent practical expedient classified fair value hierarchy level 3 assets december 31 2017 2016 see note 15 financial instruments fair value measurements definitions fair value levels company segregated plan assets following major categories levels determining fair value december 31 2017 cash equivalents carrying value approximates fair value assets classified level 1 debt securities category consists bonds shortterm fixed income securities fixed income pooled funds fair valued based compilation primarily observable market information broker quotes overthecounter markets classified level 2 equity securities category consists equity pooled funds classified level 2 fair value hierarchy level 2 assets valued using quoted prices markets active broker dealer quotations methods significant input observable measurement date valuation methodologies described may generate fair value calculation may indicative net realizable value future fair values company believes valuation methodologies used appropriate use different methodologies assumptions calculating fair value could result different amounts company invests various assets valuation determined nav company believes nav representative fair value reporting date significant restrictions redemption investments reasons indicate investment would redeemed amount different nav quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair value measurements commoncollective trusts calculated using nav redemption restrictions years ended december 31 2017 2016 follows risk management directly invested funds concentration risk monitored specific guidelines investment manager mandates investment manager mandates developed companys external investment advisor specify diversification standards maximum exposure per issuer concentration limits per type security industry country applicable investments made pooled funds investment mandates funds reviewed companys external investment advisor determine investment objectives guidelines consistent companys overall pension plan risk management objectives managing plan assets management reviews manages risk associated funded status risk interest rate risk market risk counterparty risk liquidity risk operational risk liability management asset class diversification central companys risk management approach integral overall investment strategy given process place ensure proper diversification portfolio management believes company pension plan assets exposed significant concentration risk multiemployer pension plans company previously participated number mepps terms collective bargaining agreements cover number employees risks participating mepps different single employer plans following aspects • assets contributed mepps one company may used provide benefits employees participating companies • participating company stops contributing plan unfunded obligations plan may borne remaining participating companies • company stops participating mepps continues business company would required pay amount referred withdrawal liability based unfunded status plan quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company withdrawn significant mepps replaced union sponsored promise pay future defined benefit plans company sponsored pay go defined contribution plan two mepps gciu gcc significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued estimated withdrawal liability based information provided plans trustee part purchase price allocation world color press gciu plan defined benefit plan provides retirement benefits total permanent disability benefits preretirement death benefits participating union employees company funded status gciu plan classified critical declining based gciu plans 2017 certification united states department labor funded percentage plan less 65 plan projected become insolvent 2028 result gciu plan implemented rehabilitation plan improve plans funded status company received notice withdrawal demand payment letter gciu excess reserve established company gciu withdrawal company currently litigation gciu trustees determine amount duration withdrawal payments gciu arbitration proceedings gciu completed sides appealed arbitrators ruling litigation federal court commenced april 2017 federal district court overturned arbitration decision one pending disputes matter company appealed district courts ruling ninth circuit gcc plan defined benefit plan provides retirement benefits disability benefits early retirement benefits participating union employees company funded status gcc plan classified critical declining based gcc plans 2017 certification united states department labor funded percentage plan less 65 plan projected become insolvent 2023 result gcc plan implemented rehabilitation plan improve plans funded status fourth quarter 2016 company gcc reached settlement agreement claims scheduled payments february 2024 company made payments totaling 240 million 118 million 114 million years ended december 31 2017 2016 2015 respectively company reserved 282 million estimate total mepps withdrawal liability december 31 2017 194 million recorded longterm liabilities 88 million recorded accrued liabilities consolidated balance sheets withdrawal liability reserved company within range companys estimated potential outcomes estimate may increase decrease depending final conclusion litigation gciu trustees note 17 earnings loss per share basic earnings loss per share computed net earnings loss divided basic weighted average common shares outstanding calculation diluted earnings per share includes effect dilutive equity incentive instruments company uses treasury stock method calculate effect outstanding dilutive equity incentive instruments requires company compute total proceeds sum amount employee must pay upon exercise award amount unearned stockbased compensation costs attributed future services quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated equity incentive instruments total employee proceeds exercise exceed average fair value equity incentive instrument period antidilutive effect earnings per share periods net earnings accordingly company excludes calculation antidilutive equity incentive instruments 07 million 19 million class common shares excluded computations diluted net earnings per share years ended december 31 2017 2016 respectively due net loss incurred year ended december 31 2015 assumed exercise equity incentive instruments antidilutive therefore included diluted loss per share calculation period reconciliations numerator denominator basic diluted per share computations companys common stock years ended december 31 2017 2016 2015 summarized follows note 18 equity incentive programs shareholders company approved omnibus plan two complementary purposes 1 attract retain outstanding individuals serve directors officers employees 2 increase shareholder value may 2016 additional 3000000 shares approved issuance providing aggregate 10871652 shares class common stock reserved issuance omnibus plan awards omnibus plan may consist incentive awards stock options stock appreciation rights performance shares ps performance share units psu shares class stock restricted stock rs restricted stock units rsu deferred stock units dsu stockbased awards determined companys board directors stock option granted exercise price less 100 fair market value class common stock date grant december 31 2017 2139257 shares available issuance omnibus plan authorized unissued shares treasury shares may used issuance companys equity incentive programs company intends use treasury shares class common stock meet stock requirements awards future quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company recognizes compensation expense based estimated grant date fair values sharebased awards issued employees nonemployee directors including stock options performance shares performance share units restricted stock restricted stock units deferred stock units company recognizes compensation costs awards expected vest straightline basis requisite three four year service period awards except dsu awards fully vested expensed grant date company estimated number awards expected vest based part historical forfeiture rates also based managements expectations employee turnover within specific employee groups receiving type award forfeitures estimated time grant revised necessary subsequent periods actual forfeitures differ estimates equity incentive compensation expense total compensation expense recognized related equity incentive programs 164 million 152 million 72 million years ended december 31 2017 2016 2015 respectively recorded selling general administrative expenses consolidated statements operations total future compensation expense related equity incentive programs granted december 31 2017 estimated 171 million consists entirely expense rs rsu awards estimated future compensation expense 101 million 2018 61 million 2019 09 million 2020 stock options vest four years vesting first year onethird vesting upon second third fourth anniversary dates defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee options expire later tenth anniversary grant date 24 months termination death 36 months termination normal retirement disability 90 days termination employment reason options credited dividend declarations except november 18 2011 grants stock options granted employees stock options granted years ended december 31 2017 2016 2015 compensation expense recognized related stock options years ended december 31 2017 2016 compensation expense recognized related stock options 02 million year ended december 31 2015 future compensation expense stock options granted december 31 2017 following table summary stock option activity year ended december 31 2017 intrinsic value options outstanding exercisable december 31 2017 2016 based fair value stock price outstanding options vested december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summary stock option exercises vesting activity years ended december 31 2017 2016 2015 performance share performance share units performance share performance share unit awards consist shares rights shares companys class common stock awarded employees company ps psu awards granted years ended december 31 2017 2016 2015 shares awarded 2013 performance period three years ended december 31 2015 company achieve established performance targets performance period ended december 31 2015 therefore ps psu awards canceled compensation expense awards granted recognized based best estimate anticipated payout net estimated forfeitures compensation expense recognized related ps psus years ended december 31 2017 2016 compensation income recognized related ps psus 45 million year ended december 31 2015 restricted stock restricted stock units restricted stock restricted stock unit awards consist shares rights shares companys class common stock awarded employees company awards restricted subject substantial risk forfeiture restrictions sale transfer employee rsu awards typically granted eligible employees outside united states defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving rs grants able exercise full voting rights receive full credit dividends vesting period dividends paid rs grantee within 45 days full vesting grantees receiving rsus entitled vote earn dividends upon vesting rsus settled either cash payment equal fair market value rsus vesting date issuance company class common stock following table summary rs rsu award activity year ended december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated general rs rsu awards vest third anniversary grant date provided holder share continuously employed company vesting date compensation expense recognized rs rsus 155 million 144 million 107 million years ended december 31 2017 2016 2015 respectively deferred stock units deferred stock units awards rights shares companys class common stock awarded nonemployee directors company following table summary dsu award activity year ended december 31 2017 dsu award entitles grantee receive one share class common stock upon earlier separation date grantee second anniversary grant date could subject acceleration change control death disability defined individual dsu grant agreement grantees dsu awards may exercise voting rights credited dividend equivalents dividend equivalents converted additional dsu awards based closing price class common stock compensation expense recognized dsus 09 million 08 million 08 million years ended december 31 2017 2016 2015 respectively dsu awards fully vested grant date compensation expense recognized date grant quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 19 shareholders equity company three classes common stock follows share data millions accordance articles incorporation class common share one vote per share class b class c common share ten votes per share matters voted upon companys shareholders liquidation rights three classes stock company also 05 million shares 001 par value preferred stock authorized none issued december 31 2017 2016 2015 company present plans issue preferred stock september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock year ended december 31 2017 company repurchased 200605 shares class common stock weighted average price 1889 per share total purchase price 38 million year ended december 31 2016 company repurchased 984190 shares class common stock weighted average price 896 per share total purchase price 88 million share repurchases year ended december 31 2015 december 31 2017 792 million authorized repurchases remaining program october 13 2017 companys board directors authorized cancellation 1027907 shares companys class b common stock held companys treasury returned shares status authorized unissued shares addition future acquired shares companys class b common stock immediately canceled returned status authorized unissued shares november 2017 136654 shares class b common stock converted class common stock class b common shares canceled returned status authorized unissued shares quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated accordance articles incorporation dividends paid equally three classes common shares following table details dividend activity related outstanding shares common stock years ended december 31 2017 2016 2015 note 20 accumulated comprehensive loss changes accumulated comprehensive loss component net tax years ended december 31 2017 2016 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated details reclassifications accumulated comprehensive loss net earnings loss years ended december 31 2017 2016 2015 follows note 21 segment information company leading marketing solutions provider company leverages strong print foundation part much larger robust integrated marketing platform helps marketers content creators improve efficiency effectiveness marketing spend across offline online media channels companys operating reportable segments aligned chief operating decision maker company currently manages business companys operating reportable segments including product service offerings corporate category follows •united states print related services •international •corporate united states print related services united states print related services segment predominantly comprised companys united states printing operations managed one integrated platform includes retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement together marketing complementary services including consumer insights audience targeting personalization media planning placement process optimization campaign planning creation premedia production videography photography digital execution print execution logistics segment also includes manufacture ink quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated international segment consists companys printing operations europe latin america including operations england france germany poland argentina colombia mexico peru well investments printing operations brazil india segment provides printed products marketing complementary services consistent united states print related services segment unrestricted subsidiaries defined senior unsecured notes indenture represent less 20 total consolidated assets december 31 2017 less 20 total consolidated net sales year ended december 31 2017 corporate consists unallocated general administrative activities associated expenses including part executive legal finance well certain expenses income frozen employee retirement plans pension benefit plans following summary segment information years ended december 31 2017 2016 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated restructuring impairment transactionrelated charges years ended december 31 2017 2016 2015 described note 3 restructuring impairment transactionrelated charges included operating income loss results segment goodwill impairment year ended december 31 2015 described note 4 goodwill intangible assets included operating income loss results segment reconciliation operating income loss earnings loss income taxes equity loss unconsolidated entities reported consolidated statements operations years ended december 31 2017 2016 2015 follows total assets segment december 31 2017 2016 2015 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 22 geographic area product information table presents companys net sales longlived assets years ended december 31 2017 2016 2015 geographic region amounts table differ segment data presented note 21 segment information operating segment includes operations multiple geographic regions based companys management reporting structure quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated table presents companys consolidated net sales products services years ended december 31 2017 2016 2015 note 23 separate financial information subsidiary guarantors indebtedness april 28 2014 quadgraphics completed offering senior unsecured notes see note 12 debt details senior unsecured notes companys guarantor subsidiaries fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including following • designation guarantor subsidiaries unrestricted subsidiary • release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries • sale disposition including sale substantially assets guarantor subsidiaries following condensed consolidating financial information reflects summarized financial information quadgraphics companys guarantor subsidiaries combined basis companys nonguarantor subsidiaries combined basis year ended december 31 2017 nonguarantor subsidiary company became guarantor subsidiary accordingly material supplemental financial information periods presented recast reflect subsidiaries per senior unsecured notes agreement guarantor subsidiaries december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2017 condensed consolidating statement comprehensive income loss year ended december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2016 condensed consolidating statement comprehensive income loss year ended december 31 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2015 condensed consolidating statement comprehensive income loss year ended december 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating balance sheet december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating balance sheet december 31 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 24 new accounting pronouncements february 2018 financial accounting standards board fasb issued accounting standards update 201802 income statementreporting comprehensive income topic 220 reclassification certain tax effects accumulated comprehensive income asu 201802 give entities option reclassify tax effects stranded accumulated comprehensive income loss result tax reform retained earnings accumulated deficit guidance requires entity disclose whether elected reclassify tax effects related tax act well entitys policy releasing income tax effects accumulated comprehensive income loss guidance effective interim annual periods beginning december 15 2018 early adoption permitted periods financial statements yet issued made available issuance including period tax act enacted entities choose adopt asu 201802 annual interim period enactment able choose whether apply amendments retrospectively period effect tax act recognized apply amendments period adoption company evaluating impact adoption asu 201802 consolidated financial statements august 2017 fasb issued accounting standards update 201712 derivatives hedging topic 815 targeted improvements accounting hedging activities asu 201712 simplifies reduces complexity hedge accounting requirements better aligns entitys financial reporting hedging relationships risk management activities guidance effective interim annual periods beginning december 15 2018 early adoption permitted new guidance require modified retrospective adoption approach existing hedging relationships adoption date company evaluating impact adoption asu 201712 consolidated financial statements may 2017 fasb issued accounting standards update 201709 compensationstock compensation topic 718 scope modification accounting asu 201709 clarifies types changes terms conditions share based payment awards would require entity apply modification accounting guidance effective interim annual periods beginning december 15 2017 early adoption permitted new guidance require prospective adoption approach company adopted standard october 1 2017 adoption asu 201709 material impact consolidated financial statements march 2017 fasb issued accounting standards update 201707 compensationretirement benefits topic 715 improving presentation net periodic pension cost net periodic postretirement benefit cost asu 201707 requires employer disaggregate service cost component net benefit cost provides guidance present service costs components net benefit costs statement operations new standard entity must report service cost component line item compensation costs components net benefit cost required presented statement operations separately service cost component outside subtotal operating income guidance effective interim annual periods beginning december 15 2017 early adoption permitted beginning annual period financial statements issued made available issuance new guidance require retrospective adoption approach classification components net periodic benefit income expense statement operations result adoption asu 201707 company expects reclassify pension income approximately 96 million 51 million years ended december 31 2017 2016 respectively line outside subtotal operating income resulting reduction operating income loss impact net earnings see note 16 employee retirement plans components net pension income expense company plans adopt standard first quarter 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated november 2016 fasb issued accounting standards update 201618 statement cash flows topic 320 restricted cash asu 201618 clarifies guidance classification presentation restricted cash statement cash flows guidance effective interim annual periods beginning december 15 2017 early adoption permitted new guidance require retrospective adoption approach company believes adoption asu 201618 material impact consolidated financial statements company plans adopt standard first quarter 2018 october 2016 fasb issued accounting standards update 201616 income taxes topic 740 intraentity transfer assets inventory asu 201616 requires recognition income tax consequences intraentity transfer asset inventory transfer occurs rather waiting asset sold outside party assets covered scope asu 201616 include intellectual property plant equipment guidance effective interim annual periods beginning december 15 2017 early adoption permitted beginning annual reporting period new guidance require modified retrospective transition approach entity need apply cumulativeeffect adjustment retained earnings accumulated deficit beginning first reporting period guidance adopted company adopted standard january 1 2017 adoption asu 201616 material impact consolidated financial statements august 2016 fasb issued accounting standards update 201615 statement cash flows topic 230 classification certain cash receipts cash payments asu 201615 intended reduce diversity practice providing guidance eight specific cash flow classification issues regards cash receipts cash payments presented within statements cash flows addition guidance provides entities alternative consider regarding nature source distributions investor received equity method investment classifying distributions received cash flow statements nature distribution approach cumulative earnings approach allows entity choose either one accounting policy election guidance effective interim annual periods beginning december 15 2017 early adoption permitted new guidance require retrospective adoption approach unless impracticable apply case guidance applied prospectively earliest date practicable company adopted standard october 1 2017 elected use nature distribution approach classifying distributions received equity method investments adoption asu 201615 material impact consolidated financial statements june 2016 fasb issued accounting standards update 201613 financial instrumentscredit losses topic 326 measurement credit losses financial instruments asu 201613 changes impairment model financial assets certain instruments new guidance entities required measure expected credit losses financial instruments including trade receivables based historical experience current conditions reasonable forecasts guidance effective interim annual periods beginning december 15 2019 early adoption permitted interim annual periods beginning december 15 2018 new guidance require modified retrospective transition approach entity need apply cumulativeeffect adjustment retained earnings accumulated deficit beginning first reporting period guidance adopted company evaluating impact adoption asu 201613 consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated march 2016 fasb issued accounting standards update 201607 investmentsequity method joint ventures topic 323 simplifying transition equity method accounting asu 201607 simplifies equity method accounting eliminating requirement retrospectively apply equity method accounting investment subsequently qualifies accounting result increase level ownership interest degree influence instead equity method accounting applied prospectively increase level ownership interest degree influence occurs guidance effective interim annual periods beginning december 15 2016 early adoption permitted company adopted standard january 1 2017 adoption asu 201607 material impact consolidated financial statements february 2016 fasb issued accounting standards update 201602 leases topic 842 asu 201602 establishes rightofuse model requiring lessee record rightofuse asset lease liability balance sheet leases terms longer twelve months leases classified either finance operating classification affecting pattern expense recognition guidance also requires additional disclosures enable users financial statements understand amount timing uncertainty cash flows arising leases guidance effective interim annual periods beginning december 15 2018 early adoption permitted new guidance require modified retrospective transition approach leases existing entered date initial application option elect use certain transition relief modified retrospective transition approach would require application new accounting model earliest year presented financial statements company evaluating impact adoption asu 201602 consolidated financial statements may 2014 fasb issued accounting standards update 201409 revenue contracts customers topic 606 asu 201409 provides revised guidance recognizing revenue contracts customers guidance entity recognize revenue transfers promised goods services customer amount reflects expects exchange goods services guidance also requires detailed disclosures enable users financial statements understand nature amount timing uncertainty revenue cash flow arising contracts customers guidance allows option either full retrospective adoption meaning guidance applied periods presented modified retrospective adoption meaning guidance applied current period amended asu 201409 effective interim annual periods beginning december 15 2017 company established crossfunctional implementation team evaluate impact asu 201409 consolidated financial statements company completed analysis implemented certain changes systems processes internal controls meet standards reporting disclosure requirements previously reported company determined revenue contracts customers recognized pointintime asu 201409 companys current accounting policy company adopted standard january 1 2018 applying modified retrospective approach recognizing cumulative effect initial application decrease opening balance accumulated deficit part adopting standard company changed timing recognizes certain variable considerations paid customers costs obtain contracts customers cumulative impact adopting standard january 1 2018 32 million decrease accumulated deficit december 31 2017 1629 million 23 million increase prepaid expenses current assets 20 million increase longterm assets 11 million increase liability deferred income taxes consolidated balance sheet quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 25 subsequent events acquisition ivie associates february 21 2018 company completed acquisition ivie associates ivie associates provide full array marketing services including creative production services studio services sourcing procurement staff enhancement media services public relations digital technology solutions project management many leading brands throughout world purchase price 925 million cash paid february 21 2018 potential earnout additional 16 million certain financial metrics achieved post integration declaration quarterly dividend february 21 2018 company declared quarterly dividend 030 per share paid march 30 2018 shareholders record march 19 2018 item 9item 8 financial statements supplementary data quarterly financial data unaudited following table sets forth selected financial information eight quarters twoyear period ended december 31 2018 unaudited information prepared company basis consolidated financial statements includes normal recurring adjustments necessary present information fairly read conjunction company’s audited consolidated financial statements notes thereto 1 operating income decreased 439 million three months ended march 31 2018 compared three months ended march 31 2017 primarily due following 1 157 million increased restructuring impairment transaction related charges 2 lower print volume pricing due ongoing industry pressures 3 223 million noncash expense related special employee retirement contribution 2018 resulting benefit tax reform 4 104 million net benefit 2017 changes employee vacation policies impacts partially offset 172 million gain property insurance claim 2018 savings cost reduction initiatives including employeerelated costs operating income decreased 92 million three months ended june 30 2018 compared three months ended june 30 2017 primarily due following 1 51 million increased restructuring impairment transactionrelated charges 2 lower print volume pricing due ongoing industry pressures 3 39 million net benefit 2017 gain insurance claims impacts partially offset savings cost reduction initiatives earnings ivie acquisition investment rise 02 million decrease depreciation amortization expense operating income decreased 62 million three months ended september 30 2018 compared three months ended september 30 2017 primarily due lower print volume pricing due ongoing industry pressures 08 million increase depreciation amortization expense partially offset 27 million decreased restructuring impairment transactionrelated charges savings cost reduction initiatives earnings ivie acquisition investment rise operating income decreased 380 million three months ended december 31 2018 compared three months ended december 31 2017 primarily due 251 million increased restructuring impairment transactionrelated charges lower print volume pricing due ongoing industry pressures partially offset savings cost reduction initiatives earnings ivie acquisition investment rise report independent registered public accounting firm shareholders board directors quadgraphics inc opinion financial statements audited accompanying consolidated balance sheets quadgraphics inc subsidiaries “company” december 31 2018 2017 related consolidated statements operations comprehensive income loss shareholders’ equity cash flows three years period ended december 31 2018 related notes collectively referred “financial statements” opinion financial statements present fairly material respects financial position company december 31 2018 2017 results operations cash flows three years period ended december 31 2018 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states pcaob company’s internal control financial reporting december 31 2018 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission report dated february 20 2019 expressed unqualified opinion company’s internal control financial reporting basis opinion financial statements responsibility company’s management responsibility express opinion company’s financial statements based audits public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement whether due error fraud audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation financial statements believe audits provide reasonable basis opinion deloitte touche llp milwaukee wisconsin february 20 2019 served company’s auditor since 2002 report independent registered public accounting firm shareholders board directors quadgraphics inc opinion internal control financial reporting audited internal control financial reporting quadgraphics inc subsidiaries “company” december 31 2018 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion company maintained material respects effective internal control financial reporting december 31 2018 based criteria established internal control integrated framework 2013 issued coso also audited accordance standards public company accounting oversight board united states pcaob consolidated financial statements year ended december 31 2018 company report dated february 20 2019 expressed unqualified opinion financial statements described management’s report internal control financial reporting management excluded assessment internal control financial reporting ivie associates llc “ivie” acquired february 21 2018 rise interactive analytics llc “rise” company acquired controlling financial interest march 14 2018 financial statements ivie rise collectively constitute approximately 5 consolidated total current assets approximately 4 consolidated net sales approximately 4 consolidated cost sales year ended december 31 2018 accordingly audit include internal control financial reporting ivie rise basis opinion company’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting responsibility express opinion company’s internal control financial reporting based audit public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audit accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate deloitte touche llp milwaukee wisconsin february 20 2019 quadgraphics inc consolidated statements operations millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements comprehensive income loss millions see accompanying notes consolidated financial statements quadgraphics inc consolidated balance sheets millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements cash flows millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements shareholders’ equity millions see accompanying notes consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies nature operationsas worldwide marketing solutions partner dedicated creating better way quad uses datadriven integrated marketing platform help clients reduce complexity increase efficiency enhance marketing spend effectiveness quad provides clients unmatched scale client onsite services expanded subject expertise marketing strategy creative solutions media solutions marketing management services clientcentric approach drives expanded offering combined leadingedge technology singlesource simplicity company believes resources knowledge help wide variety clients multiple vertical industries including retail publishing healthcare company operates primarily commercial print portion printing industry printer retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement company’s products services variety industries sold primarily throughout north america south america europe addition company strategically sources packaging product manufacturing multiple end markets central america asia principles consolidation basis presentationthe accompanying consolidated financial statements include accounts company whollyowned majorityowned controlled subsidiaries prepared accordance gaap results operations accounts businesses acquired included consolidated financial statements dates acquisition see note 3 “acquisitions strategic investments” investments entities company ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting investments entities company exert significant influence control ownership interest less 20 accounted using cost method accounting intercompany transactions balances eliminated consolidation foreign operationsassets liabilities denominated foreign currencies translated united states dollars exchange rate existing respective balance sheet dates income expense items translated average rates respective periods translation adjustments resulting fluctuations exchange rates recorded separate component accumulated comprehensive income loss consolidated statements shareholders’ equity transaction gains losses recorded selling general administrative expenses consolidated statements operations foreign exchange transactions resulted losses 16 million year ended december 31 2018 gains 15 million year ended december 31 2017 losses 60 million year ended december 31 2016 company 49 interest plural commercial printer based são paulo brazil december 31 2018 company accounts entity using equity method accounting company’s equity earnings loss plural’s operations recorded equity earnings loss unconsolidated entity company’s consolidated statements operations included within international segment distributions received equity method investees follow nature distribution approach distribution evaluated basis source payment classified either operating cash inflows investing cash inflows company reviews equity method investment regularly indicators temporary impairment quad significant unconsolidated entities december 31 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated use estimatesthe preparation consolidated financial statements requires use management’s estimates assumptions affect reported assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenue expenses reporting periods actual results could differ estimates used accounting items matters including limited allowances doubtful accounts inventory obsolescence asset valuations useful lives pension postretirement benefits selfinsurance reserves stockbased compensation taxes restructuring provisions contingencies revenue recognitionthe company recognizes products services revenue based transfer control passes customer service completed accepted customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related company’s imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer revenues related company’s logistics operations includes delivery printed material recognized upon completion services certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily company’s logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many company’s operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis january 1 2018 company adopted accounting standards update 201409 “revenue contracts customers” “topic 606” provides revised guidance recognizing revenue contracts customers company adopted topic 606 using modified retrospective approach applied guidance contracts completed january 1 2018 means topic 606 applied 2018 financial statements disclosures going forward prior period financial statements disclosures reflect revenue recognition standard topic 605 revenue contracts customers see note 2 “revenue recognition” additional accounting policy transition disclosures byproduct recoveriesthe company presents byproduct recoveries reduction cost salesproducts consolidated statements operations classification byproduct recoveries reduction cost sales aligns proceeds byproduct recoveries corresponding manufacturing costs financial instrumentsthe company uses derivative financial instruments purpose hedging interest rate commodity foreign exchange exposures exist part ongoing business operations including interest rate swap agreements natural gas forward purchase contracts foreign exchange contracts policy company engage speculative leveraged transactions company hold issue financial instruments trading purposes quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated derivative instruments recorded consolidated balance sheets either assets liabilities measured fair value derivative designated fair value hedge changes fair value derivative hedged item attributable hedged risk recognized earnings derivative designated cash flow hedge effective portion changes fair value derivative recorded component accumulated comprehensive income loss recognized consolidated statements operations hedged item affects earnings ineffective portions changes fair value hedges insignificant recognized earnings cash flows derivatives accounted cash flow fair value hedges included consolidated statements cash flows category item hedged fair value measurementthe company applies fair value accounting assets liabilities recognized disclosed fair value consolidated financial statements recurring basis fair value represents amount would received selling asset paid transfer liability orderly transaction market participants measurement date determining fair value measurements assets liabilities required recorded fair value company considers principal advantageous market marketbased risk measurements assumptions market participants would use pricing asset liability see note 14 “financial instruments fair value measurements” discussion research developmentresearch development costs related development new products adaptation existing products expensed incurred included cost sales totaled 36 million 90 million 93 million years ended december 31 2018 2017 2016 respectively cash equivalents restricted cashthe company considers highly liquid investments original maturities three months less cash equivalents receivablesreceivables stated net allowances doubtful accounts single customer comprised 5 company’s consolidated net sales 2018 2017 2016 5 company’s consolidated receivables december 31 2018 2017 specific customer provisions made review significant outstanding amounts utilizing information customer creditworthiness current economic trends indicates collection doubtful addition provisions made differing rates based upon age receivable company’s historical collection experience accounts deemed uncollectible written reasonable collection efforts exhausted see note 6 “receivables” discussion transactions affecting allowances doubtful accounts inventoriesinventories include material labor plant overhead stated lower cost net realizable value december 31 2018 2017 inventories valued using firstin firstout “fifo” method see note 7 “inventories” components company’s inventories quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated property plant equipmentproperty plant equipment recorded cost depreciated estimated useful lives assets using straightline method financial reporting purposes see note 8 “property plant equipment” components company’s property plant equipment major improvements extend useful lives existing assets capitalized charged asset accounts repairs maintenance significantly improve extend useful lives respective assets expensed incurred leasehold improvements depreciated shorter lease term estimated useful life respective asset retired disposed associated costs accumulated depreciation eliminated resulting gain loss recognized company’s consolidated statements operations intangible assetsidentifiable intangible assets recognized apart goodwill amortized estimated useful lives impairment longlived intangible assetsthe company evaluates longlived assets intangible assets significant property plant equipment customer relationship intangible assets whenever events circumstances occurred indicate carrying value asset may recoverable determining whether impairment occurred typically requires various estimates assumptions including determining cash flows directly related potentially impaired asset useful life cash flows occur amount asset’s residual value turn assessing whether impairment loss requires determination recoverability generally estimated ability recover balance assets expected future operating cash flows undiscounted basis impairment determined exist related impairment loss calculated based difference fair value carrying value asset goodwillwhen applicable goodwill reviewed annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value performing analysis company compares reporting unit’s fair value carrying value fair value estimated based comparable company market valuations andor expected future discounted cash flows generated reporting unit carrying value exceeds reporting unit’s fair value impairment loss would charged operations period identified see note 5 “goodwill intangible assets” discussion income taxesthe company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations company determines deferred income tax asset fully realized future valuation allowance established increased reflect amount asset likely realized would increase company’s provision income taxes period valuation allowance established company determines related deferred income tax assets realized future excess net recorded amount adjustment reduce related valuation allowance made would reduce company’s provision income taxes company regularly audited foreign domestic tax authorities audits occasionally result proposed assessments ultimate resolution might result company owing additional taxes including cases penalties interest company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination company’s worldwide tax provision related tax assets liabilities requires use significant judgment estimating impact uncertainties application gaap interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain fair market value required measure tax asset liability gaap purposes company periodically obtains independent third party assistance validate value determined conformity internal revenue service fair market value guidelines company believes appropriate support positions taken certain positions may successfully challenged taxing authorities resolution uncertainties manner inconsistent management’s expectations could material impact company’s financial condition operating results company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions determination company’s worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions see note 13 “income taxes” discussion pension plansthe company assumed certain frozen underfunded defined benefit pension plans part 2010 world color press acquisition pension plan costs determined using actuarial methods funded contributions company records amounts relating pension plans based calculations include various actuarial assumptions including discount rates assumed rates return mortality company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors purposes calculating expected return plan assets valued fair value event gives rise curtailment settlement curtailment accounted prior settlement company’s measurement date measure defined benefit plan assets projected benefit obligation december 31 january 1 2018 company adopted asu 201707 provides revised guidance present components net pension income statement operations company adopted asu 201707 retrospectively utilized practical expedient permits use amounts disclosed previous filings net pension income estimation basis presentation prior comparative periods service costs associated companys pension plans due frozen status quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company previously participated mepps result acquisition world color press due significant underfunded status mepps company withdrawn significant mepps replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan historically form retirement benefit provided quad’s employees result decision withdraw company recorded estimated withdrawal liability mepps part world color press purchase price allocation process based information received mepps’ trustees estimated withdrawal liability updated based significant events potential new information litigation proceedings mepps final withdrawal liability determined see note 15 “employee retirement plans” discussion stockbased compensationthe company recognizes stockbased compensation expense vesting period stockbased awards made employees directors based fair value instrument time grant see note 17 “equity incentive programs” discussion accumulated comprehensive income lossaccumulated comprehensive income loss consists primarily unrecognized actuarial gains losses prior service costs pension plans foreign currency translation adjustments interest rate swap adjustments presented consolidated statements shareholders’ equity see note 19 “accumulated comprehensive loss” discussion supplemental cash flow informationthe following table summarizes certain supplemental cash flow information years ended december 31 2018 2017 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 2 revenue recognition company recognizes products services revenue based transfer control passes customer service completed accepted customer effects adjustments consolidated balance sheet december 31 2017 modified retrospective adoption topic 606 follows adoption topic 606 material effect consolidated financial statements adopting topic 606 timing recognition changed certain variable consideration paid customers costs obtain contracts customers quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated revenue disaggregation following table provides information disaggregated revenue company’s operating segments major products services offerings years ended december 31 2018 2017 2016 nature products services products offering predominantly comprised company’s print operations includes retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company considers logistic operations services include delivery printed material services offering also includes revenues related company’s imaging operations include digital content management photography color services page production marketing services media planning placement facilities management medical services performance obligations contract inception company assesses products services promised contracts customers identifies performance obligations promise transfer customer product service distinct identify performance obligations company considers goods services promised contract regardless whether explicitly stated implied customary business practices company determined following distinct products services represent separate performance obligations •prepress services •print •other services prepress services company recognizes revenue pointintime upon completion performed service acceptance customer company considers transfer control occur service performed company right payment customer legal title risk reward ownership company recognizes print revenues upon transfer title passage risk loss pointintime upon shipment customer reasonable assurance collectability revenues related company’s logistics operations includes delivery printed material included print performance obligation also recognized pointintime services completed agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides revenue warehouse management fees immaterial years ended december 31 2018 2017 2016 certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily company’s logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many company’s operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis cases company print items mailed consumers bill customer postage cases company acting agent billings recorded net basis net sales significant payment terms payment terms conditions contracts customers vary company typically offers standard terms net 30 days company’s standard business practice offer extended payment terms longer one year company may offer cash discounts prepayment extended terms depending certain facts circumstances timing company’s delivery products services differs timing payment company record either contract asset contract liability quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated variable consideration evaluating transaction price company analyzes contract basis applicable variable considerations noncash consideration also performs constraint analysis nature company’s contracts give rise variable consideration including volume rebates credits discounts similar items generally decrease transaction price variable amounts generally credited customer based achieving certain levels sales activity contracts signed making payments within specific terms product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends transaction price requires allocation multiple performance obligations company uses estimated standalone selling prices using adjusted market assessment approach costs obtain contracts accordance topic 606 company capitalizes certain sales incentives sales compensation packages costs directly attributed awarded customer contract renewal would incurred contract obtained company also defers certain contract acquisition costs paid customer contract inception costs obtain contracts duration less one year expensed incurred contract costs contracts one year company amortizes costs obtain contracts straightline basis estimated life contract reviews quarterly impairment january 1 2018 company 235 million contract costs contracts completed date year ended december 31 2018 company incurred additional contract costs 75 million amortized 93 million consequently balance contract costs 217 million december 31 2018 practical expedients company elected apply following practical expedients allowed topic 606 • certain performance obligations related print contracts company elected disclose value unsatisfied performance obligations following 1 contracts original expected length one year less 2 contracts revenue recognized invoiced 3 contracts variable consideration related unsatisfied performance obligations company approximately 4697 million volume commitments contracts extend beyond one year december 31 2018 company expects recognize approximately 38 volume commitments contracts revenue end 2019 additional 32 end 2021 balance thereafter • company expenses costs obtain contracts incurred contract duration less one year • transaction amount adjusted significant financing component period transfer products services payment less one year • company accounts shipping handling activities includes postage occur control related products services transfers customer fulfillment activities therefore recognized time shipping • company excludes transaction price amounts collected customers sales taxes quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 3 acquisitions strategic investments 2018 ivie associates llc acquisition company completed acquisition ivie february 21 2018 900 million cash paid subject potential earnout additional 160 million extent certain financial metrics achieved postintegration ivie headquartered flower mound texas provides full array marketing services including creative production services studio services sourcing procurement staff enhancement media services public relations digital services technology solutions project management many leading brands throughout world purchase price 1054 million includes 136 million acquired cash estimated 154 million future cash payments related acquisition included purchase price allocation 796 million identifiable intangible assets amortized estimated useful lives ranging three eight years 283 million goodwill 264 million deductible tax purposes final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 14 “financial instruments fair value measurements” definition level 3 inputs ivie’s operations included united states print related services segment 2018 investment rise interactive analytics llc march 14 2018 company increased equity position rise 19 57 conversion 93 million loans equity ownership 87 million cash paid company historically accounted rise cost method investment rise digital marketing agency headquartered chicago illinois specializes digital media analytics customer experience helps enterprise marketers see shape act opportunities digital media company consolidated results rise date company obtained controlling financial interest rise accounts 43 portion rise’s results owned company noncontrolling interest consolidated financial statements fair value assets liabilities noncontrolling interest rise estimated 485 million including 137 million acquired cash also included fair value allocation 231 million identifiable intangible assets amortized estimated useful lives ranging five six years 263 million goodwill deductible tax purposes final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 14 “financial instruments fair value measurements” definition level 3 inputs rise’s operations included united states print related services segment note 4 restructuring impairment transactionrelated charges company recorded restructuring impairment transactionrelated charges years ended december 31 2018 2017 2016 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated costs related activities recorded consolidated statements operations restructuring impairment transactionrelated charges see note 20 “segment information” restructuring impairment transactionrelated charges segment restructuring charges company began restructuring program 2010 related eliminating excess manufacturing capacity properly aligning cost structure company announced total 43 plant closures reduced headcount approximately 13000 employees since 2010 company announced closures hazleton pennsylvania franklin kentucky plants year ended december 31 2018 company recorded following charges result plant closures restructuring programs year ended december 31 2018 • employee termination charges 230 million recorded result workforce reductions facility consolidations separation programs • integration costs 13 million recorded primarily related integration acquired companies • restructuring charges 446 million recorded consisted following 1 321 million increase company’s mepps withdrawal liability 2 129 million vacant facility carrying costs 3 100 million charges certain legal matters customer contract penalties related company’s operations peru 4 40 million lease exit charges 5 15 million charges foreign currency losses result economy argentina classified highly inflationary 6 14 million equipment infrastructure removal costs closed plants restructuring charges presented net 173 million gains sale facilities including 75 million gain sale taunton massachusetts book plant 70 million gain sale dallas texas plant 22 million gain sale san ixhuatepec mexico plant company announced closures waseca minnesota columbus ohio taunton massachusetts dallas texas plants year ended december 31 2017 company recorded following charges result plant closures restructuring programs year ended december 31 2017 • employee termination charges 269 million recorded result workforce reductions facility consolidations separation programs • restructuring charges 184 million recorded consisted following 1 142 million vacant facility carrying costs 2 67 million loss sale business 3 39 million lease exit charges including lease termination huntington beach california manassas virginia plants 4 19 million equipment infrastructure removal costs closed plants restructuring charges presented net 71 million gains sale atglen pennsylvania dickson tennessee lenexa kansas east greenville pennsylvania marengo iowa facilities 12 million gain settlements vendors bankruptcy proceedings companys argentina subsidiaries quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company announced closures atglen pennsylvania huntington beach california lenexa kansas manassas virginia monroe new jersey york pennsylvania plants year ended december 31 2016 company recorded following charges result plant closures restructuring programs year ended december 31 2016 • employee termination charges 129 million recorded result workforce reductions facility consolidations separation programs • integration costs 01 million recorded primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 316 million recorded consisted following 1 136 million vacant facility carrying costs 2 112 million increase company’s mepps withdrawal liability 3 49 million equipment infrastructure removal costs closed plants 4 45 million lease exit charges including lease termination pittsburg california facility restructuring charges presented net following 1 13 million gain settlements vendors due companys argentina subsidiaries emerging bankruptcy fourth quarter 2016 2 13 million gain sale pilar argentina building restructuring charges recorded based plans committed management part based upon management’s best estimates future events changes estimates may require future restructuring charges adjustments restructuring liabilities company expects incur additional restructuring charges related initiatives impairment charges company recognized impairment charges 265 million year ended december 31 2018 consisting following 1 169 million impairment charges primarily machinery equipment longer utilized production result facility consolidations including waseca minnesota hazleton pennsylvania franklin kentucky well capacity strategic reduction restructuring initiatives including 50 million impairment charges machinery equipment peru 2 46 million land building impairment charges primarily related franklin kentucky plant closure company recognized impairment charges 120 million year ended december 31 2017 consisting following 1 67 million impairment charges primarily machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity strategic reduction restructuring initiatives 2 53 million land building impairment charges related waseca minnesota taunton massachusetts plant closures company recognized impairment charges 268 million year ended december 31 2016 consisting following 1 121 million land building impairment charges related atglen pennsylvania plant closure 2 147 million impairment charges primarily machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois queretaro mexico well capacity strategic reduction restructuring activities quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair values impaired assets determined company level 3 fair value hierarchy see note 14 “financial instruments fair value measurements” definition level 3 inputs estimated based broker quotes internal expertise related current marketplace conditions estimated future discounted cash flows assets adjusted estimated fair values time impairment estimated fair values subsequently decline carrying values assets adjusted accordingly transactionrelated charges company incurs transactionrelated charges primarily consisting professional service fees related business acquisition divestiture activities company recognized transactionrelated charges 82 million 31 million 22 million years ended december 31 2018 2017 2016 respectively includes 64 million related proposed acquisition lsc year ended december 31 2018 10 million related sale business year ended december 31 2017 transactionrelated charges expensed incurred accordance applicable accounting guidance business combinations restructuring reserves activity impacting company’s restructuring reserves years ended december 31 2018 2017 follows company’s restructuring reserves december 31 2018 included shortterm longterm component shortterm portion included 231 million accrued liabilities see note 9 “accrued liabilities longterm liabilities” 18 million accounts payable consolidated balance sheets company expects reserves paid within next twelve months longterm portion 29 million included longterm liabilities see note 9 “accrued liabilities longterm liabilities” consolidated balance sheets note 5 goodwill intangible assets goodwill represents excess purchase price fair value identifiable net assets acquired business combination goodwill assigned specific reporting units tested annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated goodwill impairment charges recorded years ended december 31 2018 2017 2016 accumulated goodwill impairment losses carrying value goodwill december 31 2018 2017 follows company recorded goodwill within united states print related services segment related acquisitions completed year ended december 31 2018 activity impacting goodwill year ended december 31 2018 follows intangible assets components intangible assets december 31 2018 2017 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated year ended december 31 2018 gross carrying amount intangible assets increased primarily due 1027 million acquired identifiable finitelived intangible assets discussed note 3 “acquisitions strategic investments” gross carrying amount accumulated amortization within intangible assetsnet consolidated balance sheets december 31 2018 december 31 2017 differs value originally recorded acquisition due impairment charges recorded prior years effects currency fluctuations since purchase date intangible assets evaluated potential impairment whenever events circumstances indicate carrying value may recoverable impairment charges recorded finitelived intangible assets years ended december 31 2018 2017 2016 amortization expense intangible assets 344 million 183 million 507 million years ended december 31 2018 2017 2016 respectively following table outlines estimated future amortization expense related intangible assets december 31 2018 note 6 receivables activity impacting allowances doubtful accounts years ended december 31 2018 2017 2016 follows 1 writeoffs primarily consisted fully reserved receivables years ended december 31 2018 2017 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 7 inventories components inventories december 31 2018 2017 follows note 8 property plant equipment components property plant equipment december 31 2018 2017 follows 1 consists computer equipment vehicles furniture fixtures leasehold improvements communication related equipment company recorded impairment charges 265 million 120 million 268 million years ended december 31 2018 2017 2016 respectively reduce carrying amounts certain property plant equipment longer utilized production due capacity strategic reduction restructuring initiatives fair value see note 4 “restructuring impairment transactionrelated charges” discussion impairment charges company recognized depreciation expense 1963 million 2142 million 2264 million years ended december 31 2018 2017 2016 respectively assets held sale company considered certain closed facilities held sale classification consolidated balance sheets assets held sale carried lesser original cost fair value less estimated costs sell assets held sale december 31 2018 december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 9 accrued liabilities longterm liabilities components accrued longterm liabilities december 31 2018 2017 follows 1 employeerelated liabilities consist primarily payroll bonus vacation health workers’ compensation note 10 commitments contingencies commitments company firm commitments 532 million december 31 2018 purchase press finishing equipment litigation company named defendant various lawsuits claims asserted company normal course business liabilities ultimately result lawsuits expected management material impact consolidated financial statements company april 2016 company selfreported sec department justice “doj” certain foreign corrupt practices act “fcpa” issues resulting internal investigation related operations managed peru operations approximate annual sales ranging 950 million 1350 million date company acquired operations july 2010 date issues discovered selfreported issues identified company’s financial internal controls company oversight audit committee board directors proactively initiated investigation matter assistance external legal counsel external forensic accountants additional compliance issues arising peru subsidiary identified course investigation known sec doj course internal investigation company also identified selfreported doj sec transactions raising similar issues involving certain sales made quadtech china operations period 2011 2015 approximate annual sales china operations ranged 20 million 30 million course internal investigation company also identified informed office foreign assets control “ofac” doj sec certain transactions involving cuba continues investigate propriety transactions united states trade sanctions peruvian antitrust authority “indecopi” currently conducting investigation certain alleged past collusive activities among printers peru including quadgraphics peru connection matters quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company made continues evaluate certain enhancements compliance program company fully cooperating ofac sec doj indecopi time company anticipate material adverse effect business financial condition result matters environmental reserves company subject various laws regulations government policies relating health safety generation storage transportation disposal hazardous substances environment protection general company provides expenses associated environmental remediation obligations amounts probable reasonably estimated reserves adjusted new information develops circumstances change environmental reserves discounted company believes compliance laws regulations government policies material respects furthermore company anticipate maintaining compliance environmental statutes material impact upon company’s consolidated financial position note 11 debt components longterm debt december 31 2018 2017 follows description debt obligations master note security agreement september 1 1995 last amended november 24 2014 quad entered master note security agreement december 31 2018 borrowings outstanding master note security agreement 962 million senior notes master note security agreement weighted average interest rate 736 december 31 2018 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2031 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company redeemed 601 million senior notes master note security agreement resulting net loss debt extinguishment 02 million year ended december 31 2016 tendered senior notes master note security agreement canceled company used cash flows operating activities borrowings revolving credit facility fund tender primarily completed reallocate debt lower interest rate revolving credit facility thereby reduce interest expense based current libor rates senior secured credit facility april 28 2014 company entered senior secured credit facility includes revolving credit facility term loan term loan b senior secured credit facility originally entered extend stagger company’s debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals proceeds senior secured credit facility used repay company’s previous debt financing arrangements fund acquisitions well general corporate purposes company completed second amendment company’s senior secured credit facility february 10 2017 second amendment completed reduce size revolving credit facility term loan extend company’s debt maturity profile maintaining company’s current cost borrowing covenant structure revolving credit facility lowered maximum borrowing amount 7250 million 8500 million term loan lowered aggregate amount 3750 million 4500 million amendment senior secured credit facility impact company’s quarterly financial covenant requirements resulted loss debt extinguishment 26 million year ended december 31 2017 senior secured credit facility consists three different loan facilities first facility revolving credit facility amount 7250 million term four years maturing january 4 2021 second facility term loan aggregate amount 3750 million term four years maturing january 4 2021 subject certain required amortization third facility term loan b amount 3000 million term seven years maturing april 27 2021 subject certain required amortization december 31 2018 company outstanding borrowings revolving credit facility 341 million issued letters credit leaving 6909 million available future borrowings revolving credit facility term loan made senior secured credit facility december 31 2018 bear interest 200 excess reserve adjusted libor 100 excess alternate base rate borrowings term loan b december 31 2018 bear interest 325 excess reserve adjusted libor floor 100 225 excess alternative base rate company’s option senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances january 31 2019 company completed third amendment senior secured credit facility see note 24 “subsequent events” detail item quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated senior unsecured notes company completed issuance 3000 million aggregate principal amount senior unsecured notes due may 1 2022 april 28 2014 senior unsecured notes bear interest 700 interest payable semiannually senior unsecured notes issued extend stagger company’s debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals company received 2948 million net proceeds sale senior unsecured notes deducting initial purchasers’ discounts commissions proceeds senior unsecured notes used purposes detailed april 28 2014 senior secured credit facility company repurchased 565 million senior unsecured notes open market resulting net gain debt extinguishment 143 million year ended december 31 2016 repurchased senior unsecured notes canceled company used cash flows operating activities borrowings revolving credit facility fund repurchases primarily completed efficiently reduce debt balances interest expense based current libor rates company’s existing future domestic subsidiaries borrower guarantees indebtedness company’s senior secured credit facility guarantees certain company’s indebtedness company’s restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes “guarantor subsidiaries” guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events see note 22 “separate financial information subsidiary guarantors indebtedness” details guarantor subsidiaries international debt obligations company two fixed rate euro denominated international term loans purposes financing certain capital expenditures general business needs first international term loan amount 204 million entered december 28 2015 fully funded 2016 term six years maturing december 28 2021 december 31 2018 102 million remained outstanding first international term loan weighted average interest rate 172 second international term loan amount 76 million entered december 21 2018 bears interest 196 term five years maturing december 31 2023 company two multicurrency international revolving credit facilities used financing working capital general business needs company 118 million borrowings outstanding weighted average interest rate 225 international revolving credit facilities december 31 2018 leaving 42 million available future borrowing terms international revolving credit facilities includes certain financial covenants guarantee international revolving credit facilities company security agreement includes collateralizing substantially quad europe sp zoo assets first multicurrency international revolving credit facility expires october 31 2019 bears interest aggregate warsaw interbank offered rate “wibor” plus 090 polish zloty denominated borrowings aggregate euro interbank offered rate “euribor” plus 095 euro denominated borrowings aggregate british pound sterling libor plus 095 british pound sterling denominate borrowings second multicurrency international revolving credit facility expires november 20 2020 bears interest aggregate wibor plus 070 polish zloty denominated borrowings aggregate euribor plus 070 euro denominated borrowings quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair value debt based upon interest rates available company borrowings similar terms maturities fair value company’s total debt approximately 09 billion 10 billion december 31 2018 2017 respectively fair value determination company’s total debt categorized level 2 fair value hierarchy see note 14 “financial instruments fair value measurements” definition level 2 inputs december 31 2018 approximately 22 billion company’s assets pledged security various loans agreements debt issuance costs original issue discount activity impacting company’s capitalized debt issuance costs years ended december 31 2018 2017 follows activity impacting company’s original issue discount years ended december 31 2018 2017 follows amortization expense debt issuance costs 31 million 31 million 38 million years ended december 31 2018 2017 2016 respectively amortization expense original issue discount 04 million years ended december 31 2018 2017 2016 debt issuance costs original issue discount amortized straightline basis four seven eight year lives related debt instruments quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated loss gain debt extinguishment 2017 loss debt extinguishment company incurred 47 million debt issuance costs conjunction second amendment company’s senior secured credit facility accordance accounting guidance treatment debt issuance costs debt extinguishment 47 million new debt issuance costs 32 million classified reduction longterm debt consolidated balance sheets 15 million expensed classified loss debt extinguishment consolidated statements operations loss debt extinguishment recorded consolidated statements operations year ended december 31 2017 comprised following 2016 gain debt extinguishment company recorded net gain debt extinguishment 141 million year ended december 31 2016 141 million comprised 143 million gain incurred conjunction repurchase 565 million company’s senior unsecured notes offset net loss debt extinguishment 02 million resulting redemption 601 million company’s senior notes master note security agreement gain debt extinguishment recorded consolidated statements operations year ended december 31 2016 comprised following quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated covenants compliance company’s various lending arrangements include certain financial covenants financial terms numbers ratios defined company’s debt agreements among covenants company required maintain following december 31 2018 • total leverage ratio rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda shall exceed 375 100 twelve months ended december 31 2018 company’s total leverage ratio 219 100 • senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined senior secured debt consolidated ebitda shall exceed 350 100 twelve months ended december 31 2018 company’s senior secured leverage ratio 163 100 • minimum interest coverage ratio rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2018 company’s minimum interest coverage ratio 623 100 indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit company’s restricted subsidiaries’ ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially company’s consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock including following • company’s total leverage ratio greater 300 100 defined senior secured credit facility company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions • company’s senior secured leverage ratio greater 300 100 company’s total leverage ratio greater 350 100 ratios defined senior secured credit facility company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total leverage ratio less 350 100 restrictions quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated estimated principal payments approximate annual principal amounts due longterm debt excluding 72 million future amortization debt issuance costs 10 million future amortization original issue discount december 31 2018 follows note 12 lease obligations company enters various master lease agreements press finishing transportation equipment leases provide company options purchase related equipment termination value defined various early buyout dates term lease leases accounted capital leases consolidated balance sheets components capital lease assets december 31 2018 2017 follows future maturities capitalized leases december 31 2018 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company various operating lease agreements future minimum rental commitments noncancelable leases december 31 2018 follows rent expense operating lease agreements totaled 385 million 373 million 437 million years ended december 31 2018 2017 2016 respectively note 13 income taxes income taxes based following components earnings loss income taxes equity earnings loss unconsolidated entity years ended december 31 2018 2017 2016 components income tax benefit expense years ended december 31 2018 2017 2016 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table outlines reconciliation differences federal statutory tax rate company’s income tax benefit expense years ended december 31 2018 2017 2016 69 million adjustment valuation allowance 2018 primarily relates net operating losses deferred tax assets related property plant equipment expected realized future one company’s mexican subsidiaries based current projected future profitability 200 million adjustment valuation allowance 2017 primarily relates income tax credit utilized company’s polish subsidiaries due sustainable profitability company determined utilization credit sufficient record reduction valuation allowance order reflect current net realizable value related deferred tax assets based estimated credit utilization 2026 year credit expires quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated deferred income taxes significant deferred tax assets liabilities december 31 2018 2017 follows company recorded deferred income tax liabilities 321 million 419 million december 31 2018 2017 respectively included deferred income taxes consolidated balance sheets company also recorded deferred income tax assets 274 million 212 million december 31 2018 2017 respectively included longterm assets consolidated balance sheets december 31 2018 company following gross amounts taxrelated carryforwards • net operating loss carryforwards 991 million 5015 million foreign state respectively foreign net operating loss carryforwards 302 million available without expiration remainder expires 2038 state net operating loss carryforwards expire varying amounts 2038 • capital loss carryforwards 246 million 136 million federal state respectively federal capital loss carryforwards 62 million expires 2019 11 million expires 2021 173 million expires 2022 state capital loss carryforwards 46 million expires 2019 05 million expires 2021 85 million expires 2022 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated • various credit carryforwards 301 million 441 million foreign state respectively foreign credit carryforward expires 2026 state credit carryforwards include 320 million available without expiration remainder expires 2033 december 31 2018 company recorded valuation allowance 1152 million consolidated balance sheet primarily related taxaffected amounts carryforwards valuation allowance includes 59 million 536 million 557 million federal foreign state deferred tax assets respectively expected realized uncertain tax positions following table summarizes activity company’s liability unrecognized tax benefits december 31 2018 2017 2016 december 31 2018 144 million unrecognized tax benefits would impact company’s effective tax rate recognized amount reasonably possible 46 million total amount unrecognized tax benefits decrease within next twelve months due resolution income tax audits statute expirations company classified interest income expense related penalties refunds related income tax uncertainties component income tax benefit expense following table summarizes company’s interest income expense related tax uncertainties penalties recognized years ended december 31 2018 2017 2016 accrued interest penalties related income tax uncertainties reported components current liabilities longterm liabilities consolidated balance sheets following table summarizes company’s liabilities accrued interest penalties related income tax uncertainties december 31 2018 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company tax years 2014 2018 remain open subject examination internal revenue service tax years 2013 2018 remain open subject examination company’s various major state jurisdictions within united states december 22 2017 us government enacted comprehensive tax legislation commonly referred tax act tax act makes broad complex changes us tax code including limited 1 reducing us federal corporate tax rate 35 percent 21 percent 2 requiring companies pay onetime transition tax certain unrepatriated earnings foreign subsidiaries 3 generally eliminating us federal income taxes dividends foreign subsidiaries 4 requiring current inclusion us federal taxable income certain earnings controlled foreign corporations 5 creating new limitation deductible interest expense 6 creating base erosion antiabuse tax new minimum tax 7 repeal domestic production activity deduction 8 bonus depreciation allow full expensing qualified property sec staff issued staff accounting bulletin 118 “sab 118” provides guidance accounting tax effects tax act sab 118 provides measurement period extend beyond one year tax act enactment date companies complete accounting asc 740 accordance sab 118 company must reflect income tax effects aspects tax act accounting asc 740 complete extent company’s accounting certain income tax effects tax act incomplete able determine reasonable estimate must record provisional estimate financial statements company cannot determine provisional estimate included financial statements continue apply asc 740 basis provisions tax laws effect immediately enactment tax act company applied guidance sab 118 accounting enactmentdate effects tax act 2017 throughout 2018 december 31 2017 company completed accounting enactmentdate income tax effects tax act following aspects 1 remeasurement deferred tax assets liabilities due reduced us federal corporate rate 2 deemed repatriation transition tax 3 global intangible lowtax income “gilti” december 31 2018 company completed accounting enactmentdate income tax effects tax act discussed year ended december 31 2018 company recognized adjustments 08 million preliminary provisional amount recorded december 31 2017 included adjustments component income tax expense reduction us federal corporate rate tax act reduced corporate tax rate 21 percent effective january 1 2018 company recorded provisional decrease 237 million deferred tax liabilities corresponding net adjustment deferred income tax expense upon refinement calculation year ended december 31 2018 company increased provisional adjustment 08 million 245 million included component income tax expense deemed repatriation transition tax deemed repatriation transition tax “transition tax” tax previously untaxed accumulated current earnings profits “ep” certain foreign subsidiaries determine amount transition tax company must determine addition factors amount post1986 ep relevant subsidiaries well amount nonus income taxes paid earnings analysis company concluded transition tax zero based aggregate post1986 foreign earnings profits deficit relevant subsidiaries therefore change initial estimate december 31 2017 global intangible low taxed income tax act creates new requirement certain income ie gilti earned controlled foreign corporations “cfcs” must included currently gross income cfcs’ us shareholder gilti excess shareholder’s “net cfc tested income” net deemed tangible income return currently defined excess 1 ten percent aggregate us shareholder’s pro rata share quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated qualified business asset investment cfc respect us shareholder 2 amount certain interest expense taken account determination net cfctested income gaap company allowed make accounting policy choice either 1 treating taxes due future us inclusions taxable income related gilti currentperiod expense incurred “period cost method” 2 factoring amounts company’s measurement deferred taxes “deferred method” company elected account gilti period cost accordingly income included component current income tax expense year ended december 31 2018 result tax act historical earnings certain foreign subsidiaries became subject us transition tax described however actual repatriation subsidiaries could subject additional foreign us state income taxes company considers foreign earnings indefinitely invested accordingly company provide expect incur significant additional taxes could become payable upon repatriation amounts note 14 financial instruments fair value measurements certain assets liabilities required recorded fair value recurring basis assets liabilities recorded fair value nonrecurring basis generally result acquisitions impairment charges fair value determined based exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants gaap also classifies inputs used measure fair value following hierarchy level 1 quoted prices active markets identical assets liabilities level 2 quoted prices active markets similar assets liabilities quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability level 3 unobservable inputs asset liability level 3 recurring measurements assets liabilities december 31 2018 interest rate swap company entered 2500 million interest rate swap february 7 2017 swap designated cash flow hedge purpose reduce variability cash flows interest payments related portion company’s variablerate debt swap effectively converts 2500 million company’s variablerate debt based onemonth libor fixed rate 389 including 200 spread underlying debt december 31 2018 variable interest rate resets monthly swap five year arrangement maturing february 28 2022 company classifies interest rate swap level 2 inputs valuation model observable derived corroborated utilizing observable market data commonly quoted intervals interest rate swap highly effective december 31 2018 therefore increase fair value 22 million year ended december 31 2018 included accumulated comprehensive loss consolidated balance sheets shown change comprehensive income consolidated statements comprehensive income loss amount ineffectiveness recorded earnings related cash flow hedge interest rate swap classified asset fair values 43 million 21 million december 31 2018 2017 respectively recorded prepaid expenses current assets consolidated balance sheets quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company received net interest payment totaling 02 million interest income year ended december 31 2018 made net interest payment totaling 16 million interest expense year ended december 31 2017 net interest payments recognized adjustment interest expense consolidated statements operations foreign exchange contracts company operations countries transactions outside functional currencies periodically enters foreign exchange contracts used hedge net exposures changes foreign currency exchange rates designated either cash flow hedges fair value hedges gains losses net foreign currency hedges intended offset losses gains underlying net exposures effort reduce earnings volatility resulting fluctuating foreign currency exchange rates open foreign currency exchange contracts december 31 2018 natural gas forward contracts company periodically enters natural gas forward purchase contracts hedge increases commodity costs company’s commodity contracts qualified exception related normal purchases sales years ended december 31 2018 2017 company takes delivery normal course business debt company measures fair value debt instruments using interest rates available company borrowings similar terms maturities categorized level 2 see note 11 “debt” fair value company’s debt december 31 2018 nonrecurring fair value measurements addition assets liabilities recorded fair value recurring basis company required record certain assets liabilities fair value nonrecurring basis generally result acquisitions remeasurement assets resulting impairment charges see note 3 “acquisitions strategic investments” discussion acquisitions see note 4 “restructuring impairment transactionrelated charges” note 8 “property plant equipment” discussion impairment charges recorded result remeasurement certain longlived assets estimated fair value measurements company records fair value forward contracts pension plan assets recurring basis fair value cash equivalents receivables inventories restricted cash accounts payable accrued liabilities approximate carrying values december 31 2018 2017 see note 15 “employee retirement plans” details level 1 level 2 inputs related employee retirement plans quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 15 employee retirement plans defined contribution plans quadgraphics inc diversified plan comprised participantdirected 401k contributions company match profit sharing contributions total participant assets 18 billion december 31 2018 company 401k matching contributions 85 million 72 million 133 million years ended december 31 2018 2017 2016 respectively esop holds profit sharing contributions company stock made discretion company’s board directors february 16 2018 company’s board directors authorized issuance 1006061 shares company class common stock treasury company’s esop stock price 2218 per share total value 223 million profit sharing contributions years ended december 31 2017 2016 defined benefit plans company assumed various funded unfunded frozen pension plans portion fulltime employees united states part acquisition world color press 2010 benefits generally based upon years service compensation plans funded conformity applicable government regulations company funds least minimum amount required qualified plans using actuarial cost methods assumptions acceptable government regulations components net pension income years ended december 31 2018 2017 2016 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated underfunded pension obligations calculated using generally accepted actuarial methods measured annually december 31 following table provides reconciliation projected benefit obligation fair value plan assets funded status pension plans december 31 2018 2017 amounts recognized consolidated balance sheets december 31 2018 2017 follows following table provides reconciliation company’s accumulated comprehensive loss prior deferred tax effects december 31 2018 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated july 1 2017 company provided option receive lumpsum pension payment select group terminated vested participants total lump sum payments 214 million paid 2017 84 million paid october 2017 lumpsum program 2017 company settled 233 million pension liabilities 214 million pension payments april 1 2016 company provided option receive lumpsum pension payment select group terminated vested participants total lumpsum payments 748 million paid 2016 564 million paid july 2016 lumpsum program 2016 company settled 926 million pension liabilities 748 million pension payouts payments eligible participants elected receive lumpsum pension payment funded existing pension plan assets constituted settlement company’s pension liabilities respect participants result lumpsums paid participants noncash settlement charges 08 million 70 million recognized years ended december 31 2017 2016 respectively settlement charges classified restructuring impairment transactionrelated charges consolidated statement operations charges resulted recognition earnings portion actuarial losses recorded accumulated comprehensive loss based proportion obligation settled actuarial gains losses excess 10 greater projected benefit obligation marketrelated value plan assets recognized component net periodic benefit costs average remaining service period plan’s active employees unrecognized prior service costs credits also recognized component net periodic benefit cost average remaining service period plan’s active employees amortization amounts accumulated comprehensive loss expected recognized component net periodic pension income 2019 weighted average assumptions used determine net periodic benefit costs years ended december 31 2018 2017 2016 follows weighted average assumptions used determine pension benefit obligations december 31 2018 2017 follows company determines assumed discount rate based index highquality corporate bond yields matchedfunding yield curve analysis measurement date quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated estimated company contributions benefit payments 2019 company expects make cash contributions 47 million qualified defined benefit pension plans expects make estimated benefit payments 18 million nonqualified defined benefit pension plans actual pension contributions may differ based funding calculations company may choose make additional discretionary contributions estimated benefit payments may differ based actual experience estimated future benefit payments plans behalf plan participants estimate plans’ present value future benefit payments made funded qualified plans unfunded nonqualified plans plan participants december 31 2018 follows plan assets investment strategy company follows disciplined investment strategy provides diversification investments asset class foreign currency sector company pension committee approved investment policy pension plan establishes longterm asset mix targets based several factors including following funded status historical returns achieved worldwide investment markets time horizon pension plan’s obligations investment risk allocation range asset class developed whereby mix equity securities debt securities used provide appropriate riskadjusted longterm return plan assets thirdparty investment managers employed invest assets passivelyindexed activelymanaged strategies investment returns risks monitored ongoing basis derivatives used certain times hedge foreign currency exposure gains losses derivatives offset corresponding change value hedged assets derivatives strictly used hedging purposes speculative purposes current target allocations plan assets weighted average basis 30 equity securities 70 debt securities including cash equivalents actual asset allocation december 31 2018 approximately 30 equity securities 70 debt securities actual asset allocation december 31 2017 approximately 41 equity securities 59 debt securities equity investments diversified country issuer industry sector debt securities primarily consist government bonds corporate bonds diversified industries expected longterm rate return assets assumption selected first identifying expected range longterm rates return major asset class expected longterm rates return developed based longterm historical averages current expectations future returns anticipated inflation rates expected longterm rate return plan assets calculated weighting asset class quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair values company’s pension plan assets december 31 2018 2017 asset category follows 1 investments consist privately placed funds valued based nav funds based fair value fund’s underlying investments accordance asc subtopic 82010 certain investments measured fair value using nav per share equivalent practical expedient classified fair value hierarchy level 3 assets december 31 2018 2017 see note 14 “ financial instruments fair value measurements” definitions fair value levels company segregated plan assets following major categories levels determining fair value december 31 2018 cash equivalents carrying value approximates fair value assets classified level 1 debt securities category consists bonds shortterm fixed income securities fixed income pooled funds fair valued based compilation primarily observable market information broker quotes overthecounter markets classified level 2 equity securities category consists equity pooled funds classified level 2 fair value hierarchy level 2 assets valued using quoted prices markets active broker dealer quotations methods significant input observable measurement date valuation methodologies described may generate fair value calculation may indicative net realizable value future fair values company believes valuation methodologies used appropriate use different methodologies assumptions calculating fair value could result different amounts company invests various assets valuation determined nav company believes nav representative fair value reporting date significant restrictions redemption investments reasons indicate investment would redeemed amount different nav quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair value measurements commoncollective trusts calculated using nav redemption restrictions years ended december 31 2018 2017 follows risk management directly invested funds concentration risk monitored specific guidelines investment manager mandates investment manager mandates developed company’s external investment advisor specify diversification standards maximum exposure per issuer concentration limits per type security industry country applicable investments made pooled funds investment mandates funds reviewed company’s external investment advisor determine investment objectives guidelines consistent company’s overall pension plan risk management objectives managing plan assets management reviews manages risk associated funded status risk interest rate risk market risk counterparty risk liquidity risk operational risk liability management asset class diversification central company’s risk management approach integral overall investment strategy given process place ensure proper diversification portfolio management believes company pension plan assets exposed significant concentration risk multiemployer pension plans company previously participated number mepps terms collective bargaining agreements cover number employees risks participating mepps different single employer plans following aspects • assets contributed mepps one company may used provide benefits employees participating companies • participating company stops contributing plan unfunded obligations plan may borne remaining participating companies • company stops participating mepps continues business company would required pay amount referred withdrawal liability based unfunded status plan quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company withdrawn significant mepps replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan two mepps gciu gcc significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued estimated withdrawal liability based information provided plan’s trustee part purchase price allocation world color press gciu plan defined benefit plan provides retirement benefits total permanent disability benefits preretirement death benefits participating union employees company funded status gciu plan classified critical declining based gciu plan’s 2018 certification united states department labor funded percentage plan less 65 plan projected become insolvent 2030 result gciu plan implemented rehabilitation plan improve plan’s funded status company received notice withdrawal demand payment letter gciu currently litigation gciu trustees determine amount duration withdrawal payments gciu arbitration proceedings gciu completed sides appealed arbitrator’s ruling litigation federal court commenced april 2017 federal district court overturned arbitration decision one pending disputes matter company appealed district court’s ruling panel ninth circuit court appeals december 2018 panel upheld district court’s decision company filed motion reconsideration panel denied litigation gciu trustees concluded exact amount withdrawal liability known result unfavorable rulings company recorded 321 million increase mepps withdrawal liability year ended december 31 2018 recorded restructuring impairment transactionrelated charges consolidated statements operations gcc plan defined benefit plan provides retirement benefits disability benefits early retirement benefits participating union employees company funded status gcc plan classified critical declining based gcc plan’s 2018 certification united states department labor funded percentage plan less 65 plan projected become insolvent 2023 result gcc plan implemented rehabilitation plan improve plan’s funded status fourth quarter 2016 company gcc reached settlement agreement claims scheduled payments february 2024 company made payments totaling 131 million 240 million 118 million years ended december 31 2018 2017 2016 respectively company reserved 509 million estimate total mepps withdrawal liability december 31 2018 425 million recorded longterm liabilities 84 million recorded accrued liabilities consolidated balance sheets note 16 earnings per share attributable quad common shareholders basic earnings per share attributable quad common shareholders computed net earnings attributable quad common shareholders divided basic weighted average common shares outstanding calculation diluted earnings per share attributable quad common shareholders includes effect dilutive equity incentive instruments company uses treasury stock method calculate effect outstanding dilutive equity incentive instruments requires company compute total proceeds sum amount employee must pay upon exercise award amount unearned stockbased compensation costs attributed future services quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated equity incentive instruments total employee proceeds exercise exceed average fair value equity incentive instrument period antidilutive effect earnings per share periods net earnings accordingly company excludes calculation antidilutive equity incentive instruments 05 million 07 million 19 million class common shares excluded computations diluted net earnings per share years ended december 31 2018 2017 2016 respectively periods net loss assumed exercise equity incentive instruments antidilutive therefore included diluted loss per share calculation period reconciliations numerator denominator basic diluted per share computations company’s common stock years ended december 31 2018 2017 2016 summarized follows note 17 equity incentive programs shareholders company approved quadgraphics inc 2010 omnibus incentive plan “omnibus plan” two complementary purposes 1 attract retain outstanding individuals serve directors officers employees 2 increase shareholder value omnibus plan provides aggregate 10871652 shares class stock reserved issuance omnibus plan awards omnibus plan may consist incentive awards stock options stock appreciation rights performance shares performance share units shares class stock restricted stock “rs” restricted stock units “rsu” deferred stock units “dsu” stockbased awards determined company’s board directors stock option granted exercise price less 100 fair market value class stock date grant december 31 2018 1571841 shares available issuance omnibus plan authorized unissued shares company’s class stock treasury shares may used issuance company’s equity incentive programs company recognizes compensation expense based estimated grant date fair values sharebased awards issued employees nonemployee directors including stock options performance shares performance share units restricted stock restricted stock units deferred stock units company recognizes compensation costs awards expected vest straightline basis requisite three four year service period awards except dsu awards fully vested expensed grant date company estimated number awards expected vest based part historical forfeiture rates also based management’s expectations employee turnover within specific employee groups receiving type award forfeitures estimated time grant revised necessary subsequent periods actual forfeitures differ estimates quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated equity incentive compensation expense total compensation expense recognized related equity incentive programs 156 million 164 million 152 million years ended december 31 2018 2017 2016 respectively recorded primarily selling general administrative expenses consolidated statements operations total future compensation expense related equity incentive programs granted december 31 2018 estimated 159 million consists entirely expense rs rsu awards estimated future compensation expense 100 million 2019 52 million 2020 07 million 2021 stock options vest four years vesting first year onethird vesting upon second third fourth anniversary dates defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee options expire later tenth anniversary grant date 24 months termination death 36 months termination normal retirement disability 90 days termination employment reason options credited dividend declarations except november 18 2011 grants stock options granted employees stock options granted years ended december 31 2018 2017 2016 compensation expense recognized related stock options years ended december 31 2018 2017 2016 future compensation expense stock options granted december 31 2018 following table summary stock option activity year ended december 31 2018 intrinsic value options outstanding exercisable december 31 2018 2017 based fair value stock price outstanding options vested december 31 2018 following table summary stock option exercises vesting activity years ended december 31 2018 2017 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated restricted stock restricted stock units restricted stock restricted stock unit awards consist shares rights shares company’s class stock awarded employees company awards restricted subject substantial risk forfeiture restrictions sale transfer employee rsu awards typically granted eligible employees outside united states defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving rs grants able exercise full voting rights receive full credit dividends vesting period dividends paid rs grantee within 45 days full vesting grantees receiving rsus entitled vote earn dividends upon vesting rsus settled either cash payment equal fair market value rsus vesting date issuance company class stock following table summary rs rsu award activity year ended december 31 2018 general rs rsu awards vest third anniversary grant date provided holder share continuously employed company vesting date compensation expense recognized rs rsus 147 million 155 million 144 million years ended december 31 2018 2017 2016 respectively deferred stock units deferred stock units awards rights shares company’s class stock awarded nonemployee directors company following table summary dsu award activity year ended december 31 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated dsu award entitles grantee receive one share class stock upon earlier separation date grantee second anniversary grant date could subject acceleration change control death disability defined individual dsu grant agreement grantees dsu awards may exercise voting rights credited dividend equivalents dividend equivalents converted additional dsu awards based closing price class stock compensation expense recognized dsus 09 million years ended december 31 2018 2017 08 million year ended december 31 2016 dsu awards fully vested grant date compensation expense recognized date grant note 18 shareholders’ equity company three classes common stock follows share data millions accordance articles incorporation class common share one vote per share class b class c common share ten votes per share matters voted upon company’s shareholders liquidation rights three classes stock company also 05 million shares 001 par value preferred stock authorized none issued december 31 2018 2017 2016 company present plans issue preferred stock september 6 2011 company’s board directors authorized share repurchase program 1000 million company’s outstanding class stock july 30 2018 company’s board directors discontinued remainder september 6 2011 share repurchase program authorized new share repurchase program 1000 million company’s outstanding class common stock year ended december 31 2018 company repurchased 1871631 shares class common stock weighted average price 1959 per share total purchase price 367 million year ended december 31 2017 company repurchased 200605 shares class common stock weighted average price 1889 per share total purchase price 38 million year ended december 31 2016 company repurchased 984190 shares class common stock weighted average price 896 per share total purchase price 88 million december 31 2018 1000 million authorized repurchases remaining program quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated february 16 2018 company’s board directors authorized issuance 1006061 shares company class common stock treasury company’s esop stock price 2218 per share total value 223 million october 13 2017 company’s board directors authorized cancellation 1027907 shares company’s class b common stock held company’s treasury returned shares status authorized unissued shares addition future acquired shares company’s class b common stock immediately canceled returned status authorized unissued shares years ended december 31 2018 2017 284845 136654 shares class b common stock respectively converted class common stock shares class b common stock canceled returned status authorized unissued shares accordance articles incorporation dividends paid equally three classes common shares following table details dividend activity related outstanding shares common stock years ended december 31 2018 2017 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 19 accumulated comprehensive loss changes accumulated comprehensive loss component net tax years ended december 31 2018 2017 follows 1 includes adjustments adoption accounting standards update 201802 “income statementreporting comprehensive income topic 220 reclassification certain tax effects accumulated comprehensive income” “asu 201802” reclassifications accumulated comprehensive loss net earnings year ended december 31 2018 details reclassifications accumulated comprehensive loss net earnings years ended december 31 2017 2016 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 20 segment information company leading marketing solutions provider company leverages strong print foundation part much larger robust integrated marketing platform helps marketers content creators improve efficiency effectiveness marketing spend across offline online media channels company’s operating reportable segments aligned chief operating decision maker company currently manages business company’s operating reportable segments including product service offerings “corporate” category follows •united states print related services •international •corporate united states print related services united states print related services segment predominantly comprised company’s united states printing operations managed one integrated platform includes retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement together marketing complementary services including consumer insights audience targeting personalization media planning placement process optimization campaign planning creation premedia production videography photography digital execution print execution logistics segment also includes manufacture ink international segment consists company’s printing operations europe latin america including operations england france germany poland argentina colombia mexico peru well investments printing operations brazil india segment provides printed products marketing complementary services consistent united states print related services segment unrestricted subsidiaries defined senior unsecured notes indenture represent less 20 total consolidated assets december 31 2018 less 20 total consolidated net sales year ended december 31 2018 corporate consists unallocated general administrative activities associated expenses including part executive legal finance well certain expenses income frozen employee retirement plans pension benefit plans quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following summary segment information years ended december 31 2018 2017 2016 restructuring impairment transactionrelated charges years ended december 31 2018 2017 2016 described note 4 “restructuring impairment transactionrelated charges” included operating income loss results segment reconciliation operating income loss earnings loss income taxes equity loss unconsolidated entity reported consolidated statements operations years ended december 31 2018 2017 2016 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated total assets segment december 31 2018 2017 2016 follows note 21 geographic area information table presents company’s net sales longlived assets years ended december 31 2018 2017 2016 geographic region amounts table differ segment data presented note 20 “segment information” operating segment includes operations multiple geographic regions based company’s management reporting structure quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 22 separate financial information subsidiary guarantors indebtedness april 28 2014 quad completed offering senior unsecured notes see note 11 “debt” details senior unsecured notes company’s guarantor subsidiaries fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including following • designation guarantor subsidiaries unrestricted subsidiary • release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries • sale disposition including sale substantially assets guarantor subsidiaries following condensed consolidating financial information reflects summarized financial information quad company’s guarantor subsidiaries combined basis company’s nonguarantor subsidiaries combined basis quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2018 condensed consolidating statement comprehensive income loss year ended december 31 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2017 condensed consolidating statement comprehensive income loss year ended december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2016 condensed consolidating statement comprehensive income loss year ended december 31 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating balance sheet december 31 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating balance sheet december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 23 new accounting pronouncements august 2018 financial accounting standards board “fasb” issued accounting standards update 201815 “intangiblesgoodwill otherinternaluse software subtopic 35040 customers accounting implementation costs incurred cloud computing arrangement service contract” “asu 201815” aligns requirements capitalizing implementation costs incurred cloud computing arrangement service contract requirements capitalizing implementation costs incurred develop obtain internaluse software guidance effective interim annual periods beginning december 15 2019 early adoption permitted entities allowed apply either retrospective prospective transition approach adopt guidance company evaluating impact adoption asu 201815 consolidated financial statements august 2018 fasb issued accounting standards update 201814 “compensationretirement benefitsdefined benefit plansgeneral subtopic 71520 disclosure frameworkchanges disclosure requirements defined benefit plans” “asu 201814” adds removes clarifies yearend disclosure requirements related defined benefit pension postretirement plans guidance effective annual periods ending december 15 2020 early adoption permitted new guidance require retrospective adoption approach company evaluating impact adoption asu 201814 notes consolidated financial statements august 2018 fasb issued accounting standards update 201813 “fair value measurement topic 820 disclosure frameworkchanges disclosure requirements fair value measurement” “asu 201813” changes requirements fair value measurements removing modifying adding certain disclosures guidance effective interim annual periods beginning december 15 2019 early adoption permitted entities electing early adopt permitted early adopt eliminated modified disclosure requirements delay adoption new disclosure requirements effective date adoption asu 201813 requires application combination prospective retrospective methods transition depending topic disclosure company evaluating impact adoption asu 201813 notes consolidated financial statements february 2018 fasb issued accounting standards update 201802 “income statementreporting comprehensive income topic 220 reclassification certain tax effects accumulated comprehensive income” “asu 201802” give entities option reclassify tax effects stranded accumulated comprehensive loss result tax reform accumulated deficit guidance requires entity disclose whether elected reclassify tax effects related tax act well entitys policy releasing income tax effects accumulated comprehensive loss guidance effective interim annual periods beginning december 15 2018 early adoption permitted periods financial statements yet issued made available issuance including period tax act enacted entities choose adopt asu 201802 annual interim period enactment able choose whether apply amendments retrospectively period effect tax act recognized apply amendments period adoption company adopted standard january 1 2018 applying amendments period adoption company elected reclassify stranded tax effects related change federal tax rate due enactment tax act items accumulated comprehensive loss result adoption asu 201802 company reclassified 29 million accumulated comprehensive loss decrease accumulated deficit see note 19 “accumulated comprehensive loss” breakout impact component quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated august 2017 fasb issued accounting standards update 201712 “derivatives hedging topic 815 targeted improvements accounting hedging activities” “asu 201712” simplifies reduces complexity hedge accounting requirements better aligns entitys financial reporting hedging relationships risk management activities guidance effective interim annual periods beginning december 15 2018 early adoption permitted new guidance require modified retrospective adoption approach existing hedging relationships adoption date company adopted standard january 1 2018 adoption asu 201712 material impact consolidated financial statements march 2017 fasb issued asu 201707 requires employer disaggregate service cost component net benefit cost provides guidance present service costs components net benefit costs statement operations new standard entity must report service cost component line item compensation costs components net benefit cost required presented statement operations separately service cost component outside subtotal operating income guidance effective interim annual periods beginning december 15 2017 requires retrospective adoption approach classification components net periodic benefit cost statement operations company adopted standard january 1 2018 applying retrospective adoption approach utilizing practical expedient permits use amounts disclosed previous filings net pension income estimation basis presentation prior comparative periods see note 1 “basis presentation summary significant accounting policies” additional accounting policy transition disclosures note 15 “employee retirement plans” components net pension income january 2017 fasb issued accounting standards update 201704 “intangiblesgoodwill topic 350 simplifying test goodwill impairment” “asu 201704” eliminates step 2 part goodwill impairment test amount impairment charge recognized would amount carrying value exceeds reporting units fair value loss recognized cannot exceed amount goodwill allocated reporting unit amendments asu 201704 effective annual interim goodwill impairment tests fiscal years beginning december 15 2019 early adoption permitted interim annual goodwill impairment tests performed testing dates january 1 2017 company elected early adopt standard applied guidance goodwill impairment analyses performed january 1 2018 november 2016 fasb issued accounting standards update 201618 “statement cash flows topic 230 restricted cash” “asu 201618” clarifies guidance classification presentation restricted cash statement cash flows guidance effective interim annual periods beginning december 15 2017 requires retrospective adoption approach company adopted standard january 1 2018 result company condensed line items “cash equivalents” “restricted cash” one line consolidated balance sheets company also made adjustments consolidated statements cash flows included removing certain line items related transfer restricted cash adjusting beginning ending cash balances reflect newly condensed “cash equivalents” line item within consolidated balance sheets adoption asu 201618 material impact consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated june 2016 fasb issued accounting standards update 201613 “financial instrumentscredit losses topic 326 measurement credit losses financial instruments” “asu 201613” changes impairment model financial assets certain instruments new guidance entities required measure expected credit losses financial instruments including trade receivables based historical experience current conditions reasonable forecasts guidance effective interim annual periods beginning december 15 2019 early adoption permitted interim annual periods beginning december 15 2018 new guidance require modified retrospective transition approach entity need apply cumulativeeffect adjustment retained earnings accumulated deficit beginning first reporting period guidance adopted company evaluating impact adoption asu 201613 consolidated financial statements february 2016 fasb issued accounting standards update 201602 “leases topic 842” “asu 201602” establishes rightofuse model requiring lessee record rightofuse asset lease liability balance sheet leases terms longer twelve months leases classified either finance operating classification affecting pattern expense recognition guidance also requires additional disclosures enable users financial statements understand amount timing uncertainty cash flows arising leases guidance effective interim annual periods beginning december 15 2018 early adoption permitted fasb approved proposal allow prospective transition approach current year financial statements would need reported new accounting model company elected option present current year financial statements accordance topic 842 prior year comparative periods presented topic 840 company developed comprehensive project plan established crossfunctional implementation team evaluate impact standard project plan included evaluating companys lease portfolio analyzing standard’s impact company’s various types lease contracts identifying reporting requirements new standard company completed analysis implementation system performing data validation assist meeting standard’s reporting disclosure requirements company elected available practical expedients implemented changes processes internal controls enable preparation financial information upon adoption company adopted standard january 1 2019 applying modified retrospective transition approach leases existing entered january 1 2019 company final stages calculating transition adjustment requires companies record rightofuse asset lease liability operating leases valued present value remaining leases payments discounted using discount rate lease transition date impact transition adjustment estimated 1300 million 1400 million consolidated balance sheets impact consolidated statements operations note 24 subsequent events acquisition periscope january 3 2019 company completed acquisition periscope creative agency headquartered minneapolis minnesota net preliminary purchase price 1211 million excluding acquired cash periscope provides comprehensive service offering including media buying analytics creative account management periscope also packaging design premedia services complement quad’s printproduction capabilities quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated senior secured credit facility amendment company completed third amendment april 28 2014 senior secured credit facility january 31 2019 third amendment completed provide quad liquidity structural flexibility consummate proposed acquisition lsc extend existing maturities increasing aggregate amount existing revolving credit facility 7250 million 8000 million two tranches first tranche approximately 828 million maturing january 4 2021 second tranche approximately 7172 million delayed draw feature term five years maturing january 31 2024 b increasing aggregate amount existing term loan 3750 million 8250 million two tranches first tranche approximately 324 million maturing january 4 2021 second tranche approximately 7926 million term five years maturing january 31 2024 c increasing aggregate amount existing term loan b 3000 million 5000 million term seven years maturing january 31 2026 company intends loans available amended revolving credit facility used repay refinance repurchase redeem exchange otherwise terminate lsc’s existing indebtedness prior connection following consummation merger pay transaction expenses borrowings revolving credit facility delayed draw term loan made senior secured credit facility initially bear interest 250 excess reserve adjusted libor 150 excess alternate base rate borrowing term loan b initially bear interest 500 excess reserve adjusted libor 400 excess alternative base rate company’s option following amendments made quarterly financial covenants company subject financial terms numbers ratios defined senior secured credit facility amended third amendment • rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense cannot less 300 100 • new financial covenant added senior secured credit facility requires company maintain liquidity defined unrestricted cash permitted investments company subsidiaries subject certain conditions plus aggregate amount unused revolving credit facility commitments less 3000 million time period six months prior maturity date company’s senior unsecured notes earlier date senior unsecured notes repaid full b maturity date senior unsecured notes extended date least 91 days later latest maturity date senior secured credit facility maturity date company’s senior unsecured notes currently may 1 2022 addition covenants following amendment made certain limitations acquisitions indebtedness liens dividends repurchases capital stock set forth senior secured credit facility • company’s total net leverage ratio equal greater 275 100 defined senior secured credit facility company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total net leverage ratio less 275 100 restrictions senior secured credit facility remains secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances see note 11 “debt” company’s covenant requirements december 31 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated definitive agreement acquire lsc communications inc joint proxy statementprospectus previously disclosed october 30 2018 company lsc entered definitive agreement pursuant quad acquire lsc allstock transaction valued approximately 13 billion including refinancing lsc’s debt assumption obligations acquisition subject customary closing conditions including regulatory approval shareholders companies december 13 2018 quad lsc received request additional information documentary material “second request” u department justice “doj” connection doj’s review transactions contemplated definitive agreement issuance second request extends waiting period hsr act 30 days quad lsc substantially complied second request later time parties may agree doj unless waiting period terminated earlier doj company’s registration statement form s4 including part thereof joint proxy statementprospectus quad lsc effective february 4 2019 quad shareholders close business january 16 2019 record date entitled vote proposal approve issuance shares quad class common stock connection acquisition lsc quad special meeting february 22 2019 lsc stockholders close business record date entitled vote upon among things proposal adopt definitive agreement quad acquire lsc special meeting february 22 2019 acquisition consummated lsc’s stockholders entitled receive issued outstanding share lsc common stock owned immediately prior effective time acquisition 0625 shares quad class common stock quad lsc cannot consummate acquisition unless among things quad shareholders approve issuance shares quad class common stock connection acquisition lsc stockholders adopt acquisition agreement expiration waiting period hsr act required regulatory approvals satisfaction waiver closing conditions specified agreement quad continues expect acquisition consummated mid2019 declaration quarterly dividend february 19 2019 company declared quarterly dividend 030 per share paid march 8 2019 item 9item 8 financial statements supplementary data quarterly financial data unaudited following table sets forth selected financial information eight quarters twoyear period ended december 31 2019 unaudited information prepared company basis consolidated financial statements includes normal recurring adjustments necessary present information fairly read conjunction company’s audited consolidated financial statements notes thereto 1 operating income continuing operations increased 41 million three months ended march 31 2019 compared three months ended march 31 2018 primarily due following 1 223 million noncash expense related special employee retirement contribution 2018 resulting benefit tax reform repeat 2019 2 173 million decreased restructuring impairment transaction related charges 3 savings cost reduction initiatives including employeerelated costs 3 earnings ivie periscope acquisition investment rise impacts partially offset following 1 lower print volume pricing due ongoing industry pressures 2 164 million net benefit 2018 gains property insurance claims 3 50 million benefit 2018 changes employee vacation policies operating income continuing operations decreased 72 million three months ended june 30 2019 compared three months ended june 30 2018 primarily due following 1 lower print volume pricing due ongoing industry pressures excess capacity printing industry 2 increase employeerelated costs primarily due 80 million increase production hourly wages competitive labor markets 3 70 million decrease paper byproduct recoveries partially offset following 1 savings cost reduction initiatives 2 earnings periscope acquisition 3 10 million decreased restructuring impairment transactionrelated charges operating income continuing operations decreased 764 million three months ended september 30 2019 compared three months ended september 30 2018 primarily due following 1 514 million increased restructuring impairment transactionrelated charges 2 lower print volume pricing due ongoing industry pressures excess capacity printing industry 3 increase employee related costs primarily due 75 million increase production hourly wages competitive labor markers 4 84 million decrease paper byproduct recoveries partially offset following 1 savings cost reduction initiatives 2 earnings periscope acquisition 3 28 million decrease depreciation amortization expense operating income continuing operations increased 269 million three months ended december 31 2019 compared three months ended december 31 2018 primarily due following 1 470 million decreased restructuring impairment transactionrelated charges 2 savings cost reduction initiatives 3 earnings periscope acquisition partially offset following 1 lower print volume pricing due ongoing industry pressures 2 127 million decrease paper byproduct recoveries 3 56 million gain 2018 sales tax litigation settlement peru repeat 2019 4 increase employee related costs primarily due 47 million increase production hourly wages competitive labor markets 2 results operations company’s united states book business included earnings loss discontinued operations see note 4 “discontinued operations” consolidated financial statements item 8 annual report form 10k report independent registered public accounting firm shareholders board directors quadgraphics inc opinion financial statements audited accompanying consolidated balance sheets quadgraphics inc subsidiaries “company” december 31 2019 2018 related consolidated statements operations comprehensive income loss shareholders’ equity cash flows three years period ended december 31 2019 related notes collectively referred “financial statements” opinion financial statements present fairly material respects financial position company december 31 2019 2018 results operations cash flows three years period ended december 31 2019 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states pcaob company’s internal control financial reporting december 31 2019 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission report dated february 19 2020 expressed unqualified opinion company’s internal control financial reporting change accounting principle discussed note 13 financial statements company changed method accounting leases effective january 1 2019 due adoption accounting standards update asu 201602 leases topic 842 basis opinion financial statements responsibility companys management responsibility express opinion companys financial statements based audits public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement whether due error fraud audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation financial statements believe audits provide reasonable basis opinion critical audit matters critical audit matters communicated matters arising currentperiod audit financial statements communicated required communicated audit committee 1 relate accounts disclosures material financial statements 2 involved especially challenging subjective complex judgments communication critical audit matters alter way opinion financial statements taken whole communicating critical audit matters providing separate opinions critical audit matters accounts disclosures relate discontinued operations refer notes 1 4 consolidated financial statements critical audit matter description described note 4 consolidated financial statements 2019 company made decision sell united states book business “book business” management reflected results business discontinued operation consolidated statements earnings periods presented management presents discontinued operations disposal anticipated disposal component group components management’s judgment represents strategic shift major effect operations financial results upon decision sell book business 2019 net assets book business reclassified held sale accordance authoritative guidance accordingly company required assess measure net assets fair value conjunction assessment fair value longlived assets contract assets goodwill determined carrying value related assets company recorded impairment charges 865 million 56 million 101 million respectively reduce carrying values estimated fair values fair value determined company based internal discounted cash flows estimates quoted market prices available independent appraisals appropriate principal considerations determination performing procedures relating planned divestiture determination fair value book business critical audit matter high degree auditor effort judgment subjectivity involved designing performing procedures evaluate planned divestiture transaction due estimates assumptions made management assessing whether book business met criteria classified held sale including probability sale complete within one year estimate fair value assets given sensitivity operations changes demand historical results strategic plan company required high degree auditor judgment increased extent effort performing audit procedures evaluate reasonableness management’s estimates assumptions related determination fair value book business audit effort required review accuracy company’s restatement prior period financial statements critical audit matter addressed audit procedures related classification book business discontinued operation impairment assets within book business included following among others • tested effectiveness controls related management’s assertion book business met criteria presented discontinued operation effectiveness controls management’s goodwill longlived asset impairment evaluation • inquired management understand progression potential divestiture transactions • inquired management reviewed management’s plan sell business • evaluated evidence used company evaluation whether planned divestiture met criteria discontinued operations including probability sale completed within one year • evaluated allocation goodwill book business based weighting relative fair value book business compared remainder core print reporting unit • evaluated reasonableness management’s forecasts future net sales ebitda margins comparing forecasts 1 historical growth net sales historical ebitda margins 2 management’s longrange strategic plan communicated board directors 3 forecasted information included company press releases well analyst industry reports company companies peer group • evaluated reasonableness 1 valuation methodology 2 weighted average cost capital comparing fair value calculated market approach income approach evaluating weighting valuation methodology testing source information underlying determination weighted average cost capital mathematical accuracy calculation well developing range independent estimates comparing weighted average cost capital selected management • evaluated reasonableness assessment performed management’s specialist determination fair value real estate longlived assets comparing determined fair value independent estimate comparison external sources • reviewed accuracy company’s restatement prior period financial statements revenues refer notes 1 2 consolidated financial statements critical audit matter description company recognizes revenue upon transfer control promised products services customers amount reflects consideration company expects receive exchange products services company various products service lines differing levels involvement management judgment timing revenue recognition identified revenues critical audit matter diversity products service lines diversity audit evidence obtained billing arrangement individually unique requires higher degree auditor judgment increased extent effort designing performing audit procedures evaluate appropriateness management’s estimates audit evidence related recognition revenues critical audit matter addressed audit procedures related revenues included following • tested effectiveness controls related revenue recognition process • evaluated management’s significant accounting policies related revenue recognition reasonableness • selected sample recorded revenue transactions performed following procedures ◦ obtained customer source documents contract selection including master agreements related amendments evaluate relevant contractual terms appropriately considered management ◦ evaluated management’s application accounting policy tested revenue recognition specific performance obligations comparing management’s conclusions underlying master agreement related amendments ◦ tested mathematical accuracy management’s calculations revenue associated timing revenue recognized financial statements deloitte touche llp milwaukee wisconsin february 19 2020 served companys auditor since 2002 report independent registered public accounting firm shareholders board directors quadgraphics inc opinion internal control financial reporting audited internal control financial reporting quadgraphics inc subsidiaries “company” december 31 2019 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion company maintained material respects effective internal control financial reporting december 31 2019 based criteria established internal control integrated framework 2013 issued coso also audited accordance standards public company accounting oversight board united states pcaob consolidated financial statements year ended december 31 2019 company report dated february 19 2020 expressed unqualified opinion financial statements included explanatory paragraph regarding company’s adoption new accounting standard described management’s report internal control financial reporting management excluded assessment internal control financial reporting periscope inc “periscope” acquired january 3 2019 operations excluded assessment constitute approximately 3 consolidated total current assets approximately 1 consolidated net sales approximately 1 consolidated cost sales year ended december 31 2019 accordingly audit include internal control financial reporting periscope basis opinion company’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting responsibility express opinion company’s internal control financial reporting based audit public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audit accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate deloitte touche llp milwaukee wisconsin february 19 2020 quadgraphics inc consolidated statements operations millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements comprehensive income loss millions see accompanying notes consolidated financial statements quadgraphics inc consolidated balance sheets millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements cash flows millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements shareholders’ equity millions see accompanying notes consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies nature operationsquad worldwide marketing solutions partner dedicated creating better way clients datadriven integrated marketing platform helps reduce complexity increase efficiency enhance marketing spend effectiveness quad provides clients unmatched scale onsite services expanded subject expertise marketing strategy creative solutions media deployment includes strong foundation print marketing management services clientcentric approach drives expanded offering combined leadingedge technology singlesource simplicity company believes resources knowledge help wide variety clients multiple vertical industries including retail financialinsurance healthcare consumer packaged goods publishing directtoconsumer company operates primarily commercial print portion printing industry printer retail inserts publications catalogs special interest publications journals direct mail directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement company’s products services variety industries sold primarily throughout north america south america europe addition company strategically sources packaging product manufacturing multiple end markets central america asia principles consolidation basis presentationthe accompanying consolidated financial statements include accounts company whollyowned majorityowned controlled subsidiaries prepared accordance gaap results operations accounts businesses acquired included consolidated financial statements dates acquisition see note 3 “acquisitions strategic investments” investments entities company ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting investments entities company exert significant influence control ownership interest less 20 accounted using cost method accounting intercompany transactions balances eliminated consolidation discontinued operationsthe results operations company’s book business reported discontinued operations periods presented accordance asc 20520 discontinued operations corresponding current longterm assets liabilities book business classified held sale consolidated balance sheets accordance asc 20520 december 31 2019 2018 financial information pertaining discontinued operations excluded relevant notes consolidated financial statements unless otherwise noted see required disclosures information note 4 “discontinued operations” information company’s intent sell book business foreign operationsassets liabilities denominated foreign currencies translated united states dollars exchange rate existing respective balance sheet dates income expense items translated average rates respective periods translation adjustments resulting fluctuations exchange rates recorded separate component accumulated comprehensive income loss consolidated statements shareholders’ equity transaction gains losses recorded selling general administrative expenses consolidated statements operations foreign exchange transactions resulted losses 12 million year ended december 31 2019 gains 16 million year ended december 31 2018 losses 15 million year ended december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company 49 interest plural commercial printer based são paulo brazil december 31 2019 company accounts entity using equity method accounting company’s equity earnings loss plural’s operations recorded equity earnings loss unconsolidated entity company’s consolidated statements operations included within international segment distributions received equity method investees follow nature distribution approach distribution evaluated basis source payment classified either operating cash inflows investing cash inflows company reviews equity method investment regularly indicators temporary impairment quad significant unconsolidated entities december 31 2019 use estimatesthe preparation consolidated financial statements requires use management’s estimates assumptions affect reported assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenue expenses reporting periods actual results could differ estimates used accounting items matters including limited allowances doubtful accounts inventory obsolescence asset valuations useful lives pension postretirement benefits selfinsurance reserves stockbased compensation taxes restructuring provisions contingencies revenue recognitionthe company recognizes products services revenue based transfer control passes customer service completed accepted customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related company’s imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer revenues related company’s logistics operations includes delivery printed material recognized upon completion services certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily company’s logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many company’s operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis january 1 2018 company adopted accounting standards update 201409 “revenue contracts customers” “asu 201409” provides revised guidance recognizing revenue contracts customers company adopted asu 201409 using modified retrospective approach applied guidance applied new guidance asc 606 revenue contracts customers “asc 606” contracts completed january 1 2018 means asc 606 applied 2018 financial statements disclosures going forward prior period financial statements disclosures reflect revenue recognition standard asc 605 revenue recognition see note 2 “revenue recognition” additional accounting policy transition disclosures byproduct recoveriesthe company presents byproduct recoveries reduction cost salesproducts consolidated statements operations classification byproduct recoveries reduction cost sales aligns proceeds byproduct recoveries corresponding manufacturing costs quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated financial instrumentsthe company uses derivative financial instruments purpose hedging interest rate commodity foreign exchange exposures exist part ongoing business operations including interest rate swap agreements natural gas forward purchase contracts foreign exchange contracts policy company engage speculative leveraged transactions company hold issue financial instruments trading purposes derivative instruments recorded consolidated balance sheets either assets liabilities measured fair value derivative designated fair value hedge changes fair value derivative hedged item attributable hedged risk recognized earnings derivative designated cash flow hedge effective portion changes fair value derivative recorded component accumulated comprehensive income loss recognized consolidated statements operations hedged item affects earnings ineffective portions changes fair value hedges insignificant recognized earnings cash flows derivatives accounted cash flow fair value hedges included consolidated statements cash flows category item hedged fair value measurementthe company applies fair value accounting assets liabilities recognized disclosed fair value consolidated financial statements recurring basis fair value represents amount would received selling asset paid transfer liability orderly transaction market participants measurement date determining fair value measurements assets liabilities required recorded fair value company considers principal advantageous market marketbased risk measurements assumptions market participants would use pricing asset liability see note 15 “financial instruments fair value measurements” discussion research developmentresearch development costs related development new products adaptation existing products expensed incurred included cost sales totaled 36 million 36 million 90 million years ended december 31 2019 2018 2017 respectively cash equivalents restricted cashthe company considers highly liquid investments original maturities three months less cash equivalents receivablesreceivables stated net allowances doubtful accounts single customer comprised 5 company’s consolidated net sales 2019 2018 2017 5 company’s consolidated receivables december 31 2019 2018 specific customer provisions made review significant outstanding amounts utilizing information customer creditworthiness current economic trends indicates collection doubtful addition provisions made differing rates based upon age receivable company’s historical collection experience accounts deemed uncollectible written reasonable collection efforts exhausted see note 7 “receivables” discussion transactions affecting allowances doubtful accounts inventoriesinventories include material labor plant overhead stated lower cost net realizable value december 31 2019 2018 inventories valued using firstin firstout “fifo” method see note 8 “inventories” components company’s inventories quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated leases january 1 2019 company adopted accounting standards update 201602 “leases topic 842” “asu 201602” establishes rightofuse model requiring lessee record rightofuse asset lease liability balance sheet leases terms longer twelve months leases classified either finance operating classification affecting pattern expense recognition company adopted asu 201602 using modified retrospective approach applied new guidance accounting standards codification 842 leases “asc 842” contracts existing entered january 1 2019 see note 13 “leases” additional accounting policy transition disclosures property plant equipmentproperty plant equipment recorded cost depreciated estimated useful lives assets using straightline method financial reporting purposes see note 9 “property plant equipment” components company’s property plant equipment major improvements extend useful lives existing assets capitalized charged asset accounts repairs maintenance significantly improve extend useful lives respective assets expensed incurred leasehold improvements depreciated shorter lease term estimated useful life respective asset retired disposed associated costs accumulated depreciation eliminated resulting gain loss recognized company’s consolidated statements operations intangible assetsidentifiable intangible assets recognized apart goodwill amortized estimated useful lives impairment longlived intangible assetsthe company evaluates longlived assets intangible assets significant property plant equipment rightofuse assets customer relationship intangible assets whenever events circumstances occurred indicate carrying value asset may recoverable determining whether impairment occurred typically requires various estimates assumptions including determining cash flows directly related potentially impaired asset useful life cash flows occur amount asset’s residual value turn assessing whether impairment loss requires determination recoverability generally estimated ability recover balance assets expected future operating cash flows undiscounted basis impairment determined exist related impairment loss calculated based difference fair value carrying value asset goodwillgoodwill reviewed annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value performing analysis company compares reporting unit’s fair value carrying value fair value estimated based comparable company market valuations andor expected future discounted cash flows generated reporting unit carrying value exceeds reporting unit’s fair value impairment loss would charged operations period identified see note 6 “goodwill intangible assets” discussion quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated income taxesthe company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations company determines deferred income tax asset fully realized future valuation allowance established increased reflect amount asset likely realized would increase company’s provision income taxes period valuation allowance established company determines related deferred income tax assets realized future excess net recorded amount adjustment reduce related valuation allowance made would reduce company’s provision income taxes company regularly audited foreign domestic tax authorities audits occasionally result proposed assessments ultimate resolution might result company owing additional taxes including cases penalties interest company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination company’s worldwide tax provision related tax assets liabilities requires use significant judgment estimating impact uncertainties application gaap interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain fair market value required measure tax asset liability gaap purposes company periodically obtains independent third party assistance validate value determined conformity internal revenue service fair market value guidelines company believes appropriate support positions taken certain positions may successfully challenged taxing authorities resolution uncertainties manner inconsistent management’s expectations could material impact company’s financial condition operating results company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions determination company’s worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions see note 14 “income taxes” discussion pension plansthe company assumed certain frozen underfunded defined benefit pension plans part 2010 world color press acquisition pension plan costs determined using actuarial methods funded contributions company records amounts relating pension plans based calculations include various actuarial assumptions including discount rates assumed rates return mortality company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors purposes calculating expected return plan assets valued fair value event gives rise curtailment settlement curtailment accounted quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated prior settlement company’s measurement date measure defined benefit plan assets projected benefit obligation december 31 company previously participated mepps result acquisition world color press due significant underfunded status mepps company withdrawn significant mepps replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan historically form retirement benefit provided quad’s employees result decision withdraw company recorded estimated withdrawal liability mepps part world color press purchase price allocation process based information received mepps’ trustees see note 16 “employee retirement plans” discussion stockbased compensationthe company recognizes stockbased compensation expense vesting period stockbased awards made employees directors based fair value instrument time grant equity awards accounted liabilities recorded fair value initial issuance date remeasured fair value reporting period change fair value recorded selling general administrative expense condensed consolidated statements operations see note 18 “equity incentive programs” discussion accumulated comprehensive income lossaccumulated comprehensive income loss consists primarily unrecognized actuarial gains losses prior service costs pension plans foreign currency translation adjustments interest rate swap adjustments presented consolidated statements shareholders’ equity see note 20 “accumulated comprehensive loss” discussion supplemental cash flow informationthe following table summarizes certain supplemental cash flow information years ended december 31 2019 2018 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 2 revenue recognition company recognizes products services revenue based transfer control passes customer service completed accepted customer adoption asc 606 year ended december 31 2018 material effect consolidated financial statements adopting asc 606 timing recognition changed certain variable consideration paid customers costs obtain contracts customers revenue disaggregation following table provides information disaggregated revenue company’s operating segments major products services offerings years ended december 31 2019 2018 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated nature products services products offering predominantly comprised company’s print operations includes retail inserts publications catalogs special interest publications journals direct mail directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement company considers logistic operations services include delivery printed material services offering also includes revenues related company’s imaging operations include digital content management photography color services page production marketing services media planning placement facilities management medical services performance obligations contract inception company assesses products services promised contracts customers identifies performance obligations promise transfer customer product service distinct identify performance obligations company considers goods services promised contract regardless whether explicitly stated implied customary business practices company determined following distinct products services represent separate performance obligations •prepress services •print •other services prepress services company recognizes revenue pointintime upon completion performed service acceptance customer company considers transfer control occur service performed company right payment customer legal title risk reward ownership company recognizes print revenues upon transfer title passage risk loss pointintime upon shipment customer reasonable assurance collectability revenues related company’s logistics operations includes delivery printed material included print performance obligation also recognized pointintime services completed agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides revenue warehouse management fees immaterial years ended december 31 2019 2018 2017 certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily company’s logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many company’s operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis cases company print items mailed consumers bill customer postage cases company acting agent billings recorded net basis net sales quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated significant payment terms payment terms conditions contracts customers vary company typically offers standard terms net 30 days company’s standard business practice offer extended payment terms longer one year company may offer cash discounts prepayment extended terms depending certain facts circumstances timing company’s delivery products services differs timing payment company record either contract asset contract liability variable consideration evaluating transaction price company analyzes contract basis applicable variable considerations noncash consideration also performs constraint analysis nature company’s contracts give rise variable consideration including volume rebates credits discounts similar items generally decrease transaction price variable amounts generally credited customer based achieving certain levels sales activity contracts signed making payments within specific terms product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends transaction price requires allocation multiple performance obligations company uses estimated standalone selling prices using adjusted market assessment approach costs obtain contracts accordance asc 606 company capitalizes certain sales incentives sales compensation packages costs directly attributed awarded customer contract renewal would incurred contract obtained company also defers certain contract acquisition costs paid customer contract inception costs obtain contracts duration less one year expensed incurred contract costs contracts one year company amortizes costs obtain contracts straightline basis estimated life contract reviews quarterly impairment activity impacting costs obtain contracts year ended december 31 2019 follows practical expedients company elected apply following practical expedients allowed asc 606 • certain performance obligations related print contracts company elected disclose value unsatisfied performance obligations following 1 contracts original expected length one year less 2 contracts revenue recognized invoiced 3 contracts variable consideration related unsatisfied performance obligations company approximately 217 million volume commitments contracts extend beyond one year december 31 2019 company expects recognize approximately 55 volume commitments contracts revenue end 2020 remaining 45 end 2021 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated • company expenses costs obtain contracts incurred contract duration less one year • transaction amount adjusted significant financing component period transfer products services payment less one year • company accounts shipping handling activities includes postage occur control related products services transfers customer fulfillment activities therefore recognized time shipping • company excludes transaction price amounts collected customers sales taxes note 3 acquisitions strategic investments 2019 acquisition periscope january 3 2019 company completed acquisition periscope creative agency headquartered minneapolis minnesota 1210 million cash paid periscope provides comprehensive service offering including media buying analytics creative account management periscope also packaging design premedia services complement quad’s printproduction capabilities purchase price 1340 million includes 98 million acquired cash noncash equity incentive awards grant date fair value 32 million included purchase price allocation 698 million identifiable intangible assets amortized estimated useful lives ranging five six years 585 million goodwill 527 million deductible tax purposes final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 “financial instruments fair value measurements” definition level 3 inputs periscope’s operations included united states print related services segment 2018 acquisition ivie company completed acquisition ivie february 21 2018 900 million cash paid subject potential earnout additional 160 million extent certain financial metrics achieved postintegration ivie headquartered flower mound texas provides full array marketing services including creative production services studio services sourcing procurement staff enhancement media services public relations digital services technology solutions project management many leading brands throughout world purchase price 1054 million includes 136 million acquired cash estimated 154 million future cash payments related acquisition april 2019 first year earnout payment 53 million made included purchase price allocation 796 million identifiable intangible assets amortized estimated useful lives ranging three eight years 283 million goodwill 264 million deductible tax purposes final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 “financial instruments fair value measurements” definition level 3 inputs ivie’s operations included united states print related services segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 2018 investment rise march 14 2018 company increased equity position rise 19 57 conversion 93 million loans equity ownership 87 million cash paid company historically accounted rise cost method investment rise digital marketing agency headquartered chicago illinois specializes digital media analytics customer experience helps enterprise marketers see shape act opportunities digital media company consolidated results rise date company obtained controlling financial interest rise accounts 43 portion rise’s results owned company noncontrolling interest consolidated financial statements fair value assets liabilities noncontrolling interest rise estimated 485 million including 137 million acquired cash also included fair value allocation 231 million identifiable intangible assets amortized estimated useful lives ranging five six years 263 million goodwill deductible tax purposes final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 “financial instruments fair value measurements” definition level 3 inputs rise’s operations included united states print related services segment note 4 discontinued operations third quarter 2019 company made decision sell united states book business part ongoing process review business portfolio divest assets core company’s transformation strategy accordingly company classified book business discontinued operation required asc 20520 discontinued operations book business primarily consists three facilities versailles kentucky fairfield pennsylvania martinsburg west virginia company’s book business historically included within united states print related services segment core print related services reporting unit following table summarizes results operations company’s book business included loss discontinued operations consolidated statements operations years ended december 31 2019 2018 2017 1 company recognized impairment charges year ended december 31 2019 reduce carrying value book business fair value including 865 million impairment charges tangible property plant equipment 56 million impairment charges contract assets 2 book business included core print related services reporting unit amount goodwill allocated book business determined based relative fair value book business portion reporting unit quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated retained due decision sell book business company must determine whether assets book business impaired therefore management performed interim goodwill impairment test due carrying value book business net assets exceeding estimated fair value company recorded 101 million goodwill impairment charge consolidated statements cash flows periods adjusted separately disclose cash flows related discontinued operations cash flows used operating activities related book business 80 million 109 million 57 million years ended december 31 2019 2018 2017 respectively cash flows used investing activities related book business 172 million 145 million 115 million years ended december 31 2019 2018 2017 respectively following table summarizes current longterm assets liabilities discontinued book business classified held sale consolidated balance sheets december 31 2019 2018 1 includes land building assets reclassified current assets december 31 2019 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 5 restructuring impairment transactionrelated charges company recorded restructuring impairment transactionrelated charges years ended december 31 2019 2018 2017 follows costs related activities recorded consolidated statements operations restructuring impairment transactionrelated charges see note 21 “segment information” restructuring impairment transactionrelated charges segment restructuring charges company began restructuring program 2010 related eliminating excess manufacturing capacity properly aligning cost structure company announced total 45 plant closures since 2010 company announced closures facilities located midland michigan shakopee minnesota year ended december 31 2019 company classifies following charges restructuring • employee termination charges incurred company reduces workforce facility consolidations separation programs • integration costs incurred primarily integration acquired companies see note 3 “acquisitions strategic investments” descriptions company’s recent acquisitions • restructuring charges comprised following components presented net gains sale facilities businesses year ended december 31 2019 company recognized 84 million gain sale business well gains sale facilities located franklin kentucky hazleton pennsylvania year ended december 31 2018 company recognized 321 million increase company’s mepps withdrawal liability 100 million charges certain legal matters customer contract penalties related company’s operations peru well gains sale facilities located taunton massachusetts book dallas texas san ixhuatepec mexico year ended december 31 2017 company recognized 67 million loss sale business 12 million gain settlements vendors bankruptcy proceedings companys argentina subsidiaries well gains sale facilities located atglen pennsylvania dickson tennessee lenexa kansas east greenville pennsylvania marengo iowa quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated restructuring charges recorded based plans committed management part based upon management’s best estimates future events changes estimates may require future restructuring charges adjustments restructuring liabilities company expects incur additional restructuring charges related initiatives impairment charges company recognized impairment charges 79 million year ended december 31 2019 consisting following 1 76 million impairment charges primarily machinery equipment longer utilized production result facility consolidations well capacity strategic reduction restructuring initiatives 2 03 million land building impairment charges additional impairment charges recorded related book business year ended december 31 2019 disclosed note 4 “discontinued operations” company recognized impairment charges 262 million year ended december 31 2018 consisting following 1 166 million impairment charges primarily machinery equipment longer utilized production result facility consolidations including waseca minnesota hazleton pennsylvania franklin kentucky well capacity strategic reduction restructuring initiatives including 50 million impairment charges machinery equipment peru 2 46 million land building impairment charges primarily related franklin kentucky plant closure company recognized impairment charges 120 million year ended december 31 2017 consisting following 1 67 million impairment charges primarily machinery equipment longer utilized production result facility consolidations including waseca minnesota columbus ohio taunton massachusetts well capacity strategic reduction restructuring initiatives 2 53 million land building impairment charges related waseca minnesota taunton massachusetts book plant closures fair values impaired assets determined company level 3 fair value hierarchy see note 15 “financial instruments fair value measurements” definition level 3 inputs estimated based broker quotes internal expertise related current marketplace conditions estimated future discounted cash flows assets adjusted estimated fair values time impairment estimated fair values subsequently decline carrying values assets adjusted accordingly transactionrelated charges company incurs transactionrelated charges primarily consisting professional service fees related business acquisition divestiture activities company recognized transactionrelated charges 516 million 82 million 31 million years ended december 31 2019 2018 2017 respectively transactionrelated charges included 450 million reverse termination fee paid year ended december 31 2019 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated connection termination definitive agreement pursuant quad would acquired lsc 64 million related proposed acquisition lsc year ended december 31 2018 10 million related sale business year ended december 31 2017 transactionrelated charges expensed incurred accordance applicable accounting guidance business combinations restructuring reserves activity impacting company’s restructuring reserves years ended december 31 2019 2018 follows company’s restructuring reserves december 31 2019 included shortterm longterm component shortterm portion included 158 million current liabilities see note 10 “other current longterm liabilities” 13 million accounts payable consolidated balance sheets company expects reserves paid within next twelve months longterm portion 74 million included longterm liabilities see note 10 “other current longterm liabilities” consolidated balance sheets included table 20 million noncash reclassification transition lease liabilities previously accounted asc 420 exit disposal cost obligations operating lease obligations accordance new guidance asc 842 see note 13 “leases” additional accounting policy transition disclosures note 6 goodwill intangible assets goodwill represents excess purchase price fair value identifiable net assets acquired business combination goodwill assigned specific reporting units tested annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value due company’s decision sell book business interim goodwill impairment test required completed remaining goodwill core print related services reporting unit third quarter 2019 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair value determined using equal weighting income market approaches income approach company determined fair value based estimated future cash flows discounted estimated weightedaverage cost capital reflects overall level inherent risk rate return outside investor would expect earn market approach company derived fair value reporting units based market multiples comparable publiclytraded companies fair value determination categorized level 3 fair value hierarchy see note 15 “financial instruments fair value measurements” definition level 3 inputs due carrying value book business net assets exceeding estimated fair value company recorded 101 million goodwill impairment charge related book business third quarter 2019 see note 4 “discontinued operations” addition remaining goodwill allocated business sold must tested impairment goodwill impairment recorded remaining 1030 million related retained portion core print related services reporting unit year ended december 31 2019 goodwill impairment charges recorded related company’s continuing operations years ended december 31 2019 2018 2017 accumulated goodwill impairment losses carrying value goodwill continuing operations december 31 2019 2018 follows activity impacting goodwill years ended december 31 2019 2018 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated intangible assets components intangible assets december 31 2019 2018 follows year ended december 31 2019 gross carrying amount intangible assets increased primarily due 698 million acquired identifiable finitelived intangible assets discussed note 3 “acquisitions strategic investments” intangible assets evaluated potential impairment whenever events circumstances indicate carrying value may recoverable impairment charges recorded finitelived intangible assets years ended december 31 2019 2018 2017 amortization expense intangible assets 448 million 344 million 183 million years ended december 31 2019 2018 2017 respectively following table outlines estimated future amortization expense related intangible assets december 31 2019 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 7 receivables activity impacting allowances doubtful accounts years ended december 31 2019 2018 2017 follows 1 writeoffs primarily consisted fully reserved receivables years ended december 31 2019 2018 2017 note 8 inventories components inventories december 31 2019 2018 follows note 9 property plant equipment components property plant equipment december 31 2019 2018 follows 1 consists computer equipment vehicles furniture fixtures leasehold improvements communication related equipment company recorded impairment charges 79 million 262 million 120 million years ended december 31 2019 2018 2017 respectively reduce carrying amounts certain property plant equipment longer utilized production due capacity strategic reduction restructuring initiatives fair value see note 5 “restructuring impairment transactionrelated charges” discussion impairment charges quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company recognized depreciation expense continuing operations 1647 million 1805 million 2002 million years ended december 31 2019 2018 2017 respectively assets held sale continuing operations company considered certain closed facilities omaha packaging plant held sale classification consolidated balance sheets assets held sale carried lesser original cost fair value less estimated costs sell assets held sale continuing operations 593 million december 31 2019 assets held sale continuing operations december 31 2018 assets carried lesser original cost fair value less estimated costs sell fair values determined company level 3 fair value hierarchy see note 15 “financial instruments fair value measurements” definition level 3 inputs estimated based quoted market prices available independent appraisals appropriate assets held sale included prepaid expenses current assets consolidated balance sheets note 10 current longterm liabilities components current longterm liabilities december 31 2019 2018 follows 1 employeerelated liabilities consist primarily payroll bonus vacation health workers’ compensation 2 omaha packaging plant considered held sale consolidated balance sheets quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 11 commitments contingencies commitments company firm commitments 266 million december 31 2019 purchase press finishing equipment litigation company named defendant various lawsuits claims asserted company normal course business liabilities ultimately result lawsuits expected management material impact consolidated financial statements company beginning april 2016 company selfreported sec united states department justice “doj” certain foreign corrupt practices act “fcpa” issues arising operations managed peru quadtech china also course internal investigation matters company identified informed office foreign assets control “ofac” doj sec certain transactions involving cuba arising company’s operations managed peru third quarter 2019 company sec entered resolution matters company paid 99 million sec october 2019 doj declined bring action company citing company’s voluntary prompt selfreporting cooperation full remediation third fourth quarters 2019 company peruvian antitrust authority indecopi negotiated agreements regarding indecopi’s investigation certain competition law issues regard private public sector clients company agreed pay total 69 million next four years beginning january 2020 environmental reserves company subject various laws regulations government policies relating health safety generation storage transportation disposal hazardous substances environment protection general company provides expenses associated environmental remediation obligations amounts probable reasonably estimated reserves adjusted new information develops circumstances change environmental reserves discounted company believes compliance laws regulations government policies material respects furthermore company anticipate maintaining compliance environmental statutes material impact upon company’s consolidated financial position quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 12 debt components longterm debt december 31 2019 2018 follows description debt obligations master note security agreement september 1 1995 last amended november 24 2014 quad entered master note security agreement december 31 2019 borrowings outstanding master note security agreement 707 million senior notes master note security agreement weighted average interest rate 724 december 31 2019 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2031 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement senior secured credit facility april 28 2014 company entered senior secured credit facility included revolving credit facility term loan term loan b company completed third amendment senior secured credit facility january 31 2019 third amendment completed provide quad liquidity structural flexibility consummate proposed terminated acquisition lsc extend existing maturities increasing aggregate amount existing revolving credit facility 7250 million 8000 million term five years maturing january 31 2024 b increasing aggregate amount existing term loan 3750 million 8250 million delayed draw feature term five years maturing january 31 2024 c increasing aggregate amount existing term loan b 3000 million 5000 million term seven years maturing january 31 2026 company intended loans available amended revolving credit facility would used repay refinance repurchase redeem exchange otherwise terminate lsc’s existing indebtedness connection consummation merger pay transaction expenses july 26 2019 following termination proposed acquisition lsc quad fully funded 8250 million delayed draw term loan retire entire amount outstanding 5000 million term loan b reduced borrowings revolving credit facility third amendment also amended certain quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated quarterly financial covenants company subject financial terms numbers ratios defined senior secured credit facility amended third amendment december 31 2019 company outstanding borrowings revolving credit facility 358 million issued letters credit leaving 7642 million available future borrowings revolving credit facility delayed draw term loan made senior secured credit facility december 31 2019 bear interest 250 excess reserve adjusted libor 150 excess alternate base rate senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances senior unsecured notes company issued 3000 million aggregate principal amount senior unsecured notes due may 1 2022 april 28 2014 senior unsecured notes bear interest 700 interest payable semiannually senior unsecured notes issued extend stagger company’s debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals company received 2948 million net proceeds sale senior unsecured notes deducting initial purchasers’ discounts commissions proceeds senior unsecured notes used purposes detailed senior secured credit facility company’s existing future domestic subsidiaries borrower guarantees indebtedness company’s senior secured credit facility guarantees certain company’s indebtedness company’s restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes “guarantor subsidiaries” guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events see note 23 “separate financial information subsidiary guarantors indebtedness” details guarantor subsidiaries international debt obligations company two fixed rate euro denominated international term loans purposes financing certain capital expenditures general business needs first international term loan amount 199 million entered december 28 2015 fully funded 2016 term six years maturing december 28 2021 december 31 2019 60 million remained outstanding first international term loan weighted average interest rate 172 second international term loan amount 118 million entered december 21 2018 bears interest 196 term five years maturing december 31 2023 december 31 2019 105 million remained outstanding second international term loan quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company two multicurrency international revolving credit facilities used financing working capital general business needs company 57 million borrowings outstanding weighted average interest rate 190 international revolving credit facilities december 31 2019 leaving 101 million available future borrowing terms international revolving credit facilities includes certain financial covenants guarantee international revolving credit facilities company security agreement includes collateralizing substantially quad europe sp zoo assets first multicurrency international revolving credit facility expires october 31 2020 bears interest aggregate warsaw interbank offered rate “wibor” plus 090 polish zloty denominated borrowings aggregate euro interbank offered rate “euribor” plus 095 euro denominated borrowings aggregate british pound sterling libor plus 095 british pound sterling denominate borrowings second multicurrency international revolving credit facility expires november 20 2020 bears interest aggregate wibor plus 070 polish zloty denominated borrowings aggregate euribor plus 070 euro denominated borrowings fair value debt based upon interest rates available company borrowings similar terms maturities fair value company’s total debt approximately 11 billion 09 billion december 31 2019 2018 respectively fair value determination company’s total debt categorized level 2 fair value hierarchy see note 15 “financial instruments fair value measurements” definition level 2 inputs december 31 2019 approximately 20 billion company’s assets pledged security various loans agreements debt issuance costs original issue discount activity impacting company’s capitalized debt issuance costs original issue discount years ended december 31 2019 2018 follows amortization expense debt issuance costs 27 million 31 million 31 million years ended december 31 2019 2018 2017 respectively amortization expense original issue discount 09 million 04 million 04 million years ended december 31 2019 2018 2017 respectively debt issuance costs original issue discount amortized straightline basis four seven eight year lives related debt instruments quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated loss debt extinguishment 2019 loss debt extinguishment conjunction third amendment company’s senior secured credit facility completed january 31 2019 company incurred 202 million debt issuance costs accordance accounting guidance treatment debt issuance costs debt extinguishment 202 million new debt issuance costs 60 million classified reduction longterm debt consolidated balance sheets 142 million expensed classified loss debt extinguishment consolidated statements operations time refinancing loss debt extinguishment recorded year ended december 31 2019 comprised following 2017 loss debt extinguishment company incurred 47 million debt issuance costs conjunction second amendment company’s senior secured credit facility accordance accounting guidance treatment debt issuance costs debt extinguishment 47 million new debt issuance costs 32 million classified reduction longterm debt consolidated balance sheets 15 million expensed classified loss debt extinguishment consolidated statements operations loss debt extinguishment recorded consolidated statements operations year ended december 31 2017 comprised following quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated covenants compliance company’s various lending arrangements include certain financial covenants financial terms numbers ratios defined company’s debt agreements among covenants company required maintain following december 31 2019 • total leverage ratio rolling twelvemonth basis total leverage ratio defined consolidated total indebtedness consolidated ebitda shall exceed 375 100 twelve months ended december 31 2019 company’s total leverage ratio 322 100 • amount outstanding revolving credit facility term loan lender revolving credit exposure term loan credit exposure company required maintain following ◦ senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined consolidated senior secured net indebtedness consolidated ebitda shall exceed 350 100 twelve months ended december 31 2019 company’s senior secured leverage ratio 230 100 • interest coverage ratio rolling twelvemonth basis interest coverage ratio defined consolidated ebitda cash consolidated interest expense shall less 300 100 twelve months ended december 31 2019 company’s interest coverage ratio 452 100 indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit company’s restricted subsidiaries’ ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially company’s consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock following limitations utilize total net leverage ratio calculation rolling twelvemonth basis defined consolidated net indebtedness consolidated ebitda twelve months ended december 31 2019 company’s total net leverage ratio 301 100 • company’s total net leverage ratio greater 275 100 company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total net leverage ratio less 275 100 restrictions company’s total net leverage ratio december 31 2019 301 100 limitations described currently applicable quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated • company’s senior secured leverage ratio greater 300 100 company’s total net leverage ratio greater 350 100 company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total net leverage ratio less 350 100 restrictions limitations described currently applicable company’s senior secured leverage ratio 230 100 total net leverage ratio 301 100 december 31 2019 estimated principal payments approximate annual principal amounts due longterm debt excluding 93 million future amortization debt issuance costs december 31 2019 follows note 13 leases company determines arrangement contains lease contract inception company recognizes rightofuse “rou” asset lease liability lease commencement date operating finance leases lease liability initially measured present value unpaid lease payments lease commencement date subsequently measured amortized cost using effective interest method key estimates judgments include company determines discount rate lease term lease payments • asc 842 requires lessee discount unpaid lease payments using interest rate implicit lease rate cannot readily determined incremental borrowing rate generally company cannot determine implicit interest rate access lessor’s estimated residual value amount lessor’s deferred initial direct costs therefore company generally uses incremental borrowing rate discount rate lease company’s incremental borrowing rate lease rate interest would pay collateralized basis borrow amount equal lease payments similar terms based published united states treasury rates well company’s credit rating implementation lease inception date • lease term company’s leases includes noncancelable period lease plus minus additional periods covered option extend terminate lease company reasonably certain exercise quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated • lease payments included lease liability comprised fixed payments well exercise price company option purchase underlying asset company reasonably certain exercise company’s leases contain variable lease payments rou assets initially measured cost comprises initial amount lease liability adjusted lease payments made lease commencement date plus initial direct costs incurred less lease incentives received operating leases rou asset subsequently amortized straightline lease expense adjusted lease liability accretion lease term finance leases rou asset subsequently amortized straightline basis lease commencement date earlier end useful life end lease term amortization rou asset recognized presented separately interest expense lease liability company’s rou assets operating finance leases reviewed impairment losses quarterly basis line asc 36010 property plant equipment overall company recognized impairment losses date continuing operations company also monitors leases events changes circumstances require reassessment lease reassessment results remeasurement lease liability corresponding adjustment made carrying amount rou asset operating leases included operating lease rightofuse assetsnet current portion operating lease obligations operating lease obligations consolidated balance sheets finance leases included property equipmentnet current portion finance lease obligations finance lease obligations consolidated balance sheets company elected recognize rou assets lease liabilities shortterm leases original lease term twelve months less therefore company recognizes lease payments associated shortterm leases expense lease term consolidated statement operations adoption asu 201602 transition approach company adopted asu 201602 january 1 2019 using additional optional transition method pursuant accounting standards update 201811 “leases topic 842 targeted improvements” meaning restatement prior period consolidated financial statements presentation comparative disclosures necessary adoption company elected following practical expedients allowed • company elected practical expedient package therefore reassess existing leases ◦ whether contracts contain leases ◦ lease classification existing leases ◦ initial direct costs • company elected practical expedient related land easements allowing carry forward accounting treatment land easements existing agreements • company used “hindsight” judgments impact lease term • company elected combine lease nonlease components one lease component select underlying lease asset categories real estate leases accounted separately leases quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated primarily equipment leases separate lease nonlease components accounted single lease component adoption new standard resulted recording operating lease rightofuse assets operating lease obligations 1308 million 1324 million respectively january 1 2019 transition adjustment included rightofuse assets operating lease obligations attributable book business 06 million 06 million respectively transition impact consolidated statement operations leases financial information company enters various lease agreements real estate office space manufacturing facilities well equipment leases including press finishing transportation equipment many leases provide company options renew terminate case equipment leases purchase related equipment termination value defined various early buyout dates term lease general company determined options reasonably certain exercised therefore included determination lease term following summarizes certain lease information year ended december 31 2019 rent expense company’s operating lease agreements prior adoption asu 201602 totaled 378 million 368 million years ended december 31 2018 2017 respectively quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated components finance lease assets december 31 2019 2018 follows future maturities lease liabilities december 31 2019 follows note 14 income taxes income taxes continuing operations based following components earnings loss continuing operations income taxes equity earnings loss unconsolidated entity years ended december 31 2019 2018 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated components income tax benefit continuing operations years ended december 31 2019 2018 2017 follows following table outlines reconciliation differences federal statutory tax rate company’s income tax benefit continuing operations years ended december 31 2019 2018 2017 69 million adjustment valuation allowance 2018 primarily relates net operating losses deferred tax assets related property plant equipment expected realized future one company’s mexican subsidiaries based current projected future profitability 200 million adjustment valuation allowance 2017 primarily relates income tax credit utilized company’s polish subsidiaries due sustainable profitability company determined utilization credit sufficient record reduction valuation allowance order reflect current net realizable value related deferred tax assets based estimated credit utilization 2026 year credit expires quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated deferred income taxes significant deferred tax assets liabilities december 31 2019 2018 follows company recorded deferred income tax liabilities 28 million 321 million december 31 2019 2018 respectively included deferred income taxes consolidated balance sheets company also recorded deferred income tax assets 612 million 274 million december 31 2019 2018 respectively included longterm assets consolidated balance sheets december 31 2019 company following gross amounts taxrelated carryforwards • net operating loss carryforwards 328 million 811 million 5223 million federal foreign state respectively federal net operating loss carryforward generated 2019 available without expiration foreign net operating loss carryforwards 291 million available without expiration remainder expires 2039 state net operating loss carryforwards expire varying amounts 2039 • capital loss carryforwards 183 million 90 million federal state respectively federal capital loss carryforwards 11 million expires 2021 172 million expires 2022 state capital loss carryforwards 05 million expires 2021 85 million expires 2022 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated • various credit carryforwards 21 million 284 million 439 million federal foreign state respectively federal carryforward expires 2039 foreign credit carryforward expires 2026 state credit carryforwards include 321 million available without expiration remainder expires 2034 december 31 2019 company recorded valuation allowance 1071 million consolidated balance sheet primarily related taxaffected amounts carryforwards valuation allowance includes 45 million 470 million 556 million federal foreign state deferred tax assets respectively expected realized uncertain tax positions following table summarizes activity company’s liability unrecognized tax benefits december 31 2019 2018 2017 december 31 2019 105 million unrecognized tax benefits would impact company’s effective tax rate recognized amount reasonably possible 16 million total amount unrecognized tax benefits decrease within next twelve months due resolution income tax audits statute expirations company classified interest expense income related penalties refunds related income tax uncertainties component income tax expense benefit following table summarizes company’s interest expense income related tax uncertainties penalties recognized years ended december 31 2019 2018 2017 accrued interest penalties related income tax uncertainties reported components current liabilities longterm liabilities consolidated balance sheets following table summarizes company’s liabilities accrued interest penalties related income tax uncertainties december 31 2019 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company tax years 2016 2019 remain open subject examination internal revenue service tax years 2015 2019 remain open subject examination company’s various major state jurisdictions within united states december 22 2017 us government enacted comprehensive tax legislation commonly referred tax act tax act makes broad complex changes us tax code including limited 1 reducing us federal corporate tax rate 35 percent 21 percent 2 requiring companies pay onetime transition tax certain unrepatriated earnings foreign subsidiaries 3 generally eliminating us federal income taxes dividends foreign subsidiaries 4 requiring current inclusion us federal taxable income certain earnings controlled foreign corporations 5 creating new limitation deductible interest expense 6 creating base erosion antiabuse tax new minimum tax 7 repeal domestic production activity deduction 8 bonus depreciation allow full expensing qualified property sec staff issued staff accounting bulletin 118 “sab 118” provides guidance accounting tax effects tax act sab 118 provides measurement period extend beyond one year tax act enactment date companies complete accounting asc 740 accordance sab 118 company must reflect income tax effects aspects tax act accounting asc 740 complete extent company’s accounting certain income tax effects tax act incomplete able determine reasonable estimate must record provisional estimate financial statements company cannot determine provisional estimate included financial statements continue apply asc 740 basis provisions tax laws effect immediately enactment tax act company applied guidance sab 118 accounting enactmentdate effects tax act 2017 throughout 2018 december 31 2017 company completed accounting enactmentdate income tax effects tax act following aspects 1 remeasurement deferred tax assets liabilities due reduced us federal corporate rate 2 deemed repatriation transition tax 3 global intangible lowtax income “gilti” december 31 2018 company completed accounting enactmentdate income tax effects tax act discussed year ended december 31 2018 company recognized adjustments 08 million preliminary provisional amount recorded december 31 2017 included adjustments component income tax expense reduction us federal corporate rate tax act reduced corporate tax rate 21 percent effective january 1 2018 company recorded provisional decrease 237 million net deferred tax liabilities corresponding net adjustment deferred income tax expense upon refinement calculation year ended december 31 2018 company increased provisional adjustment 08 million 245 million included component income tax expense deemed repatriation transition tax deemed repatriation transition tax “transition tax” tax previously untaxed accumulated current earnings profits “ep” certain foreign subsidiaries determine amount transition tax company must determine addition factors amount post1986 ep relevant subsidiaries well amount nonus income taxes paid earnings analysis company concluded transition tax zero based aggregate post1986 foreign earnings profits deficit relevant subsidiaries therefore change initial estimate december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated global intangible low taxed income tax act creates new requirement certain income ie gilti earned controlled foreign corporations “cfcs” must included currently gross income cfcs’ us shareholder gilti excess shareholder’s “net cfc tested income” net deemed tangible income return currently defined excess 1 ten percent aggregate us shareholder’s pro rata share qualified business asset investment cfc respect us shareholder 2 amount certain interest expense taken account determination net cfctested income gaap company allowed make accounting policy choice either 1 treating taxes due future us inclusions taxable income related gilti currentperiod expense incurred “period cost method” 2 factoring amounts company’s measurement deferred taxes “deferred method” company elected account gilti period cost accordingly income included component current income tax expense years ended december 31 2019 2018 result tax act historical earnings certain foreign subsidiaries became subject us transition tax described however actual repatriation subsidiaries could subject additional foreign us state income taxes general company’s practice intention reinvest certain earnings nonus subsidiaries operations company analyzed global working capital cash requirements potential tax liabilities attributable repatriation earnings determined change prior assertion company significant prior year untaxed undistributed earnings foreign operations december 31 2019 company provide expect incur significant additional taxes could become payable upon repatriation amounts note 15 financial instruments fair value measurements certain assets liabilities required recorded fair value recurring basis assets liabilities recorded fair value nonrecurring basis generally result acquisitions impairment charges fair value determined based exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants gaap also classifies inputs used measure fair value following hierarchy level 1 quoted prices active markets identical assets liabilities level 2 quoted prices active markets similar assets liabilities quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability level 3 unobservable inputs asset liability level 3 recurring measurements assets liabilities december 31 2019 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated interest rate swaps company currently holds two interest rate swap contracts designated cash flow hedges purpose reduce variability cash flows interest payments related portion quad’s variablerate debt swaps effectively convert notional value company’s variable rate debt based onemonth libor fixed rate including spread underlying debt monthly reset variable interest rate key terms interest rate swaps follows company classifies interest rate swaps level 2 inputs valuation model observable derived corroborated utilizing observable market data commonly quoted intervals fair values interest rate swaps classified level 2 december 31 2019 2018 follows interest rate swaps highly effective december 31 2019 amount ineffectiveness recorded earnings related cash flow hedges cash flows associated interest rate swaps recognized adjustment interest expense consolidated statements operations changes fair value interest rate swaps included comprehensive loss consolidated statements comprehensive income loss foreign exchange contracts company operations countries transactions outside functional currencies periodically enters foreign exchange contracts used hedge net exposures changes foreign currency exchange rates designated either cash flow hedges fair value hedges gains losses net foreign currency hedges intended offset losses gains underlying net exposures effort reduce earnings volatility resulting fluctuating foreign currency exchange rates open foreign currency exchange contracts december 31 2019 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated natural gas forward contracts company periodically enters natural gas forward purchase contracts hedge increases commodity costs company’s commodity contracts qualified exception related normal purchases sales years ended december 31 2019 2018 company takes delivery normal course business debt company measures fair value debt instruments using interest rates available company borrowings similar terms maturities categorized level 2 see note 12 “debt” fair value company’s debt december 31 2019 nonrecurring fair value measurements addition assets liabilities recorded fair value recurring basis company required record certain assets liabilities fair value nonrecurring basis generally result acquisitions remeasurement assets resulting impairment charges see note 3 “acquisitions strategic investments” discussion acquisitions see note 4 “discontinued operations” note 5 “restructuring impairment transactionrelated charges” note 6 “goodwill intangible assets” note 9 “property plant equipment” discussion impairment charges recorded result remeasurement certain longlived assets estimated fair value measurements company records fair value forward contracts pension plan assets recurring basis fair value cash equivalents receivables inventories restricted cash accounts payable current liabilities approximate carrying values december 31 2019 2018 see note 16 “employee retirement plans” details level 1 level 2 inputs related employee retirement plans note 16 employee retirement plans defined contribution plans quadgraphics inc diversified plan comprised participantdirected 401k contributions company match profit sharing contributions total participant assets 21 billion december 31 2019 company 401k matching contributions 154 million 85 million 72 million years ended december 31 2019 2018 2017 respectively esop holds profit sharing contributions company stock made discretion company’s board directors february 16 2018 company’s board directors authorized issuance 1006061 shares company class common stock treasury company’s esop stock price 2218 per share total value 223 million profit sharing contributions years ended december 31 2019 2017 defined benefit plans company assumed various funded unfunded frozen pension plans portion fulltime employees united states part acquisition world color press 2010 benefits generally based upon years service compensation plans funded conformity applicable government regulations company funds least minimum amount required qualified plans using actuarial cost methods assumptions acceptable government regulations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated components net pension income years ended december 31 2019 2018 2017 follows underfunded pension obligations calculated using generally accepted actuarial methods measured annually december 31 following table provides reconciliation projected benefit obligation fair value plan assets funded status pension plans december 31 2019 2018 amounts recognized consolidated balance sheets december 31 2019 2018 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table provides reconciliation company’s accumulated comprehensive loss prior deferred tax effects december 31 2019 2018 july 1 2017 company provided option receive lumpsum pension payment select group terminated vested participants total lump sum payments 214 million paid 2017 84 million paid october 2017 lumpsum program 2017 company settled 233 million pension liabilities 214 million pension payments eligible participants elected receive lumpsum pension payment funded existing pension plan assets constituted settlement company’s pension liabilities respect participants result lumpsums paid participants noncash settlement charges 08 million recognized year ended december 31 2017 charges resulted recognition earnings portion actuarial losses recorded accumulated comprehensive loss based proportion obligation settled actuarial gains losses excess 10 greater projected benefit obligation marketrelated value plan assets recognized component net periodic benefit costs average remaining service period plan’s active employees unrecognized prior service costs credits also recognized component net periodic benefit cost average remaining service period plan’s active employees amortization amounts accumulated comprehensive loss expected recognized component net periodic pension income 2020 weighted average assumptions used determine net periodic benefit costs years ended december 31 2019 2018 2017 follows weighted average assumptions used determine pension benefit obligations december 31 2019 2018 follows company determines assumed discount rate based index highquality corporate bond yields matchedfunding yield curve analysis measurement date quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated estimated company contributions benefit payments 2020 company expects make cash contributions 111 million qualified defined benefit pension plans expects make estimated benefit payments 19 million nonqualified defined benefit pension plans actual pension contributions may differ based funding calculations company may choose make additional discretionary contributions estimated benefit payments may differ based actual experience estimated future benefit payments plans behalf plan participants estimate plans’ present value future benefit payments made funded qualified plans unfunded nonqualified plans plan participants december 31 2019 follows plan assets investment strategy company follows disciplined investment strategy provides diversification investments asset class foreign currency sector company pension committee approved investment policy pension plan establishes longterm asset mix targets based several factors including following funded status historical returns achieved worldwide investment markets time horizon pension plan’s obligations investment risk allocation range asset class developed whereby mix equity securities debt securities used provide appropriate riskadjusted longterm return plan assets thirdparty investment managers employed invest assets passivelyindexed activelymanaged strategies investment returns risks monitored ongoing basis derivatives used certain times hedge foreign currency exposure gains losses derivatives offset corresponding change value hedged assets derivatives strictly used hedging purposes speculative purposes current target allocations plan assets weighted average basis 30 equity securities 70 debt securities including cash equivalents actual asset allocation december 31 2019 december 31 2018 approximately 30 equity securities 70 debt securities equity investments diversified country issuer industry sector debt securities primarily consist government bonds corporate bonds diversified industries expected longterm rate return assets assumption selected first identifying expected range longterm rates return major asset class expected longterm rates return developed based longterm historical averages current expectations future returns anticipated inflation rates expected longterm rate return plan assets calculated weighting asset class quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair values company’s pension plan assets december 31 2019 2018 asset category follows 1 investments consist privately placed funds valued based nav funds based fair value fund’s underlying investments accordance asc subtopic 82010 certain investments measured fair value using nav per share equivalent practical expedient classified fair value hierarchy level 3 assets december 31 2019 2018 see note 15 “ financial instruments fair value measurements” definitions fair value levels company segregated plan assets following major categories levels determining fair value december 31 2019 cash equivalents carrying value approximates fair value assets classified level 1 debt securities category consists bonds shortterm fixed income securities fixed income pooled funds fair valued based compilation primarily observable market information broker quotes overthecounter markets classified level 2 equity securities category consists equity pooled funds classified level 2 fair value hierarchy level 2 assets valued using quoted prices markets active broker dealer quotations methods significant input observable measurement date valuation methodologies described may generate fair value calculation may indicative net realizable value future fair values company believes valuation methodologies used appropriate use different methodologies assumptions calculating fair value could result different amounts company invests various assets valuation determined nav company believes nav representative fair value reporting date significant restrictions redemption investments reasons indicate investment would redeemed amount different nav quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair value measurements commoncollective trusts calculated using nav redemption restrictions years ended december 31 2019 2018 follows risk management directly invested funds concentration risk monitored specific guidelines investment manager mandates investment manager mandates developed company’s external investment advisor specify diversification standards maximum exposure per issuer concentration limits per type security industry country applicable investments made pooled funds investment mandates funds reviewed company’s external investment advisor determine investment objectives guidelines consistent company’s overall pension plan risk management objectives managing plan assets management reviews manages risk associated funded status risk interest rate risk market risk counterparty risk liquidity risk operational risk liability management asset class diversification central company’s risk management approach integral overall investment strategy given process place ensure proper diversification portfolio management believes company pension plan assets exposed significant concentration risk multiemployer pension plans company previously participated number mepps terms collective bargaining agreements cover number employees risks participating mepps different single employer plans following aspects • assets contributed mepps one company may used provide benefits employees participating companies • participating company stops contributing plan unfunded obligations plan may borne remaining participating companies • company stops participating mepps continues business company would required pay amount referred withdrawal liability based unfunded status plan quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company withdrawn significant mepps replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan two mepps gciu gcc significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued estimated withdrawal liability based information provided plan’s trustee part purchase price allocation world color press gciu plan defined benefit plan provides retirement benefits total permanent disability benefits preretirement death benefits participating union employees company funded status gciu plan classified critical declining based gciu plan’s 2019 certification united states department labor funded percentage plan less 65 plan projected become insolvent 2029 result gciu plan implemented rehabilitation plan improve plan’s funded status company recorded 321 million increase mepps withdrawal liability year ended december 31 2018 result unfavorable rulings following litigation gciu trustees recorded restructuring impairment transactionrelated charges consolidated statements operations 2019 company gciu reached settlement agreement claims scheduled payments april 2032 gcc plan defined benefit plan provides retirement benefits disability benefits early retirement benefits participating union employees company funded status gcc plan classified critical declining based gcc plan’s 2019 certification united states department labor funded percentage plan less 65 plan projected become insolvent 2023 result gcc plan implemented rehabilitation plan improve plan’s funded status 2016 company gcc reached settlement agreement claims scheduled payments february 2024 company made payments totaling 104 million 131 million 240 million years ended december 31 2019 2018 2017 respectively company reserved 441 million estimate total mepps withdrawal liability december 31 2019 357 million recorded longterm liabilities 84 million recorded current liabilities consolidated balance sheets note 17 earnings loss per share attributable quad common shareholders basic earnings loss per share attributable quad common shareholders computed net earnings loss attributable quad common shareholders divided basic weighted average common shares outstanding calculation diluted earnings loss per share attributable quad common shareholders includes effect dilutive equity incentive instruments company uses treasury stock method calculate effect outstanding dilutive equity incentive instruments requires company compute total proceeds sum amount employee must pay upon exercise award amount unearned stockbased compensation costs attributed future services quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated equity incentive instruments total employee proceeds exercise exceed average fair value equity incentive instrument period antidilutive effect earnings per share periods net earnings accordingly company excludes calculation due net loss incurred year ended december 31 2019 assumed exercise equity incentive instruments antidilutive therefore included diluted loss per share calculation antidilutive equity incentive instruments 05 million 07 million class common shares excluded computations diluted net earnings per share years ended december 31 2018 2017 respectively reconciliations numerator denominator basic diluted per share computations company’s common stock years ended december 31 2019 2018 2017 summarized follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 18 equity incentive programs shareholders company approved quadgraphics inc 2010 omnibus incentive plan “omnibus plan” two complementary purposes 1 attract retain outstanding individuals serve directors officers employees 2 increase shareholder value may 2019 additional 1800000 shares approved issuance providing aggregate 12671652 shares class stock reserved issuance omnibus plan awards omnibus plan may consist incentive awards stock options stock appreciation rights performance shares performance share units shares class stock restricted stock “rs” restricted stock units “rsu” deferred stock units “dsu” stockbased awards determined company’s board directors stock option granted exercise price less 100 fair market value class stock date grant december 31 2019 1682404 shares available issuance omnibus plan authorized unissued shares company’s class stock treasury shares may used issuance company’s equity incentive programs company plans either use treasury shares class common stock issue shares class common stock meet stock requirements awards future company recognizes compensation expense based estimated grant date fair values sharebased awards issued employees nonemployee directors including stock options performance shares performance share units restricted stock restricted stock units deferred stock units company recognizes compensation costs awards expected vest straightline basis requisite three four year service period awards except dsu awards fully vested expensed grant date company estimated number awards expected vest based part historical forfeiture rates also based management’s expectations employee turnover within specific employee groups receiving type award forfeitures estimated time grant revised necessary subsequent periods actual forfeitures differ estimates equity incentive compensation expense total compensation expense recognized related equity incentive programs 136 million 156 million 164 million years ended december 31 2019 2018 2017 respectively recorded primarily selling general administrative expenses consolidated statements operations total stockbased compensation expense included income 11 million recognized liability awards remeasured quarterly basis year ended december 31 2019 total future compensation expense related equity incentive programs granted december 31 2019 estimated 158 million consists entirely expense rs rsu awards estimated future compensation expense 98 million 2020 53 million 2021 07 million 2022 stock options vest four years vesting first year onethird vesting upon second third fourth anniversary dates defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee options expire later tenth anniversary grant date 24 months termination death 36 months termination normal retirement disability 90 days termination employment reason options credited dividend declarations except november 18 2011 grants stock options granted employees quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated stock options granted years ended december 31 2019 2018 2017 compensation expense recognized related stock options years ended december 31 2019 2018 2017 future compensation expense stock options granted december 31 2019 following table summary stock option activity year ended december 31 2019 intrinsic value options outstanding exercisable december 31 2019 2018 based fair value stock price outstanding options vested december 31 2019 following table summary stock option exercises vesting activity years ended december 31 2019 2018 2017 restricted stock restricted stock units restricted stock restricted stock unit awards consist shares rights shares company’s class stock awarded employees company awards restricted subject substantial risk forfeiture restrictions sale transfer employee rsu awards typically granted eligible employees outside united states defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving rs grants able exercise full voting rights receive full credit dividends vesting period dividends paid rs grantee within 45 days full vesting grantees receiving rsus entitled vote earn dividends upon vesting rsus settled either cash payment equal fair market value rsus vesting date issuance company class stock quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summary rs rsu award activity year ended december 31 2019 first quarter 2019 company issued rsu awards connection acquisition periscope accounted liability awards vest march 1 2022 awards recorded fair value initial issuance date remeasured fair value reporting period change fair value recorded selling general administrative expense consolidated statements operations change fair value awards classified liabilities resulted income 11 million year ended december 31 2019 december 31 2019 fair value rsu awards classified liabilities 06 million included longterm liabilities consolidated balance sheets general rs rsu awards vest third anniversary grant date provided holder share continuously employed company vesting date compensation expense recognized rs rsus classified equity 138 million 147 million 155 million years ended december 31 2019 2018 2017 respectively deferred stock units deferred stock units awards rights shares company’s class stock awarded nonemployee directors company following table summary dsu award activity year ended december 31 2019 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated dsu award entitles grantee receive one share class stock upon earlier separation date grantee second anniversary grant date could subject acceleration change control death disability defined individual dsu grant agreement grantees dsu awards may exercise voting rights credited dividend equivalents dividend equivalents converted additional dsu awards based closing price class stock compensation expense recognized dsus 09 million years ended december 31 2019 2018 2017 dsu awards fully vested grant date compensation expense recognized date grant note 19 shareholders’ equity company three classes common stock follows share data millions accordance articles incorporation class common share one vote per share class b class c common share ten votes per share matters voted upon company’s shareholders liquidation rights three classes stock company also 05 million shares 001 par value preferred stock authorized none issued december 31 2019 2018 2017 company present plans issue preferred stock may 20 2019 company held annual meeting shareholders meeting shareholders company approved amendment company’s articles incorporation increase number authorized shares class common stock 800 million 1050 million corresponding increase number authorized shares capital stock 1805 million 2055 million quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated september 6 2011 company’s board directors authorized share repurchase program 1000 million company’s outstanding class stock july 30 2018 company’s board directors discontinued remainder september 6 2011 share repurchase program authorized new share repurchase program 1000 million company’s outstanding class stock shares company’s class stock repurchased year ended december 31 2019 year ended december 31 2018 company repurchased 1871631 shares class common stock weighted average price 1959 per share total purchase price 367 million year ended december 31 2017 company repurchased 200605 shares class common stock weighted average price 1889 per share total purchase price 38 million december 31 2019 1000 million authorized repurchases remaining program february 16 2018 company’s board directors authorized issuance 1006061 shares company class common stock treasury company’s esop stock price 2218 per share total value 223 million october 13 2017 company’s board directors authorized cancellation 1027907 shares company’s class b common stock held company’s treasury returned shares status authorized unissued shares addition future acquired shares company’s class b common stock immediately canceled returned status authorized unissued shares year ended december 31 2018 284845 shares class b common stock converted class common stock shares class b common stock canceled returned status authorized unissued shares conversions class b common stock year ended december 31 2019 accordance articles incorporation dividends paid equally three classes common shares following table details dividend activity related outstanding shares common stock years ended december 31 2019 2018 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 20 accumulated comprehensive loss changes accumulated comprehensive loss component net tax years ended december 31 2019 2018 follows reclassifications accumulated comprehensive loss net earnings loss years ended december 31 2019 2018 details reclassifications accumulated comprehensive loss net earnings year ended december 31 2017 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 21 segment information quad worldwide marketing solutions partner dedicated creating better way clients datadriven integrated marketing platform helps reduce complexity increase efficiency enhance marketing spend effectiveness company’s operating reportable segments aligned chief operating decision maker company currently manages business company’s operating reportable segments including product service offerings “corporate” category follows •united states print related services •international •corporate united states print related services united states print related services segment predominantly comprised company’s united states printing operations managed one integrated platform includes retail inserts publications catalogs special interest publications journals direct mail directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement together marketing complementary services including consumer insights audience targeting personalization media planning placement process optimization campaign planning creation premedia production videography photography digital execution print execution logistics segment also includes manufacture ink international segment consists company’s printing operations europe latin america including operations england france germany poland argentina colombia mexico peru well investments printing operations brazil india segment provides printed products marketing complementary services consistent united states print related services segment december 31 2019 company unrestricted subsidiaries defined company’s senior unsecured notes indenture corporate consists unallocated general administrative activities associated expenses including part executive legal finance well certain expenses income frozen employee retirement plans pension benefit plans quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following summary segment information years ended december 31 2019 2018 2017 capital expenditures shown table includes capital expenditures discontinued operations periods presented restructuring impairment transactionrelated charges years ended december 31 2019 2018 2017 described note 5 “restructuring impairment transactionrelated charges” included operating income loss results segment reconciliation operating income continuing operations earnings loss continuing operations income taxes equity earnings loss unconsolidated entity reported consolidated statements operations years ended december 31 2019 2018 2017 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated total assets segment december 31 2019 2018 2017 shown following table total assets discontinued operations included within united states print related services segment periods presented note 22 geographic area information table presents company’s net sales longlived assets years ended december 31 2019 2018 2017 geographic region amounts table differ segment data presented note 21 “segment information” operating segment includes operations multiple geographic regions based company’s management reporting structure quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 23 separate financial information subsidiary guarantors indebtedness april 28 2014 quad completed offering senior unsecured notes see note 12 “debt” details senior unsecured notes company’s guarantor subsidiaries fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including following • designation guarantor subsidiaries unrestricted subsidiary • release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries • sale disposition including sale substantially assets guarantor subsidiaries following condensed consolidating financial information reflects summarized financial information quad company’s guarantor subsidiaries combined basis company’s nonguarantor subsidiaries combined basis quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2019 condensed consolidating statement comprehensive income loss year ended december 31 2019 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2018 condensed consolidating statement comprehensive income loss year ended december 31 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2017 condensed consolidating statement comprehensive income loss year ended december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating balance sheet december 31 2019 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating balance sheet december 31 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2019 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2017 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 24 new accounting pronouncements december 2019 financial accounting standards board “fasb” issued accounting standards update 201912 “income taxes topic 740 simplifying accounting income taxes” “asu 201912” enhances simplifies various aspects income tax accounting guidance including requirements tax basis stepup goodwill obtained transaction business combination ownership changes investments accounting hybrid tax regimes interimperiod accounting enacted changes tax law limitation tax benefit yeartodate losses guidance effective interim annual periods beginning december 15 2020 early adoption permitted company evaluating impact adoption asu 201912 consolidated financial statements august 2018 fasb issued accounting standards update 201815 “intangiblesgoodwill otherinternaluse software subtopic 35040 customer’s accounting implementation costs incurred cloud computing arrangement service contract” “asu 201815” aligns requirements capitalizing implementation costs incurred cloud computing arrangement service contract requirements capitalizing implementation costs incurred develop obtain internaluse software guidance effective interim annual periods beginning december 15 2019 early adoption permitted entities allowed apply either retrospective prospective transition approach adopt guidance company adopted standard january 1 2020 adoption asu 201815 material impact consolidated financial statements august 2018 fasb issued accounting standards update 201814 “compensationretirement benefitsdefined benefit plansgeneral subtopic 71520 disclosure frameworkchanges disclosure requirements defined benefit plans” “asu 201814” adds removes clarifies yearend disclosure requirements related defined benefit pension postretirement plans guidance effective annual periods ending december 15 2020 early adoption permitted new guidance require retrospective adoption approach company evaluating impact adoption asu 201814 notes consolidated financial statements august 2018 fasb issued accounting standards update 201813 “fair value measurement topic 820 disclosure frameworkchanges disclosure requirements fair value measurement” “asu 201813” changes requirements fair value measurements removing modifying adding certain disclosures guidance effective interim annual periods beginning december 15 2019 early adoption permitted entities electing early adopt permitted early adopt eliminated modified disclosure requirements delay adoption new disclosure requirements effective date adoption asu 201813 requires application combination prospective retrospective methods transition depending topic disclosure company adopted standard january 1 2020 adoption asu 201813 material impact consolidated financial statements june 2016 fasb issued accounting standards update 201613 “financial instrumentscredit losses topic 326 measurement credit losses financial instruments” “asu 201613” changes impairment model financial assets certain instruments new guidance entities required measure expected credit losses financial instruments including trade receivables based historical experience current conditions reasonable forecasts guidance effective interim annual periods beginning december 15 2019 early adoption permitted interim annual periods beginning december 15 2018 new guidance require modified retrospective transition approach entity need apply cumulativeeffect adjustment retained earnings accumulated deficit beginning first reporting period guidance adopted company adopted standard january 1 2020 company final stages calculating transition adjustment estimated increase company’s allowance credit losses 50 million 80 million impact consolidated statements operations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 25 subsequent events sale omaha packaging plant january 31 2020 company completed sale omaha nebraska packaging plant graphic packaging international leading provider packaging solutions 413 million cash subject final working capital adjustments divestiture allows company focus two packaging plants provide highvalue packaging solutions help clients create cohesive brand experience across marketing solution channels cash proceeds used reduce debt obligations declaration quarterly dividend february 18 2020 company declared quarterly dividend 015 per share paid march 9 2020 shareholders record february 28 2020 item 9item 8 financial statements supplementary data quarterly financial data unaudited following table sets forth selected financial information eight quarters twoyear period ended december 31 2011 unaudited information prepared company basis consolidated financial statements includes normal recurring adjustments necessary present information fairly read conjunction companys audited consolidated financial statements notes thereto 1 reflects results acquired businesses relevant acquisition dates 2 fullyear amounts equal sum quarters due rounding 187 million increase class common shares july 2 2010 result world color press acquisition 3 july 6 2010 companys class stock commenced trading nyse prior time trading value companys class stock 4 results operations companys canadian operations included loss discontinued operations see note 4 discontinued operations consolidated financial statements item 8 annual report form 10k companys canadian operations originally acquired company part world color press acquisition july 2 2010 report independent registered public accounting firm board directors shareholders quadgraphics inc subsidiaries audited accompanying consolidated balance sheets quadgraphics inc subsidiaries company december 31 2011 2010 related consolidated statements operations comprehensive income loss redeemable equity common stock equity noncontrolling interests cash flows three years period ended december 31 2011 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position quadgraphics inc subsidiaries december 31 2011 2010 results operations cash flows three years period ended december 31 2011 conformity accounting principles generally accepted united states america discussed note 2 consolidated financial statements company changed method presenting comprehensive income 2011 due adoption fasb accounting standards update 201105 presentation comprehensive income change presentation applied retrospectively periods presented also audited accordance standards public company accounting oversight board united states companys internal control financial reporting december 31 2011 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission report dated february 29 2012 expressed unqualified opinion companys internal control financial reporting deloitte touche llp milwaukee wisconsin february 29 2012 report independent registered public accounting firm board directors shareholders quadgraphics inc subsidiaries audited internal control financial reporting quadgraphics inc subsidiaries company december 31 2011 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission companys management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying managements report internal control financial reporting responsibility express opinion companys internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion companys internal control financial reporting process designed supervision companys principal executive principal financial officers persons performing similar functions effected companys board directors management personnel provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting including possibility collusion improper management override controls material misstatements due error fraud may prevented detected timely basis also projections evaluation effectiveness internal control financial reporting future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion company maintained material respects effective internal control financial reporting december 31 2011 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states consolidated financial statements year ended december 31 2011 company report dated february 29 2012 expressed unqualified opinion consolidated financial statements includes explanatory paragraph related company changing method presenting comprehensive income 2011 due adoption fasb accounting standards update 201105 presentation comprehensive income applied retrospectively periods presented deloitte touche llp milwaukee wisconsin february 29 2012 quadgraphics inc consolidated statements operations millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements comprehensive income loss millions see accompanying notes consolidated financial statements quadgraphics inc consolidated balance sheets millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements cash flows millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements redeemable equity common stock equity noncontrolling interests millions see accompanying notes consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies nature operationsquadgraphics inc subsidiaries company quadgraphics operates primarily commercial print portion printing industry printer catalogs consumer magazines retail inserts books directories special interest publications direct marketing materials company also provides imaging logistics services customers companys products services sold primarily throughout north america europe latin america catalogers publishers retailers additionally company manufactures printingrelated auxiliary equipment sold original equipment manufacturers printing companies throughout world principles consolidation basis presentationthe accompanying consolidated financial statements include accounts company whollyowned majorityowned controlled subsidiaries prepared accordance accounting principles generally accepted united states america gaap results operations accounts businesses acquired included consolidated financial statements dates acquisition see note 3 investments entities company ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting intercompany transactions balances eliminated consolidation discontinued operationsthe results operations companys canadian operations exception companys vancouver british columbia facility reported discontinued operations periods presented corresponding canadian assets liabilities reclassified accordance authoritative literature assets held sale december 31 2011 reclassified december 31 2010 result consolidated balance sheets related footnotes comparable periods accordance authoritative literature company elected separately disclose cash flows related canadian discontinued operations see note 3 note 4 information companys pending sale canadian operations foreign operationsassets liabilities denominated foreign currencies translated us dollars exchange rate existing respective balance sheet dates income expense items translated average rates respective periods translation adjustments resulting fluctuations exchange rates recorded separate component accumulated comprehensive income loss consolidated statements redeemable equity common stock equity noncontrolling interests transaction gains losses recorded selling general administrative expenses consolidated statements operations companys international operations conducted europe quadwinkowski sp z oo quadwinkowski well following latin american countries argentina brazil chile colombia mexico peru company owns 85 certain operations argentina consolidates amounts companys consolidated financial statements presents 15 owned company noncontrolling interest company owns 49 certain operations brazil 50 operations chile accounts entities using equity method accounting see note 11 discussion significant noncontrolling interests unconsolidated entities use estimatesthe preparation consolidated financial statements requires use managements estimates assumptions affect reported assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenue expenses reporting periods actual results could differ estimates used accounting items matters including limited allowances doubtful accounts inventory obsolescence asset valuations useful lives goodwill pension postretirement benefits selfinsurance reserves stockbased compensation taxes restructuring provisions contingencies revenue recognitionthe company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides certain cases delivery billing schedules outlined customer agreement product revenue recognized manufacturing complete title risk loss transfer customer reasonable assurance collectibility product returns significant majority products customized however company accrues estimated amount customer allowances time sale based historical experience known trends quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer revenues related companys logistics operations includes delivery printed material recognized upon completion delivery services company also manufactures printingrelated auxiliary equipment ensure industry leading technology printing operations well sell businesses revenue generally recognized equipment sales time shipment revenue services related installation equipment customer sites recognized upon completion installation payments received customers manufacture equipment prior shipment case installation services prior completion installation cases payments received advance meeting applicable revenue recognition criteria deferred revenue recorded criteria subsequently met services account greater 10 companys consolidated net sales therefore net sales related costs sales products services included separate line items consolidated statements operations certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis byproduct recoveriesthe company records sale byproducts net product sales consolidated statements operations financial instrumentsthe company uses derivative financial instruments purpose hedging commodity foreign exchange exposures exist part ongoing business operations including natural gas forward purchase contracts foreign exchange contracts policy company engage speculative leveraged transactions company hold issue financial instruments trading purposes derivative instruments recorded consolidated balance sheets either assets liabilities measured fair value derivative designated fair value hedge changes fair value derivative hedged item attributable hedged risk recognized earnings derivative designated cash flow hedge effective portion changes fair value derivative recorded component accumulated comprehensive income loss recognized consolidated statements operations hedged item affects earnings ineffective portions changes fair value hedges recognized earnings cash flows derivatives accounted cash flow fair value hedges included consolidated statements cash flows category item hedged fair value measurementthe company applies fair value accounting assets liabilities recognized disclosed fair value consolidated financial statements recurring basis fair value represents amount would received selling asset paid transfer liability orderly transaction market participants measurement date determining fair value measurements assets liabilities required recorded fair value company considers principal advantageous market marketbased risk measurements assumptions market participants would use pricing asset liability research developmentresearch development costs related development new products adaptation existing products expensed incurred included cost sales totaled 169 million 173 million 143 million years ended december 31 2011 2010 2009 respectively cash equivalentsthe company considers highly liquid investments original maturities three months less cash equivalents quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated receivablesreceivables stated net allowances doubtful accounts single customer comprised 10 companys consolidated net sales 2011 2010 2009 10 companys consolidated accounts receivable december 31 2011 2010 specific customer provisions made review significant outstanding amounts utilizing information customer creditworthiness current economic trends indicates collection doubtful addition provisions made differing rates based upon age receivable companys historical collection experience inventoriesinventories include material labor plant overhead stated lower cost market company also maintains inventory reserves excess obsolete inventories determined part future demand forecasts december 31 2011 2010 inventories valued using firstin firstout fifo method property plant equipmentproperty plant equipment recorded cost depreciated estimated useful lives assets using straightline method financial reporting purposes major improvements extend useful lives existing assets capitalized charged asset accounts repairs maintenance improve extend useful lives respective assets expensed incurred leasehold improvements depreciated shorter lease term estimated useful life respective asset intangible assetsidentifiable intangible assets except intangible assets indefinite lives recognized apart goodwill amortized estimated useful lives identifiable intangible assets indefinite lives amortized impairment longlived intangible assetsthe company evaluates longlived assets intangible assets significant property plant equipment customer relationship intangible assets whenever events circumstances occurred indicate carrying value asset may recoverable determining whether impairment occurred typically requires various estimates assumptions including determining cash flows directly related potentially impaired asset useful life cash flows occur amount assets residual value turn measurement impairment loss requires determination fair value generally estimated ability recover balance assets expected future operating cash flows undiscounted basis impairment determined exist related impairment loss calculated based difference fair value carrying value asset goodwill indefinitelived intangible assetsgoodwill indefinitelived intangible assets reviewed annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value performing analysis company compares reporting units fair value estimated based comparable company market valuations andor expected future discounted cash flows generated reporting unit carrying value carrying value exceeds reporting units fair value company performs fair value measurement calculation determine impairment loss would charged operations period identified see note 6 discussion income taxesin connection july 2 2010 acquisition world color press inc world color press public registration quadgraphics class stock company changed tax status remaining entities within quadgraphics legal structure c corporation status provisions internal revenue code 1986 amended internal revenue code point forward company subject federal state income taxes prior july 2 2010 majority entities within companys structure corporation company contractually required shareholders agreement pay tax distributions shareholders connection companys election taxed corporation certain entities representing less 5 companys book taxable income c corporations administrative legal purposes c corporations taxable legal entity level also certain states impose entity level taxes corporations company recorded deferred income taxes temporary differences financial reporting income tax basis certain assets liabilities quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated applicable income tax rates entities subject tax entity level company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations company determines deferred income tax assets realized future excess net recorded amount adjustment valuation allowance made would reduce companys provision income taxes company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit greater fiftypercent likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination companys worldwide tax provision related tax assets liabilities requires use significant judgment estimates interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain company believes appropriate support positions taken certain positions may successfully challenged taxing authorities company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions determination companys worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions pension postretirement plansthe company assumed certain defined benefit pension postretirement benefit plans part world color press acquisition pension plan costs determined using actuarial methods funded contributions company records amounts relating pension postretirement benefit plans based calculations include various actuarial assumptions including discount rates mortality assumed rates return compensation increases turnover rates health care cost trend rates company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheet generally amortized operating income future periods deferred amount recorded accumulated comprehensive income loss consolidated balance sheet company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors purposes calculating expected return plan assets valued fair value event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 addition result acquisition world color press company participated six union multiemployer pension plans mepps company records required cash contributions mepps expenses period incurred liability recognized contributions due unpaid consistent accounting defined contribution plans due significantly underfunded status mepps time world color press acquisition company began process withdraw significant mepps replace benefits company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded estimated withdrawal liability mepps part purchase price allocation process based information received mepps trustees estimated withdrawal liability updated new withdrawal liability projections provided plans trustees final withdrawal liability determined paid exact amount withdrawal liability could higher lower estimate depending among things nature timing triggering events funded status plans time see note 20 discussion quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated stockbased compensationthe company recognizes stockbased compensation expense vesting period stockbased awards made employees directors based fair value instrument time grant accumulated comprehensive income lossaccumulated comprehensive income loss consists unrecognized actuarial gains losses prior service costs pension postretirement plans foreign currency translation adjustments presented consolidated statements redeemable equity common stock equity noncontrolling interests components accumulated comprehensive income loss consist following december 31 2011 2010 2009 transaction gains losses included selling general administrative expenses consolidated statements operations foreign exchange transactions resulted losses 45 million 2011 68 million 2010 30 million 2009 note 2 new accounting pronouncements september 2011 financial accounting standards board fasb issued new guidance disclosures employers participation mepps new guidance requires additional disclosures regarding significant mepps employer participates includes level employers contributions mepps whether contributions represent five percent total contributions made plan contributing employers expanded disclosures also address financial health significant mepps including funded status existence funding improvement plans existence imposed surcharges contributions plan well nature employer commitments plan company adopted guidance effective december 31 2011 adoption guidance impacted companys disclosures material impact companys consolidated financial position results operations cash flows company began process withdrawing significant mepps 2010 recorded estimated 835 million withdrawal liability based information provided plans trustees september 2011 fasb issued new guidance testing goodwill impairment new guidance gives entities subject certain conditions option first performing qualitative assessment determine whether existence events circumstances leads determination likely fair value reporting unit less carrying amount guidance effective prospectively annual interim goodwill impairment tests performed fiscal years beginning december 15 2011 early adoption permitted adoption guidance material impact companys consolidated financial position results operations cash flows june 2011 fasb issued new guidance presentation comprehensive income new guidance requires components net income comprehensive income either presented one continuous statement referred statement comprehensive income two separate consecutive statements new guidance eliminates current option report comprehensive income components statement shareholders equity new guidance changes presentation comprehensive income changes components recognized net income comprehensive income current accounting guidance subsequently december 2011 fasb issued update recently issued guidance presentation comprehensive income update defers effective date requirement present face financial statements reclassification adjustments component accumulated comprehensive income guidance effective retrospectively fiscal years beginning december 15 2011 early adoption permitted company elected early adopt requirements guidance retrospective application upon adoption guidance company reported separate consolidated statement comprehensive income loss periods presented adoption guidance amended presentation components comprehensive income impact companys consolidated financial position results operations cash flows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated may 2011 fasb issued new guidance fair value measurements new guidance amends definition fair value measurement principles disclosure requirements eliminate differences gaap international financial reporting standards new guidance requires new quantitative qualitative disclosures sensitivity recurring level 3 measurement disclosures well transfers level 1 level 2 fair value hierarchy guidance effective prospectively fiscal years beginning december 15 2011 adoption guidance material impact companys consolidated financial position results operations cash flows december 2010 fasb issued new guidance disclosures supplementary pro forma information business combinations new guidance specifies pro forma disclosures reported business combination occurred current year occurred beginning comparable prior annual reporting period pro forma disclosures must include description material nonrecurring pro forma adjustments company adopted guidance effective january 1 2011 adoption guidance impacted companys disclosures material impact companys consolidated financial position results operations cash flows note 3 acquisitions 2011 acquisitions july 12 2011 company transcontinental inc transcontinental entered definitive agreement whereby quadgraphics acquired 100 transcontinentals mexican operations exchange companys canadian operations exception companys vancouver british columbia facility transcontinentals mexican operations printed magazines catalogs retail inserts books printed materials employed approximately 900 people among three facilities azcapotzalco toluca xochimilco mexico transcontinental mexican operations included within international segment company completed acquisition transcontinentals mexican operations september 8 2011 companys determination acquired operations fair value december 31 2011 636 million component purchase price terms definitive agreement require cash consideration paid monthly transcontinental period acquisition transcontinentals mexican operations completion sale companys canadian operations company estimated payments total 33 million 12 million paid transcontinental december 31 2011 21 million paid 2012 remaining 624 million purchase price payable december 31 2011 consolidated balance sheet settled company noncash net assets companys canadian business 21 million 2012 cash payments connection acquisition transcontinentals mexican operations definitive agreement required company deposit 500 million canadian dollars transcontinental canadian operations sale completed february 7 2012 company announced authorized canadas competition bureau complete sale canadian operations transcontinental canada competition bureau authorized closing proceed company expects refunded 500 million canadian dollar deposit upon close transaction company expects sale completed march 31 2012 december 31 2011 deposit classified prepaid expenses current assets consolidated balance sheet company elected hedge foreign currency exchange rate exposure related 500 million canadian dollar deposit entering shortterm foreign currency forward exchange contracts company intends continue using rolling shortterm forward exchange contracts pertaining foreign currency denominated deposit fair value hedge close sale canadian discontinued operations year ended december 31 2011 05 million unrealized marktomarket loss 22 million realized marktomarket gain derivative contracts offset 17 million transaction loss translation foreign currency denominated deposit within selling general administrative expenses fair value determination foreign currency forward exchange contracts categorized level 2 fair value hierarchy see note 18 definition level 2 inputs quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated acquisition accounted using acquisition method accounting existing gaap december 31 2011 canadian transaction yet closed therefore company recorded preliminary allocation purchase price acquired tangible identifiable intangible assets liabilities assumed based fair values acquisition date goodwill recorded based amount purchase price exceeds fair value net assets acquired preliminary purchase price allocation follows preliminary purchase price allocation based valuations performed determine fair value net assets acquisition date preliminary purchase price 636 million estimated utilizing discounted cash flow model following income approach incorporates various assumptions including expected future revenue growth profit margins capital expenditures working capital levels weightedaverage cost capital nonrecurring fair value measurement classified level 3 valuation hierarchy see note 18 definition level 3 inputs purchased identifiable intangible assets amortized straightline basis six years results operations acquired business included since respective dates acquisition accompanying consolidated financial statements pro forma information related acquisition included impact companys consolidated results operations considered immaterial company expects complete purchase price allocation 2012 upon completion sale canadian operations 2010 acquisitions february 28 2010 company acquired 47 interest hgi company llc hgi wisconsinbased commercial printer 100 million october 29 2010 company purchased remaining 53 hgis equity increase companys ownership 100 51 million cash 74 million company stock total purchase price hgi 225 million company also assumed 128 million debt accounted using acquisition method accounting existing gaap hgi specializes short mediumrun books manuals directories publications marketing collateral instorepointofpurchase materials hgi included within north america print related services segment hgi accounted using equity method accounting february 28 2010 october 29 2010 consolidated subsequent october 29 2010 upon acquiring 100 ownership july 2 2010 company acquired world color press provider comprehensive print digital related services retailers catalogers publishers brandedgoods companies businesses north america latin american countries world color press products include advertising inserts circulars catalogs direct mail products magazines books directories digital premedia logistics mail list technologies connection closing acquisition company registered class stock united states securities exchange commission sec securities exchange act 1934 amended july 6 2010 quadgraphics class stock commenced trading new york stock exchange llc nyse symbol quad completion acquisition outstanding world color press common share including common shares issued upon conversion certain world color press preferred shares converted right receive 02154 shares class stock quadgraphics former world color press common shareholders received total 18734045 shares quadgraphics class stock subject fractional share cashouts immediately following completion acquisition shareholders quadgraphics shareholders prior completion acquisition owned approximately 60 outstanding common stock quadgraphics former common shareholders world color press owned approximately quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 40 outstanding common stock quadgraphics addition share consideration former holders world color press common shares received aggregate cash consideration 484 million approximately 056 per share quadgraphics also provided 449 million cash consideration purchase outstanding world color press warrants fund redemptions payments due equity securities converted common shares including dividends preferred shares based consideration total purchase price consummate acquisition world color press follows concurrent closing acquisition quadgraphics received 2500 million advance existing revolving credit facility 6892 million term loan portion companys former 123 billion debt financing agreement amounts well quadgraphics world color press cash used july 2 2010 fund 1 replacement quadgraphics former revolving credit facility outstanding borrowings 1061 million including interest owed payment debt issuance costs due upon transaction new debt financing agreement 329 million 2 satisfaction certain world color press debt obligations 5806 million included 80 million early repayment premiums funding 1239 million defease world color press unsecured notes 347 million returned company august 2 2010 upon unsecured notes called company resulting 892 million restricted cash related unsecured notes remaining 3 transaction costs 455 million paid july 2 2010 excluding debt issuance costs transaction costs incurred quadgraphics expensed incurred accordance acquisition method accounting classified restructuring impairment transactionrelated charges consolidated statements operations 4 redemption outstanding world color press equity securities consisting preferred shares warrants deferred share units restricted share units cash consideration paid former world color press common shareholders described total 885 million addition 48 million preferred dividends paid january 25 2010 execution arrangement agreement prior july 2 2010 5 distribution 1400 million quadgraphics existing common shareholders 6 collateralization letters credit 320 million 7 payment settle capital lease 176 million 8 obligations arising acquisition 147 million quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following unaudited pro forma combined financial information presents companys results though quadgraphics world color press combined january 1 2010 pro forma information prepared following considerations 1 unaudited pro forma consolidated financial information prepared using acquisition method accounting existing gaap quadgraphics acquirer accounting purposes 2 world color press historical amounts converted canadian generally accepted accounting principles gaap 3 pro forma combined financial information reflect operating synergy savings combined company may achieve result acquisition costs necessary achieve operating synergy savings additional charges necessary result integration tax effects companys transition c corporation 4 pro forma amounts restated exclude canadian discontinued operations see note 4 world color press acquisition accounted using acquisition method accounting existing gaap company recorded allocation purchase price world color press tangible identifiable intangible assets acquired liabilities assumed based fair values july 2 2010 goodwill recorded based amount purchase price exceeds fair value net assets acquired purchase price allocation follows millions allocation purchase price based valuations performed determine fair value net assets acquisition date company completed purchase price allocation 2011 allocation recorded north america print related services segment international segment historical world color press united states canadian operations retained sale certain canadian operations transcontinental see note 4 included within north american print related services segment historical world color press latin american operations included within international segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 4 discontinued operations discussed note 3 july 12 2011 company transcontinental entered definitive agreement whereby among things transcontinental agreed acquire companys canadian operations exception companys vancouver british columbia facility part transaction transcontinental assume pension postretirement obligations pertaining canadian employees quadgraphics employs approximately 1500 people among seven facilities sold transcontinental located aurora concord markham ontario lasalle montreal quebec edmonton alberta dartmouth nova scotia december 31 2011 sale companys canadian operations remained subject customary regulatory clearances including clearance canadian competition act february 7 2012 company announced authorized canadas competition bureau complete sale canadian operations transcontinental company expects sale completed march 31 2012 following table summarizes results operations canadian operations included loss discontinued operations consolidated statements operations years ended december 31 2011 2010 results 2010 july 2 2010 december 31 2010 period time company owned canadian operations company continued execute restructuring events related plant closures workforce reductions restructuring initiatives well transaction costs related sale canadian operations due initiatives company recognized 451 million 150 million restructuring impairment transactionrelated costs years ended december 31 2011 2010 respectively within discontinued operations consolidated statements operations 2011 restructuring expense included 179 million charge recognize pension curtailment loss 139 million goodwill impairment charge third quarter 2011 pending sale canadian discontinued operations due carrying value canadian net assets exceeding estimated fair value mexican net assets acquired transcontinental due yearend benefit plan actuarial valuation canadian pension liability increased 346 million december 31 2011 result net assets canadian operations sold decreased fair value mexican operations acquired quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summarized current noncurrent assets liabilities held sale discontinued canadian operations included consolidated balance sheet december 31 2011 note 5 restructuring impairment transactionrelated charges company recorded restructuring impairment transactionrelated charges years ended december 31 2011 2010 2009 follows companys restructuring actions july 2 2010 world color press acquisition december 31 2011 resulted approximately 6200 gross fulltime equivalent positions eliminated approximately 4500 net positions eliminated considering job additions related work transferred facilities related 12 plant closures workforce reductions announced fourth quarter 2011 approximately 600 reductions two plant closures relate restructuring activities completed canada prior pending sale canadian operations transcontinental restructuring charges recorded based restructuring plans committed management part based upon managements best estimates future events changes estimates may require future restructuring charges adjustments restructuring liabilities costs related restructuring activities recorded consolidated statements operations restructuring impairment transactionrelated charges transaction costs expensed incurred accordance applicable accounting guidance business combinations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated restructuring impairment transactionrelated charges segment see note 24 2011 restructuring impairment transactionrelated charges year ended december 31 2011 company recorded 1 295 million employee termination costs plant closures workforce reduction initiatives 2 138 million impairment charges related closure stillwater oklahoma plant well machinery equipment facilities 3 29 million transaction costs incurred primarily connection transaction transcontinental see note 3 4 457 million world color press integration costs 5 221 million various restructuring charges including costs maintain exit closed facilities well lease exit charges 457 million integration costs recognized year ended december 31 2011 includes 64 million stock based compensation expense related termination liquidation stock options grant new options see note 22 integration costs partially offset 156 million gain collection note receivable june 2008 sale world color press european operations october 17 2011 company announced closure richmond virginia stillwater oklahoma plants part closure richmond plant company recognized 20 million employee termination costs 01 million restructuring costs year ended december 31 2011 part closure stillwater plant company recognized 13 million employee termination costs 36 million impairment charges year ended december 31 2011 company expects incur additional restructuring charges richmond stillwater plant closures future april 18 2011 company announced closure buffalo new york plant part closure company recognized 17 million employee termination costs 24 million restructuring charges related equipment removal costs facility carrying costs year ended december 31 2011 restructuring costs partially offset postretirement benefit obligation curtailment gain 70 million company expects incur additional restructuring charges buffalo plant closure future march 15 2011 company announced closure mt morris illinois plant part closure company recognized 35 million employee termination costs 26 million restructuring charges related equipment removal costs facility carrying costs year ended december 31 2011 company expects incur additional restructuring charges mt morris plant closure future addition plant closures company continued execute various workforce reductions restructuring initiatives related integration operations world color press well certain corporate administrative functions severance costs also continue incurred related previously announced plant closures workforce reductions company recognized following charges related restructuring activities year ended december 31 2011 1 210 million employee termination costs 2 102 million impairment charges machinery equipment 3 109 million facility carrying costs 4 59 million lease exit charges 5 72 million restructuring charges company expects incur additional restructuring charges related initiatives future 2010 restructuring impairment transactionrelated charges year ended december 31 2010 company recorded 1 267 million employee termination costs plant closures workforce reduction initiatives 2 329 million impairment charges assets primarily related closures pila poland fredericksburg virginia reno nevada plants 3 410 million transaction costs incurred primarily connection acquisition world color press 4 278 million world color press integration costs 5 191 million various restructuring charges including utility contract costs maintain exit closed facilities lease exit charges november 30 2010 company announced closure fredericksburg virginia plant workforce reductions mt morris illinois plant part closure fredericksburg plant company recognized 12 million severance charges 21 million impairment charges part workforce reductions mt morris company recognized 08 million severance charges year ended december 31 2010 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated august 5 2010 company announced plant closures reno nevada clarksville tennessee corinth mississippi cincinnati lebanon ohio well acceleration previously announced plant closure dyersburg tennessee operations plants consolidated existing facilities part integration efforts streamline operations company plants ceased production 2010 part closures company recognized 126 million severance charges 64 million impairment charges 44 million facility equipment dismantling restructuring charges 40 million longterm utility contract costs 03 million lease exit charges year ended december 31 2010 addition result closure clarksville plant onetime pension curtailment gain 34 million recorded june 16 2010 company announced closure printing plant pila poland consolidation operations companys wyszkow poland printing plant company began equipment relocations july completed majority relocations end 2010 part plant closure company recognized 33 million severance charges 244 million asset impairment charges 12 million equipment dismantling charges restructuring charges year ended december 31 2010 addition plant closures company executed various workforce reductions restructuring initiatives related integration operations world color press well certain corporate administrative functions including closure world color press corporate headquarters montreal quebec company recognized following charges related restructuring activities year end december 31 2010 1 51 million employee termination costs 2 71 million lease exit charges 3 55 million facility restructuring charges addition prior acquisition world color press implemented retention bonus plan certain employees 37 million expense recognized year ended december 31 2010 2009 restructuring impairment transactionrelated charges year ended december 31 2009 company recorded 1 101 million employee termination costs workforce reduction initiatives 2 11 million lease exit charges reserves restructuring impairment transactionrelated charges activity impacting companys reserves restructuring impairment transactionrelated charges years ended december 31 2011 2010 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reserves classified accrued liabilities consolidated balance sheets company expects reserves paid within next twelve months restructuring actions related canadian discontinued operations reflected 2011 amounts detailed note 4 note 6 goodwill intangible assets goodwill tested annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value one indicators change business climate may evidenced among things decline companys market capitalization book value third quarter 2011 companys stock price decreased companys market capitalization less carrying value equity result company conducted interim goodwill impairment assessment united states latin american reporting units included comparing carrying amount net assets including goodwill reporting unit respective fair value august 31 2011 date interim assessment european reporting unit goodwill canadian reporting unit assessed separately goodwill impairment part pending sale canadian operations fair value determined using equal weighting income market approaches fair value determination categorized level 3 fair value hierarchy income approach company determined fair value based estimated future cash flows discounted estimated weightedaverage cost capital reflects overall level inherent risk rate return outside investor would expect earn market approach company derived fair value reporting units based market multiples comparable publiclytraded companies estimated fair value companys united states latin american reporting units exceeded respective carrying amounts management concluded impairment existed august 31 2011 company completed annual goodwill impairment assessment october 31 2011 utilizing approach performed interim impairment assessment estimated fair value companys united states latin american reporting units exceeded respective carrying amounts result management concluded impairment existed october 31 2011 fair value reporting units exceed respective carrying values greater ten percent additional indications impairment identified october 31 2011 december 31 2011 goodwill related continuing operations december 31 2011 2010 2009 include accumulated impairment losses goodwill impairment recorded related continuing operations years ended december 31 2011 2010 however 139 million goodwill impairment recorded related canadian discontinued operations year ended december 31 2011 see note 4 activity impacting companys goodwill years ended december 31 2011 2010 follows company finalized world color press hgi purchase price allocation company expects complete transcontinental mexico purchase price allocation 2012 upon completion sale canadian quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated operations goodwill related canadian discontinued operations reflected balance december 31 2011 see note 4 components intangible assets december 31 2011 2010 follows intangible assets related canadian discontinued operations reflected balance december 31 2011 see note 4 amortization expense intangible assets 658 million 340 million 21 million years ended december 31 2011 2010 2009 respectively following table outlines estimated future amortization expense related intangible assets december 31 2011 note 7 receivables transactions affecting allowance doubtful accounts years ended december 31 2011 2010 2009 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 8 inventories components companys inventories december 31 2011 2010 follows inventories related canadian discontinued operations reflected balance december 31 2011 see note 4 note 9 property plant equipment components companys property plant equipment december 31 2011 2010 follows consists computer equipment vehicles furniture fixtures leasehold improvements communication related equipment net book value property plant equipment related canadian discontinued operations reflected balance december 31 2011 see note 4 2011 company recorded impairment charges 138 million reduce carrying amount certain building production equipment fair value primarily related closure stillwater oklahoma mt morris illinois manufacturing facilities well restructuring integration activities 2010 company recorded impairment charges 300 million reduce carrying amount certain buildings production equipment fair value primarily related closure pila poland reno nevada manufacturing facilities well restructuring integration activities 2009 events changes circumstances indicated carrying value property plant equipment may recoverable 2009 fire companys west virginia location damaged equipment property within facility company received 33 million 192 million insurance carrier relating equipment related repair costs 2010 2009 respectively casualty gains 71 million 122 million recorded selling general administrative expenses equipment years ended december 31 2010 2009 respectively company recognized depreciation expense 2788 million 2334 million 1946 million years ended december 31 2011 2010 2009 respectively assets held sale continuing operations certain closed facilities considered held sale net book value assets held sale continuing operations 143 million 200 million december 31 2011 2010 respectively assets valued fair value less estimated costs sell assets held sale continuing operations included prepaid expenses current assets consolidated balance sheets quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 10 restricted cash components companys restricted cash december 31 2011 2010 follows note 11 equity method investments unconsolidated entities company 49 ownership interest plural editora e gráfica plural commercial printer based são paulo brazil 50 ownership interest world color chile sa chile commercial printer based santiago chile companys ownership interest plural accounted using equity method accounting periods presented companys ownership interest chile accounted using equity method accounting since july 2 2010 company acquired ownership interest chile part world color press acquisition companys equity earnings plurals chiles operations recorded line item entitled equity earnings unconsolidated entities companys consolidated statements operations included within international segment combined condensed balance sheets plural chile december 31 2011 2010 presented combined condensed statements operations plural chile years ended december 31 2011 2010 2009 presented quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 12 accrued liabilities components companys accrued liabilities december 31 2011 2010 follows employeerelated liabilities consist primarily payroll bonus profit sharing vacation health workers compensation accrued liabilities related canadian discontinued operations reflected balance december 31 2011 see note 4 note 13 commitments contingencies commitments company firm commitments 204 million purchase press finishing equipment december 31 2011 litigation normal course business company named defendant various lawsuits claims asserted company opinion management liabilities ultimately result lawsuits expected material impact consolidated financial statements company environmental reserves company subject various laws regulations government policies relating health safety generation storage transportation disposal hazardous substances environment protection general company provides expenses associated environmental remediation obligations amounts probable reasonably estimated reserves adjusted new information develops circumstances change environmental reserves discounted company believes compliance laws regulations government policies material respects furthermore company anticipate maintaining compliance environmental statutes material impact upon companys competitive consolidated financial position note 14 world color press insolvency proceedings company continues manage bankruptcy claim settlement process quebecor world inc qwi bankruptcy proceedings united states canada qwi changed name world color press inc upon emerging bankruptcy july 21 2009 extent claims allowed holders claims entitled receive recovery nature recovery dependent upon type classification claims regard respect certain types claims holders thereof entitled receive cash andor unsecured notes holders certain types claims entitled receive combination quadgraphics common stock cash accordance terms world color press acquisition agreement respect claims asserted holders thereof entitled priority cash recovery company estimated approximately 195 million 261 million recorded claims yet paid december 31 2011 december 31 2010 respectively obligation classified amounts owing satisfaction bankruptcy claims consolidated balance sheets quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated respect unsecured claims held creditors operating subsidiary debtors quebecor world usa inc class 3 claims allowed class 3 claim entitled receive unsecured note amount exceed 50 creditors allowed class 3 claim provided however aggregate principal amount unsecured notes cannot exceed 750 million event total allowed class 3 claims exceeds 1500 million creditor holding allowed class 3 claim receive pro rata share 750 million unsecured notes issued together accrued interest 5 prepayment redemption premium thereon total 892 million connection world color press acquisition company required deposit maximum potential payout class 3 claim creditors 892 million trustee amount remain trustee either 1 paid creditor allowed class 3 claim 2 upon class 3 claims resolved excess amount revert company year ended december 31 2011 138 million paid class 3 claim creditors therefore 754 million remains december 31 2011 classified restricted cash consolidated balance sheets see note 10 based companys analysis outstanding claims company recorded liability classified unsecured notes issued consolidated balance sheet 387 million december 31 2011 liabilities recorded bankruptcy matters based managements current assessment amount likely paid possible identify final amount priority cash claims amount class 3 claims ultimately allowed us bankruptcy court therefore amounts owing satisfaction bankruptcy claims consolidated balance sheet could materially higher amounts estimated would require additional cash payments made amount exceeding companys estimate amounts payable related unsecured notes could reach maximum aggregate principal amount 750 million would require additional cash payment maximum potential exposure already funded trust would require additional liability expense recorded companys december 31 2011 estimate total class 3 claim payments 387 million light substantial number amount claims filed claims resolution process take considerable time complete note 15 income taxes connection july 2 2010 acquisition world color press see note 3 public registration quadgraphics class stock company changed tax status certain entities within quadgraphics legal structure c corporation status provisions internal revenue code amended point forward entities subject federal state income taxes impact conversion c corporation status resulted recognition net shortterm deferred tax assets 236 million net longterm deferred tax liabilities 2233 million increase accumulated comprehensive loss due impact foreign currency translation 08 million recognition income tax expense year ended december 31 2010 2005 million january 1 2005 july 1 2010 quadgraphics contractually required shareholders agreement pay tax distributions shareholders connection companys election taxed corporation result companys issuance shares class stock pursuant acquisition world color press termination corporation election shareholders agreement amended terminate obligation pay tax distributions periods following july 1 2010 revise certain provisions concerning adjustments tax distributions related corporation periods prior july 1 2010 shareholders corporation years receive adjusting payments ultimately increased tax liability required reimburse company tax liability decreases previously estimated distributed prior periods adjustments could required audits necessary adjustments prior periods adjustments made recorded retained earnings consolidated balance sheet quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated income taxes based following components earnings income taxes equity earnings unconsolidated entities years ended december 31 2011 2010 2009 components income tax expense consist following years ended december 31 2011 2010 2009 following table outlines reconciliation differences federal statutory tax rate companys effective tax rate years ended december 31 2011 2010 2009 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated deferred income taxes significant deferred tax assets liabilities december 31 2011 2010 follows net deferred tax assets liabilities classified consolidated balance sheets december 31 2011 2010 follows deferred tax assets liabilities related canadian discontinued operations reflected balance december 31 2011 see note 4 december 31 2011 company federal net operating loss carry forwards 62 million foreign net operating loss carry forwards 1855 million state net operating loss carry forwards 5855 million federal net operating loss carry forward expires 2030 foreign net operating loss carry forwards 953 million available without expiration remainder expires 2020 state net operating loss carry forwards expire varying amounts beginning 2011 continuing 2031 company also 541 million various federal state foreign credit carry forwards 308 million available without expiration remainder expires beginning 2011 2031 december 31 2011 company recorded valuation allowance 1252 million deferred tax assets expected realized quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company completed liquidation icelandic subsidiary october 26 2011 october 26 2011 december 31 2010 subsidiary gross net operating loss carry forwards 9589 million net operating losses expire varying amounts 2020 october 26 2011 december 31 2010 company recorded full valuation allowance deferred tax assets expected realized result liquidation company forfeited iceland net operating losses due full valuation allowance recorded impact financial statements result liquidation subsidiary company considers foreign earnings permanently invested accordingly company currently provide additional united states foreign income taxes would become payable upon remission undistributed earnings foreign subsidiaries cumulative undistributed earnings subsidiaries december 31 2011 material uncertain tax provisions following table summarizes activity companys liability unrecognized tax benefits december 31 2011 2010 2009 447 million would impact companys effective tax rate recognized december 31 2011 reasonably possible 988 million total amount unrecognized tax benefits decrease within 12 months due resolution audits statute expirations company classifies interest expense related penalties related income tax uncertainties component income tax expense total interest income expense related tax uncertainties recognized consolidated statements operations years ended december 31 2011 2010 2009 07 million 0 05 million respectively penalties amount 01 million 0 recognized years ended december 31 2011 2010 2009 respectively accrued interest 11 million 0 related income tax uncertainties reported component current liabilities accrued interest 47 million 64 million related income tax uncertainties reported component longterm liabilities consolidated balance sheets december 31 2011 2010 respectively accrued penalties 02 million 0 related income tax uncertainties reported current liabilities accrued penalties 07 million 08 million related income tax uncertainties reported longterm liabilities consolidated balance sheets december 31 2011 2010 respectively company tax years 2008 2011 remain open subject examination internal revenue service tax years 1995 2011 remain open subject examination companys various major state jurisdictions within united states poland company longer subject income tax examinations tax authorities years prior 2006 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 16 debt longterm debt consisted following december 31 2011 2010 senior notes weightedaverage interest rate 751 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2036 various tranches notes collateralized certain us land buildings press finishing equipment terms master note security agreement b july 26 2011 company entered 15 billion debt financing agreement certain lenders 15 billion debt financing agreement includes three different loan facilities first revolving facility amount 8500 million term five years maturing july 25 2016 second facility term loan aggregate amount 4500 million term five years maturing july 25 2016 third facility term loan b amount 2000 million net 10 million original issue discount term seven years maturing july 25 2018 subject certain required amortization december 31 2011 company borrowings 850 million revolving credit agreement well 349 million issued letters credit leaving 7301 million available future borrowings revolving facility term loan loans made 15 billion debt financing agreement bear interest london interbank offered rate libor plus 225 125 excess alternate base rate term loan b loans bear interest 300 excess libor floor 100 200 excess alternative base rate companys option debt financing agreement entered reduce companys borrowing costs lower interest rates create flexibility higher revolving credit capacity improvement financial terms proceeds term loan term loan b revolving credit facility used repay outstanding balances terminate companys 123 billion debt financing agreement included 7000 million term loan 5300 million revolving credit facility well pay new debt issuance costs incurred refinancing 15 billion debt financing agreement secured substantially unencumbered assets company c companys former 123 billion debt financing agreement included 7000 million term loan 5300 million revolving credit facility replaced 15 billion debt financing agreement described b quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated december 16 2008 debt related companys international operations refinanced entering secured credit agreement facilities agreement facilities agreement includes euro denominated term loan multicurrency revolving credit facility term loan principal payments commenced december 2009 matures december 16 2015 multicurrency revolving credit facility used financing working capital general business needs renewed december 2011 expire december 16 2012 december 31 2011 companys international operations borrowings 67 million multicurrency revolving credit facility leaving 78 million available future borrowing terms facilities agreement include certain financial covenants guarantee facilities agreement company security agreement includes collateralizing substantially quadwinkowski assets facilities bear interest aggregate warsaw interbank offered rate wibor euro interbank offered rate euribor margin e domestic term loan domestic revolving credit agreement paid june 2011 based upon interest rates available company borrowings similar terms maturities fair value companys total debt approximately 14 billion december 31 2011 company incurred 115 million debt issuance costs connection july 26 2011 15 billion debt financing agreement addition prior execution new debt agreement 357 million remaining unamortized debt issuance costs 89 million remaining original issue discount terminated 123 billion debt financing agreement accordance accounting guidance treatment debt issuance costs debt extinguishment 561 million combined debt issuance costs remaining original issue discount company accounted amounts follows 340 million recognized year ended december 31 2011 classified loss debt extinguishment consolidated statements operations 221 million capitalized debt issuance costs classified longterm assets consolidated balance sheet amortized 5 7 year lives new debt instruments new original issue discount 10 million related term loan b classified reduction longterm debt december 31 2011 companys various lending arrangements included certain financial covenants financial terms numbers ratios defined companys debt agreements among covenants company required maintain following december 31 2011 covenant restrictive measurement included • rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda defined debt agreement shall exceed 350 100 twelve months ended december 31 2011 companys leverage ratio 227 100 • rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 325 100 twelve months ended december 31 2011 companys interest coverage ratio 663 100 • rolling twelvemonth basis fixed charge coverage ratio defined consolidated ebitda rent expense interest rent expense shall less 150 100 twelve months ended december 31 2011 companys fixed charge coverage ratio 323 100 • consolidated net worth least 7458 million plus 40 positive consolidated net income cumulatively year december 31 2011 companys consolidated net worth restrictive covenant quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated per various debt agreements 124 billion addition covenants 15 billion debt financing agreement also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock companys total leverage ratio greater 300 100 total leverage ratio defined debt financing agreement company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions twelvemonth period ended december 31 2011 company compliance financial covenants debt agreements approximate annual principal amounts due longterm debt follows years ending december 31 note 17 lease obligations company entered various master lease agreements press finishing equipment leases provide company options purchase related equipment termination value defined various early buyout dates term lease leases accounted capital leases consolidated balance sheets assets recorded capital leases follows december 31 2011 2010 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated december 31 2011 future maturities capitalized leases consisted following company various operating lease agreements future minimum rental commitments noncancelable leases follows rent expense operating lease agreements totaled 228 million 259 million 107 million years ended december 31 2011 2010 2009 respectively note 18 financial instruments fair value measurements certain assets liabilities required recorded fair value recurring basis assets liabilities recorded fair value nonrecurring basis generally result acquisitions impairment charges fair value determined based exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants company records fair value forward contracts pension plan assets recurring basis assets measured fair value nonrecurring basis include property plant equipment assets held sale income tax accounts goodwill intangible assets fair value cash equivalents receivables inventories restricted cash accounts payable accrued liabilities amounts owing satisfaction bankruptcy claims approximate carrying values december 31 2011 2010 see note 16 discussion fair value companys debt note 20 details level 1 level 2 inputs related employee retirement plans gaap also classifies inputs used measure fair value following hierarchy level 1 quoted prices active markets identical assets liabilities level 2 quoted prices active markets similar assets liabilities quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability level 3 unobservable inputs asset liability level 3 assets liabilities december 31 2011 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company operations countries transactions outside functional currencies periodically enters foreign exchange contracts used hedge net exposures changes foreign currency exchange rates designated either cash flow hedges fair value hedges gains losses net foreign currency hedges intended offset losses gains underlying net exposures effort reduce earnings volatility resulting fluctuating foreign currency exchange rates company periodically enters natural gas forward purchase contracts hedge increases commodity costs years ended december 31 2011 2010 companys commodity contracts qualified exception related normal purchases sales company takes delivery normal course business company held open shortterm foreign currency forward exchange contracts hedge exchange rate exposure 500 million canadian dollars deposit related transcontinental mexico acquisition december 31 2011 see note 3 open foreign currency exchange contracts december 31 2010 years ended december 31 2011 2010 2009 impact consolidated statements operations hedge ineffectiveness material note 19 longterm liabilities longterm liabilities consisted following december 31 2011 2010 single employer pension postretirement obligation well withdrawal liability multiemployer pension plans pertaining canadian operations reflected 2011 amounts included note 4 note 20 employee retirement plans company assumed multiple defined benefit pension postretirement benefit plans became participant multiemployer pension plans part world color press acquisition prior acquisition company defined contribution plan referred personal enrichment plan pep plan effective july 2 2010 company split pep plan two separate plans formally established quadgraphics employee stock ownership plan esop plan quadgraphics diversified plan diversified plan defined contribution plans diversified plan comprised participant directed 401k contributions company match profit sharingcontributions company 401k matching contributions 128 million 62 million 60 million years ended december 31 2011 2010 2009 respectively esop plan holds profit sharing contributions company stock made discretion companys board directors annual profit sharing contributions totaled 134 million 148 million 0 years ended december 31 2011 2010 2009 respectively 2010 company loaned 96 million pep plan fund annual common stock purchases employees retired terminated employment company loan made anticipation companys public registration quadgraphics common shares owned pep plan part companys overall public registration class stock loan settled december 31 2010 79 million loan repaid cash remaining 17 million applied prepayment 2010 profit sharing contribution approved companys board directors quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company assumed defined contribution plan united states part acquisition world color press plan comprised participant directed 401k contributions prior years also included employer match contributions employer match frozen world color press prior july 2 2010 acquisition company made cash contributions plan 2010 plan merged pep plan january 1 2011 defined benefit plans postretirement benefit plans company sponsors various funded unfunded pension plans portion fulltime employees us canada benefits generally based upon years service compensation plans funded conformity applicable government regulations company funds least minimum amount required qualified plans using actuarial cost methods assumptions acceptable government regulations addition pension benefits company provides certain healthcare life insurance benefits retired employees pension postretirement obligations related canadian discontinued operations reflected 2011 amounts components net periodic pension postretirement benefit expense income years ended december 31 2011 2010 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated pension postretirement obligations calculated using generally accepted actuarial methods measured december 31 following provides reconciliation projected benefit obligation fair value plan assets funded status pension postretirement plans december 31 2011 2010 summary pension plans accumulated benefit obligations excess plan assets december 31 2011 2010 follows amounts recognized consolidated balance sheets december 31 2011 2010 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table provides reconciliation companys accumulated comprehensive income loss prior deferred tax effects december 31 2011 2010 follows included plan curtailments 179 million canada pension curtailment loss recorded within discontinued operations consolidated statement operations actuarial gains losses excess 10 greater projected benefit obligation marketrelated value plan assets recognized component net periodic benefit costs average remaining service period plans active employees unrecognized prior service costs credit also recognized component net periodic benefit cost average remaining service period plans active employees amounts accumulated comprehensive income loss expected recognized components net periodic pension postretirement benefit expense next year follows weighted average assumptions separately pension postretirement benefit plans follows company determines assumed discount rate based index highquality corporate bond yields matchedfunding yield curve analysis measurement date quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated assumed health care cost trend rate used measuring accumulated postretirement benefit obligation 80 end 2011 expected gradually decline 2024 ultimate trend rate 50 remains level thereafter onepercentage point change assumed health care cost trend rates would following effects estimated company contributions benefit payments 2012 company expects make cash contributions 520 million qualified defined benefit pension plans make estimated benefit payments 40 million nonqualified defined benefit pension postretirement plans actual pension contributions may differ based funding calculations company may choose make additional discretionary contributions estimated benefit payments may differ based actual claim experience estimated future benefit payments plans behalf plan participants estimate future benefit payments qualified nonqualified postretirement plans made follows plan assets investment strategy company follows disciplined investment strategy provides diversification investments asset class foreign currency sector company pension committee approved investment policies different pension plans establish longterm asset mix targets based several factors including historical returns achieved worldwide investment markets time horizon pension plans obligations investment risk plans allocation range asset class developed whereby mix equities fixedincome investments used provide appropriate riskadjusted longterm return plan assets third party investment managers employed invest assets passivelyindexed activelymanaged strategies investment returns risks monitored ongoing basis addition companys canadian pension plans partly hedge exposure foreign currency risk derivatives used hedge 50 exposure us dollar euro british pound japanese yen gains losses derivatives offset corresponding change canadian dollar value hedged assets derivatives strictly used hedging purposes speculative purposes target allocations plan assets weightedaverage basis 65 equity securities 35 fixedincome including cash equivalents actual asset allocation december 31 2011 approximately 64 equity 35 debt securities 1 equity investments diversified country issuer industry sector fixed income securities consist government bonds corporate bonds diversified industries types investments consist currency forward contracts fixed income futures contracts real estate funds expected longterm rate return assets assumption selected first identifying expected range longterm rates return major asset class expected longterm rates return developed based longterm historical averages current expectations future returns anticipated inflation rates expected longterm rate return plan assets calculated weighting asset class extent individual pension plans different target asset quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated mixes expected longterm rate return assets may differ across plans fair values companys pension plan assets december 31 2011 2010 asset category follows level 3 assets liabilities december 31 2011 2010 company segregated plan assets following major categories levels determining fair value december 31 2011 cash equivalentscarrying value approximates fair value assets classified level 1 fixed incomethis category consists bonds shortterm fixed income securities fair valued based compilation primarily observable market information broker quotes overthecounter markets classified level 2 equitiesthis category consists equity investments equity pooled funds assets classified level 1 level 2 fair value equity investments based quoted prices active market fair value equity pooled funds based funds net asset value nav established funds administrator othersthis category consists mainly currency forward contracts classified level 1 level 2 currency forwards categorized level 2 valued based compilation primarily observable market information valuation methodologies described may generate fair value calculation may indicative net realizable value future fair values company believes valuation methodologies used appropriate use different methodologies assumptions calculating fair value could result different amounts company invests various assets valuation determined nav company believes nav representative fair value reporting date significant restrictions redemption investments reasons indicate investment would redeemed amount different nav risk management directly invested funds concentration risk monitored specific guidelines investment manager mandates investment manager mandates developed companys external investment advisor specify diversification standards maximum exposure per issuer concentration limits per type security industry country applicable investments made pooled funds investment mandates funds reviewed companys external investment advisor determine investment objectives guidelines consistent companys overall pension plan risk management objectives managing plan assets review manage risk associated funded status risk interest rate risk market risk counterparty risk liquidity risk operational risk liability management asset class diversification central risk management approach integral overall investment strategy quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated given process place ensure proper diversification portfolio management believes company pension plan assets exposed significant concentration risk multiemployer pension plans result acquisition world color press july 2 2010 company participates number mepps terms collective bargaining agreements cover number employees risks participating mepps different single employer plans following aspects • assets contributed mepps one company may used provide benefits employees participating companies • participating company stops contributing plan unfunded obligations plan may borne remaining participating companies • company stops participating mepps continues business company would required pay amount referred withdrawal liability based unfunded status plan company records required cash contributions mepps expenses period incurred liability recognized contributions due unpaid exception recognition withdrawal liability recorded longterm liabilities years ended december 31 2011 2010 company made cash contributions aggregate mepps 03 million 18 million respectively due significantly underfunded status mepps company began process withdraw significant mepps replace pension benefits company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company accrued 835 million estimated withdrawal liability based information provided plans trustee part purchase price allocation world color press 835 million estimated withdrawal liability classified longterm liabilities consolidated balance sheets december 31 2011 2010 december 31 2011 company participated two mepps determined significant based underfunded status potential withdrawal liability graphics communications international union employer retirement fund gciu plan defined benefit plan provides retirement benefits total permanent disability benefits preretirement death benefits participating union employees company funded status gciu plan classified critical based gciu plans 2011 certification united states department labor funded percentage plan less 65 projected accumulated funding deficit next four plan years result gciu plan implemented rehabilitation plan improve plans funded status company paid surcharge contributions made gciu plan years ended december 31 2011 2010 company made cash contributions gciu plan 03 million 13 million respectively company estimates contributions made gciu plan company world color press represent greater 5 total contributions made participating employers 2009 plan year plan year ended december 31 2009 latest available financial information provided gciu plan 2011 company reached agreement participating local unions withdraw gciu plan relieving companys obligation make future annual benefit contributions gciu plan subsequently company notified gciu plan trustee companys withdrawal end plan year december 31 2011 company currently waiting withdrawal liability calculation gciu plans trustee graphics communications conference international brotherhood teamsters national pension fund gcc plan defined benefit plan provides retirement benefits disability benefits early retirement benefits participating union employees company funded status gcc plan classified critical based gcc plans 2011 certification united states department labor funded percentage plan less 65 projected accumulated funding deficit next four plan years result gcc plan implemented rehabilitation plan improve plans funded status company paid surcharge contributions made gcc quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated plan years ended december 31 2011 2010 company made cash contributions gcc plan 0 05 million respectively company estimates contributions made gcc plan company world color press represent greater 5 total contributions made participating employers 2010 plan year plan year ended april 30 2010 latest available financial information provided gcc plan 2011 company reached agreement participating local unions withdraw gcc plan relieving companys obligation make future annual benefit contributions gcc plan subsequently company notified gcc plan trustee companys withdrawal end plan year april 30 2011 company process determining final withdrawal liability gcc plans trustee note 21 earnings loss per share attributable quadgraphics common shareholders basic earnings loss per share attributable quadgraphics common shareholders computed dividing net earnings loss attributable quadgraphics common shareholders weighted average common shares outstanding 471 million 375 million 283 million shares years ended december 31 2011 2010 2009 respectively calculation diluted earnings per share amount includes effect dilutive equity incentive instruments company uses treasury stock method calculate effect outstanding dilutive equity incentive instruments requires company compute total proceeds sum 1 amount employee must pay upon exercise award 2 amount unearned stockbased compensation costs attributed future services 3 amount tax benefits would credited additional paidin capital assuming exercise award equity incentive instruments total employee proceeds exercise exceed average fair value equity incentive instrument period antidilutive effect earnings per share accordingly company excludes calculation due net loss attributable quadgraphics common shareholders incurred years ended december 31 2011 2010 assumed exercise equity incentive instruments antidilutive therefore included diluted loss per share attributable quadgraphics common shareholders calculation antidilutive stock options purchase 15 million shares class stock excluded computations diluted net earnings per share 2009 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reconciliations numerator denominator basic diluted per share computations companys common stock including impact discontinued operations years ended december 31 2011 2010 2009 summarized follows note 22 stock incentive programs company recognizes compensation expense based estimated grant date fair values sharebased awards issued employees nonemployee directors using blackscholes option pricing model total compensation expense recognized related equity incentive programs 149 million 51 million 44 million years ended december 31 2011 2010 2009 respectively recorded selling general administrative expenses restructuring impairment transactionrelated charges consolidated statements operations company recognizes compensation costs awards expected vest straightline basis requisite service period awards generally vesting term company estimated number awards expected vest based part historical forfeiture rates also based managements expectations employee turnover within specific employee groups receiving type award forfeitures estimated time grant revised necessary subsequent periods actual forfeitures differ estimates quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated grants made prior january 1 2011 equity incentive compensation expense included companys 1999 nonqualified stock option plan 1990 stock option plan grants beginning january 1 2011 shareholders company approved quadgraphics inc 2010 omnibus incentive plan omnibus plan two complimentary purposes 1 attract retain outstanding individuals serve directors officers employees 2 increase shareholder value concurrent july 2 2010 closing world color press acquisition additional 23 million shares class stock approved issuance companys omnibus plan omnibus plan replaced 1999 nonqualified stock option plan 1990 stock option plan january 1 2011 equity grants made omnibus plan within framework omnibus plan companys board directors approved form new stock option award agreement restricted stock award agreement restricted stock unit award agreement deferred stock unit award agreement equity incentive instrument granted exercise price less 100 fair market value class stock date grant december 31 2011 18 million shares available issuance omnibus plan stock options november 18 2011 company announced board directors approved termination outstanding stock options companys 1990 stock option plan 1999 nonqualified stock option plan “409a options” result termination option holders receive aggregate termination payment 200 million based number 409a options held option holders companys weighted volume adjusted stock price 1347 november 18 2011 exercise price 409a options addition option holders granted new options omnibus plan equal number terminated 409a options held new options granted exercise price equal greater fair market value 1347 per share exercise price option holders 409a options greater 1347 new options issued greater price therefore none new options granted exercise price fair market value new options granted exercise price equal greater corresponding 409a option canceled accordance authoritative literature termination modification stock options company recorded 200 million liability termination payment 64 million incremental stock option expense recorded restructuring impairment transactionrelated charges consolidated statements operations addition company recorded 51 million reduction additional paid capital reduce deferred tax asset associated termination 409a options prior termination 409a options granted prior 2011 generally vested rate 5 10 per year expired 90 days respective employees termination company new option grants beginning january 1 2011 options vest four years vesting first year onethird vesting upon second third fourth anniversary dates defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee new option grants beginning january 1 2011 options expire upon earliest tenth anniversary grant date twentyfour months termination death thirtysix months termination normal retirement disability 90 days termination employment reason stock options granted prior 2011 credited dividend declarations new option grants time credited dividend declarations stock options granted employees granted new option grant terms january 1 2011 forward quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated excluding 3571652 new options granted november 18 2011 company granted 451029 stock options omnibus plan 2011 company granted 495000 options pre2011 stock option plans january 1 2010 since terminated november 18 2011 grant date weighted average fair value options 1317 1878 1624 grants years ended december 31 2011 2010 2009 respectively excluding 3571652 new options granted november 18 2011 fair value stock option grant estimated date grant following weighted average assumptions years ended december 31 2011 2010 2009 company determined expected volatility based volatility comparable company stock average riskfree interest rate based united states treasury security rate effect grant date term expected life expected life based term vesting period grant adjusted historical experience vesting prior 2011 dividend yield included dividends credited option holders compensation expense recognized related stock options 127 million 51 million 44 million years ended december 31 2011 2010 2009 respectively total future compensation expense stock options granted december 31 2011 approximately 295 million expected recognized 31 years weightedaverage vesting period 15 years cash received option exercises 16 million 11 million 11 million years ended december 31 2011 2010 2009 respectively following table summary stock option activity year ended december 31 2011 1 termination 3571652 409a options weighted average exercise price 1312 grant 3571652 new options weighted average exercise price 1874 excluded options granted modified intrinsic value options exercisable options outstanding december 31 2011 2010 2009 based fair value stock price quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated sharebased compensation activity years ended december 31 2011 2010 2009 noted restricted stock restricted stock units deferred stock units restricted stock rs restricted stock unit rsu awards consist shares rights shares companys class stock awarded employees company awards restricted subject substantial risk forfeiture restrictions sale transfer employee rsu awards typically granted eligible employees outside united states defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving rs grants able exercise full voting rights receive full credit dividends vesting period dividends paid rs grantee within 45 days full vesting grantees receiving rsus entitled vote earn dividends upon vesting rsus settled either cash payment equal fair market value rsus vesting date issuance company class stock following table summary rs rsu award activity year ended december 31 2011 rs shares rsus vest third anniversary grant date provided holder share continuously employed company vesting date compensation expense 16 million recognized related rs rsus year ended december 31 2011 total future compensation expense rs rsus granted december 31 2011 approximately 33 million expected recognized 20 years weightedaverage vesting period 1 year aggregate fair value outstanding rsus december 31 2011 06 million january 1 2011 13704 deferred stock units dsu granted grant date fair value 4126 nonemployee directors deferred stock units fully vested grant date dsu entitles grantee receive one share class stock upon earlier separation date grantee second anniversary grant date could subject acceleration change control death disability defined individual dsu grant agreement grantees dsus may exercise voting rights credited dividends converted additional dsus based closing price class stock upon settlement december 31 2011 11740 deferred stock units outstanding year ended december 31 2011 compensation expense recorded awards 06 million awards fully vested grant date compensation expense recognized date grant information authorized unissued shares treasury shares may used issuance companys equity incentive programs company intends use treasury shares class stock meet stock requirements awards quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated future note 23 shareholders equity company three classes common stock follows share data millions 1 discussed note 3 increase 2010 187 million shares class stock issued represents consideration provided world color press common shareholders exchange world color press common shares company also 05 million shares 001 par value preferred stock authorized none issued december 31 2011 2010 2009 company present plans issue preferred stock accordance articles incorporation dividends paid equally class b class c common shares following table details dividend activity related companys class b class c stock years ended december 31 2011 2010 2009 addition part july 2010 acquisition world color press cash distribution 1400 million paid quadgraphics preacquisition common shareholders accordance articles incorporation class common share one vote per share class b class c common share ten votes per share matters voted upon companys shareholders liquidation rights three classes stock companys class c stock held esop plan owned transferred company employee benefit plan intended satisfy qualification requirements section 401 internal revenue code september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock december 31 2011 company repurchased quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 04 million shares class stock open market 82 million redeemable equity company follows applicable gaap sec authoritative guidance redeemable stock requires company record class c stock full redemption value balance sheet date extent redemption securities solely within control company terms articles incorporation class c common shares required owned qualified employee retirement plan company holder class c stock continuous right class c stock repurchased company redemption value class c qualified employee retirement plan shares december 31 2011 2010 2009 totaled 35 million 106 million 84 million respectively class c common shares redeemed company years ended december 31 2011 2010 year ended december 31 2009 redemption features eliminated 4362 redeemable class c common shares weighted average price 3175 per share prior january 24 2010 terms company pep plan class stock held participant accounts associated profit sharing contributions made prior december 31 1999 pre2000 accounts could distributed participant upon retirement termination form stock subject automatic call provision pep plan amended january 24 2010 change forms distribution pre2000 accounts result pep plan amendment class common shares pre2000 accounts required classified redeemable june 30 2010 class stock resulting exercised stock options vested stock options also classified redeemable equity result commencement july 6 2010 trading companys class stock nyse shares related companys nonqualified stock option plans registered sec third quarter 2010 readily tradable market exists companys class common shares thereby eliminating put right applicable stock option agreements combination events resulted 1299 million reclassified redeemable equity common stock equity consolidated balance sheet 2010 redemption value class common shares december 31 2011 2010 readily tradable market redemption value class common shares december 31 2009 totaled 1331 million included 243 million aggregate intrinsic value outstanding unexercised vested stock options redemption features eliminated 33 million 11 million redeemable class common shares held former employees weighted average price 3936 3175 per share years ended december 31 2010 2009 respectively quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated subsequent changes redemption value securities due changes stock valuation dividend declarations charged retained earnings decreases redemption value due elimination redemption features credited additional paidin capital retained earnings year ended december 31 2011 balance redeemable equity decreased 71 million additional information regarding changes redeemable equity years ended december 31 2011 2010 2009 provided table note 24 segment information company operates primarily commercial print portion printing industry related product service offerings designed offer customers complete solutions communicating messages target audiences companys operating reportable segments aligned chief operating decision maker company currently manages business companys reportable operating segments product service offerings summarized north america print related services north america print related services segment includes companys united states printing operations well canadian printing operations vancouver british columbia retained sale companys canadian operations transcontinental see note 4 segment managed one integrated platform products include catalogs magazines retail inserts books directories special interest publications direct marketing materials related service offerings include digital photography digital imaging binding mailing distribution data optimization analytics services segment also includes design development manufacture service printingrelated auxiliary equipment well manufacture ink international segment consists companys printing operations europe latin america including newly acquired transcontinental mexican operations see note 3 segment provides printed products related services consistent north america print related services segment exception printingrelated auxiliary quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated equipment included north america print related services segment corporate segment consists unallocated general administrative activities associated expenses including part executive legal finance information technology human resources restructuring impairment transactionrelated charges years ended december 31 2011 2010 2009 described note 5 included operating incomeloss results segment total assets canadian discontinued operations 1775 million december 31 2011 capital expenditures canadian discontinued operations 72 million year ended december 31 2011 included north america print related services segment reconciliation operating income earnings loss continuing operations income taxes equity earnings unconsolidated entities reported consolidated statements operations years ended december 31 2011 2010 2009 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 25 geographic area product information table presents net sales longlived assets geographic region years ended december 31 2011 2010 2009 amounts table differ segment data presented note 24 operating segment includes operations multiple geographic regions based companys management reporting structure table presents consolidated net sales products services years ended december 31 2011 2010 2009 note 26 subsequent events declaration quarterly dividend february 28 2012 company declared quarterly dividend 025 per share paid march 23 2012 shareholders record march 12 2012 item 9item 8 financial statements supplementary data quarterly financial data unaudited following table sets forth selected financial information eight quarters twoyear period ended december 31 2015 unaudited information prepared company basis consolidated financial statements includes normal recurring adjustments necessary present information fairly read conjunction companys audited consolidated financial statements notes thereto 1 reflects results acquired businesses relevant acquisition dates primarily related acquisitions brown printing may 30 2014 marins february 3 2015 copac april 14 2015 specialty august 25 2015 see note 2 acquisitions strategic investments consolidated financial statements item 8 annual report form 10k information acquisitions 2 reflects pretax noncash goodwill impairment charges 8083 million 5424 million net tax recorded year ended december 31 2015 report independent registered public accounting firm board directors stockholders quadgraphics inc subsidiaries sussex wi audited accompanying consolidated balance sheets quadgraphics inc subsidiaries company december 31 2015 2014 related consolidated statements operations comprehensive income loss shareholders equity cash flows three years period ended december 31 2015 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position quadgraphics inc subsidiaries december 31 2015 2014 results operations cash flows three years period ended december 31 2015 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states companys internal control financial reporting december 31 2015 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission report dated february 23 2016 expressed unqualified opinion companys internal control financial reporting deloitte touche llp milwaukee wisconsin february 23 2016 report independent registered public accounting firm board directors stockholders quadgraphics inc subsidiaries sussex wi audited internal control financial reporting quadgraphics inc subsidiaries company december 31 2015 based criteria established internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission companys management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying managements report internal control financial reporting responsibility express opinion companys internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion companys internal control financial reporting process designed supervision companys principal executive principal financial officers persons performing similar functions effected companys board directors management personnel provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting including possibility collusion improper management override controls material misstatements due error fraud may prevented detected timely basis also projections evaluation effectiveness internal control financial reporting future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion company maintained material respects effective internal control financial reporting december 31 2015 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states consolidated financial statements year ended december 31 2015 company report dated february 23 2016 expressed unqualified opinion financial statements deloitte touche llp milwaukee wisconsin february 23 2016 quadgraphics inc consolidated statements operations millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements comprehensive income loss millions see accompanying notes consolidated financial statements quadgraphics inc consolidated balance sheets millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements cash flows millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements shareholders equity millions see accompanying notes consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies nature operationsquadgraphics operates primarily commercial print portion printing industry printer retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement company also provides complementary service offerings customers companys products services variety industries sold primarily throughout north america south america europe addition company strategically sources packaging product manufacturing multiple end markets central america asia principles consolidation basis presentationthe accompanying consolidated financial statements include accounts company whollyowned subsidiaries prepared accordance gaap results operations accounts businesses acquired included consolidated financial statements dates acquisition see note 2 acquisitions strategic investments consolidated financial statements include retrospective adoption new accounting guidance balance sheet presentation debt issuance costs deferred taxes issued fasb april 2015 november 2015 respectively accordingly consolidated balance sheets restated periods presented see note 25 new accounting pronouncements information impact retrospective adoption accounting guidance financial statement line items within companys consolidated balance sheets december 31 2014 follows investments entities company ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting investments entities company exert significant influence control ownership interest less 20 accounted using cost method accounting intercompany transactions balances eliminated consolidation quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated foreign operationsassets liabilities denominated foreign currencies translated united states dollars exchange rate existing respective balance sheet dates income expense items translated average rates respective periods translation adjustments resulting fluctuations exchange rates recorded separate component accumulated comprehensive income loss consolidated statements shareholders equity transaction gains losses recorded selling general administrative expenses consolidated statements operations foreign exchange transactions resulted pretax realized unrealized losses 14 million 59 million 57 million years ended december 31 2015 2014 2013 respectively company owns 49 company brazil owned 50 company chile company sold ownership interest chile july 31 2015 company accounts entities using equity method accounting see note 8 equity method investments unconsolidated entities discussion companys equity loss plurals chiles operations recorded equity loss unconsolidated entities companys consolidated statements operations included within international segment significant unconsolidated entities use estimatesthe preparation consolidated financial statements requires use managements estimates assumptions affect reported assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenue expenses reporting periods actual results could differ estimates used accounting items matters including limited allowances doubtful accounts inventory obsolescence asset valuations useful lives goodwill pension postretirement benefits selfinsurance reserves stockbased compensation taxes restructuring provisions contingencies revenue recognitionthe company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer reasonable assurance collectability agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides product returns significant majority products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer revenues related companys logistics operations includes delivery printed material recognized upon completion services account greater 10 companys consolidated net sales therefore net sales related costs sales products services included separate line items consolidated statements operations certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis byproduct recoveriesthe company records sale byproducts net product sales consolidated statements operations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated financial instrumentsthe company uses derivative financial instruments purpose hedging commodity foreign exchange exposures exist part ongoing business operations including natural gas forward purchase contracts foreign exchange contracts policy company engage speculative leveraged transactions company hold issue financial instruments trading purposes derivative instruments recorded consolidated balance sheets either assets liabilities measured fair value derivative designated fair value hedge changes fair value derivative hedged item attributable hedged risk recognized earnings derivative designated cash flow hedge effective portion changes fair value derivative recorded component accumulated comprehensive income loss recognized consolidated statements operations hedged item affects earnings ineffective portions changes fair value hedges insignificant recognized earnings cash flows derivatives accounted cash flow fair value hedges included consolidated statements cash flows category item hedged fair value measurementthe company applies fair value accounting assets liabilities recognized disclosed fair value consolidated financial statements recurring basis fair value represents amount would received selling asset paid transfer liability orderly transaction market participants measurement date determining fair value measurements assets liabilities required recorded fair value company considers principal advantageous market marketbased risk measurements assumptions market participants would use pricing asset liability see note 15 financial instruments fair value measurements discussion research developmentresearch development costs related development new products adaptation existing products expensed incurred included cost sales totaled 103 million 113 million 134 million years ended december 31 2015 2014 2013 respectively cash equivalentsthe company considers highly liquid investments original maturities three months less cash equivalents receivablesreceivables stated net allowances doubtful accounts single customer comprised 5 companys consolidated net sales 2015 2014 2013 5 companys consolidated receivables december 31 2015 2014 specific customer provisions made review significant outstanding amounts utilizing information customer creditworthiness current economic trends indicates collection doubtful addition provisions made differing rates based upon age receivable companys historical collection experience see note 5 receivables discussion transactions affecting allowances doubtful accounts inventoriesinventories include material labor plant overhead stated lower cost net realizable value december 31 2015 2014 inventories valued using firstin firstout fifo method see note 6 inventories breakdown components companys inventories quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated property plant equipmentproperty plant equipment recorded cost depreciated estimated useful lives assets using straightline method financial reporting purposes see note 7 property plant equipment breakdown components companys property plant equipment major improvements extend useful lives existing assets capitalized charged asset accounts repairs maintenance significantly improve extend useful lives respective assets expensed incurred leasehold improvements depreciated shorter lease term estimated useful life respective asset retired disposed associated costs accumulated depreciation eliminated resulting profit loss recognized companys consolidated statements operations intangible assetsidentifiable intangible assets recognized apart goodwill amortized estimated useful lives impairment longlived intangible assetsthe company evaluates longlived assets intangible assets significant property plant equipment customer relationship intangible assets whenever events circumstances occurred indicate carrying value asset may recoverable determining whether impairment occurred typically requires various estimates assumptions including determining cash flows directly related potentially impaired asset useful life cash flows occur amount assets residual value turn measurement impairment loss requires determination recoverability generally estimated ability recover balance assets expected future operating cash flows undiscounted basis impairment determined exist related impairment loss calculated based difference fair value carrying value asset goodwillgoodwill reviewed annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value performing analysis company compares reporting units fair value estimated based comparable company market valuations andor expected future discounted cash flows generated reporting unit carrying value carrying value exceeds reporting units fair value company performs fair value measurement calculation determine impairment loss would charged operations period identified see note 4 goodwill intangible assets discussion income taxesthe company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations company determines deferred income tax asset fully realized future valuation allowance established increased reflect amount asset likely realized would increase companys provision income taxes period valuation allowance established company determines related deferred income tax assets realized future excess net recorded amount adjustment reduce related valuation allowance made quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated would reduce companys provision income taxes consolidated financial statements include retrospective adoption new accounting guidance balance sheet presentation deferred taxes issued fasb november 2015 accordingly consolidated balance sheets restated periods presented see note 25 new accounting pronouncements information company regularly audited foreign domestic tax authorities audits occasionally result proposed assessments ultimate resolution might result company owing additional taxes including cases penalties interest company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit greater fiftypercent likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination companys worldwide tax provision related tax assets liabilities requires use significant judgment estimating impact uncertainties application gaap interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain fair market value required measure tax asset liability gaap purposes company periodically obtains independent third party assistance validate value determined conformity internal revenue service fair market value guidelines company believes appropriate support positions taken certain positions may successfully challenged taxing authorities resolution uncertainties manner inconsistent managements expectations could material impact companys financial condition operating results company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions determination companys worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions see note 14 income taxes discussion pension plansthe company assumed certain frozen underfunded defined benefit pension plans part 2010 world color press acquisition pension plan costs determined using actuarial methods funded contributions company records amounts relating pension plans based calculations include various actuarial assumptions including discount rates assumed rates return mortality compensation increases turnover rates company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors purposes calculating expected return plan assets valued fair value event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 company previously participated mepps result acquisition world color press due significant underfunded status mepps company withdrawn significant mepps replaced union sponsored promise pay future defined benefit plans company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded estimated withdrawal liability mepps part world color press purchase price allocation process based information received mepps trustees estimated withdrawal liability updated based significant events potential new information ongoing litigation proceedings mepps final withdrawal liability determined exact amount withdrawal liability could higher lower estimate depending among things nature quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated timing triggering events funded status plans time final conclusion litigation mepps trustees see note 17 employee retirement plans discussion stockbased compensationthe company recognizes stockbased compensation expense vesting period stockbased awards made employees directors based fair value instrument time grant see note 19 equity incentive programs discussion accumulated comprehensive income lossaccumulated comprehensive income loss consists primarily unrecognized actuarial gains losses prior service costs pension postretirement plans foreign currency translation adjustments presented consolidated statements shareholders equity see note 21 accumulated comprehensive loss discussion supplemental cash flow informationthe following table summarizes certain supplemental cash flow information years ended december 31 2015 2014 2013 note 2 acquisitions strategic investments 2015 specialty finishing inc acquisition company completed acquisition specialty august 25 2015 618 million specialty fullservice paperboard folding carton manufacturer logistics provider located omaha nebraska purchase price 618 million includes 01 million acquired cash net purchase price 617 million included preliminary purchase price allocation 96 million identifiable intangible assets amortized estimated useful lives ranging three six years 35 million goodwill preliminary purchase price allocation based valuations performed determine fair value net assets acquisition date purchase price well purchase price allocation subject final determination acquired working capital completion final valuation net assets acquired net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs specialtys operations included united states print related services segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 2015 copac global packaging inc acquisition company completed acquisition copac april 14 2015 594 million copac leading international provider innovative packaging supply chain solutions including turnkey packaging design production fulfillment services across range end markets copac manufactures products folding cartons labels inserts tags specialty envelopes production facilities spartanburg south carolina santo domingo dominican republic well strategically sourcing packaging product manufacturing multiple end markets central america asia giving global footprint purchase price 594 million includes 09 million acquired cash net purchase price 585 million included purchase price allocation 222 million identifiable intangible assets amortized estimated useful lives six years 235 million goodwill final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs copacs operations included united states print related services segment 2015 marins international acquisition company completed acquisition marins february 3 2015 311 million marins headquartered paris france worldwide leader pointofsale display industry specializes research design display solutions marins products produced global network licensees including quadgraphics well one wideformat digital print kitting fulfillment facility paris marins uses europeanbased sales force global licensees sell patented product portfolio purchase price 311 million includes 101 million acquired cash net purchase price 210 million included purchase price allocation 179 million identifiable intangible assets amortized estimated useful lives ranging three eight years 68 million goodwill final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs marins operations included international segment 2014 brown printing company acquisition company completed acquisition brown printing may 30 2014 1011 million brown printing provides magazine catalog printing distribution services integrated media solutions magazine publishers catalog marketers united states company used cash hand borrowings revolving credit facility finance acquisition brown printings operations included united states print related services segment disclosure financial results brown printing since acquisition date practicable operated standalone business combined companys existing operations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company recorded allocation purchase price tangible identifiable intangible assets acquired liabilities assumed including certain contingent liabilities based fair values may 30 2014 acquisition date included purchase price allocation identifiable customer relationship intangible assets amortized estimated useful lives six years final purchase price allocation follows final allocation purchase price unaudited pro forma condensed combined financial information based valuations performed determine fair value net assets acquisition date valuation 975 million net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs 2014 anselmo l morvillo sa investment company invested additional 65 million morvillo argentina increased ownership share morvillo 85 100 year ended december 31 2014 company historically consolidated results morvillo companys consolidated financial statements presented 15 portion morvillos results owned company noncontrolling interest company longer presents noncontrolling interest going forward morvillos results fully consolidated companys consolidated financial statements 2014 unigraphic inc acquisition company completed acquisition unigraphic commercial specialty printing company based boston metro area february 5 2014 112 million unigraphic offers commercial specialty printing instore marketing digital fulfillment solutions wide variety industries including arts entertainment education financial food healthcare mass media pharmaceutical retail purchase price 112 million net cash acquired identifiable customer relationship intangible assets 69 million recorded final purchase price allocation amortized six years final purchase price allocation based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs unigraphics operations included united states print related services segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 2013 proteus packaging transpak corporation acquisitions company completed acquisition wisconsinbased proteus well sister company transpak december 18 2013 487 million payments 431 million made december 18 2013 upon completion acquisition remaining payments 50 million 06 million paid 2014 2015 respectively proteus designer manufacturer highend paperboard packaging offering packaging solutions wide variety industries including automotive biotechnology food beverage personal care pharmaceuticals software electronics transpak fullservice industrial packaging company offering crating packaging warehousing distribution logistics services destinations worldwide company recorded allocation purchase price acquired tangible identifiable intangible assets liabilities assumed based fair values december 18 2013 acquisition date included purchase price allocation identifiable customer relationship intangible assets amortized estimated useful lives six years goodwill resulting acquisition deductible tax purposes recorded within united states print related services segment based amount purchase price exceeds fair value net assets acquired final purchase price allocation follows final purchase price allocation based valuations performed determine fair value net assets acquisition date valuation net assets acquired 487 million classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs proteus transpaks operations included united states print related services segment 2013 novia careclinics llc acquisition company completed acquisition novia indianapolis indiana healthcare solutions company november 7 2013 133 million novia develops manages onsite shared primary care clinics small medium sized companies public sector school districts city county governments identifiable customer relationships 135 million recorded final purchase price allocation identifiable customer relationship intangible assets amortized estimated useful lives six years final purchase price allocation based valuations performed determine fair value net assets acquisition date valuations net assets acquired 133 million classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs novias operations included united states print related services segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 2013 vertis holdings inc acquisition company completed acquisition substantially assets vertis january 16 2013 2654 million pursuant terms asset purchase agreement asset agreement vertis leading provider retail inserts direct marketing instore marketing solutions acquisition vertis enhanced companys position leader production retail inserts direct marketing instore marketing solutions company provide clients enhanced integrated offerings purchase vertis accounted using acquisition method accounting gaap company acquire certain assets assume certain liabilities vertis subsidiaries asset acquisition including among liabilities underfunded pension postretirement obligations company used cash hand borrowings revolving credit facility finance acquisition october 2012 company made 259 million deposit held escrow accordance terms asset agreement deposit applied purchase price upon january 16 2013 consummation acquisition vertis operations included united states print related services segment disclosure financial results vertis since acquisition date practicable operated standalone business combined companys existing operations company recorded allocation purchase price tangible identifiable assets acquired liabilities assumed including certain contingent liabilities based fair values january 16 2013 acquisition date included purchase price allocation identifiable customer relationship intangible assets amortized estimated useful lives six years final purchase price allocation follows final purchase price allocation unaudited pro forma condensed consolidated financial information based valuations performed determine fair value net assets acquisition date valuation net assets acquired 2654 million classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated unaudited pro forma condensed combined financial information following unaudited pro forma condensed combined financial information presents companys results company acquired brown printing january 1 2013 vertis january 1 2012 unaudited pro forma information prepared following considerations • unaudited pro forma condensed combined financial information prepared using acquisition method accounting existing gaap company acquirer accounting purposes • unaudited pro forma condensed combined financial information reflect operating cost synergy savings combined companies may achieve result acquisition costs necessary achieve operating synergy savings additional charges necessary result integration note 3 restructuring impairment transactionrelated charges company recorded restructuring impairment transactionrelated charges years ended december 31 2015 2014 2013 follows costs related activities recorded consolidated statements operations restructuring impairment transactionrelated charges see note 22 segment information restructuring impairment transactionrelated charges segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated restructuring charges company began restructuring program 2010 related eliminating excess manufacturing capacity properly aligning cost structure company announced total 31 plant closures reduced headcount approximately 10000 employees since 2010 company announced closures augusta georgia east greenville pennsylvania enfield connecticut loveland colorado pilar argentina queretaro mexico plants year ended december 31 2015 company recorded following charges result plant closures restructuring programs year ended december 31 2015 • employee termination charges 421 million recorded company result workforce reductions facility consolidations involuntary separation programs • integration costs 51 million recorded company primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 291 million recorded company consisted 1 117 million vacant facility carrying costs 2 28 million equipment infrastructure removal costs closed plants 3 86 million lease exit charges primarily related closure atlanta georgia loveland colorado facilities company also recorded 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment see note 8 equity method investments unconsolidated entities additional details company announced closures atlanta georgia dickson tennessee marengo iowa pomona california st cloud minnesota woodstock illinois plants year ended december 31 2014 company recorded following charges result plant closures restructuring programs year ended december 31 2014 • employee termination charges 306 million recorded company result workforce reductions facility consolidations involuntary separation programs • integration costs 112 million recorded company primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 85 million recorded company consisted 1 77 million vacant facility carrying costs 2 24 million legal fees 3 18 million equipment infrastructure removal costs closed plants 4 15 million lease exit charges restructuring charges presented net 49 million gain termination postretirement medical benefit plan see note 17 employee retirement plans details postretirement medical benefit plan termination quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company announced closures bristol pennsylvania dubuque iowa pittsburg california vancouver british columbia canada plants year ended december 31 2013 company recorded following charges result plant closures restructuring programs year ended december 31 2013 • employee termination charges 157 million recorded company result workforce reductions facility consolidations involuntary separation programs • integration costs 252 million recorded company primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 286 million recorded company consisted 1 144 million vacant facility carrying costs 2 62 million equipment infrastructure removal costs closed plants 3 101 million lease exit charges restructuring charges presented net 21 million pension plan settlement gain see note 17 employee retirement plans details pension plan settlement gain restructuring charges recorded based plans committed management part based upon managements best estimates future events changes estimates may require future restructuring charges adjustments restructuring liabilities company expects incur additional restructuring charges related initiatives impairment charges company recognized impairment charges 953 million year ended december 31 2015 consisting 1 547 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado queretaro mexico well capacity reduction restructuring initiatives 2 186 million investmentrelated impairment charges primarily related 167 million impairment charges reduce book value companys equity method investment chile fair value see note 8 equity method investments unconsolidated entities additional details related impairment companys equity method investment chile 3 127 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 4 71 million customer relationship intangible asset impairments 5 22 million impairment charges primarily related restructuring proceedings argentina companys argentina subsidiaries land building machinery equipment intangible assets company recognized impairment charges 144 million year ended december 31 2014 consisting 1 80 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee mexico city mexico pomona california st cloud minnesota well capacity reduction restructuring initiatives 2 64 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures company recognized impairment charges 218 million year ended december 31 2013 consisting 1 117 million impairment charges machinery equipment longer utilized production result facility consolidations including dubuque iowa jonesboro arkansas pittsburg california vancouver british columbia canada well capacity reduction restructuring initiatives 2 101 million land building impairment charges primarily related corinth mississippi marengo iowa mexico city mexico plant closures quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair values impaired assets determined company level 3 fair value hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs estimated based broker quotes internal expertise related current marketplace conditions estimated future undiscounted cash flows assets adjusted estimated fair values time impairment noncash goodwill impairment charges included line item entitled goodwill impairment companys consolidated statements operations discussed note 4 goodwill intangible assets transactionrelated charges income company incurs transactionrelated charges income primarily consisting professional service fees related business acquisition divestiture activities company recognized transactionrelated charges income 67 million year ended december 31 2015 includes 100 million nonrecurring gain result couriers termination agreement pursuant quadgraphics acquire courier partially offset 33 million professional service fees including fees terminated acquisition courier acquisitions marins copac specialty company recognized transactionrelated charges 26 million year ended december 31 2014 primarily includes professional service fees acquisitions brown printing unigraphic company recognized transactionrelated charges 40 million year ended december 31 2013 primarily includes professional service fees acquisitions vertis proteus transpak transactionrelated charges expensed incurred accordance applicable accounting guidance business combinations reserves restructuring impairment transactionrelated charges activity impacting companys reserves restructuring impairment transactionrelated charges years ended december 31 2015 2014 follows companys restructuring impairment transactionrelated reserves december 31 2015 included shortterm longterm component shortterm portion included 310 million accrued liabilities see note 9 accrued liabilities 13 million accounts payable consolidated balance sheets company expects reserves paid within next twelve months longterm portion 66 million included longterm liabilities see note 16 longterm liabilities consolidated balance sheets quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 4 goodwill intangible assets goodwill represents excess purchase price fair value identifiable net assets acquired business combination goodwill assigned specific reporting units tested annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value united states print related services segment due decline companys stock price third quarter 2015 interim goodwill impairment test three reporting units united states print related services segment performed july 31 2015 reporting units include core print related services reporting unit specialty print related services reporting unit united states products services reporting unit goodwill 6408 million 1156 million 186 million respectively july 31 2015 determining fair value reporting unit company used equal weighting income market approaches except united states products services reporting unit income approach used completing step one evaluation estimated fair value three reporting units united states print related services segment determined lower carrying value respective reporting unit three reporting units failed step one goodwill impairment test step two goodwill impairment test requires company perform hypothetical purchase price allocation reporting unit determine implied fair value goodwill compare implied fair value goodwill carrying amount goodwill estimate fair value complex requires significant judgment thirdparty valuation firm engaged assist step two valuation process fair value determination categorized level 3 fair value hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs result interim goodwill impairment assessment well annual impairment test october 31 2015 companys united states print related services segment recorded pretax noncash goodwill impairment charges 7783 million year ended december 31 2015 included impairment charges 6408 million 1189 million 186 million core print related services reporting unit specialty print related services reporting unit united states products services reporting unit respectively goodwill impairment charges resulted reduction estimated fair value reporting unit based lower expectations future revenue profitability cash flows due volume pricing pressures compared expectations last annual goodwill impairment assessment performed october 31 2014 international segment march 25 2015 due deteriorating economic conditions including inflation currency devaluation combined uncertain political conditions declining print volumes labor challenges companys argentina subsidiaries included within latin america reporting unit commenced bankruptcy restructuring proceedings goal consolidating operations result company conducted interim goodwill impairment assessment latin america reporting unit included comparing carrying amount net assets including goodwill respective fair value march 31 2015 date interim assessment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair value determined using equal weighting income market approaches income approach company determined fair value based estimated future cash flows discounted estimated weightedaverage cost capital reflects overall level inherent risk rate return outside investor would expect earn market approach company derived fair value reporting units based market multiples comparable publiclytraded companies company performed additional fair value measurement calculation determine whether latin america reporting unit impairment charge recorded fair value reporting unit carrying amount part calculation company also estimated fair values significant tangible intangible longlived assets latin america reporting unit fair value determination categorized level 3 fair value hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs result interim goodwill impairment assessment well annual impairment test october 31 2015 companys international segment recorded noncash nondeductible goodwill impairment charges 300 million year ended december 31 2015 primarily including 233 million noncash goodwill impairment charge latin america reporting unit goodwill impairment charges resulted reduction estimated fair value reporting unit based lower expectations future revenue profitability cash flows due volume pricing pressures compared expectations last annual goodwill impairment assessment performed october 31 2014 goodwill december 31 2015 included 8083 million accumulated impairment losses 7783 million relates united states print related services segment 300 million relates international segment goodwill december 31 2014 include accumulated impairment losses noncash goodwill impairment charges 8083 million recorded year ended december 31 2015 goodwill impairment charges recorded years ended december 31 2014 2013 activity impacting goodwill years ended december 31 2015 2014 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated components intangible assets december 31 2015 2014 follows year ended december 31 2015 gross carrying amount intangible assets increased primarily due 497 million acquired identifiable intangible assets discussed note 2 acquisitions strategic investments gross carrying amount accumulated amortization within intangible assetsnet consolidated balance sheets december 31 2015 2014 differs value originally recorded acquisition due impairment charges recorded effects currency fluctuations purchase date december 31 2015 2014 intangible assets evaluated potential impairment whenever events circumstances indicate carrying value may recoverable company recorded finitelived intangible asset impairment charges 72 million primarily related customer relationships year ended december 31 2015 see note 3 restructuring impairment transactionrelated charges discussion impairment charges impairment charges recorded finitelived intangible assets years ended december 31 2014 2013 amortization expense intangible assets 796 million 759 million 703 million years ended december 31 2015 2014 2013 respectively following table outlines estimated future amortization expense related intangible assets december 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 5 receivables activity impacting allowances doubtful accounts years ended december 31 2015 2014 2013 follows note 6 inventories components inventories december 31 2015 2014 follows note 7 property plant equipment components property plant equipment december 31 2015 2014 follows 1 consists computer equipment vehicles furniture fixtures leasehold improvements communication related equipment company recorded impairment charges 695 million 144 million 218 million years ended december 31 2015 2014 2013 respectively reduce carrying amounts certain property plant quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated equipment longer utilized production fair value see note 3 restructuring impairment transactionrelated charges discussion impairment charges company recognized depreciation expense 2457 million 2605 million 2702 million years ended december 31 2015 2014 2013 respectively assets held sale company considered certain closed facilities held sale classification consolidated balance sheets net book value assets held sale 63 million 18 million december 31 2015 2014 respectively assets carried lesser original cost fair value less estimated costs sell fair values determined company level 3 fair value hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs estimated based broker quotes internal expertise related current marketplace conditions assets held sale included prepaid expenses current assets consolidated balance sheets note 8 equity method investments unconsolidated entities company 49 ownership interest plural commercial printer based são paulo brazil company 50 ownership interest chile commercial printer based santiago chile company sold ownership interest chile july 31 2015 companys ownership interest plural chile accounted using equity method accounting periods presented companys equity loss plurals chiles operations recorded equity loss unconsolidated entities companys consolidated statements operations included within international segment company reviews equity method investments regularly indicators temporary impairment second quarter 2015 company recorded 167 million impairment charge reduce book value 50 ownership interest chile fair value based intent sell investment impairment recorded restructuring impairment transactionrelated charges consolidated statement operations included within international segment fair value measurement investment classified level 3 fair value hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs determined using internal expertise current marketplace conditions july 31 2015 company sold 50 ownership interest chile 105 million company recorded 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment year ended december 31 2015 recorded within restructuring impairment transactionrelated charges consolidated statements operations january 1 2013 company sold 100 ownership interest two whollyowned brazilian entities quadgraphics nordeste industria gráfica ltda quadgraphics são paulo industria gráfica sa plural purchase price 55 million year ended december 31 2013 company recorded 28 million gain sale within selling general administrative expenses companys consolidated statements operations result sale plural company longer controls entities company owns 49 entities ownership interest plural thus assets liabilities entities sold deconsolidated accordance gaap since sale plural companys ownership interest results operations entities included equity loss unconsolidated entities consolidated statements operations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed balance sheet plural december 31 2015 combined condensed balance sheets plural chile december 31 2014 follows combined condensed statements operations plural chile years ended december 31 2015 2014 2013 presented results chile equity method investment included following table july 31 2015 sale date note 9 accrued liabilities components accrued liabilities december 31 2015 2014 follows employeerelated liabilities consist primarily payroll bonus vacation health workers compensation pension obligations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 10 commitments contingencies commitments company firm commitments 149 million purchase press finishing equipment litigation company named defendant various lawsuits claims asserted company normal course business liabilities ultimately result lawsuits expected management material impact consolidated financial statements company environmental reserves company subject various laws regulations government policies relating health safety generation storage transportation disposal hazardous substances environment protection general company provides expenses associated environmental remediation obligations amounts probable reasonably estimated reserves adjusted new information develops circumstances change environmental reserves discounted company believes compliance laws regulations government policies material respects furthermore company anticipate maintaining compliance environmental statutes material impact upon companys competitive consolidated financial position note 11 world color press insolvency proceedings company continues manage bankruptcy claim settlement process quebecor world inc qwi bankruptcy proceedings united states canada qwi changed name world color press upon emerging bankruptcy july 21 2009 extent claims allowed holders claims entitled receive recovery nature recovery dependent upon type classification claims regard respect certain types claims holders thereof entitled receive cash andor unsecured notes holders certain types claims entitled receive combination quadgraphics common stock cash accordance terms world color press acquisition agreement respect claims asserted holders thereof entitled priority cash recovery company estimated approximately 14 million recorded claims yet paid december 31 2015 2014 obligation classified amounts owing satisfaction bankruptcy claims consolidated balance sheets respect unsecured claims held creditors operating subsidiary debtors quebecor world usa inc class 3 claims allowed class 3 claim entitled receive unsecured note amount equaling 50 creditors allowed class 3 claim provided however aggregate principal amount unsecured notes cannot exceed 750 million allowed class 3 claim also receive accrued interest 5 prepayment redemption premium thereon total aggregate maximum principal interest prepayment redemption premium class 3 claims 892 million connection world color press acquisition company required deposit maximum potential payout class 3 claim creditors 892 million trustee amount remain trustee either 1 paid creditor allowed class 3 claim 2 excess amounts required class 3 claim payments revert company quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated years ended december 31 2015 2014 01 million 80 million respectively restricted cash paid class 3 claim creditors company also received refunds 175 million 189 million restricted cash years ended december 31 2015 2014 respectively december 31 2015 115 million maximum potential payout class 3 claim creditors remains classified restricted cash consolidated balance sheets based companys analysis outstanding claims company liability 71 million december 31 2015 classified unsecured notes issued consolidated balance sheets activity impacting restricted cash unsecured notes issued years ended december 31 2015 2014 follows components restricted cash december 31 2015 2014 follows liabilities recorded bankruptcy matters based managements current assessment amount likely paid possible identify final amount priority cash claims amount class 3 claims ultimately allowed united states bankruptcy court therefore payments amounts owing satisfaction bankruptcy claims could higher amounts accrued consolidated balance sheets would require additional cash payments made expense recorded amount exceeding companys estimate amounts payable related unsecured notes could exceed current estimates would require additional expense recorded company resolved majority claims since acquiring world color press 2010 ultimate timing completion bankruptcy process depends resolution remaining claims quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 12 debt components longterm debt december 31 2015 2014 follows description debt obligations master note security agreement september 1 1995 last amended november 24 2014 quadgraphics entered master note security agreement december 31 2015 borrowings outstanding master note security agreement 2604 million senior notes master note security agreement weightedaverage interest rate 753 december 31 2015 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2031 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement company redeemed 1088 million senior notes master note security agreement 1096 million october 10 2014 resulting 08 million loss plus applicable transaction fees 02 million total 10 million included loss debt extinguishment consolidated statements operations company used revolving credit facility effect redemption primarily completed reduce interest expense based current libor rates company certain subsidiaries entered fourth amendment master note security agreement november 24 2014 amendment among things amended financial covenants removing consolidated net worth requirement removed periods december 31 2014 fixed charge coverage ratio well adding minimum interest coverage ratio maximum total leverage ratio maximum senior secured leverage ratio amendments align financial covenants master note security agreement closely financial covenants senior secured credit facility quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated senior secured credit facility senior unsecured notes company completed 19 billion debt financing arrangements april 28 2014 included refinancing extending expanding existing revolving credit facility term loan term loan b 16 billion senior secured credit facility issuance 3000 million aggregate principal amount 70 senior unsecured notes due may 1 2022 senior secured credit facility senior unsecured notes entered extend stagger companys debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals proceeds senior secured credit facility senior unsecured notes used repay companys previous revolving credit facility term loan term loan b 2008 international term loan b fund acquisition brown printing c general corporate purposes senior secured credit facility consists three different loan facilities first facility revolving credit facility amount 8500 million term five years maturing april 27 2019 second facility term loan aggregate amount 4500 million term five years maturing april 27 2019 subject certain required amortization third facility term loan b amount 3000 million term seven years maturing april 27 2021 subject certain required amortization december 31 2015 company borrowings 708 million revolving credit facility well 483 million issued letters credit leaving 7309 million available future borrowings revolving credit facility term loan loans made senior secured credit facility initially bear interest 200 excess reserve adjusted libor 100 excess alternate base rate term loan b loans bear interest 325 excess reserve adjusted libor floor 100 225 excess alternative base rate companys option senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances company entered amendment senior secured credit facility december 18 2014 eliminated net debt concept calculation total leverage ratio senior secured leverage ratio eliminated consolidated net worth covenant company received 2948 million net proceeds sale senior unsecured notes deducting initial purchasers discounts commissions senior unsecured notes bear interest 70 interest payable semiannually senior unsecured notes due may 1 2022 companys existing future domestic subsidiaries borrower guarantees indebtedness companys senior secured credit facility guarantees certain companys indebtedness companys restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes guarantor subsidiaries current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including designation guarantor subsidiaries unrestricted subsidiary b release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries c sale disposition including sale substantially assets guarantor subsidiaries quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated international debt obligations company entered fixed rate euro denominated international term loan december 28 2015 purposes financing certain capital expenditures general business needs 196 million term loan funded december 31 2015 must funded within one year date agreement term loan funds course 2016 tranche bear interest fixed rate 17 plus bank initiated interest rate swap equivalent euro interbank offered rate euribor time tranche funded term loan requires monthly payments term six years maturing december 28 2021 multicurrency international revolving credit facility used financing working capital general business needs expire october 31 2016 december 31 2015 company borrowings international revolving credit facility leaving 127 million available future borrowing terms international revolving credit facility includes certain financial covenants guarantee international revolving credit facility company security agreement includes collateralizing substantially quadgraphics europe sp zoo assets facilities bear interest aggregate warsaw interbank offered rate wibor euribor margin equipment term loans company refinanced certain equipment leases 2015 37 million equipment term loan secured formerly leased equipment term loan bears interest fixed rate 253 requires monthly payments term seven years expiring 2022 purchase equipment resulted 37 million noncash investing financing activities see note 1 basis presentation summary significant accounting policies required supplemental cash flow information company refinanced certain equipment leases 2013 171 million equipment term loans secured formerly leased equipment term loans bear interest fixed rate 475 require quarterly payments five year terms expiring 2018 purchase assets resulted 128 million noncash investing financing activities represents 171 million equipment term loans net 43 million eliminated capital lease obligations see note 1 basis presentation summary significant accounting policies required supplemental cash flow information fair value debt based upon interest rates available company borrowings similar terms maturities fair value companys total debt approximately 12 billion 13 billion december 31 2015 2014 respectively fair value determination companys total debt categorized level 2 fair value hierarchy see note 15 financial instruments fair value measurements definition level 2 inputs december 31 2015 approximately 26 billion companys assets pledged security various loans agreements debt issuance costs original issue discount company incurred 143 million debt issuance costs conjunction 19 billion debt financing arrangement completed april 28 2014 accordance accounting guidance treatment debt issuance costs debt extinguishment 143 million new debt issuance costs 110 million capitalized classified reduction longterm debt consolidated balance sheets discussed note 25 new accounting pronouncements 33 million expensed classified loss debt extinguishment consolidated statements operations addition original issue discount 30 million related term loan b senior secured credit facility classified reduction longterm debt consolidated balance sheets quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company incurred 10 million debt issuance costs conjunction redemption 1088 million senior notes master note security agreement october 10 2014 accordance accounting guidance treatment debt issuance costs debt extinguishment 10 million expensed classified loss debt extinguishment consolidated statements operations year ended december 31 2014 company incurred 12 million debt issuance costs conjunction amendment master note security agreement november 24 2014 accordance accounting guidance treatment debt issuance costs debt extinguishment 12 million new debt issuance costs 10 million capitalized classified reduction long term debt consolidated balance sheets 02 million expensed classified loss debt extinguishment consolidated statements operations year ended december 31 2014 loss debt extinguishment recorded consolidated statements operations year ended december 31 2014 comprised following activity impacting companys capitalized debt issuance costs years ended december 31 2015 2014 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated activity impacting companys original issue discount years ended december 31 2015 2014 follows amortization expense debt issuance costs 39 million 38 million 40 million years ended december 31 2015 2014 2013 respectively amortization expense original issue discount 05 million 04 million 01 million years ended december 31 2015 2014 2013 respectively debt issuance costs original issue discount amortized straightline basis five seven eight year lives related debt instruments covenants compliance companys various lending arrangements include certain financial covenants financial terms numbers ratios defined companys debt agreements among covenants company required maintain following december 31 2015 • total leverage ratio rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda shall exceed 375 100 twelve months ended december 31 2015 companys total leverage ratio 289 100 • senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined senior secured debt consolidated ebitda shall exceed 350 100 twelve months ended december 31 2015 companys senior secured leverage ratio 226 100 • minimum interest coverage ratio rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2015 companys minimum interest coverage ratio 566 100 indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit companys restricted subsidiaries ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially companys consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock including following • companys total leverage ratio greater 300 100 defined senior secured credit facility company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions • companys senior secured leverage ratio greater 300 100 companys total leverage ratio greater 350 100 ratios defined senior secured credit facility company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total leverage ratio less 350 100 restrictions estimated principal payments approximate annual principal amounts due longterm debt excluding 161 million future amortization debt issuance costs 22 million future amortization original issue discount december 31 2015 follows note 13 lease obligations company enters various master lease agreements press finishing transportation equipment leases provide company options purchase related equipment termination value defined various early buyout dates term lease leases accounted capital leases consolidated balance sheets components capital lease assets december 31 2015 2014 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated future maturities capitalized leases december 31 2015 follows company various operating lease agreements future minimum rental commitments noncancelable leases december 31 2015 follows rent expense operating lease agreements totaled 448 million 396 million 369 million years ended december 31 2015 2014 2013 respectively note 14 income taxes income taxes based following components earnings loss income taxes equity loss unconsolidated entities years ended december 31 2015 2014 2013 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated components income tax expense benefit years ended december 31 2015 2014 2013 follows company recorded 8083 million noncash goodwill impairment charges year ended december 31 2015 7430 million nondeductible income tax purposes total tax benefit 2659 million composed 1 2414 million deferred tax benefit associated reduction deferred tax liability related investments united states subsidiaries due lower estimated fair value united states print related services segment 2 245 million tax benefit 653 million deductible goodwill deferred tax liability related investments united states subsidiaries originally established former world color press entities emerged bankruptcy 2009 following table outlines reconciliation differences federal statutory tax rate companys effective tax rate years ended december 31 2015 2014 2013 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated deferred income taxes significant deferred tax assets liabilities december 31 2015 2014 follows december 31 2015 company following gross amounts taxrelated carryforwards •net operating loss carryforwards 74 million 1420 million 6753 million federal foreign state respectively federal net operating loss carryforwards expire 2035 foreign net operating loss carryforwards 487 million available without expiration remainder expire 2034 state net operating loss carryforwards expire varying amounts 2035 •capital loss carryforwards 1556 million 961 million federal state respectively federal capital loss carryforwards 1494 million expires 2017 62 million expires 2019 state capital loss carryforwards 925 million expires 2017 36 million expires 2019 •various credit carryforwards 17 million 461 million federal state respectively state credit carryforwards include 203 million available without expiration remainder expire 2035 december 31 2015 company recorded valuation allowance 1644 million consolidated balance sheet primarily related taxaffected amounts carryforwards valuation allowance includes 545 million 494 million 605 million federal foreign state deferred tax assets respectively expected realized quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company considers foreign earnings indefinitely invested accordingly company provide additional united states foreign income taxes would become payable upon remission undistributed earnings foreign subsidiaries cumulative undistributed earnings foreign subsidiaries december 31 2015 material uncertain tax positions following table summarizes activity companys liability unrecognized tax benefits december 31 2015 2014 2013 december 31 2015 298 million unrecognized tax benefits would impact companys effective tax rate recognized amount reasonably possible 10 million total amount unrecognized tax benefits decrease within 12 months due resolution audits statute expirations company classified interest expense related penalties related income tax uncertainties component income tax expense following table summarizes companys interest expense income related tax uncertainties penalties recognized years ended december 31 2015 2014 2013 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated accrued interest penalties related income tax uncertainties reported components current liabilities longterm liabilities consolidated balance sheets following table summarizes companys liabilities accrued interest penalties related income tax uncertainties december 31 2015 2014 company tax years 2012 2015 remain open subject examination internal revenue service tax years 2007 2015 remain open subject examination companys various major state jurisdictions within united states note 15 financial instruments fair value measurements certain assets liabilities required recorded fair value recurring basis assets liabilities recorded fair value nonrecurring basis generally result acquisitions impairment charges fair value determined based exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants gaap also classifies inputs used measure fair value following hierarchy level 1 quoted prices active markets identical assets liabilities level 2 quoted prices active markets similar assets liabilities quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability level 3 unobservable inputs asset liability level 3 recurring measurements assets liabilities december 31 2015 company records fair value forward contracts pension plan assets recurring basis fair value cash equivalents receivables inventories restricted cash accounts payable accrued liabilities amounts owing satisfaction bankruptcy claims approximate carrying values december 31 2015 2014 see note 12 debt discussion fair value companys debt note 17 employee retirement plans details level 1 level 2 inputs related employee retirement plans addition assets liabilities recorded fair value recurring basis company required record certain assets liabilities fair value nonrecurring basis generally result acquisitions remeasurement assets resulting impairment charges see note 2 acquisitions strategic investments discussion acquisitions see note 3 restructuring impairment transactionrelated charges note 4 goodwill intangible assets note 7 property plant equipment note 8 equity method quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated investments unconsolidated entities discussion impairment charges recorded result remeasurement certain longlived assets company operations countries transactions outside functional currencies periodically enters foreign exchange contracts used hedge net exposures changes foreign currency exchange rates designated either cash flow hedges fair value hedges gains losses net foreign currency hedges intended offset losses gains underlying net exposures effort reduce earnings volatility resulting fluctuating foreign currency exchange rates open foreign currency exchange contracts december 31 2015 company periodically enters natural gas forward purchase contracts hedge increases commodity costs companys commodity contracts qualified exception related normal purchases sales years ended december 31 2015 2014 company takes delivery normal course business note 16 longterm liabilities components longterm liabilities december 31 2015 2014 follows note 17 employee retirement plans defined contribution plans quadgraphics diversified plan comprised participant directed 401k contributions company match profit sharing contributions total participant assets 19 billion december 31 2015 company 401k matching contributions 166 million 146 million 132 million years ended december 31 2015 2014 2013 respectively quadgraphics employee stock ownership plan holds profit sharing contributions company stock made discretion companys board directors profit sharing contributions years ended december 31 2015 2014 2013 defined benefit plans postretirement benefit plans company assumed various funded unfunded frozen pension plans portion fulltime employees united states part acquisition world color press 2010 benefits generally based upon years service compensation plans funded conformity applicable government regulations company funds least minimum amount required qualified plans using actuarial cost methods assumptions acceptable government regulations addition pension benefits company provided certain healthcare life insurance benefits retired employees 2014 company eliminated postretirement medical benefit coverage retirees quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated components net periodic pension postretirement benefit income years ended december 31 2015 2014 2013 follows underfunded pension obligations calculated using generally accepted actuarial methods measured annually december 31 following table provides reconciliation projected benefit obligation fair value plan assets funded status pension plans december 31 2015 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated amounts recognized consolidated balance sheets december 31 2015 2014 follows following table provides reconciliation companys accumulated comprehensive income loss prior deferred tax effects december 31 2015 2014 company announced elimination postretirement medical benefit coverage retirees resulted reduction plan obligations 37 million recognition termination gain 49 million termination gain recorded restructuring impairment transactionrelated charges consolidated statement operations 2013 company paid lump sums participants exceeded threshold settlement accounting resulted acceleration recognition accumulated comprehensive income settlement gain 21 million settlement gain recorded restructuring impairment transactionrelated charges consolidated statement operations actuarial gains losses excess 10 greater projected benefit obligation marketrelated value plan assets recognized component net periodic benefit costs average remaining service period plans active employees unrecognized prior service costs credits also recognized component net periodic benefit cost average remaining service period plans active employees amortization amounts accumulated comprehensive income loss expected recognized components net periodic pension income 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated weightedaverage assumptions separately pension postretirement benefit plans used determine net periodic benefit costs years ended december 31 2015 2014 2013 follows weightedaverage assumptions used determine pension benefit obligations december 31 2015 2014 follows company determines assumed discount rate based index highquality corporate bond yields matchedfunding yield curve analysis measurement date 2015 company measured interest costs utilizing single weightedaverage discount rate derived yield curve used measure plan obligations beginning 2016 company change approach used measure interest costs pension benefits 2016 company elected measure interest costs applying specific spot rates along yield curve plans liability cash flows new method would also impact calculation service costs applicable companys pension plans due frozen status company believes new approach provides precise measurement interest costs aligning timing plans liability cash flows corresponding spot rates yield curve change affect measurement plan obligations company reflecting change accounting estimate accordingly accounting prospective basis estimated company contributions benefit payments 2016 company expects make cash contributions 04 million qualified defined benefit pension plans make estimated benefit payments 19 million nonqualified defined benefit pension plans actual pension contributions may differ based funding calculations company may choose make additional discretionary contributions estimated benefit payments may differ based actual experience quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated estimated future benefit payments plans behalf plan participants estimate plans future benefit payments made funded qualified plans unfunded nonqualified plans plan participants december 31 2015 follows plan assets investment strategy company follows disciplined investment strategy provides diversification investments asset class foreign currency sector company pension committee approved investment policy pension plan establishes longterm asset mix targets based several factors including following funded status historical returns achieved worldwide investment markets time horizon pension plans obligations investment risk allocation range asset class developed whereby mix equity securities debt securities used provide appropriate riskadjusted longterm return plan assets thirdparty investment managers employed invest assets passivelyindexed activelymanaged strategies investment returns risks monitored ongoing basis derivatives used certain times hedge foreign currency exposure gains losses derivatives offset corresponding change value hedged assets derivatives strictly used hedging purposes speculative purposes current target allocations plan assets weightedaverage basis 55 equity securities 45 debt securities including cash equivalents actual asset allocation december 31 2015 approximately 54 equity securities 46 debt securities actual asset allocation december 31 2014 approximately 66 equity securities 34 debt securities equity investments diversified country issuer industry sector debt securities primarily consist government bonds corporate bonds diversified industries expected longterm rate return assets assumption selected first identifying expected range longterm rates return major asset class expected longterm rates return developed based longterm historical averages current expectations future returns anticipated inflation rates expected longterm rate return plan assets calculated weighting asset class quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair values companys pension plan assets december 31 2015 2014 asset category follows level 3 assets liabilities december 31 2015 2014 company segregated plan assets following major categories levels determining fair value december 31 2015 cash equivalents carrying value approximates fair value assets classified level 1 debt securities category consists bonds shortterm fixed income securities fixed income pooled funds fair valued based compilation primarily observable market information broker quotes overthecounter markets classified level 2 equity securities category consists equity investments equity pooled funds assets classified level 1 level 2 respectively fair value equity investments based quoted prices active market fair value equity pooled funds based funds net asset value nav established funds administrator valuation methodologies described may generate fair value calculation may indicative net realizable value future fair values company believes valuation methodologies used appropriate use different methodologies assumptions calculating fair value could result different amounts company invests various assets valuation determined nav company believes nav representative fair value reporting date significant restrictions redemption investments reasons indicate investment would redeemed amount different nav risk management directly invested funds concentration risk monitored specific guidelines investment manager mandates investment manager mandates developed companys external investment advisor specify diversification standards maximum exposure per issuer concentration limits per type security industry country applicable investments made pooled funds investment mandates funds reviewed companys external investment advisor determine investment objectives guidelines consistent companys overall pension plan risk management objectives managing plan assets management reviews manages risk associated funded status risk interest rate risk market risk counterparty risk liquidity risk operational risk liability management asset class diversification central companys risk management approach integral overall investment strategy quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated given process place ensure proper diversification portfolio management believes company pension plan assets exposed significant concentration risk multiemployer pension plans company previously participated number mepps terms collective bargaining agreements cover number employees risks participating mepps different single employer plans following aspects • assets contributed mepps one company may used provide benefits employees participating companies • participating company stops contributing plan unfunded obligations plan may borne remaining participating companies • company stops participating mepps continues business company would required pay amount referred withdrawal liability based unfunded status plan company withdrawn significant mepps replaced union sponsored promise pay future defined benefit plans company sponsored pay go defined contribution plan two mepps gciu gcc significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued 986 million estimated withdrawal liability based information provided plans trustee part purchase price allocation world color press company making required interim payments mepps companys withdrawal liability gciu gcc plans gciu plan defined benefit plan provides retirement benefits total permanent disability benefits preretirement death benefits participating union employees company funded status gciu plan classified critical based gciu plans 2015 certification united states department labor funded percentage plan less 65 projected accumulated funding deficit next four plan years result gciu plan implemented rehabilitation plan improve plans funded status gcc plan defined benefit plan provides retirement benefits disability benefits early retirement benefits participating union employees company funded status gcc plan classified critical declining based gcc plans 2015 certification united states department labor funded percentage plan less 65 projected insolvent within next fifteen years result gcc plan implemented rehabilitation plan improve plans funded status company received notices withdrawal demand payment letters gciu gcc plans total excess 986 million original reserves established company withdrawals company process determining final withdrawal payments mepps administrators currently litigation mepps trustees determine amount duration payments arbitration proceedings process gciu also company gciu filed lawsuits federal court arbitration proceedings gcc completed sides appealed arbitrators ruling litigation commenced withdrawal liability reserved company within range companys estimated potential outcomes company made monthly payments totaling 114 million 139 million 144 million years ended december 31 2015 2014 2013 respectively required employee retirement income security act although payments waive companys rights object withdrawal quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated liabilities submitted gciu gcc plan administrators company reserved 476 million estimate total mepps withdrawal liability december 31 2015 310 million recorded longterm liabilities 111 million recorded accrued liabilities 55 million recorded unsecured notes issued consolidated balance sheets estimate may increase decrease depending final conclusion litigation mepps trustees note 18 earnings loss per share attributable quadgraphics common shareholders basic earnings loss per share attributable quadgraphics common shareholders computed net earnings loss attributable quadgraphics common shareholders less allocation participating securities divided basic weighted average common shares outstanding 479 million 475 million 470 million shares years ended december 31 2015 2014 2013 respectively calculation diluted earnings per share includes effect dilutive equity incentive instruments company uses treasury stock method calculate effect outstanding dilutive equity incentive instruments requires company compute total proceeds sum 1 amount employee must pay upon exercise award 2 amount unearned stockbased compensation costs attributed future services 3 amount tax benefits would credited additional paidin capital assuming exercise award equity incentive instruments total employee proceeds exercise exceed average fair value equity incentive instrument period antidilutive effect earnings per share periods net earnings accordingly company excludes calculation due net loss attributable quadgraphics common shareholders incurred year ended december 31 2015 assumed exercise equity incentive instruments antidilutive therefore included diluted loss per share attributable quadgraphics common shareholders calculation period antidilutive equity incentive instruments 18 million 16 million class common shares excluded computations diluted net earnings per share years ended december 31 2014 2013 respectively unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid required treated participating securities included computation earnings loss per share pursuant twoclass method company participating securities 2015 stock options granted november 18 2011 became fully vested november 18 2014 companys participating securities reduced basic diluted earnings per share attributable quadgraphics common shareholders 001 002 years ended december 31 2014 2013 respectively quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reconciliations numerator denominator basic diluted per share computations companys common stock years ended december 31 2015 2014 2013 summarized follows note 19 equity incentive programs shareholders company approved quadgraphics inc 2010 omnibus incentive plan omnibus plan two complementary purposes 1 attract retain outstanding individuals serve directors officers employees 2 increase shareholder value omnibus plan provides aggregate 7871652 shares class common stock reserved issuance omnibus plan awards omnibus plan may consist incentive awards stock options stock appreciation rights performance shares performance share units shares class stock restricted stock restricted stock units deferred stock units stockbased awards determined companys board directors stock option granted exercise price less 100 fair market value class common stock date grant december 31 2015 1565996 shares available issuance omnibus plan company recognizes compensation expense based estimated grant date fair values sharebased awards issued employees nonemployee directors including stock options performance shares performance share units restricted stock restricted stock units deferred stock units company recognizes compensation costs awards expected vest straightline basis requisite three four year service period awards except deferred stock units fully vested expensed grant date company estimated number awards expected vest based part historical forfeiture rates also based managements expectations employee turnover within specific employee groups receiving type award forfeitures estimated time grant revised necessary subsequent periods actual forfeitures differ estimates quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated equity incentive compensation expense total compensation expense recognized related equity incentive programs 72 million 173 million 186 million years ended december 31 2015 2014 2013 respectively recorded selling general administrative expenses consolidated statements operations total future compensation expense related equity incentive programs granted december 31 2015 estimated 154 million estimated future compensation expense 96 million 2016 51 million 2017 07 million 2018 net tax benefit equity award activity shown tax benefit equity award activity financing section consolidated statements cash flows 28 million 08 million 22 million years ended december 31 2015 2014 2013 respectively stock options vest four years vesting first year onethird vesting upon second third fourth anniversary dates defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee options expire later tenth anniversary grant date 24 months termination death 36 months termination normal retirement disability 90 days termination employment reason options credited dividend declarations except november 18 2011 grants stock options granted employees stock options granted years ended december 31 2015 2014 2013 compensation expense recognized related stock options 02 million 72 million 108 million years ended december 31 2015 2014 2013 respectively future compensation expense stock options granted december 31 2015 following table summary stock option activity year ended december 31 2015 intrinsic value options exercisable december 31 2015 intrinsic value options outstanding december 31 2015 2014 based fair value stock price outstanding options either vested expected vest december 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summary stock option exercises vesting activity years ended december 31 2015 2014 2013 performance share performance share units performance share ps performance share unit psu awards consist shares rights shares companys class common stock awarded employees company shares payable upon determination company achieved certain established performance targets range 0 200 targeted payout based actual results shares awarded 2013 performance period three years ending december 31 2015 set forth individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving ps psu grants receive full credit dividends vesting period dividends paid grantee within 45 days full vesting upon vesting psus settled either cash payment equal fair market value psus vesting date issuance company class common stock voting rights instruments vesting occurs share stock issued following table summary ps psu award activity year ended december 31 2015 ps psu awards granted years ended december 31 2015 2014 year ended december 31 2013 ps awards 389930 shares psu awards 16208 units granted weightedaverage grant date fair value 2039 2050 respectively grant dates target number shares granted company achieve established performance targets performance period ended december 31 2015 therefore ps psu awards canceled compensation expense awards granted recognized based best estimate anticipated payout net estimated forfeitures compensation expense income recognized related ps psus income 45 million expense 22 million expense 23 million years ended december 31 2015 2014 2013 respectively expected future compensation expense ps psus granted december 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated restricted stock restricted stock units restricted stock rs restricted stock unit rsu awards consist shares rights shares companys class common stock awarded employees company awards restricted subject substantial risk forfeiture restrictions sale transfer employee rsu awards typically granted eligible employees outside united states defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving rs grants able exercise full voting rights receive full credit dividends vesting period dividends paid rs grantee within 45 days full vesting grantees receiving rsus granted prior january 1 2012 entitled vote earn dividends grantees receiving rsus january 1 2012 entitled vote earn dividends upon vesting rsus settled either cash payment equal fair market value rsus vesting date issuance company class common stock following table summary rs rsu award activity year ended december 31 2015 year ended december 31 2015 rs awards 603377 shares rsu awards 113792 units granted weightedaverage grant date fair value 2287 1778 respectively year ended december 31 2014 rs awards 706490 shares rsu awards 17767 units granted weightedaverage grant date fair value 2344 2345 respectively year ended december 31 2013 rs awards 408146 shares rsu awards 32671 units granted weightedaverage grant date fair value 2039 2072 respectively general rs rsu awards vest third anniversary grant date provided holder share continuously employed company vesting date compensation expense recognized rs rsus 107 million 73 million 48 million years ended december 31 2015 2014 2013 respectively total future compensation expense rs rsus granted december 31 2015 approximately 154 million estimated future compensation expense 96 million 2016 51 million 2017 07 million 2018 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated deferred stock units deferred stock units dsu awards rights shares companys class common stock awarded nonemployee directors company following table summary dsu award activity year ended december 31 2015 years ended december 31 2015 2014 2013 dsu awards 34139 26316 33115 units granted weightedaverage grant date fair value 2311 2345 2039 respectively dsu award entitles grantee receive one share class common stock upon earlier separation date grantee second anniversary grant date could subject acceleration change control death disability defined individual dsu grant agreement grantees dsu awards may exercise voting rights credited dividend equivalents dividend equivalents converted additional dsu awards based closing price class common stock dividend equivalents granted years ended december 31 2015 2014 2013 11864 5392 3529 units respectively compensation expense recognized dsus 08 million 06 million 07 million years ended december 31 2015 2014 2013 respectively dsu awards fully vested grant date compensation expense recognized date grant information authorized unissued shares treasury shares may used issuance companys equity incentive programs company intends use treasury shares class common stock meet stock requirements awards future quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 20 shareholders equity company three classes common stock follows share data millions accordance articles incorporation class common share one vote per share class b class c common share ten votes per share matters voted upon companys shareholders liquidation rights three classes stock company also 05 million shares 001 par value preferred stock authorized none issued december 31 2015 2014 2013 company present plans issue preferred stock september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock 918 million authorized repurchases remain program december 31 2015 company repurchased shares years ended december 31 2015 2014 2013 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated accordance articles incorporation dividends paid equally three classes common shares following table details dividend activity related outstanding shares common stock years ended december 31 2015 2014 2013 note 21 accumulated comprehensive loss changes accumulated comprehensive loss component net tax years ended december 31 2015 2014 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated details reclassifications accumulated comprehensive loss net earnings loss years ended december 31 2015 2014 2013 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 22 segment information company operates primarily commercial print portion printing industry related product service offerings designed offer clients complete solutions communicating message target audiences companys operating reportable segments aligned chief operating decision maker company currently manages business companys reportable operating segments product service offerings summarized united states print related services united states print related services segment predominantly comprised companys united states printing operations managed one integrated platform includes retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement together complementary service offerings including marketing strategy media planning placement data insights segmentation response analytics services creative services videography photography workflow solutions digital imaging facilities management services digital publishing interactive print solutions including image recognition near field communication technology mailing distribution logistics data optimization hygiene services segment also includes manufacture ink international segment consists companys printing operations europe latin america including operations england france germany poland argentina colombia mexico peru well strategic investments printing operations brazil india segment provides printed products complementary service offerings consistent united states print related services segment unrestricted subsidiaries defined senior unsecured notes indenture represent less 20 total consolidated assets december 31 2015 less 20 total consolidated net sales year ended december 31 2015 corporate consists unallocated general administrative activities associated expenses including part executive legal finance addition 2014 2015 certain expenses income frozen employee retirement plans pension postretirement benefit plans included corporate allocated operating segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following summary segment information years ended december 31 2015 2014 2013 restructuring impairment transactionrelated charges years ended december 31 2015 2014 2013 described note 3 restructuring impairment transactionrelated charges included operating income loss results segment goodwill impairment year ended december 31 2015 described note 4 goodwill intangible assets included operating income loss results segment reconciliation operating income loss earnings loss income taxes equity loss unconsolidated entities reported consolidated statements operations years ended december 31 2015 2014 2013 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated total assets segment december 31 2015 2014 follows note 23 geographic area product information table presents companys net sales longlived assets years ended december 31 2015 2014 2013 geographic region amounts table differ segment data presented note 22 segment information operating segment includes operations multiple geographic regions based companys management reporting structure quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated table presents companys consolidated net sales products services years ended december 31 2015 2014 2013 note 24 separate financial information subsidiary guarantors indebtedness april 28 2014 quadgraphics completed offering senior unsecured notes see note 12 debt details senior unsecured notes companys guarantor subsidiaries fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including following • designation guarantor subsidiaries unrestricted subsidiary • release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries • sale disposition including sale substantially assets guarantor subsidiaries following condensed consolidating financial information reflects summarized financial information quadgraphics companys guarantor subsidiaries combined basis companys nonguarantor subsidiaries combined basis year ended december 31 2015 nonguarantor subsidiary company became guarantor subsidiary accordingly supplemental financial information periods presented recast reflect subsidiaries per senior unsecured notes agreement guarantor subsidiaries december 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2015 condensed consolidating statement comprehensive income loss year ended december 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2014 condensed consolidating statement comprehensive income loss year ended december 31 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2013 condensed consolidating statement comprehensive income loss year ended december 31 2013 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating balance sheet december 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating balance sheet december 31 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2013 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 25 new accounting pronouncements november 2015 fasb issued new guidance simplifies balance sheet presentation deferred taxes guidance deferred tax assets liabilities related allowances classified noncurrent classification change deferred taxes noncurrent simplifies entities’ processes eliminates need separately identify net current net noncurrent deferred tax asset liability tax jurisdiction allocate valuation allowances guidance effective interim annual periods beginning december 15 2016 early adoption permitted company retrospectively adopted guidance effective december 31 2015 accordingly consolidated balance sheets conform new standard periods presented impact consolidated balance sheets reduction current deferred income tax assets noncurrent deferred income tax liabilities 484 million december 31 2014 september 2015 fasb issued new guidance eliminates requirement acquirer business combination account measurementperiod adjustments retrospectively instead acquirer required recognize adjustments provisional amounts identified measurement period reporting period amounts determined guidance effective interim annual periods beginning december 15 2015 early adoption permitted company adopted guidance effective september 30 2015 adoption guidance material impact consolidated financial statements july 2015 fasb issued new guidance related simplifying measurement inventory guidance inventory accounted using firstin firstout average cost method shall measured lower cost net realizable value opposed lower cost market measurement current guidance effective interim annual periods beginning december 15 2016 early adoption permitted new guidance required retrospectively applied prior periods company adopted guidance effective december 31 2015 adoption guidance material impact consolidated financial statements april 2015 fasb issued new guidance related accounting cloud computing arrangements contain software license arrangement contains software license customer would account fees related software license element manner consistent current guidance accounting software licenses however arrangement contain software license customer would account arrangement service contract guidance effective interim annual periods beginning december 15 2015 early adoption permitted company believe adoption guidance material impact consolidated financial statements april 2015 fasb issued new guidance simplifies financial statement presentation debt issuance costs guidance debt issuance costs shall recorded balance sheet direct deduction face amount related debt liability opposed recording debt issuance costs balance sheet asset ie deferred charge current guidance amortization debt issuance costs shall recorded interest expense statement operations guidance effective interim annual periods beginning december 15 2015 early adoption permitted new guidance required retrospectively applied prior periods company adopted guidance effective june 30 2015 accordingly consolidated balance sheets conform new standard periods presented impact consolidated balance sheets reduction longterm assets longterm debt 200 million december 31 2014 impact consolidated statement operations company recorded amortization debt issuance costs interest expense quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated january 2015 fasb issued new guidance eliminating concept extraordinary items event transaction unusual nature infrequently occurring guidance entity longer 1 segregate extraordinary item results ordinary operations 2 separately present extraordinary item statements operations net tax earnings continuing operations 3 disclose income taxes earnings per share data applicable extraordinary item guidance effective interim annual periods beginning december 15 2015 early adoption permitted company believe adoption guidance material impact consolidated financial statements may 2014 fasb issued new guidance recognizing revenue contracts customers guidance entity recognize revenue transfers promised goods services customer amount reflects expects exchange goods services guidance also requires detailed disclosures enable users financial statements understand nature amount timing uncertainty revenue cash flow arising contracts customers guidance allows option either full retrospective adoption meaning guidance applied periods presented modified retrospective adoption meaning guidance applied current period july 2015 fasb decided defer one year effective date new revenue standard guidance deferral action makes standard effective interim annual periods beginning december 15 2017 company currently evaluating impact guidance consolidated financial statements determining transition method use note 26 subsequent events declaration quarterly dividend february 19 2016 company declared quarterly dividend 030 per share paid march 18 2016 shareholders record march 7 2016 item 9item 8 financial statements supplementary data quarterly financial data unaudited following table sets forth selected financial information eight quarters twoyear period ended december 31 2016 unaudited information prepared company basis consolidated financial statements includes normal recurring adjustments necessary present information fairly read conjunction companys audited consolidated financial statements notes thereto 1 reflects results acquired businesses relevant acquisition dates primarily related acquisitions marins february 3 2015 copac april 14 2015 specialty august 25 2015 see note 2 acquisitions strategic investments consolidated financial statements part ii item 8 annual report form 10k information acquisitions 2 2016 company modified presentation byproduct recoveries include byproduct recoveries reduction cost salesproducts consolidated statements operations previously byproduct recoveries reported net salesproducts classification byproduct recoveries reduction cost sales aligns proceeds byproduct recoveries corresponding manufacturing costs quarterly net sales 2015 reclassified reflect change presentation reclassification impact operating loss net loss attributable quadgraphics common shareholders 2015 consolidated statements operations 3 reflects pretax noncash goodwill impairment charges 8083 million 5424 million net tax recorded year ended december 31 2015 report independent registered public accounting firm board directors stockholders quadgraphics inc subsidiaries sussex wi audited accompanying consolidated balance sheets quadgraphics inc subsidiaries company december 31 2016 2015 related consolidated statements operations comprehensive income loss shareholders equity cash flows three years period ended december 31 2016 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position quadgraphics inc subsidiaries december 31 2016 2015 results operations cash flows three years period ended december 31 2016 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states companys internal control financial reporting december 31 2016 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission report dated february 22 2017 expressed unqualified opinion companys internal control financial reporting deloitte touche llp milwaukee wisconsin february 22 2017 report independent registered public accounting firm board directors stockholders quadgraphics inc subsidiaries sussex wi audited internal control financial reporting quadgraphics inc subsidiaries company december 31 2016 based criteria established internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission companys management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying managements report internal control financial reporting responsibility express opinion companys internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion companys internal control financial reporting process designed supervision companys principal executive principal financial officers persons performing similar functions effected companys board directors management personnel provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting including possibility collusion improper management override controls material misstatements due error fraud may prevented detected timely basis also projections evaluation effectiveness internal control financial reporting future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion company maintained material respects effective internal control financial reporting december 31 2016 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states consolidated financial statements year ended december 31 2016 company report dated february 22 2017 expressed unqualified opinion financial statements deloitte touche llp milwaukee wisconsin february 22 2017 quadgraphics inc consolidated statements operations millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements comprehensive income loss millions see accompanying notes consolidated financial statements quadgraphics inc consolidated balance sheets millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements cash flows millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements shareholders equity millions see accompanying notes consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies nature operationsquadgraphics global marketing services provider helps brand owners market products services content efficiently effectively using strong print foundation combination media channels company operates primarily commercial print portion printing industry printer retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement company also provides marketing complementary services customers companys products services variety industries sold primarily throughout north america south america europe addition company strategically sources packaging product manufacturing multiple end markets central america asia principles consolidation basis presentationthe accompanying consolidated financial statements include accounts company whollyowned subsidiaries prepared accordance gaap results operations accounts businesses acquired included consolidated financial statements dates acquisition see note 2 acquisitions strategic investments entities company ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting investments entities company exert significant influence control ownership interest less 20 accounted using cost method accounting intercompany transactions balances eliminated consolidation foreign operationsassets liabilities denominated foreign currencies translated united states dollars exchange rate existing respective balance sheet dates income expense items translated average rates respective periods translation adjustments resulting fluctuations exchange rates recorded separate component accumulated comprehensive income loss consolidated statements shareholders equity transaction gains losses recorded selling general administrative expenses consolidated statements operations foreign exchange transactions resulted pretax realized unrealized losses 60 million 14 million 59 million years ended december 31 2016 2015 2014 respectively company 49 interest plural commercial printer based brazil formerly owned 50 commercial printer chile company sold ownership interest chile july 31 2015 company accounts entities using equity method accounting see note 8 equity method investments unconsolidated entities discussion companys equity loss plurals chiles operations recorded equity loss unconsolidated entities companys consolidated statements operations included within international segment significant unconsolidated entities use estimatesthe preparation consolidated financial statements requires use managements estimates assumptions affect reported assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenue expenses reporting periods actual results could differ estimates used accounting items matters including limited allowances doubtful accounts inventory obsolescence asset valuations useful lives pension postretirement benefits selfinsurance reserves stockbased compensation taxes restructuring provisions contingencies quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated revenue recognitionthe company recognizes printing revenues upon transfer title passage risk loss generally upon shipment customer reasonable assurance collectability agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related companys imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer revenues related companys logistics operations includes delivery printed material recognized upon completion services certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily companys logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many companys operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis byproduct recoveriesin 2016 company modified presentation byproduct recoveries include byproduct recoveries reduction cost salesproducts consolidated statements operations previously byproduct recoveries reported net salesproducts classification byproduct recoveries reduction cost sales aligns proceeds byproduct recoveries corresponding manufacturing costs consolidated statements operations corresponding notes financial statements years ended december 31 2015 2014 reclassified reflect change presentation reclassification impact operating income loss net earnings loss consolidated statements operations financial instrumentsthe company uses derivative financial instruments purpose hedging commodity foreign exchange exposures exist part ongoing business operations including natural gas forward purchase contracts foreign exchange contracts policy company engage speculative leveraged transactions company hold issue financial instruments trading purposes derivative instruments recorded consolidated balance sheets either assets liabilities measured fair value derivative designated fair value hedge changes fair value derivative hedged item attributable hedged risk recognized earnings derivative designated cash flow hedge effective portion changes fair value derivative recorded component accumulated comprehensive income loss recognized consolidated statements operations hedged item affects earnings ineffective portions changes fair value hedges insignificant recognized earnings cash flows derivatives accounted cash flow fair value hedges included consolidated statements cash flows category item hedged quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair value measurementthe company applies fair value accounting assets liabilities recognized disclosed fair value consolidated financial statements recurring basis fair value represents amount would received selling asset paid transfer liability orderly transaction market participants measurement date determining fair value measurements assets liabilities required recorded fair value company considers principal advantageous market marketbased risk measurements assumptions market participants would use pricing asset liability see note 15 financial instruments fair value measurements discussion research developmentresearch development costs related development new products adaptation existing products expensed incurred included cost sales totaled 93 million 103 million 113 million years ended december 31 2016 2015 2014 respectively cash equivalentsthe company considers highly liquid investments original maturities three months less cash equivalents receivablesreceivables stated net allowances doubtful accounts single customer comprised 5 companys consolidated net sales 2016 2015 2014 5 companys consolidated receivables december 31 2016 2015 specific customer provisions made review significant outstanding amounts utilizing information customer creditworthiness current economic trends indicates collection doubtful addition provisions made differing rates based upon age receivable companys historical collection experience see note 5 receivables discussion transactions affecting allowances doubtful accounts inventoriesinventories include material labor plant overhead stated lower cost net realizable value december 31 2016 2015 inventories valued using firstin firstout fifo method see note 6 inventories components companys inventories property plant equipmentproperty plant equipment recorded cost depreciated estimated useful lives assets using straightline method financial reporting purposes see note 7 property plant equipment components companys property plant equipment major improvements extend useful lives existing assets capitalized charged asset accounts repairs maintenance significantly improve extend useful lives respective assets expensed incurred leasehold improvements depreciated shorter lease term estimated useful life respective asset retired disposed associated costs accumulated depreciation eliminated resulting profit loss recognized companys consolidated statements operations intangible assetsidentifiable intangible assets recognized apart goodwill amortized estimated useful lives quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated impairment longlived intangible assetsthe company evaluates longlived assets intangible assets significant property plant equipment customer relationship intangible assets whenever events circumstances occurred indicate carrying value asset may recoverable determining whether impairment occurred typically requires various estimates assumptions including determining cash flows directly related potentially impaired asset useful life cash flows occur amount assets residual value turn assessing whether impairment loss requires determination recoverability generally estimated ability recover balance assets expected future operating cash flows undiscounted basis impairment determined exist related impairment loss calculated based difference fair value carrying value asset goodwillgoodwill reviewed annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value performing analysis company compares reporting units fair value estimated based comparable company market valuations andor expected future discounted cash flows generated reporting unit carrying value carrying value exceeds reporting units fair value company performs fair value measurement calculation determine impairment loss would charged operations period identified see note 4 goodwill intangible assets discussion income taxesthe company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations company determines deferred income tax asset fully realized future valuation allowance established increased reflect amount asset likely realized would increase companys provision income taxes period valuation allowance established company determines related deferred income tax assets realized future excess net recorded amount adjustment reduce related valuation allowance made would reduce companys provision income taxes company regularly audited foreign domestic tax authorities audits occasionally result proposed assessments ultimate resolution might result company owing additional taxes including cases penalties interest company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination companys worldwide tax provision related tax assets liabilities requires use significant judgment estimating impact uncertainties application gaap interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain fair market value required measure tax asset liability gaap purposes company periodically obtains independent third party assistance validate value determined conformity internal revenue service fair market value guidelines company believes appropriate support positions taken certain positions may successfully challenged taxing authorities resolution uncertainties manner inconsistent managements expectations could material impact companys quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated financial condition operating results company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions determination companys worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions see note 14 income taxes discussion pension plansthe company assumed certain frozen underfunded defined benefit pension plans part 2010 world color press acquisition pension plan costs determined using actuarial methods funded contributions company records amounts relating pension plans based calculations include various actuarial assumptions including discount rates assumed rates return mortality compensation increases turnover rates company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors purposes calculating expected return plan assets valued fair value event gives rise curtailment settlement curtailment accounted prior settlement companys measurement date measure defined benefit plan assets projected benefit obligation december 31 company previously participated mepps result acquisition world color press due significant underfunded status mepps company withdrawn significant mepps replaced union sponsored promise pay future defined benefit plans company sponsored pay go defined contribution plan historically form retirement benefit provided quadgraphics employees result decision withdraw company recorded estimated withdrawal liability mepps part world color press purchase price allocation process based information received mepps trustees estimated withdrawal liability updated based significant events potential new information litigation proceedings mepps final withdrawal liability determined exact amount withdrawal liability could higher lower estimate see note 16 employee retirement plans discussion stockbased compensationthe company recognizes stockbased compensation expense vesting period stockbased awards made employees directors based fair value instrument time grant see note 18 equity incentive programs discussion accumulated comprehensive income lossaccumulated comprehensive income loss consists primarily unrecognized actuarial gains losses prior service costs pension postretirement plans foreign currency translation adjustments presented consolidated statements shareholders equity see note 20 accumulated comprehensive loss discussion quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated supplemental cash flow informationthe following table summarizes certain supplemental cash flow information years ended december 31 2016 2015 2014 note 2 acquisitions strategic investments 2015 specialty finishing inc acquisition company completed acquisition specialty august 25 2015 610 million specialty fullservice paperboard folding carton manufacturer logistics provider located omaha nebraska purchase price 610 million included 03 million acquired cash net purchase price 607 million included purchase price allocation 96 million identifiable intangible assets amortized estimated useful lives ranging three six years 35 million goodwill final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs specialtys operations included united states print related services segment 2015 copac global packaging inc acquisition company completed acquisition copac april 14 2015 594 million copac leading international provider innovative packaging supply chain solutions including turnkey packaging design production fulfillment services across range end markets copac manufactures products folding cartons labels inserts tags specialty envelopes production facilities spartanburg south carolina santo domingo dominican republic well strategically sourcing packaging product manufacturing multiple end markets central america asia giving global footprint purchase price 594 million included 09 million acquired cash net purchase price 585 million included purchase price allocation 222 million identifiable intangible assets amortized estimated useful lives six years 235 million goodwill final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs copacs operations included united states print related services segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 2015 marins international acquisition company completed acquisition marins february 3 2015 311 million marins headquartered paris france worldwide leader pointofsale display industry specializes research design display solutions marins products produced global network licensees including quadgraphics well one wideformat digital print kitting fulfillment facility paris marins uses europeanbased sales force global licensees sell patented product portfolio purchase price 311 million included 101 million acquired cash net purchase price 210 million included purchase price allocation 179 million identifiable intangible assets amortized estimated useful lives ranging three eight years 68 million goodwill final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs marins operations included international segment 2014 brown printing company acquisition company completed acquisition brown printing may 30 2014 1011 million brown printing provides magazine catalog printing distribution services integrated media solutions magazine publishers catalog marketers united states company used cash hand borrowings revolving credit facility finance acquisition brown printings operations included united states print related services segment disclosure financial results brown printing since acquisition date practicable operated standalone business combined companys existing operations company recorded allocation purchase price tangible identifiable intangible assets acquired liabilities assumed including certain contingent liabilities based fair values may 30 2014 acquisition date included purchase price allocation identifiable customer relationship intangible assets amortized estimated useful lives six years final purchase price allocation follows final allocation purchase price unaudited pro forma condensed combined financial information based valuations performed determine fair value net assets acquisition date valuation 975 million net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 2014 anselmo l morvillo sa investment company invested additional 65 million morvillo argentina increased ownership share morvillo 85 100 year ended december 31 2014 company historically consolidated results morvillo companys consolidated financial statements presented 15 portion morvillos results owned company noncontrolling interest company longer presents noncontrolling interest going forward morvillos results fully consolidated companys consolidated financial statements 2014 unigraphic inc acquisition company completed acquisition unigraphic commercial specialty printing company based boston metro area february 5 2014 112 million unigraphic offers commercial specialty printing instore marketing digital fulfillment solutions wide variety industries including arts entertainment education financial food healthcare mass media pharmaceutical retail purchase price 112 million net cash acquired identifiable customer relationship intangible assets 69 million recorded final purchase price allocation amortized six years final purchase price allocation based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs unigraphics operations included united states print related services segment unaudited pro forma condensed combined financial information following unaudited pro forma condensed combined financial information presents companys results company acquired brown printing january 1 2013 unaudited pro forma information prepared following considerations • unaudited pro forma condensed combined financial information prepared using acquisition method accounting existing gaap company acquirer accounting purposes • unaudited pro forma condensed combined financial information reflect operating cost synergy savings combined companies may achieve result acquisition costs necessary achieve operating synergy savings additional charges necessary result integration quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 3 restructuring impairment transactionrelated charges company recorded restructuring impairment transactionrelated charges years ended december 31 2016 2015 2014 follows costs related activities recorded consolidated statements operations restructuring impairment transactionrelated charges see note 21 segment information restructuring impairment transactionrelated charges segment restructuring charges company began restructuring program 2010 related eliminating excess manufacturing capacity properly aligning cost structure company announced total 37 plant closures reduced headcount approximately 11100 employees since 2010 company announced closures atglen pennsylvania huntington beach california lenexa kansas manassas virginia monroe new jersey york pennsylvania plants year ended december 31 2016 company recorded following charges result plant closures restructuring programs year ended december 31 2016 • employee termination charges 129 million recorded company result workforce reductions facility consolidations involuntary separation programs • integration costs 01 million recorded company primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 386 million recorded company consisted following 1 136 million vacant facility carrying costs 2 112 million adjustment mepps withdrawal liability 3 70 million noncash pension settlement charge related lumpsum pension payments year ended december 31 2016 see note 16 employee retirement plans additional details 4 49 million equipment infrastructure removal costs closed plants 5 45 million lease exit charges including lease termination pittsburg california facility restructuring charges presented net following 1 13 million gain settlements vendors due companys argentina subsidiaries emerging bankruptcy fourth quarter 2016 2 13 million gain sale pilar argentina building quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company announced closures augusta georgia east greenville pennsylvania enfield connecticut loveland colorado pilar argentina queretaro mexico plants year ended december 31 2015 company recorded following charges result plant closures restructuring programs year ended december 31 2015 • employee termination charges 421 million recorded company result workforce reductions facility consolidations involuntary separation programs • integration costs 51 million recorded company primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 291 million recorded company consisted following 1 117 million vacant facility carrying costs 2 28 million equipment infrastructure removal costs closed plants 3 86 million lease exit charges primarily related closure atlanta georgia loveland colorado facilities company also recorded 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment see note 8 equity method investments unconsolidated entities additional details company announced closures atlanta georgia dickson tennessee marengo iowa pomona california st cloud minnesota woodstock illinois plants year ended december 31 2014 company recorded following charges result plant closures restructuring programs year ended december 31 2014 • employee termination charges 306 million recorded company result workforce reductions facility consolidations involuntary separation programs • integration costs 112 million recorded company primarily related preparing existing facilities meet new production requirements resulting work transferring closed plants well costs related integration acquired companies • restructuring charges 85 million recorded company consisted following 1 77 million vacant facility carrying costs 2 24 million legal fees 3 18 million equipment infrastructure removal costs closed plants 4 15 million lease exit charges restructuring charges presented net 49 million gain termination postretirement medical benefit plan see note 16 employee retirement plans details postretirement medical benefit plan termination restructuring charges recorded based plans committed management part based upon managements best estimates future events changes estimates may require future restructuring charges adjustments restructuring liabilities company expects incur additional restructuring charges related initiatives quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated impairment charges company recognized impairment charges 268 million year ended december 31 2016 consisting following 1 121 million land building impairment charges related atglen pennsylvania plant closure 2 147 million impairment charges primarily machinery equipment longer utilized production result facility consolidations including atglen pennsylvania augusta georgia east greenville pennsylvania monroe new jersey woodstock illinois queretaro mexico well capacity reduction restructuring activities company recognized impairment charges 953 million year ended december 31 2015 consisting following 1 547 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia augusta georgia dickson tennessee east greenville pennsylvania loveland colorado queretaro mexico well capacity reduction restructuring initiatives 2 186 million investmentrelated impairment charges primarily related 167 million impairment charges reduce book value companys equity method investment chile fair value see note 8 equity method investments unconsolidated entities additional details related impairment companys equity method investment chile 3 127 million land building impairment charges primarily related augusta georgia east greenville pennsylvania plant closures 4 71 million customer relationship intangible asset impairments 5 22 million impairment charges primarily related restructuring proceedings argentina companys argentina subsidiaries land building machinery equipment intangible assets company recognized impairment charges 144 million year ended december 31 2014 consisting following 1 80 million impairment charges machinery equipment longer utilized production result facility consolidations including atlanta georgia dickson tennessee mexico city mexico pomona california st cloud minnesota well capacity reduction restructuring initiatives 2 64 million land building impairment charges primarily related bristol pennsylvania dickson tennessee plant closures fair values impaired assets determined company level 3 fair value hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs estimated based broker quotes internal expertise related current marketplace conditions estimated future discounted cash flows assets adjusted estimated fair values time impairment noncash goodwill impairment charges included line item entitled goodwill impairment companys consolidated statements operations discussed note 4 goodwill intangible assets transactionrelated charges income company incurs transactionrelated charges income primarily consisting professional service fees related business acquisition divestiture activities company recognized transactionrelated charges 22 million year ended december 31 2016 company recognized transactionrelated income 67 million year ended december 31 2015 included 100 million nonrecurring gain result couriers termination agreement pursuant quadgraphics acquire courier partially offset 33 million professional service fees including fees terminated acquisition courier acquisitions marins copac specialty company recognized transactionrelated charges 26 million year ended december 31 2014 primarily includes professional service fees acquisitions brown printing unigraphic transactionrelated charges expensed incurred accordance applicable accounting guidance business combinations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated restructuring reserves activity impacting companys restructuring reserves years ended december 31 2016 2015 follows companys restructuring reserves december 31 2016 included shortterm longterm component shortterm portion included 135 million accrued liabilities see note 9 accrued liabilities longterm liabilities 09 million accounts payable consolidated balance sheets company expects reserves paid within next twelve months longterm portion 48 million included longterm liabilities see note 9 accrued liabilities longterm liabilities consolidated balance sheets note 4 goodwill intangible assets goodwill represents excess purchase price fair value identifiable net assets acquired business combination goodwill assigned specific reporting units tested annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value united states print related services segment due decline companys stock price third quarter 2015 interim goodwill impairment test three reporting units united states print related services segment performed july 31 2015 reporting units include core print related services reporting unit specialty print related services reporting unit united states products services reporting unit goodwill 6408 million 1156 million 186 million respectively july 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated result interim goodwill impairment assessment well annual impairment test october 31 2015 companys united states print related services segment recorded pretax noncash goodwill impairment charges 7783 million year ended december 31 2015 included impairment charges 6408 million 1189 million 186 million core print related services reporting unit specialty print related services reporting unit united states products services reporting unit respectively goodwill impairment charges resulted reduction estimated fair value reporting unit based lower expectations future revenue profitability cash flows due volume pricing pressures compared expectations previous annual goodwill impairment assessment performed october 31 2014 international segment march 25 2015 due deteriorating economic conditions including inflation currency devaluation combined uncertain political conditions declining print volumes labor challenges companys argentina subsidiaries included within latin america reporting unit commenced bankruptcy restructuring proceedings goal consolidating operations result company conducted interim goodwill impairment assessment latin america reporting unit included comparing carrying amount net assets including goodwill respective fair value march 31 2015 date interim assessment result interim goodwill impairment assessment well annual impairment test october 31 2015 companys international segment recorded noncash nondeductible goodwill impairment charges 300 million year ended december 31 2015 primarily including 233 million noncash goodwill impairment charge latin america reporting unit goodwill impairment charges resulted reduction estimated fair value reporting unit based lower expectations future revenue profitability cash flows due volume pricing pressures compared expectations previous annual goodwill impairment assessment performed october 31 2014 noncash goodwill impairment charges 8083 million recorded year ended december 31 2015 goodwill impairment charges recorded years ended december 31 2016 2014 accumulated goodwill impairment losses carrying value goodwill december 31 2016 2015 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated activity impacting goodwill year ended december 31 2015 follows components intangible assets december 31 2016 2015 follows gross carrying amount accumulated amortization within intangible assetsnet condensed consolidated balance sheets december 31 2016 december 31 2015 differs value originally recorded acquisition due impairment charges recorded effects currency fluctuations purchase date december 31 2016 december 31 2015 intangible assets evaluated potential impairment whenever events circumstances indicate carrying value may recoverable impairment charges recorded finitelived intangible assets years ended december 31 2016 2014 company recorded finitelived intangible asset impairment charges 72 million primarily related customer relationships year ended december 31 2015 see note 3 restructuring impairment transactionrelated charges discussion impairment charges quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated amortization expense intangible assets 507 million 796 million 759 million years ended december 31 2016 2015 2014 respectively following table outlines estimated future amortization expense related intangible assets december 31 2016 note 5 receivables activity impacting allowances doubtful accounts years ended december 31 2016 2015 2014 follows note 6 inventories components inventories december 31 2016 2015 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 7 property plant equipment components property plant equipment december 31 2016 2015 follows 1 consists computer equipment vehicles furniture fixtures leasehold improvements communication related equipment company recorded impairment charges 268 million 695 million 144 million years ended december 31 2016 2015 2014 respectively reduce carrying amounts certain property plant equipment longer utilized production fair value see note 3 restructuring impairment transactionrelated charges discussion impairment charges company recognized depreciation expense 2264 million 2457 million 2605 million years ended december 31 2016 2015 2014 respectively assets held sale company considered certain closed facilities held sale classification consolidated balance sheets net book value assets held sale 52 million 63 million december 31 2016 2015 respectively assets carried lesser original cost fair value less estimated costs sell fair values determined company level 3 fair value hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs estimated based broker quotes internal expertise related current marketplace conditions assets held sale included prepaid expenses current assets consolidated balance sheets note 8 equity method investments unconsolidated entities company 49 ownership interest plural commercial printer based são paulo brazil company 50 ownership interest chile commercial printer based santiago chile company sold ownership interest chile july 31 2015 companys ownership interest plural chile accounted using equity method accounting periods presented companys equity loss plurals chiles operations recorded equity loss unconsolidated entities companys consolidated statements operations included within international segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company reviews equity method investments regularly indicators temporary impairment second quarter 2015 company recorded 167 million impairment charge reduce book value 50 ownership interest chile fair value based intent sell investment impairment recorded restructuring impairment transactionrelated charges consolidated statement operations included within international segment fair value measurement investment classified level 3 fair value hierarchy see note 15 financial instruments fair value measurements definition level 3 inputs determined using internal expertise current marketplace conditions july 31 2015 company sold 50 ownership interest chile 105 million company recorded 60 million noncash expense recognize accumulated foreign exchange losses sale chile equity method investment year ended december 31 2015 recorded within restructuring impairment transactionrelated charges consolidated statements operations condensed balance sheets plural december 31 2016 2015 follows condensed statement operation plural year ended december 31 2016 combined condensed statements operations plural chile years ended december 31 2015 2014 presented results chile equity method investment included following table july 31 2015 sale date quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 9 accrued liabilities longterm liabilities components accrued longterm liabilities december 31 2016 2015 follows employeerelated liabilities consist primarily payroll bonus vacation health workers compensation note 10 commitments contingencies commitments company firm commitments 146 million december 31 2016 purchase press finishing equipment litigation company named defendant various lawsuits claims asserted company normal course business liabilities ultimately result lawsuits expected management material impact consolidated financial statements company april 2016 company selfreported sec department justice doj certain foreign corrupt practices act fcpa issues resulting internal investigation related operations managed peru operations approximate annual sales ranging 950 million 1350 million date company acquired operations july 2010 date issues discovered selfreported issues identified companys financial internal controls company oversight audit committee board directors proactively initiated investigation matter assistance external legal counsel external forensic accountants course internal investigation company also identified selfreported doj sec transactions raising similar issues involving certain sales made quadtech china operations period 2011 2015 approximate annual sales china operations ranged 20 million 30 million connection investigation company made continues evaluate certain enhancements compliance program company fully cooperating sec doj time company anticipate material adverse effect business financial condition result matter quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated environmental reserves company subject various laws regulations government policies relating health safety generation storage transportation disposal hazardous substances environment protection general company provides expenses associated environmental remediation obligations amounts probable reasonably estimated reserves adjusted new information develops circumstances change environmental reserves discounted company believes compliance laws regulations government policies material respects furthermore company anticipate maintaining compliance environmental statutes material impact upon companys consolidated financial position note 11 world color press insolvency proceedings company continues manage bankruptcy claim settlement process quebecor world inc qwi bankruptcy proceedings united states canada qwi changed name world color press upon emerging bankruptcy july 21 2009 extent claims allowed holders claims entitled receive recovery nature recovery dependent upon type classification claims regard respect certain types claims holders thereof entitled receive cash andor unsecured notes holders certain types claims entitled receive combination quadgraphics common stock cash class 4 claims accordance terms world color press acquisition agreement respect claims asserted holders thereof entitled priority cash recovery company estimated approximately 12 million 14 million recorded claims yet paid december 31 2016 2015 respectively respect claims asserted holders thereof entitled class 4 claims second quarter 2016 company provided 11 million restricted cash future satisfaction cash portion remaining class 4 claims obligations priority cash claims class 4 claims classified amounts owing satisfaction bankruptcy claims consolidated balance sheets respect unsecured claims held creditors operating subsidiary debtors quebecor world usa inc class 3 claims allowed class 3 claim entitled receive unsecured note amount equaling 50 creditors allowed class 3 claim provided however aggregate principal amount unsecured notes cannot exceed 750 million allowed class 3 claim also receive accrued interest 5 prepayment redemption premium thereon total aggregate maximum principal interest prepayment redemption premium class 3 claims 892 million connection world color press acquisition company required deposit maximum potential payout class 3 claim creditors trustee amount used pay creditors allowed class 3 claims excess amounts required class 3 claim payments reverting company quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated years ended december 31 2016 2015 03 million 01 million respectively restricted cash paid class 3 claim creditors company also received refunds 40 million 175 million restricted cash years ended december 31 2016 2015 respectively december 31 2016 72 million maximum potential payout class 3 claim creditors remains classified restricted cash consolidated balance sheets based companys analysis outstanding claims company liability 54 million december 31 2016 classified unsecured notes issued consolidated balance sheets activity impacting restricted cash unsecured notes issued years ended december 31 2016 2015 follows components restricted cash december 31 2016 2015 follows liabilities recorded bankruptcy matters based managements current assessment amount likely paid possible identify final amount priority cash claims class 4 claims class 3 claims ultimately allowed united states bankruptcy court therefore payments amounts owing satisfaction bankruptcy claims could higher amounts accrued consolidated balance sheets would require additional cash payments made expense recorded amount exceeding companys estimate amounts payable related unsecured notes could exceed current estimates would require additional expense recorded company resolved majority claims since acquiring world color press 2010 ultimate timing completion bankruptcy process depends resolution remaining claims quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 12 debt components longterm debt december 31 2016 2015 follows description debt obligations master note security agreement september 1 1995 last amended november 24 2014 quadgraphics entered master note security agreement december 31 2016 borrowings outstanding master note security agreement 1526 million senior notes master note security agreement weighted average interest rate 747 december 31 2016 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2031 various tranches notes collateralized certain united states land buildings press finishing equipment terms master note security agreement company redeemed 601 million senior notes master note security agreement resulting net loss debt extinguishment 02 million year ended december 31 2016 tendered senior notes master note security agreement canceled company used cash flows operating activities borrowings revolving credit facility fund tender primarily completed reallocate debt lower interest rate revolving credit facility thereby reduce interest expense based current london interbank offered rate libor rates quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated senior secured credit facility company completed issuance 16 billion senior secured credit facility including revolving credit facility term loan term loan b april 28 2014 senior secured credit facility entered extend stagger companys debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals proceeds senior secured credit facility used following 1 repay companys previous revolving credit facility term loan term loan b 2008 international term loan 2 fund acquisition brown printing 3 general corporate purposes senior secured credit facility consists three different loan facilities first facility revolving credit facility amount 8500 million term five years maturing april 27 2019 second facility term loan aggregate amount 4500 million term five years maturing april 27 2019 subject certain required amortization third facility term loan b amount 3000 million term seven years maturing april 27 2021 subject certain required amortization december 31 2016 company borrowings 190 million revolving credit facility well 479 million issued letters credit leaving 7831 million available future borrowings revolving credit facility term loan loans made senior secured credit facility initially bear interest 200 excess reserve adjusted libor 100 excess alternate base rate term loan b loans bear interest 325 excess reserve adjusted libor floor 100 225 excess alternative base rate companys option senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances february 2017 company entered interest rate swap designated cash flow hedge completed second amendment senior secured credit facility see note 25 “subsequent events” detail items senior unsecured notes company completed issuance 3000 million aggregate principal amount senior unsecured notes due may 1 2022 april 28 2014 senior unsecured notes bear interest 700 interest payable semiannually senior unsecured notes entered extend stagger companys debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals company received 2948 million net proceeds sale senior unsecured notes deducting initial purchasers discounts commissions proceeds senior unsecured notes used purposes detailed april 28 2014 senior secured credit facility company repurchased 565 million senior unsecured notes open market resulting net gain debt extinguishment 143 million year ended december 31 2016 repurchased senior unsecured notes canceled company used cash flows operating activities borrowings revolving credit facility fund repurchases primarily completed efficiently reduce debt balances interest expense based current libor rates quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated companys existing future domestic subsidiaries borrower guarantees indebtedness companys senior secured credit facility guarantees certain companys indebtedness companys restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes guarantor subsidiaries guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events see note 23 separate financial information subsidiary guarantors indebtedness details guarantor subsidiaries international debt obligations company entered fixed rate euro denominated international term loan december 28 2015 purposes financing certain capital expenditures general business needs 187 million term loan fully funded 2016 168 million outstanding weighted average interest rate 172 december 31 2016 term loan term six years maturing december 28 2021 company two multicurrency international revolving credit facilities used financing working capital general business needs company 53 million borrowings outstanding international revolving credit facilities december 31 2016 leaving 90 million available future borrowing terms international revolving credit facilities includes certain financial covenants guarantee international revolving credit facilities company security agreement includes collateralizing substantially quadgraphics europe sp zoo assets first multicurrency international revolving credit facility expires october 31 2017 bears interest aggregate warsaw interbank offered rate wibor plus 090 polish zloty denominated borrowings aggregate euro interbank offered rate euribor plus 095 euro denominated borrowings second multicurrency international revolving credit facility expires november 20 2018 bears interest aggregate wibor plus 070 polish zloty denominated borrowings aggregate euribor plus 070 euro denominated borrowings fair value debt based upon interest rates available company borrowings similar terms maturities fair value companys total debt approximately 11 billion 12 billion december 31 2016 2015 respectively fair value determination companys total debt categorized level 2 fair value hierarchy see note 15 financial instruments fair value measurements definition level 2 inputs december 31 2016 approximately 24 billion companys assets pledged security various loans agreements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated debt issuance costs original issue discount activity impacting companys capitalized debt issuance costs years ended december 31 2016 2015 follows activity impacting companys original issue discount years ended december 31 2016 2015 follows amortization expense debt issuance costs 38 million 39 million 38 million years ended december 31 2016 2015 2014 respectively amortization expense original issue discount 04 million 05 million 04 million years ended december 31 2016 2015 2014 respectively debt issuance costs original issue discount amortized straightline basis five seven eight year lives related debt instruments gain loss debt extinguishment 2016 gain debt extinguishment company recorded net gain debt extinguishment 141 million year ended december 31 2016 141 million comprised 143 million gain incurred conjunction repurchase 565 million companys senior unsecured notes offset net loss debt extinguishment 02 million resulting redemption 601 million companys senior notes master note security agreement quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated gain debt extinguishment recorded consolidated statements operations year ended december 31 2016 comprised following 2014 loss debt extinguishment company incurred 143 million debt issuance costs conjunction 19 billion debt financing arrangement completed april 28 2014 accordance accounting guidance treatment debt issuance costs debt extinguishment 143 million new debt issuance costs 110 million capitalized classified reduction longterm debt consolidated balance sheets 33 million expensed classified loss debt extinguishment consolidated statements operations addition original issue discount 30 million related term loan b senior secured credit facility classified reduction longterm debt consolidated balance sheets company incurred 10 million debt issuance costs conjunction redemption 1088 million senior notes master note security agreement october 10 2014 accordance accounting guidance treatment debt issuance costs debt extinguishment 10 million expensed classified loss debt extinguishment consolidated statements operations year ended december 31 2014 company incurred 12 million debt issuance costs conjunction amendment master note security agreement november 24 2014 accordance accounting guidance treatment debt issuance costs debt extinguishment 12 million new debt issuance costs 10 million capitalized classified reduction long term debt consolidated balance sheets 02 million expensed classified loss debt extinguishment consolidated statements operations year ended december 31 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated loss debt extinguishment recorded consolidated statements operations year ended december 31 2014 comprised following covenants compliance companys various lending arrangements include certain financial covenants financial terms numbers ratios defined companys debt agreements among covenants company required maintain following december 31 2016 • total leverage ratio rolling twelvemonth basis total leverage ratio defined total consolidated debt consolidated ebitda shall exceed 375 100 twelve months ended december 31 2016 companys total leverage ratio 234 100 • senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined senior secured debt consolidated ebitda shall exceed 350 100 twelve months ended december 31 2016 companys senior secured leverage ratio 184 100 • minimum interest coverage ratio rolling twelvemonth basis minimum interest coverage ratio defined consolidated ebitda consolidated cash interest expense shall less 350 100 twelve months ended december 31 2016 companys minimum interest coverage ratio 677 100 indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit companys restricted subsidiaries ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially companys consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock including following • companys total leverage ratio greater 300 100 defined senior secured credit facility company prohibited making greater 1200 million annual dividend payments capital stock repurchases certain payments total leverage ratio less 300 100 restrictions • companys senior secured leverage ratio greater 300 100 companys total leverage ratio greater 350 100 ratios defined senior secured credit facility company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total leverage ratio less 350 100 restrictions estimated principal payments approximate annual principal amounts due longterm debt excluding 113 million future amortization debt issuance costs 18 million future amortization original issue discount december 31 2016 follows note 13 lease obligations company enters various master lease agreements press finishing transportation equipment leases provide company options purchase related equipment termination value defined various early buyout dates term lease leases accounted capital leases consolidated balance sheets components capital lease assets december 31 2016 2015 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated future maturities capitalized leases december 31 2016 follows company various operating lease agreements future minimum rental commitments noncancelable leases december 31 2016 follows rent expense operating lease agreements totaled 437 million 448 million 396 million years ended december 31 2016 2015 2014 respectively note 14 income taxes income taxes based following components earnings loss income taxes equity loss unconsolidated entities years ended december 31 2016 2015 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated components income tax expense benefit years ended december 31 2016 2015 2014 follows company recorded 8083 million noncash goodwill impairment charges year ended december 31 2015 7430 million nondeductible income tax purposes tax benefit related goodwill impairment charges 2659 million composed 1 2414 million deferred tax benefit associated reduction deferred tax liability related investments united states subsidiaries due lower estimated fair value united states print related services segment 2 245 million tax benefit 653 million deductible goodwill deferred tax liability related investments united states subsidiaries originally established former world color press entities emerged bankruptcy 2009 following table outlines reconciliation differences federal statutory tax rate companys effective tax rate years ended december 31 2016 2015 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated deferred income taxes significant deferred tax assets liabilities december 31 2016 2015 follows december 31 2016 company following gross amounts taxrelated carryforwards •net operating loss carryforwards 01 million 1481 million 4993 million federal foreign state respectively federal net operating loss carryforwards expire 2035 foreign net operating loss carryforwards 613 million available without expiration remainder expire 2036 state net operating loss carryforwards expire varying amounts 2036 •capital loss carryforwards 1585 million 959 million federal state respectively federal capital loss carryforwards 1498 million expires 2017 62 million expires 2019 25 million expires 2021 state capital loss carryforwards 909 million expires 2017 35 million expires 2019 15 million expires 2021 •various credit carryforwards 20 million 464 million federal state respectively federal credit carryforward expires 2035 state credit carryforwards include 314 million available without expiration remainder expire 2036 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated december 31 2016 company recorded valuation allowance 1559 million consolidated balance sheet primarily related taxaffected amounts carryforwards valuation allowance includes 555 million 465 million 539 million federal foreign state deferred tax assets respectively expected realized company considers foreign earnings indefinitely invested accordingly company provide additional united states foreign income taxes would become payable upon remission undistributed earnings foreign subsidiaries cumulative undistributed earnings foreign subsidiaries december 31 2016 material uncertain tax positions following table summarizes activity companys liability unrecognized tax benefits december 31 2016 2015 2014 december 31 2016 296 million unrecognized tax benefits would impact companys effective tax rate recognized amount reasonably possible 06 million total amount unrecognized tax benefits decrease within 12 months due resolution audits statute expirations company classified interest expense related penalties related income tax uncertainties component income tax expense following table summarizes companys interest expense related tax uncertainties penalties recognized years ended december 31 2016 2015 2014 accrued interest penalties related income tax uncertainties reported components longterm liabilities consolidated balance sheets accrued interest 59 million 48 million december 31 2016 2015 respectively accrued penalties 04 million 04 million december 31 2016 2015 respectively company tax years 2013 2016 remain open subject examination internal revenue service tax years 2007 2016 remain open subject examination companys various major state jurisdictions within united states quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 15 financial instruments fair value measurements certain assets liabilities required recorded fair value recurring basis assets liabilities recorded fair value nonrecurring basis generally result acquisitions impairment charges fair value determined based exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants gaap also classifies inputs used measure fair value following hierarchy level 1 quoted prices active markets identical assets liabilities level 2 quoted prices active markets similar assets liabilities quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability level 3 unobservable inputs asset liability level 3 recurring measurements assets liabilities december 31 2016 company records fair value forward contracts pension plan assets recurring basis fair value cash equivalents receivables inventories restricted cash accounts payable accrued liabilities amounts owing satisfaction bankruptcy claims approximate carrying values december 31 2016 2015 see note 12 debt discussion fair value companys debt note 16 employee retirement plans details level 1 level 2 inputs related employee retirement plans addition assets liabilities recorded fair value recurring basis company required record certain assets liabilities fair value nonrecurring basis generally result acquisitions remeasurement assets resulting impairment charges see note 2 acquisitions strategic investments discussion acquisitions see note 3 restructuring impairment transactionrelated charges note 4 goodwill intangible assets note 7 property plant equipment note 8 equity method investments unconsolidated entities discussion impairment charges recorded result remeasurement certain longlived assets company operations countries transactions outside functional currencies periodically enters foreign exchange contracts used hedge net exposures changes foreign currency exchange rates designated either cash flow hedges fair value hedges gains losses net foreign currency hedges intended offset losses gains underlying net exposures effort reduce earnings volatility resulting fluctuating foreign currency exchange rates open foreign currency exchange contracts december 31 2016 company periodically enters natural gas forward purchase contracts hedge increases commodity costs companys commodity contracts qualified exception related normal purchases sales years ended december 31 2016 2015 company takes delivery normal course business quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 16 employee retirement plans defined contribution plans quadgraphics diversified plan comprised participant directed 401k contributions company match profit sharing contributions total participant assets 19 billion december 31 2016 company 401k matching contributions 133 million 166 million 146 million years ended december 31 2016 2015 2014 respectively quadgraphics employee stock ownership plan holds profit sharing contributions company stock made discretion companys board directors profit sharing contributions years ended december 31 2016 2015 2014 defined benefit plans postretirement benefit plans company assumed various funded unfunded frozen pension plans portion fulltime employees united states part acquisition world color press 2010 benefits generally based upon years service compensation plans funded conformity applicable government regulations company funds least minimum amount required qualified plans using actuarial cost methods assumptions acceptable government regulations addition pension benefits company provided certain healthcare life insurance benefits retired employees 2014 company eliminated postretirement medical benefit coverage retirees resulted recognition termination gain 49 million termination gain recorded restructuring impairment transactionrelated charges consolidated statement operations components net pension postretirement benefit income years ended december 31 2016 2015 2014 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated underfunded pension obligations calculated using generally accepted actuarial methods measured annually december 31 following table provides reconciliation projected benefit obligation fair value plan assets funded status pension plans december 31 2016 2015 amounts recognized consolidated balance sheets december 31 2016 2015 follows following table provides reconciliation companys accumulated comprehensive income loss prior deferred tax effects december 31 2016 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated april 1 2016 company provided option receive lumpsum pension payment select group terminated vested participants total lumpsum payments 748 million paid 2016 564 million paid july 2016 lumpsum program 2016 company settled 926 million pension liabilities 748 million pension payouts payments eligible participants elected receive lumpsum pension payment funded existing pension plan assets constituted settlement companys pension liabilities respect participants result lumpsums paid participants noncash settlement charges 70 million recognized 2016 settlement charges classified restructuring impairment transactionrelated charges consolidated statement operations charges resulted recognition earnings portion actuarial losses recorded accumulated comprehensive loss based proportion obligation settled actuarial gains losses excess 10 greater projected benefit obligation marketrelated value plan assets recognized component net periodic benefit costs average remaining service period plans active employees unrecognized prior service costs credits also recognized component net periodic benefit cost average remaining service period plans active employees amortization amounts accumulated comprehensive loss expected recognized component net periodic pension income 2017 weighted average assumptions separately pension postretirement benefit plans used determine net periodic benefit costs years ended december 31 2016 2015 2014 follows weighted average assumptions used determine pension benefit obligations december 31 2016 2015 follows company determines assumed discount rate based index highquality corporate bond yields matchedfunding yield curve analysis measurement date 2015 company measured interest costs utilizing single weighted average discount rate derived yield curve used measure plan obligations beginning 2016 company changed approach used measure interest costs pension benefits elected measure interest costs applying specific spot rates along yield curve plans liability cash flows new method would also impact calculation service costs applicable companys pension plans due frozen status company made change provide precise measurement interest costs aligning timing plans liability cash flows corresponding spot rates yield curve change affect measurement plan obligations company reflected change accounting estimate accordingly accounted prospective basis quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated estimated company contributions benefit payments 2017 company required make cash contributions qualified defined benefit pension plans expects make estimated benefit payments 18 million nonqualified defined benefit pension plans actual pension contributions may differ based funding calculations company may choose make additional discretionary contributions estimated benefit payments may differ based actual experience estimated future benefit payments plans behalf plan participants estimate plans future benefit payments made funded qualified plans unfunded nonqualified plans plan participants december 31 2016 follows plan assets investment strategy company follows disciplined investment strategy provides diversification investments asset class foreign currency sector company pension committee approved investment policy pension plan establishes longterm asset mix targets based several factors including following funded status historical returns achieved worldwide investment markets time horizon pension plans obligations investment risk allocation range asset class developed whereby mix equity securities debt securities used provide appropriate riskadjusted longterm return plan assets thirdparty investment managers employed invest assets passivelyindexed activelymanaged strategies investment returns risks monitored ongoing basis derivatives used certain times hedge foreign currency exposure gains losses derivatives offset corresponding change value hedged assets derivatives strictly used hedging purposes speculative purposes current target allocations plan assets weighted average basis 55 equity securities 45 debt securities including cash equivalents actual asset allocation december 31 2016 approximately 56 equity securities 44 debt securities actual asset allocation december 31 2015 approximately 54 equity securities 46 debt securities equity investments diversified country issuer industry sector debt securities primarily consist government bonds corporate bonds diversified industries expected longterm rate return assets assumption selected first identifying expected range longterm rates return major asset class expected longterm rates return developed based longterm historical averages current expectations future returns anticipated inflation rates expected longterm rate return plan assets calculated weighting asset class quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair values companys pension plan assets december 31 2016 2015 asset category follows 1 investments consist privately placed funds valued based nav funds based fair value funds underlying investments accordance asc subtopic 82010 certain investments measured fair value using nav per share equivalent practical expedient classified fair value hierarchy see note 24 new accounting pronouncements discussion adoption new accounting standard level 3 assets liabilities december 31 2016 2015 see note 15 financial instruments fair value measurements definitions fair value levels company segregated plan assets following major categories levels determining fair value december 31 2016 cash equivalents carrying value approximates fair value assets classified level 1 debt securities category consists bonds shortterm fixed income securities fixed income pooled funds fair valued based compilation primarily observable market information broker quotes overthecounter markets classified level 2 equity securities category consists equity investments equity pooled funds assets classified level 1 level 2 respectively level 1 assets valued based quoted prices active market level 2 assets valued using quoted prices markets active broker dealer quotations methods significant input observable measurement date valuation methodologies described may generate fair value calculation may indicative net realizable value future fair values company believes valuation methodologies used appropriate use different methodologies assumptions calculating fair value could result different amounts company invests various assets valuation determined nav company believes nav representative fair value reporting date significant restrictions redemption investments reasons indicate investment would redeemed amount different nav quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair value measurements commoncollective trusts calculated using nav redemption restrictions years ended december 31 2016 2015 follows risk management directly invested funds concentration risk monitored specific guidelines investment manager mandates investment manager mandates developed companys external investment advisor specify diversification standards maximum exposure per issuer concentration limits per type security industry country applicable investments made pooled funds investment mandates funds reviewed companys external investment advisor determine investment objectives guidelines consistent companys overall pension plan risk management objectives managing plan assets management reviews manages risk associated funded status risk interest rate risk market risk counterparty risk liquidity risk operational risk liability management asset class diversification central companys risk management approach integral overall investment strategy given process place ensure proper diversification portfolio management believes company pension plan assets exposed significant concentration risk multiemployer pension plans company previously participated number mepps terms collective bargaining agreements cover number employees risks participating mepps different single employer plans following aspects • assets contributed mepps one company may used provide benefits employees participating companies • participating company stops contributing plan unfunded obligations plan may borne remaining participating companies • company stops participating mepps continues business company would required pay amount referred withdrawal liability based unfunded status plan quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company withdrawn significant mepps replaced union sponsored promise pay future defined benefit plans company sponsored pay go defined contribution plan two mepps gciu gcc significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued estimated withdrawal liability based information provided plans trustee part purchase price allocation world color press gciu plan defined benefit plan provides retirement benefits total permanent disability benefits preretirement death benefits participating union employees company funded status gciu plan classified critical declining based gciu plans 2016 certification united states department labor funded percentage plan less 65 plan projected become insolvent within next 20 years result gciu plan implemented rehabilitation plan improve plans funded status company received notice withdrawal demand payment letter gciu excess reserve established company gciu withdrawal company currently litigation gciu trustees determine amount duration withdrawal payments gciu arbitration proceedings gciu completed sides appealed arbitrators ruling litigation federal court commenced gcc plan defined benefit plan provides retirement benefits disability benefits early retirement benefits participating union employees company funded status gcc plan classified critical declining based gcc plans 2016 certification united states department labor funded percentage plan less 65 plan projected insolvent within next 15 years result gcc plan implemented rehabilitation plan improve plans funded status fourth quarter 2016 company gcc reached settlement agreement claims scheduled payments february 2024 company made payments totaling 118 million 114 million 139 million years ended december 31 2016 2015 2014 respectively company reserved 481 million estimate total mepps withdrawal liability december 31 2016 334 million recorded longterm liabilities 106 million recorded accrued liabilities 41 million recorded unsecured notes issued consolidated balance sheets withdrawal liability reserved company within range companys estimated potential outcomes estimate may increase decrease depending final conclusion litigation gciu trustees quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 17 earnings loss per share attributable quadgraphics common shareholders basic earnings loss per share attributable quadgraphics common shareholders computed net earnings loss attributable quadgraphics common shareholders less allocation participating securities divided basic weighted average common shares outstanding 479 million 479 million 475 million shares years ended december 31 2016 2015 2014 respectively calculation diluted earnings per share includes effect dilutive equity incentive instruments company uses treasury stock method calculate effect outstanding dilutive equity incentive instruments requires company compute total proceeds sum following 1 amount employee must pay upon exercise award 2 amount unearned stockbased compensation costs attributed future services 3 years ended december 31 2015 2014 amount tax benefits would credited additional paidin capital assuming exercise award calculation total proceeds year ended december 31 2016 excludes excess tax benefits result early prospective adoption new accounting guidance related sharebased compensation second quarter 2016 retrospective application january 1 2016 adoption accounting standard material impact consolidated financial statements see note 24 new accounting pronouncements discussion adoption new accounting standard related sharebased compensation impacts consolidated financial statements equity incentive instruments total employee proceeds exercise exceed average fair value equity incentive instrument period antidilutive effect earnings per share periods net earnings accordingly company excludes calculation antidilutive equity incentive instruments 19 million 18 million class common shares excluded computations diluted net earnings per share years ended december 31 2016 2014 respectively due net loss attributable quadgraphics common shareholders incurred year ended december 31 2015 assumed exercise equity incentive instruments antidilutive therefore included diluted loss per share attributable quadgraphics common shareholders calculation period unvested sharebased payment awards contain nonforfeitable rights dividends dividend equivalents whether paid unpaid required treated participating securities included computation earnings loss per share pursuant twoclass method company participating securities 2016 2015 stock options granted november 18 2011 became fully vested november 18 2014 companys participating securities reduced basic diluted earnings per share attributable quadgraphics common shareholders 001 year ended december 31 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reconciliations numerator denominator basic diluted per share computations companys common stock years ended december 31 2016 2015 2014 summarized follows note 18 equity incentive programs shareholders company approved quadgraphics inc 2010 omnibus incentive plan omnibus plan two complementary purposes 1 attract retain outstanding individuals serve directors officers employees 2 increase shareholder value may 2016 additional 3000000 shares approved issuance providing aggregate 10871652 shares class common stock reserved issuance omnibus plan awards omnibus plan may consist incentive awards stock options stock appreciation rights performance shares performance share units shares class stock restricted stock restricted stock units deferred stock units stockbased awards determined companys board directors stock option granted exercise price less 100 fair market value class common stock date grant december 31 2016 2856394 shares available issuance omnibus plan company recognizes compensation expense based estimated grant date fair values sharebased awards issued employees nonemployee directors including stock options performance shares performance share units restricted stock restricted stock units deferred stock units company recognizes compensation costs awards expected vest straightline basis requisite three four year service period awards except deferred stock units fully vested expensed grant date company estimated number awards expected vest based part historical forfeiture rates also based managements expectations employee turnover within specific employee groups receiving type award forfeitures estimated time grant revised necessary subsequent periods actual forfeitures differ estimates quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated equity incentive compensation expense total compensation expense recognized related equity incentive programs 152 million 72 million 173 million years ended december 31 2016 2015 2014 respectively recorded selling general administrative expenses consolidated statements operations total future compensation expense related equity incentive programs granted december 31 2016 estimated 142 million estimated future compensation expense 90 million 2017 46 million 2018 06 million 2019 net tax benefit equity award activity 04 million 28 million 08 million years ended december 31 2016 2015 2014 respectively prospective adoption new accounting standard sharebased compensation net tax benefit equity award activity included net earnings loss operating activities section consolidated statement cash flows year ended december 31 2016 see note 24 new accounting pronouncements discussion adoption new accounting standard related sharebased compensation impacts consolidated financial statements net tax benefit equity award activity shown tax benefit equity award activity financing activities section consolidated statement cash flows years ended december 31 2015 2014 stock options vest four years vesting first year onethird vesting upon second third fourth anniversary dates defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee options expire later tenth anniversary grant date 24 months termination death 36 months termination normal retirement disability 90 days termination employment reason options credited dividend declarations except november 18 2011 grants stock options granted employees stock options granted years ended december 31 2016 2015 2014 compensation expense recognized related stock options year ended december 31 2016 compensation expense recognized related stock options 02 million 72 million years ended december 31 2015 2014 respectively future compensation expense stock options granted december 31 2016 following table summary stock option activity year ended december 31 2016 intrinsic value options exercisable december 31 2016 intrinsic value options outstanding december 31 2016 2015 based fair value stock price outstanding options vested december 31 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summary stock option exercises vesting activity years ended december 31 2016 2015 2014 performance share performance share units performance share ps performance share unit psu awards consist shares rights shares companys class common stock awarded employees company ps psu awards granted years ended december 31 2016 2015 2014 shares awarded 2013 performance period three years ended december 31 2015 company achieve established performance targets performance period ended december 31 2015 therefore ps psu awards canceled compensation expense awards granted recognized based best estimate anticipated payout net estimated forfeitures compensation expense recognized related ps psus year ended december 31 2016 compensation expense income recognized related ps psus income 45 million expense 22 million years ended december 31 2015 2014 respectively expected future compensation expense ps psus granted december 31 2016 restricted stock restricted stock units restricted stock rs restricted stock unit rsu awards consist shares rights shares companys class common stock awarded employees company awards restricted subject substantial risk forfeiture restrictions sale transfer employee rsu awards typically granted eligible employees outside united states defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving rs grants able exercise full voting rights receive full credit dividends vesting period dividends paid rs grantee within 45 days full vesting grantees receiving rsus granted prior january 1 2012 entitled vote earn dividends grantees receiving rsus january 1 2012 entitled vote earn dividends upon vesting rsus settled either cash payment equal fair market value rsus vesting date issuance company class common stock quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summary rs rsu award activity year ended december 31 2016 year ended december 31 2016 rs awards 1315571 shares rsu awards 175228 units granted weighted average grant date fair value per share 943 1008 respectively year ended december 31 2015 rs awards 603377 shares rsu awards 113792 units granted weighted average grant date fair value per share 2287 1778 respectively year ended december 31 2014 rs awards 706490 shares rsu awards 17767 units granted weighted average grant date fair value per share 2344 2345 respectively general rs rsu awards vest third anniversary grant date provided holder share continuously employed company vesting date compensation expense recognized rs rsus 144 million 107 million 73 million years ended december 31 2016 2015 2014 respectively total future compensation expense rs rsus granted december 31 2016 approximately 142 million estimated future compensation expense 90 million 2017 46 million 2018 06 million 2019 deferred stock units deferred stock units dsu awards rights shares companys class common stock awarded nonemployee directors company following table summary dsu award activity year ended december 31 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated years ended december 31 2016 2015 2014 dsu awards 78750 34139 26316 units granted weighted average grant date fair value per share 930 2311 2345 respectively dsu award entitles grantee receive one share class common stock upon earlier separation date grantee second anniversary grant date could subject acceleration change control death disability defined individual dsu grant agreement grantees dsu awards may exercise voting rights credited dividend equivalents dividend equivalents converted additional dsu awards based closing price class common stock dividend equivalents granted years ended december 31 2016 2015 2014 14182 11864 5392 units respectively compensation expense recognized dsus 08 million 08 million 06 million years ended december 31 2016 2015 2014 respectively dsu awards fully vested grant date compensation expense recognized date grant information authorized unissued shares treasury shares may used issuance companys equity incentive programs company intends use treasury shares class common stock meet stock requirements awards future note 19 shareholders equity company three classes common stock follows share data millions accordance articles incorporation class common share one vote per share class b class c common share ten votes per share matters voted upon companys shareholders liquidation rights three classes stock company also 05 million shares 001 par value preferred stock authorized none issued december 31 2016 2015 2014 company present plans issue preferred stock quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated september 6 2011 companys board directors authorized share repurchase program 1000 million companys outstanding class stock year ended december 31 2016 company repurchased 984190 shares class common stock weighted average price 896 per share total purchase price 88 million share repurchases years ended december 31 2015 2014 december 31 2016 829 million authorized repurchases remaining program accordance articles incorporation dividends paid equally three classes common shares following table details dividend activity related outstanding shares common stock years ended december 31 2016 2015 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 20 accumulated comprehensive loss changes accumulated comprehensive loss component net tax years ended december 31 2016 2015 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated details reclassifications accumulated comprehensive loss net earnings loss years ended december 31 2016 2015 2014 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 21 segment information company operates primarily commercial print portion printing industry related product service offerings designed offer clients complete solutions communicating message target audiences companys operating reportable segments aligned chief operating decision maker company currently manages business companys operating reportable segments including product service offerings corporate category follows •united states print related services •international •corporate united states print related services united states print related services segment predominantly comprised companys united states printing operations managed one integrated platform includes retail inserts publications catalogs special interest publications journals direct mail books directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement together marketing complementary services including marketing strategy media planning placement data insights segmentation response analytics services creative services videography photography workflow solutions digital imaging facilities management services digital publishing interactive print solutions including image recognition near field communication technology mailing distribution logistics data optimization hygiene services segment also includes manufacture ink international segment consists companys printing operations europe latin america including operations england france germany poland argentina colombia mexico peru well investments printing operations brazil india segment provides printed products marketing complementary services consistent united states print related services segment unrestricted subsidiaries defined senior unsecured notes indenture represent less 20 total consolidated assets december 31 2016 less 20 total consolidated net sales year ended december 31 2016 corporate consists unallocated general administrative activities associated expenses including part executive legal finance well certain expenses income frozen employee retirement plans pension benefit plans quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following summary segment information years ended december 31 2016 2015 2014 restructuring impairment transactionrelated charges years ended december 31 2016 2015 2014 described note 3 restructuring impairment transactionrelated charges included operating income loss results segment goodwill impairment year ended december 31 2015 described note 4 goodwill intangible assets included operating income loss results segment reconciliation operating income loss earnings loss income taxes equity loss unconsolidated entities reported consolidated statements operations years ended december 31 2016 2015 2014 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated total assets segment december 31 2016 2015 2014 follows note 22 geographic area product information table presents companys net sales longlived assets years ended december 31 2016 2015 2014 geographic region amounts table differ segment data presented note 21 segment information operating segment includes operations multiple geographic regions based companys management reporting structure quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated table presents companys consolidated net sales products services years ended december 31 2016 2015 2014 note 23 separate financial information subsidiary guarantors indebtedness april 28 2014 quadgraphics completed offering senior unsecured notes see note 12 debt details senior unsecured notes companys guarantor subsidiaries fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes current guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events including following • designation guarantor subsidiaries unrestricted subsidiary • release discharge guarantee indebtedness resulted creation guarantee senior unsecured notes guarantor subsidiaries • sale disposition including sale substantially assets guarantor subsidiaries following condensed consolidating financial information reflects summarized financial information quadgraphics companys guarantor subsidiaries combined basis companys nonguarantor subsidiaries combined basis quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2016 condensed consolidating statement comprehensive income loss year ended december 31 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2015 condensed consolidating statement comprehensive income loss year ended december 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement operations year ended december 31 2014 condensed consolidating statement comprehensive income loss year ended december 31 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating balance sheet december 31 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating balance sheet december 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2016 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2015 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated condensed consolidating statement cash flows year ended december 31 2014 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 24 new accounting pronouncements november 2016 financial accounting standards board fasb issued accounting standards update 201618 statement cash flows topic 320 restricted cash asu 201618 clarifies guidance classification presentation restricted cash statement cash flows guidance effective interim annual periods beginning december 15 2017 early adoption permitted new guidance require retrospective adoption approach company believes adoption asu 201618 material impact consolidated financial statements october 2016 fasb issued accounting standards update 201616 income taxes topic 740 intraentity transfer assets inventory asu 201616 requires recognition income tax consequences intraentity transfer asset inventory transfer occurs rather waiting asset sold outside party assets covered scope asu 201616 include intellectual property plant equipment guidance effective interim annual periods beginning december 15 2017 early adoption permitted beginning annual reporting period new guidance require modified retrospective transition approach entity need apply cumulativeeffect adjustment retained earnings accumulated deficit beginning first reporting period guidance adopted company plans early adopt standard first quarter 2017 company believes adoption asu 201616 material impact consolidated financial statements august 2016 fasb issued accounting standards update 201615 statement cash flows topic 230 classification certain cash receipts cash payments asu 201615 intended reduce diversity practice providing guidance eight specific cash flow classification issues regards cash receipts cash payments presented within statements cash flows guidance effective interim annual periods beginning december 15 2017 early adoption permitted new guidance require retrospective adoption approach unless impracticable apply case guidance applied prospectively earliest date practicable company believes adoption asu 201615 material impact consolidated financial statements june 2016 fasb issued accounting standards update 201613 financial instrumentscredit losses topic 326 measurement credit losses financial instruments asu 201613 changes impairment model financial assets certain instruments new guidance entities required measure expected credit losses financial instruments including trade receivables based historical experience current conditions reasonable forecasts guidance effective interim annual periods beginning december 15 2019 early adoption permitted interim annual periods beginning december 15 2018 new guidance require modified retrospective transition approach entity need apply cumulativeeffect adjustment retained earnings accumulated deficit beginning first reporting period guidance adopted company evaluating impact adoption asu 201613 consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated march 2016 fasb issued accounting standards update 201609 compensationstock compensation topic 718 improvements employee sharebased payment accounting asu 201609 simplifies accounting sharebased payments including income tax consequences accounting forfeitures classification awards either equity liabilities classification statements cash flows guidance effective interim annual periods beginning december 15 2016 early adoption permitted second quarter 2016 company elected early adopt asu 201609 retrospective application january 1 2016 prior adoption asu excess tax benefits expense related stockbased compensation transactions recognized additional paidin capital consolidated balance sheets following adoption asu excess tax benefits expense related stockbased compensation transactions recognized prospectively income tax expense benefit consolidated statements operations excess tax benefits expense stockbased compensation transactions previously included financing activities consolidated statements cash flows prospectively included component net earnings loss consolidated statements cash flows see note 17 earnings loss per share attributable quadgraphics common shareholders impacts adoption asu 201609 calculation effect outstanding dilutive equity incentive instruments using treasury stock method see note 18 equity incentive programs companys policy election accounting forfeitures adoption asu 201609 material impact consolidated financial statements march 2016 fasb issued accounting standards update 201607 investmentsequity method joint ventures topic 323 simplifying transition equity method accounting asu 201607 simplifies equity method accounting eliminating requirement retrospectively apply equity method accounting investment subsequently qualifies accounting result increase level ownership interest degree influence instead equity method accounting applied prospectively increase level ownership interest degree influence occurs guidance effective interim annual periods beginning december 15 2016 early adoption permitted company believes adoption asu 201607 material impact consolidated financial statements february 2016 fasb issued accounting standards update 201602 leases topic 842 asu 201602 establishes rightofuse model requiring lessee record rightofuse asset lease liability balance sheet leases terms longer twelve months leases classified either finance operating classification affecting pattern expense recognition guidance also requires additional disclosures enable users financial statements understand amount timing uncertainty cash flows arising leases guidance effective interim annual periods beginning december 15 2018 early adoption permitted new guidance require modified retrospective transition approach leases existing entered date initial application option elect use certain transition relief modified retrospective transition approach would require application new accounting model earliest year presented financial statements company evaluating impact adoption asu 201602 consolidated financial statements may 2015 fasb issued accounting standards update 201507 fair value measurement topic 820 disclosures investment certain entities calculate net asset value per share equivalent asu 201507 removes requirement classify investments fair value measured net asset value nav per share equivalent using practical expedient fair value hierarchy amendment expected eliminate diversity practice resulting way investments measured nav classified within fair value hierarchy company adopted asu 201507 december 31 2016 applied retrospective basis see note 16 employee retirement plans impacts adoption asu 201507 fair value hierarchy table adoption asu 201507 material impact companys financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated may 2014 fasb issued accounting standards update 201409 revenue contracts customers topic 606 asu 201409 provides revised guidance recognizing revenue contracts customers guidance entity recognize revenue transfers promised goods services customer amount reflects expects exchange goods services guidance also requires detailed disclosures enable users financial statements understand nature amount timing uncertainty revenue cash flow arising contracts customers guidance allows option either full retrospective adoption meaning guidance applied periods presented modified retrospective adoption meaning guidance applied current period amended asu 201409 effective interim annual periods beginning december 15 2017 early adoption permitted interim annual periods beginning december 15 2016 company plans adopt standard first quarter 2018 company established crossfunctional implementation team evaluate impact asu 201409 consolidated financial statements company identified process implementing changes systems processes internal controls meet standards reporting disclosure requirements company continues assess potential impacts standard currently company believes potential impact related timing revenue recognition contracts customers may qualify overtime revenue recognition rather pointintime revenue recognition companys current policy december 31 2016 companys evaluation timing revenue recognition within operating reportable segments ongoing company determines contracts qualify revenue recognition overtime impact date adoption could significant consolidated financial statements company currently anticipates applying modified retrospective approach adopting guidance note 25 subsequent events 2500 million interest rate swap company entered 2500 million interest rate swap february 7 2017 swap designated cash flow hedge purpose reduce variability cash flows interest payments related portion quadgraphics variablerate debt swap becomes effective february 28 2017 effectively convert 2500 million companys variablerate debt based onemonth libor fixed rate 389 including 200 spread underlying debt swap five year arrangement maturing february 28 2022 senior secured credit facility amendment company completed second amendment april 28 2014 senior secured credit facility february 10 2017 second amendment completed reduce sizing revolving credit facility term loan extend companys debt maturity profile maintaining companys current cost borrowing covenant structure revolving credit facility lowered maximum borrowing amount 7250 million term four years maturing january 4 2021 term loan lowered aggregate amount 3750 million term four years maturing january 4 2021 subject certain required amortization borrowings revolving credit facility term loan loans made senior secured credit facility initially bear interest 200 excess reserve adjusted libor 100 excess alternate base rate amendment senior secured credit facility impact quarterly financial covenant requirements company subject see note 12 “debt” companys covenant requirements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated senior secured credit facility remains secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances declaration quarterly dividend february 17 2017 company declared quarterly dividend 030 per share paid march 10 2017 shareholders record february 27 2017 item 9item 8 financial statements supplementary data report independent registered public accounting firm shareholders board directors quadgraphics inc opinion financial statements audited accompanying consolidated balance sheets quadgraphics inc subsidiaries “company” december 31 2020 2019 related consolidated statements operations comprehensive loss shareholders’ equity cash flows two years period ended december 31 2020 related notes collectively referred “financial statements” opinion financial statements present fairly material respects financial position company december 31 2020 2019 results operations cash flows two years period ended december 31 2020 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states pcaob company’s internal control financial reporting december 31 2020 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission report dated february 24 2021 expressed unqualified opinion company’s internal control financial reporting change accounting principles discussed note 13 financial statements company changed method accounting leases effective january 1 2019 due adoption accounting standards update asu 201602 leases topic 842 basis opinion financial statements responsibility companys management responsibility express opinion companys financial statements based audits public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement whether due error fraud audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation financial statements believe audits provide reasonable basis opinion critical audit matter critical audit matter communicated matter arising currentperiod audit financial statements communicated required communicated audit committee 1 relates accounts disclosures material financial statements 2 involved especially challenging subjective complex judgments communication critical audit matters alter way opinion financial statements taken whole communicating critical audit matter providing separate opinion critical audit matter accounts disclosures relates revenues refer notes 1 2 consolidated financial statements critical audit matter description company recognizes revenue upon transfer control promised products services customers amount reflects consideration company expects receive exchange products services company various products service lines differing levels involvement management judgment timing revenue recognition identified revenues critical audit matter diversity products service lines diversity audit evidence obtained billing arrangement individually unique requires higher degree auditor judgment increased extent effort designing performing audit procedures evaluate appropriateness management’s estimates audit evidence related recognition revenues critical audit matter addressed audit procedures related revenues included following •we tested effectiveness controls related revenue recognition process •we evaluated management’s significant accounting policies related revenue recognition reasonableness •we selected sample recorded revenue transactions performed following procedures ◦obtained customer source documents contract selection including master agreements related amendments evaluate relevant contractual terms appropriately considered management ◦evaluated management’s application accounting policy tested revenue recognition specific performance obligations comparing management’s conclusions underlying master agreement related amendments ◦tested mathematical accuracy management’s calculations revenue associated timing revenue recognized financial statements deloitte touche llp milwaukee wisconsin february 24 2021 served companys auditor since 2002 report independent registered public accounting firm shareholders board directors quadgraphics inc opinion internal control financial reporting audited internal control financial reporting quadgraphics inc subsidiaries “company” december 31 2020 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion company maintained material respects effective internal control financial reporting december 31 2020 based criteria established internal control integrated framework 2013 issued coso also audited accordance standards public company accounting oversight board united states pcaob consolidated financial statements year ended december 31 2020 company report dated february 24 2021 expressed unqualified opinion financial statements included explanatory paragraph regarding company’s adoption new accounting standard basis opinion company’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting responsibility express opinion company’s internal control financial reporting based audit public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audit accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate deloitte touche llp milwaukee wisconsin february 24 2021 quadgraphics inc consolidated statements operations millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements comprehensive loss millions see accompanying notes consolidated financial statements quadgraphics inc consolidated balance sheets millions except per share data see accompanying notes consolidated financial statements quadgraphics inc consolidated statements cash flows millions see accompanying notes consolidated financial statements quadgraphics inc consolidated statements shareholders’ equity millions see accompanying notes consolidated financial statements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 1 basis presentation summary significant accounting policies nature operationsas worldwide marketing solutions partner quad leverages 50year heritage platform excellence innovation strong culture social purpose create better way clients employees communities company’s integrated marketing platform helps brands marketers reduce complexity increase efficiency enhance marketing spend effectiveness quad provides clients unmatched scale onsite services expanded subject expertise marketing strategy creative solutions media deployment marketing management services clientcentric approach drives company continuously evolve offering combined leadingedge technology singlesource simplicity company resources knowledge help wide variety clients multiple vertical industries including retail publishing consumer technology consumer packaged goods financial services insurance healthcare directtoconsumer company operates primarily commercial print portion printing industry printer retail inserts publications catalogs special interest publications journals direct mail directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement company’s products services variety industries sold primarily throughout north america south america europe addition company strategically sources packaging product manufacturing multiple end markets central america asia principles consolidation basis presentationthe accompanying consolidated financial statements include accounts company whollyowned majorityowned controlled subsidiaries prepared accordance gaap results operations accounts businesses acquired included consolidated financial statements dates acquisition see note 3 “acquisitions strategic investments” investments entities company ability exert significant influence control ownership interest 50 less 20 accounted using equity method accounting investments entities company exert significant influence control ownership interest less 20 accounted using cost method accounting intercompany transactions balances eliminated consolidation discontinued operationsthe results operations company’s book business reported discontinued operations periods presented accordance accounting standards codification “asc” 20520 discontinued operations corresponding current longterm assets liabilities book business classified held sale consolidated balance sheets accordance asc 20520 december 31 2019 sale book business completed 2020 financial information pertaining discontinued operations excluded relevant notes consolidated financial statements unless otherwise noted see required disclosures information note 4 “discontinued operations” information company’s sale book business foreign operationsassets liabilities denominated foreign currencies translated united states dollars exchange rate existing respective balance sheet dates income expense items translated average rates respective periods translation adjustments resulting fluctuations exchange rates recorded separate component accumulated comprehensive income loss consolidated statements shareholders’ equity transaction gains losses recorded selling general administrative expenses consolidated statements operations foreign exchange transactions resulted losses 20 million year ended december 31 2020 gains 12 million year ended december 31 2019 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company 49 interest plural commercial printer based são paulo brazil december 31 2020 company accounts entity using equity method accounting company’s equity earnings loss plural’s operations recorded equity earnings loss unconsolidated entity company’s consolidated statements operations included within international segment distributions received equity method investees follow nature distribution approach distribution evaluated basis source payment classified either operating cash inflows investing cash inflows company reviews equity method investment regularly indicators temporary impairment quad significant unconsolidated entities december 31 2020 use estimatesthe preparation consolidated financial statements requires use management’s estimates assumptions affect reported assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenue expenses reporting periods actual results could differ estimates used accounting items matters including limited allowances doubtful accounts inventory obsolescence asset valuations useful lives pension postretirement benefits selfinsurance reserves stockbased compensation taxes restructuring provisions contingencies revenue recognitionthe company recognizes products services revenue based transfer control passes customer service completed accepted customer agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends revenue services recognized services performed revenues related company’s imaging operations include digital content management photography color services page production recognized accordance terms contract typically upon completion performed service acceptance customer revenues related company’s logistics operations includes delivery printed material recognized upon completion services certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily company’s logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many company’s operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis byproduct recoveriesthe company presents byproduct recoveries reduction cost salesproducts consolidated statements operations classification byproduct recoveries reduction cost sales aligns proceeds byproduct recoveries corresponding manufacturing costs financial instrumentsthe company uses derivative financial instruments purpose hedging interest rate commodity foreign exchange exposures exist part ongoing business operations including interest rate swap agreements natural gas forward purchase contracts foreign exchange contracts policy company engage speculative leveraged transactions company hold issue financial instruments trading purposes quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated derivative instruments recorded consolidated balance sheets either assets liabilities measured fair value derivative designated fair value hedge changes fair value derivative hedged item attributable hedged risk recognized earnings derivative designated cash flow hedge effective portion changes fair value derivative recorded component accumulated comprehensive income loss recognized consolidated statements operations hedged item affects earnings ineffective portions changes fair value hedges insignificant recognized earnings cash flows derivatives accounted cash flow fair value hedges included consolidated statements cash flows category item hedged fair value measurementthe company applies fair value accounting assets liabilities recognized disclosed fair value consolidated financial statements recurring basis fair value represents amount would received selling asset paid transfer liability orderly transaction market participants measurement date determining fair value measurements assets liabilities required recorded fair value company considers principal advantageous market marketbased risk measurements assumptions market participants would use pricing asset liability see note 15 “financial instruments fair value measurements” discussion research developmentresearch development costs related development new products adaptation existing products expensed incurred included cost sales totaled 30 million 36 million years ended december 31 2020 2019 respectively cash equivalents restricted cashthe company considers highly liquid investments original maturities three months less cash equivalents receivablesreceivables stated net allowances credit losses single customer comprised 5 company’s consolidated net sales 2020 2019 5 company’s consolidated receivables december 31 2020 2019 january 1 2020 company adopted accounting standards update 201613 “financial instrumentscredit losses topic 326 measurement credit losses financial instruments” “asu 201613” changes impairment model financial assets certain instruments new impairment model also known current expected credit loss “cecl” model based expected losses rather incurred losses asc 326financial instrumentscredit losses “asc 326” company required measure expected credit losses financial instruments including trade receivables based historical experience current conditions reasonable forecasts company adopted asu 201613 using modified retrospective transition approach recorded cumulativeeffect transition adjustment accumulated deficit increase allowance credit losses balance january 1 2020 see note 7 “receivables” discussion transactions affecting allowances doubtful accounts inventoriesinventories include material labor plant overhead stated lower cost net realizable value december 31 2020 2019 inventories valued using firstin firstout method see note 8 “inventories” components company’s inventories quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated leaseson january 1 2019 company adopted accounting standards update 201602 “leases topic 842” “asu 201602” establishes rightofuse model requiring lessee record rightofuse asset lease liability balance sheet leases terms longer twelve months leases classified either finance operating classification affecting pattern expense recognition company adopted asu 201602 using modified retrospective approach applied new guidance asc 842 leases “asc 842” contracts existing entered january 1 2019 see note 13 “leases” additional accounting policy transition disclosures property plant equipmentproperty plant equipment recorded cost depreciated estimated useful lives assets using straightline method financial reporting purposes see note 9 “property plant equipment” components company’s property plant equipment major improvements extend useful lives existing assets capitalized charged asset accounts repairs maintenance significantly improve extend useful lives respective assets expensed incurred leasehold improvements depreciated shorter lease term estimated useful life respective asset retired disposed associated costs accumulated depreciation eliminated resulting gain loss recognized company’s consolidated statements operations intangible assetsidentifiable intangible assets recognized apart goodwill amortized estimated useful lives impairment longlived intangible assetsthe company evaluates longlived assets intangible assets significant property plant equipment rightofuse assets customer relationship intangible assets whenever events circumstances occurred indicate carrying value asset may recoverable determining whether impairment occurred typically requires various estimates assumptions including determining cash flows directly related potentially impaired asset useful life cash flows occur amount asset’s residual value turn assessing whether impairment loss requires determination recoverability generally estimated ability recover balance assets expected future operating cash flows undiscounted basis impairment determined exist related impairment loss calculated based difference fair value carrying value asset goodwillgoodwill reviewed annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value performing analysis company compares reporting unit’s fair value carrying value fair value estimated based comparable company market valuations andor expected future discounted cash flows generated reporting unit carrying value exceeds reporting unit’s fair value impairment loss would charged operations period identified see note 6 “goodwill intangible assets” discussion income taxesthe company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences items reported financial statements method deferred tax assets liabilities measured based differences financial statement tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes effective date enactment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company records net deferred tax assets extent company believes assets likely realized determination based upon available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income tax planning strategies recent financial operations company determines deferred income tax asset fully realized future valuation allowance established increased reflect amount asset likely realized would increase company’s provision income taxes period valuation allowance established company determines related deferred income tax assets realized future excess net recorded amount adjustment reduce related valuation allowance made would reduce company’s provision income taxes company regularly audited foreign domestic tax authorities audits occasionally result proposed assessments ultimate resolution might result company owing additional taxes including cases penalties interest company recognizes tax position consolidated financial statements likely position would sustained upon examination tax authorities recognized tax position measured largest amount benefit likely recognized upon ultimate settlement company recognizes interest penalties related unrecognized tax benefits income tax expense determination company’s worldwide tax provision related tax assets liabilities requires use significant judgment estimating impact uncertainties application gaap interpretation complex tax laws ordinary course business transactions calculations final tax outcome uncertain fair market value required measure tax asset liability gaap purposes company periodically obtains independent third party assistance validate value determined conformity internal revenue service fair market value guidelines company believes appropriate support positions taken certain positions may successfully challenged taxing authorities resolution uncertainties manner inconsistent management’s expectations could material impact company’s financial condition operating results company applies provisions authoritative guidance accounting uncertain tax positions determine appropriate amount tax benefits recognized respect uncertain tax positions determination company’s worldwide tax provision includes impact changes amount tax benefits recognized respect uncertain tax positions see note 14 “income taxes” discussion pension plansthe company assumed certain frozen underfunded defined benefit pension plans part 2010 world color press acquisition pension plan costs determined using actuarial methods funded contributions company records amounts relating pension plans based calculations include various actuarial assumptions including discount rates assumed rates return mortality company reviews actuarial assumptions annual basis modifies assumptions based current rates trends appropriate effects modifications recognized immediately consolidated balance sheets generally amortized operating income future periods deferred amount recorded accumulated comprehensive loss consolidated balance sheets company believes assumptions utilized recording obligations plans reasonable based experience market conditions input actuaries investment advisors purposes calculating expected return plan assets valued fair value event gives rise curtailment settlement curtailment accounted prior settlement company’s measurement date measure defined benefit plan assets projected benefit obligation december 31 company previously participated mepps result acquisition world color press due significant underfunded status mepps company withdrawn significant mepps replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan form retirement benefit provided quad’s employees result decision withdraw company recorded estimated withdrawal liability mepps part world color quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated press purchase price allocation process based information received mepps’ trustees see note 16 “employee retirement plans” discussion stockbased compensationthe company recognizes stockbased compensation expense vesting period stockbased awards made employees directors based fair value instrument time grant equity awards accounted liabilities recorded fair value initial issuance date remeasured fair value reporting period change fair value recorded selling general administrative expense consolidated statements operations see note 18 “equity incentive programs” discussion accumulated comprehensive income lossaccumulated comprehensive income loss consists primarily unrecognized actuarial gains losses prior service costs pension plans foreign currency translation adjustments interest rate swap adjustments presented consolidated statements shareholders’ equity see note 20 “accumulated comprehensive loss” discussion covid19 pandemic impacts responsethe covid19 pandemic continue negative impact company’s business financial condition cash flows results operations supply chain although full extent still uncertain company implemented cost reduction cash conservation initiatives response impact covid19 pandemic business including implementing covid19 temporary furlough program employees take unpaid leave absence length varies upon business needs temporary salary reductions leaders end july 2020 including 50 salary reduction chief executive officer 35 salary reduction named executive officers temporary 50 reduction retainer fees company’s nonemployee directors temporarily suspending use vacation payouts end june 2020 temporarily suspending production several manufacturing facilities declining client volume effects pandemic impacted company’s ability operate resumed operations end september 2020 suspending quarterly dividend payments notice delaying capital spending projects company also announced permanent closures facilities located following locations result ongoing volume declines particularly retail exacerbated covid19 pandemic year ended december 31 2020 1 taunton massachusetts 2 fernley nevada 3 nashville tennessee 4 oklahoma city oklahoma 5 charlotte north carolina addition company amended senior secured credit facility second quarter 2020 provide certain financial covenant relief fiscal quarter ending september 30 2021 company continuing evaluate cost structure expects implement additional cost reduction measures necessary pandemic continues extent impact company’s business financial condition cash flows results operations supply chain depend future developments still highly uncertain cannot predicted quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated supplemental cash flow informationthe following table summarizes certain supplemental cash flow information years ended december 31 2020 2019 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 2 revenue recognition revenue disaggregation following table provides information disaggregated revenue company’s operating segments major products services offerings years ended december 31 2020 2019 nature products services company recognizes products services revenue based transfer control passes client service completed accepted client products offering predominantly comprised company’s print operations includes retail inserts publications catalogs special interest publications journals direct mail directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement company considers logistic operations services include delivery printed material services offering also includes revenues related company’s imaging operations include digital content management photography color services page production marketing services media planning placement facilities management medical services quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated performance obligations contract inception company assesses products services promised contracts customers identifies performance obligations promise transfer customer product service distinct identify performance obligations company considers goods services promised contract regardless whether explicitly stated implied customary business practices company determined following distinct products services represent separate performance obligations •prepress services •print •other services prepress services company recognizes revenue pointintime upon completion performed service acceptance customer company considers transfer control occur service performed company right payment customer legal title risk reward ownership company recognizes print revenues upon transfer title passage risk loss pointintime upon shipment customer reasonable assurance collectability revenues related company’s logistics operations includes delivery printed material included print performance obligation also recognized pointintime services completed agreements certain customers products may stored company future delivery situations company may receive warehouse management fees services provides revenue warehouse management fees immaterial years ended december 31 2020 2019 certain revenues earned company require judgment determine revenue recorded gross principal net related costs agent billings thirdparty shipping handling costs primarily company’s logistics operations outofpocket expenses recorded gross net sales cost sales consolidated statements operations many company’s operations process materials primarily paper may supplied directly customers may purchased company sold customers revenue recognized customersupplied paper revenues companysupplied paper recognized gross basis cases company print items mailed consumers bill customer postage cases company acting agent billings recorded net basis net sales significant payment terms payment terms conditions contracts customers vary company typically offers standard terms net 30 days company’s standard business practice offer extended payment terms longer one year company may offer cash discounts prepayment extended terms depending certain facts circumstances timing company’s delivery products services differs timing payment company record either contract asset contract liability variable consideration evaluating transaction price company analyzes contract basis applicable variable considerations noncash consideration also performs constraint analysis nature company’s contracts give rise variable consideration including volume rebates credits discounts similar items generally decrease transaction price variable amounts generally credited customer based achieving certain levels sales activity contracts signed making payments within specific terms quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated product returns significant products customized however company accrues estimated amount customer allowances time sale based historical experience known trends transaction price requires allocation multiple performance obligations company uses estimated standalone selling prices using adjusted market assessment approach costs obtain contracts accordance asc 606 revenue contracts customers “asc 606” company capitalizes certain sales incentives sales compensation packages costs directly attributed awarded customer contract renewal would incurred contract obtained company also defers certain contract acquisition costs paid customer contract inception costs obtain contracts duration less one year expensed incurred contract costs contracts one year company amortizes costs obtain contracts straightline basis estimated life contract reviews quarterly impairment activity impacting costs obtain contracts year ended december 31 2020 follows practical expedients company elected apply following practical expedients allowed asc 606 •for certain performance obligations related print contracts company elected disclose value unsatisfied performance obligations following 1 contracts original expected length one year less 2 contracts revenue recognized invoiced 3 contracts variable consideration related unsatisfied performance obligations company zero volume commitments contracts extend beyond one year december 31 2020 •the company expenses costs obtain contracts incurred contract duration less one year •the transaction amount adjusted significant financing component period transfer products services payment less one year •the company accounts shipping handling activities includes postage occur control related products services transfers customer fulfillment activities therefore recognized time shipping •the company excludes transaction price amounts collected customers sales taxes quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 3 acquisitions strategic investments 2020 change ownership rise interactive june 15 2020 company purchased units equity rise previous holder form 159 million note payable paid full october 1 2020 10 million cash paid june 15 2020 addition june 15 2020 rise purchased retired units equity previous holders rise 54 million cash transactions resulted company’s ownership interest changing 57 99 company began consolidating results rise company’s consolidated financial statements equity ownership increased 57 march 14 2018 portion rise’s operating results owned company 43 june 15 2020 1 june 15 2020 recorded net earnings loss attributable noncontrolling interests consolidated statement operations portion net assets owned company recorded noncontrolling interests respective dates shown consolidated balance sheets 2019 acquisition periscope january 3 2019 company completed acquisition periscope creative agency headquartered minneapolis minnesota 1210 million cash paid periscope provides comprehensive service offering including media buying analytics creative account management periscope also packaging design premedia services complement quad’s printproduction capabilities purchase price 1340 million includes 98 million acquired cash noncash equity incentive awards grant date fair value 32 million included purchase price allocation 698 million identifiable intangible assets amortized estimated useful lives ranging five six years 585 million goodwill 527 million deductible tax purposes final allocation purchase price based valuations performed determine fair value net assets acquisition date net assets acquired excluding acquired cash classified level 3 valuation hierarchy see note 15 “financial instruments fair value measurements” definition level 3 inputs periscope’s operations included united states print related services segment note 4 discontinued operations third quarter 2019 company made decision sell united states book business part ongoing process review business portfolio divest assets core company’s transformation strategy accordingly company classified book business discontinued operation required asc 20520 discontinued operations book business primarily consists three facilities versailles kentucky fairfield pennsylvania martinsburg west virginia company’s book business historically included within united states print related services segment core print related services reporting unit july 1 2020 company completed sale versailles kentucky book manufacturing plant cjk group inc serves book magazine catalog journal publishers 70 million cash assumption approximately 30 million finance lease obligation resulting 101 million impairment charge related property plant equipment 30 million gain sale business year ended december 31 2020 working capital finalized third quarter 2020 company used proceeds sale reduce debt october 31 2020 company completed sale fairfield pennsylvania martinsburg west virginia book manufacturing plants berryville graphics division bertelsmann printing group usa media services education company 142 million cash resulting loss sale business 35 million 14 million impairment charge related property plant equipment year ended december 31 2020 working capital finalized fourth quarter 2020 company used proceeds sale quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reduce debt sale final step previously announced strategic decision divest company’s book business optimize product portfolio following table summarizes results operations company’s book business included loss discontinued operations consolidated statements operations years ended december 31 2020 2019 1the company recognized 115 million impairment charges tangible property plant equipment year ended december 31 2020 reduce carrying value book business fair value recognized 22 million employee termination charges 27 million restructuring charges year ended december 31 2020 impairment charges recognized reduce carrying value book business fair value year ended december 31 2019 included 865 million impairment charges tangible property plant equipment 56 million impairment charges contract assets 2the book business included core print related services reporting unit amount goodwill allocated book business determined based relative fair value book business portion reporting unit retained due decision sell book business company must determine whether assets book business impaired therefore management performed interim goodwill impairment test due carrying value book business net assets exceeding estimated fair value company recorded 101 million goodwill impairment charge consolidated statements cash flows periods adjusted separately disclose cash flows related discontinued operations cash flows related book business years ended december 31 2020 2019 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table summarizes current longterm assets liabilities discontinued book business classified held sale consolidated balance sheets december 31 2020 2019 1includes land building assets reclassified current assets december 31 2019 note 5 restructuring impairment transactionrelated charges company recorded restructuring impairment transactionrelated charges years ended december 31 2020 2019 follows costs related activities recorded consolidated statements operations restructuring impairment transactionrelated charges see note 21 “segment information” restructuring impairment transactionrelated charges segment quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated restructuring charges company began restructuring program 2010 related eliminating excess manufacturing capacity properly aligning cost structure company announced total 50 plant closures since 2010 company announced closures facilities located charlotte north carolina taunton massachusetts retail facility fernley nevada nashville tennessee oklahoma city oklahoma year ended december 31 2020 company classifies following charges restructuring •employee termination charges incurred company reduces workforce facility consolidations separation programs •integration costs incurred primarily integration acquired companies see note 3 “acquisitions strategic investments” descriptions company’s recent acquisitions •other restructuring charges comprised following components presented net gains sale facilities businesses year ended december 31 2020 company recognized gains sale facilities located midland michigan shakopee minnesota year ended december 31 2019 company recognized 84 million gain sale business well gains sale facilities located franklin kentucky hazleton pennsylvania restructuring charges recorded based plans committed management part based upon management’s best estimates future events changes estimates may require future restructuring charges adjustments restructuring liabilities company expects incur additional restructuring charges related initiatives impairment charges company recognized impairment charges 641 million year ended december 31 2020 consisted 221 million machinery equipment longer utilized production result facility consolidations well capacity reduction restructuring activities 420 million land building impairment charges company recognized impairment charges 79 million year ended december 31 2019 consisted 76 million impairment charges primarily machinery equipment longer utilized production result facility consolidations well capacity reduction restructuring activities 03 million land building impairment charges additional impairment charges recorded related book business year ended december 31 2019 disclosed note 4 “discontinued operations” quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair values impaired assets determined company level 3 fair value hierarchy see note 15 “financial instruments fair value measurements” definition level 3 inputs estimated based broker quotes internal expertise related current marketplace conditions estimated future discounted cash flows assets adjusted estimated fair values time impairment estimated fair values subsequently decline carrying values assets adjusted accordingly transactionrelated charges company incurs transactionrelated charges primarily consisting professional service fees related business acquisition divestiture activities company recognized transactionrelated charges 14 million 516 million years ended december 31 2020 2019 respectively transactionrelated charges included 45 million reverse termination fee paid year ended december 31 2019 connection termination definitive agreement pursuant quad would acquired lsc communications inc “lsc” transactionrelated charges expensed incurred accordance applicable accounting guidance business combinations restructuring reserves activity impacting company’s restructuring reserves years ended december 31 2020 2019 follows company’s restructuring reserves december 31 2020 included shortterm longterm component shortterm portion included 331 million current liabilities see note 10 “other current longterm liabilities” 06 million accounts payable consolidated balance sheets company expects reserves paid within next twelve months longterm portion 72 million included longterm liabilities see note 10 “other current longterm liabilities” consolidated balance sheets quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 6 goodwill intangible assets goodwill represents excess purchase price fair value identifiable net assets acquired business combination goodwill assigned specific reporting units tested annually impairment october 31 frequently events changes circumstances indicate likely fair value reporting unit carrying value due decline company’s stock price uncertainty impacts covid19 pandemic company global economy interim goodwill impairment test completed goodwill core print related services reporting unit first quarter 2020 result company determined fair value core print related services reporting unit exceeded carrying value therefore impairment recorded company completed annual impairment test october 31 2020 identified indicators impairment companys reporting units year ended december 31 2020 due company’s decision sell book business interim goodwill impairment test completed remaining goodwill core print related services reporting unit third quarter 2019 due carrying value book business net assets exceeding estimated fair value company recorded 101 million goodwill impairment charge related book business third quarter 2019 see note 4 “discontinued operations” addition remaining goodwill allocated business sold must tested impairment goodwill impairment recorded remaining 1030 million related retained portion core print related services reporting unit year ended december 31 2019 fair value determined using equal weighting income market approaches income approach company determined fair value based estimated future cash flows discounted estimated weightedaverage cost capital reflects overall level inherent risk rate return outside investor would expect earn market approach company derived fair value reporting units based market multiples comparable publiclytraded companies fair value determination categorized level 3 fair value hierarchy see note 15 “financial instruments fair value measurements” definition level 3 inputs goodwill impairment charges recorded related company’s continuing operations years ended december 31 2020 2019 accumulated goodwill impairment losses carrying value goodwill continuing operations december 31 2020 2019 follows activity impacting goodwill year ended december 31 2020 activity impacting goodwill year ended december 31 2019 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated intangible assets components intangible assets december 31 2020 2019 follows intangible assets evaluated potential impairment whenever events circumstances indicate carrying value may recoverable impairment charges recorded finitelived intangible assets years ended december 31 2020 2019 amortization expense intangible assets 391 million 448 million years ended december 31 2020 2019 respectively following table outlines estimated future amortization expense related intangible assets december 31 2020 note 7 receivables company adopted asu 201613 january 1 2020 using modified retrospective transition approach recorded cumulativeeffect transition adjustment accumulated deficit january 1 2020 transition adjustment 63 million accumulated deficit included 84 million increase allowance credit losses partially offset 21 million increase deferred tax benefit transition impact consolidated statement operations quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated prior granting credit company evaluates client underwriting process taking consideration prospective client’s financial condition past payment experience credit bureau information financial qualitative factors may affect client’s ability pay specific credit reviews standard industry credit scoring models used performing evaluation clients’ financial condition continuously monitored part normal course business company’s clients highly leveraged otherwise subject operating regulatory risks specific client provisions made review significant outstanding amounts utilizing information client creditworthiness well current future economic trends based reasonable forecasts indicates collection doubtful company also records general provision based overall risk profile receivables assessment reasonable economic forecasts risk profile assessed quarterly basis using various methods including external resources credit scoring models accounts deemed uncollectible written reasonable collection efforts exhausted company recorded credit loss expense 91 million 56 million years ended december 31 2020 2019 respectively included selling general administrative expenses consolidated statements operations receivables stated net allowances credit losses consolidated balance sheets based clients’ account reviews continued uncertainty global economy company established allowance credit losses 338 million december 31 2020 250 million december 31 2019 note 8 inventories components inventories december 31 2020 2019 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 9 property plant equipment components property plant equipment december 31 2020 2019 follows 1other consists computer equipment vehicles furniture fixtures leasehold improvements communication related equipment company recorded impairment charges 641 million 79 million years ended december 31 2020 2019 respectively reduce carrying amounts certain property plant equipment longer utilized production due capacity strategic reduction restructuring initiatives fair value see note 5 “restructuring impairment transactionrelated charges” discussion impairment charges company recognized depreciation expense continuing operations 1425 million 1647 million years ended december 31 2020 2019 respectively assets held sale continuing operations company considered certain closed facilities held sale classification consolidated balance sheets assets held sale carried lesser original cost fair value less estimated costs sell assets held sale continuing operations 49 million december 31 2020 593 million december 31 2019 including omaha nebraska packaging plant sold january 31 2020 fair values determined company level 3 fair value hierarchy see note 15 “financial instruments fair value measurements” definition level 3 inputs estimated based quoted market prices available independent appraisals appropriate assets held sale included prepaid expenses current assets consolidated balance sheets quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 10 current longterm liabilities components current longterm liabilities december 31 2020 2019 follows 1employeerelated liabilities consist primarily payroll bonus vacation health workers’ compensation 2the omaha nebraska packaging plant considered held sale consolidated balance sheets december 31 2019 company completed sale january 31 2020 note 11 commitments contingencies commitments company firm commitments 87 million december 31 2020 purchase press finishing equipment litigation company named defendant various lawsuits claims asserted company normal course business liabilities ultimately result lawsuits expected management material impact consolidated financial statements company quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated environmental reserves company subject various laws regulations government policies relating health safety generation storage transportation disposal hazardous substances environment protection general company provides expenses associated environmental remediation obligations amounts probable reasonably estimated reserves adjusted new information develops circumstances change environmental reserves discounted company believes compliance laws regulations government policies material respects furthermore company anticipate maintaining compliance environmental statutes material impact upon company’s consolidated financial position note 12 debt components longterm debt december 31 2020 2019 follows description debt obligations master note security agreement september 1 1995 last amended november 24 2014 quad entered master note security agreement december 31 2020 borrowings outstanding master note security agreement 156 million senior notes master note security agreement weighted average interest rate 778 december 31 2020 fixed maturity interest payable semiannually principal payments commenced september 1997 extend april 2026 various tranches notes collateralized certain united states press equipment terms master note security agreement company redeemed 376 million senior notes master note security agreement par outstanding principal balance date payment year ended december 31 2020 direct gain loss recognized result tender notes redeemed par however 02 million unamortized debt issuance costs related tendered notes recognized loss debt extinguishment year ended december 31 2020 tendered senior notes master note security agreement canceled company used cash flows operating activities borrowings revolving credit facility quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fund tender primarily completed reallocate debt lower interest rate revolving credit facility thereby reduce interest expense based current libor rates senior secured credit facility april 28 2014 company entered senior secured credit facility included revolving credit facility term loan term loan b company completed third amendment senior secured credit facility january 31 2019 third amendment completed provide quad liquidity structural flexibility consummate proposed terminated acquisition lsc extend existing maturities increasing aggregate amount existing revolving credit facility 7250 million 8000 million term five years maturing january 31 2024 b increasing aggregate amount existing term loan 3750 million 8250 million delayed draw feature term five years maturing january 31 2024 c increasing aggregate amount existing term loan b 3000 million 5000 million term seven years maturing january 31 2026 company intended loans available amended revolving credit facility would used repay refinance repurchase redeem exchange otherwise terminate lsc’s existing indebtedness connection consummation merger pay transaction expenses july 26 2019 following termination proposed acquisition lsc quad fully funded 8250 million delayed draw term loan retire entire amount outstanding 5000 million term loan b reduced borrowings revolving credit facility company completed fourth amendment senior secured credit facility june 29 2020 senior secured credit facility amended provide certain financial covenant relief fiscal quarter ending september 30 2021 covenant relief period b reduce aggregate amount existing revolving credit facility 8000 million 5000 million c make certain adjustments pricing addition 075 libor floor prohibit repurchases capital stock payments cash dividends covenant relief period certain amendments also made quarterly financial covenants company subject described december 31 2020 company outstanding borrowings revolving credit facility 386 million issued letters credit leaving 4614 million available future borrowings revolving credit facility delayed draw term loan made senior secured credit facility december 31 2020 bear interest 250 excess reserve adjusted libor floor 075 150 excess alternate base rate senior secured credit facility secured substantially unencumbered assets company senior secured credit facility also requires company provide additional collateral lenders certain limited circumstances senior unsecured notes company issued 3000 million aggregate principal amount senior unsecured notes due may 1 2022 april 28 2014 senior unsecured notes bear interest 70 interest payable semiannually senior unsecured notes issued extend stagger company’s debt maturity profile diversify capital structure provide borrowing capacity better position company execute strategic goals company received 2948 million net proceeds sale senior unsecured notes deducting initial purchasers’ discounts commissions proceeds senior unsecured notes used purposes detailed senior secured credit facility quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company repurchased 47 million outstanding senior unsecured notes open market resulting net gain debt extinguishment 08 million year ended december 31 2020 repurchased senior unsecured notes canceled company used cash flows operating activities borrowings revolving credit facility fund repurchases primarily completed reallocate debt lower interest rate revolving credit facility thereby reduce interest expense based current libor rates company’s existing future domestic subsidiaries borrower guarantees indebtedness company’s senior secured credit facility guarantees certain company’s indebtedness company’s restricted subsidiaries intercompany indebtedness fully unconditionally guarantee case future subsidiaries guarantee joint several basis senior unsecured notes “guarantor subsidiaries” guarantor subsidiaries 100 owned company guarantor subsidiaries automatically released guarantees upon occurrence certain events international debt obligations company two fixed rate euro denominated international term loans purposes financing certain capital expenditures general business needs first international term loan amount 217 million entered december 28 2015 fully funded 2016 term six years maturing december 28 2021 december 31 2020 22 million remained outstanding first international term loan weighted average interest rate 172 second international term loan amount 128 million entered december 21 2018 bears interest 196 term five years maturing december 31 2023 december 31 2020 85 million remained outstanding second international term loan company two multicurrency international revolving credit facilities used financing working capital general business needs company 49 million borrowings outstanding weighted average interest rate 137 international revolving credit facilities december 31 2020 leaving 112 million available future borrowing terms international revolving credit facilities includes certain financial covenants guarantee international revolving credit facilities company security agreement includes collateralizing substantially quad europe sp zoo assets first multicurrency international revolving credit facility expires october 31 2021 bears interest aggregate warsaw interbank offered rate “wibor” plus 140 polish zloty denominated borrowings aggregate euro interbank offered rate “euribor” plus 145 euro denominated borrowings aggregate british pound sterling libor plus 145 british pound sterling denominate borrowings second multicurrency international revolving credit facility expires november 20 2021 bears interest aggregate wibor plus 100 polish zloty denominated borrowings aggregate euribor plus 100 euro denominated borrowings fair value debt based upon interest rates available company borrowings similar terms maturities fair value company’s total debt approximately 09 billion 11 billion december 31 2020 2019 respectively fair value determination company’s total debt categorized level 2 fair value hierarchy see note 15 “financial instruments fair value measurements” definition level 2 inputs december 31 2020 approximately 16 billion company’s assets pledged security various loans agreements quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated debt issuance costs original issue discount debt issuance costs original issue discount amortized straightline basis four seven eight year lives related debt instruments activity impacting company’s capitalized debt issuance costs original issue discount years ended december 31 2020 2019 follows loss debt extinguishment 2020 loss debt extinguishment loss debt extinguishment recorded year ended december 31 2020 comprised following 2019 loss debt extinguishment conjunction third amendment company’s senior secured credit facility completed january 31 2019 company incurred 202 million debt issuance costs accordance accounting guidance treatment debt issuance costs debt extinguishment 202 million new debt issuance costs 60 million classified reduction longterm debt consolidated balance sheets 142 million expensed classified loss debt extinguishment consolidated statements operations time refinancing quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated loss debt extinguishment recorded year ended december 31 2019 comprised following covenants compliance company’s various lending arrangements include certain financial covenants financial terms numbers ratios defined company’s debt agreements among covenants company required maintain following december 31 2020 •maximum total net leverage ratio rolling twelvemonth basis maximum total net leverage ratio defined consolidated total indebtedness net 750 million unrestricted cash consolidated ebitda shall exceed 450 100 quarters ending december 31 2020 march 31 2021 ii 425 100 quarter ending june 30 2021 iii 4125 100 quarter ending september 30 2021 twelve months ended december 31 2020 company’s maximum total net leverage ratio 329 100 covenant relief period company required comply total leverage ratio covenant defined consolidated total indebtedness consolidated ebitda shall exceed 375 100 •if amount outstanding revolving credit facility term loan lender revolving credit exposure term loan credit exposure company required maintain following ◦senior secured leverage ratio rolling twelvemonth basis senior secured leverage ratio defined consolidated senior secured net indebtedness consolidated ebitda shall exceed 350 100 twelve months ended december 31 2020 company’s senior secured leverage ratio 241 100 •interest coverage ratio rolling twelvemonth basis interest coverage ratio defined consolidated ebitda cash consolidated interest expense shall less 300 100 twelve months ended december 31 2020 company’s interest coverage ratio 464 100 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated indenture underlying senior unsecured notes contains various covenants including limited covenants subject certain exceptions limit company’s restricted subsidiaries’ ability incur andor guarantee additional debt pay dividends repurchase stock make certain restricted payments enter agreements limiting dividends certain restricted payments prepay redeem repurchase subordinated debt grant liens assets enter sale leaseback transactions merge consolidate transfer dispose substantially company’s consolidated assets sell transfer otherwise dispose property assets engage transactions affiliates addition covenants senior secured credit facility also includes certain limitations acquisitions indebtedness liens dividends repurchases capital stock following limitations utilize total net leverage ratio calculation rolling twelvemonth basis defined consolidated net indebtedness consolidated ebitda twelve months ended december 31 2020 company’s total net leverage ratio 330 100 •if company’s total net leverage ratio greater 275 100 company prohibited making greater 600 million annual dividend payments capital stock repurchases certain payments total net leverage ratio less 275 100 restrictions provided however restricted payments shall made covenant relief period company’s total net leverage ratio december 31 2020 330 100 covenant relief period limitations described currently applicable •if company’s senior secured leverage ratio greater 300 100 company’s total net leverage ratio greater 350 100 company prohibited voluntarily prepaying senior unsecured notes voluntarily prepaying unsecured subordinated indebtedness certain exceptions including mandatory prepayments senior unsecured notes unsecured subordinated debt senior secured leverage ratio less 300 100 total net leverage ratio less 350 100 restrictions limitations described currently applicable company’s senior secured leverage ratio 241 100 total net leverage ratio 330 100 december 31 2020 estimated principal payments approximate annual principal amounts due longterm debt excluding 69 million future amortization debt issuance costs december 31 2020 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 13 leases company determines arrangement contains lease contract inception company recognizes rightofuse “rou” asset lease liability lease commencement date operating finance leases lease liability initially measured present value unpaid lease payments lease commencement date subsequently measured amortized cost using effective interest method key estimates judgments include company determines discount rate lease term lease payments •asc 842 requires lessee discount unpaid lease payments using interest rate implicit lease rate cannot readily determined incremental borrowing rate generally company cannot determine implicit interest rate access lessor’s estimated residual value amount lessor’s deferred initial direct costs therefore company generally uses incremental borrowing rate discount rate lease company’s incremental borrowing rate lease rate interest would pay collateralized basis borrow amount equal lease payments similar terms based published united states treasury rates well company’s credit rating implementation lease inception date •the lease term company’s leases includes noncancelable period lease plus minus additional periods covered option extend terminate lease company reasonably certain exercise •lease payments included lease liability comprised fixed payments well exercise price company option purchase underlying asset company reasonably certain exercise company’s leases contain variable lease payments rou assets initially measured cost comprises initial amount lease liability adjusted lease payments made lease commencement date plus initial direct costs incurred less lease incentives received operating leases rou asset subsequently amortized straightline lease expense adjusted lease liability accretion lease term finance leases rou asset subsequently amortized straightline basis lease commencement date earlier end useful life end lease term amortization rou asset recognized presented separately interest expense lease liability company’s rou assets operating finance leases reviewed impairment losses quarterly basis line asc 36010 property plant equipment overall company recognized impairment losses date continuing operations company also monitors leases events changes circumstances require reassessment lease reassessment results remeasurement lease liability corresponding adjustment made carrying amount rou asset operating leases included operating lease rightofuse assetsnet current portion operating lease obligations operating lease obligations consolidated balance sheets finance leases included property equipmentnet current portion finance lease obligations finance lease obligations consolidated balance sheets quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company elected recognize rou assets lease liabilities shortterm leases original lease term twelve months less therefore company recognizes lease payments associated shortterm leases expense lease term consolidated statement operations practical expedients company elected apply following practical expedients allowed asu 842 •the company elected practical expedient package therefore reassess existing leases ◦whether contracts contain leases ◦the lease classification existing leases ◦any initial direct costs •the company elected practical expedient related land easements allowing carry forward accounting treatment land easements existing agreements •the company used “hindsight” judgments impact lease term •the company elected combine lease nonlease components one lease component select underlying lease asset categories real estate leases accounted separately leases primarily equipment leases separate lease nonlease components accounted single lease component leases financial information company enters various lease agreements real estate office space manufacturing facilities well equipment leases including press finishing transportation equipment many leases provide company options renew terminate case equipment leases purchase related equipment termination value defined various early buyout dates term lease general company determined options reasonably certain exercised therefore included determination lease term quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following summarizes certain lease information years ended december 31 2020 2019 components finance lease assets december 31 2020 2019 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated future maturities lease liabilities december 31 2020 follows note 14 income taxes income taxes continuing operations based following components earnings loss continuing operations income taxes equity earnings loss unconsolidated entity years ended december 31 2020 2019 components income tax expense benefit continuing operations years ended december 31 2020 2019 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table outlines reconciliation differences federal statutory tax rate company’s income tax expense benefit continuing operations years ended december 31 2020 2019 154 million effective rate reconciling item state taxes net federal benefit 2020 includes 191 million adjustment valuation allowance primarily related net operating losses credits expected realized future state income tax purposes 131 million adjustment valuation allowance 2020 primarily relates net operating losses credits deferred tax asset interest limitation expected realized future federal income tax purposes march 27 2020 united states government passed law coronavirus aid relief economic security act “cares act” legislation includes significant tax provisions measures assist individuals businesses impacted economic effects covid19 pandemic 143 million rate reconciling item benefit net operating loss carryback 2020 primarily relates provision cares act allowing net operating loss “nol” generated 2019 2020 carried back five years federal statutory tax rate 35 amount nol available carried back increased provisions cares act temporarily increases amount interest expense businesses allowed deduct 2019 2020 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated deferred income taxes significant deferred tax assets liabilities december 31 2020 2019 follows company recorded deferred income tax liabilities 42 million 28 million december 31 2020 2019 respectively included deferred income taxes consolidated balance sheets company also recorded deferred income tax assets 162 million 612 million december 31 2020 2019 respectively included longterm assets consolidated balance sheets december 31 2020 company following gross amounts taxrelated carryforwards •net operating loss carryforwards 822 million 723 million 6383 million federal foreign state respectively federal net operating loss carryforward generated 2020 available without expiration foreign net operating loss carryforwards 288 million available without expiration remainder expires 2040 state net operating loss carryforwards expire varying amounts 2040 •capital loss carryforwards 171 million 87 million federal state respectively federal state capital loss carryforwards expire 2022 •various credit carryforwards 89 million 289 million 440 million federal foreign state respectively federal carryforward expires 2040 foreign credit carryforward expires 2026 state credit carryforwards include 321 million available without expiration remainder expires 2040 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated december 31 2020 company recorded valuation allowance 1439 million consolidated balance sheet primarily related taxaffected amounts carryforwards valuation allowance includes 225 million 460 million 754 million federal foreign state deferred tax assets respectively expected realized uncertain tax positions following table summarizes activity company’s liability unrecognized tax benefits december 31 2020 2019 december 31 2020 104 million unrecognized tax benefits would impact company’s effective tax rate recognized amount reasonably possible 04 million total amount unrecognized tax benefits decrease within next twelve months due resolution income tax audits statute expirations company classified interest expense income related penalties refunds related income tax uncertainties component income tax expense benefit following table summarizes company’s interest expense income related tax uncertainties penalties recognized years ended december 31 2020 2019 accrued interest penalties related income tax uncertainties reported components current liabilities longterm liabilities consolidated balance sheets following table summarizes company’s liabilities accrued interest penalties related income tax uncertainties december 31 2020 2019 company tax years 2013 2020 remain open subject examination internal revenue service tax years 2016 2020 remain open subject examination company’s various major state jurisdictions within united states quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company’s practice intention reinvest certain earnings nonus subsidiaries operations company analyzed global working capital cash requirements potential tax liabilities attributable repatriation earnings determined change permanent reinvestment assertion company significant prior year untaxed undistributed earnings foreign operations december 31 2020 company provide expect incur significant additional taxes could become payable upon repatriation amounts note 15 financial instruments fair value measurements certain assets liabilities required recorded fair value recurring basis assets liabilities recorded fair value nonrecurring basis generally result acquisitions impairment charges fair value determined based exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants gaap also classifies inputs used measure fair value following hierarchy level 1 quoted prices active markets identical assets liabilities level 2 quoted prices active markets similar assets liabilities quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability level 3 unobservable inputs asset liability level 3 recurring measurements assets liabilities december 31 2020 interest rate swaps company currently holds two interest rate swap contracts purpose entering contracts reduce variability cash flows interest payments related portion quad’s variablerate debt interest rate swaps previously designated cash flow hedges effectively converted notional value company’s variable rate debt based onemonth libor fixed rate including spread underlying debt monthly reset variable interest rate however company amended senior secured credit facility second quarter 2020 added 075 libor floor company’s variable rate debt changing critical terms hedged instrument due change critical terms company elected dedesignate swaps cash flow hedges resulting future changes fair value recognized interest expense balance accumulated comprehensive loss attributable interest rate swaps june 30 2020 amortized interest expense straightline basis remaining lives swap contracts company expects reclassify 71 million balance interest expense next twelve months quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company classifies interest rate swaps level 2 inputs valuation model observable derived corroborated utilizing observable market data commonly quoted intervals fair values interest rate swaps classified level 2 december 31 2020 2019 follows prior company’s dedesignation interest rate swaps cash flow hedges interest rate swaps considered highly effective amount ineffectiveness recorded earnings changes fair value interest rate swaps included comprehensive loss consolidated statements comprehensive loss first quarter 2020 recorded adjustment interest expense consolidated statements operations periods thereafter cash flows associated interest rate swaps recognized adjustment interest expense consolidated statements operations foreign exchange contracts company operations countries transactions outside functional currencies periodically enters foreign exchange contracts used hedge net exposures changes foreign currency exchange rates designated either cash flow hedges fair value hedges gains losses net foreign currency hedges intended offset losses gains underlying net exposures effort reduce earnings volatility resulting fluctuating foreign currency exchange rates open foreign currency exchange contracts december 31 2020 natural gas forward contracts company periodically enters natural gas forward purchase contracts hedge increases commodity costs company’s commodity contracts qualified exception related normal purchases sales years ended december 31 2020 2019 company takes delivery normal course business debt company measures fair value debt instruments using interest rates available company borrowings similar terms maturities categorized level 2 see note 12 “debt” fair value company’s debt december 31 2020 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated nonrecurring fair value measurements addition assets liabilities recorded fair value recurring basis company required record certain assets liabilities fair value nonrecurring basis generally result acquisitions remeasurement assets resulting impairment charges see note 3 “acquisitions strategic investments” discussion acquisitions see note 4 “discontinued operations” note 5 “restructuring impairment transactionrelated charges” note 6 “goodwill intangible assets” note 9 “property plant equipment” discussion impairment charges recorded result remeasurement certain longlived assets estimated fair value measurements company records fair value forward contracts pension plan assets recurring basis fair value cash equivalents receivables inventories restricted cash accounts payable current liabilities approximate carrying values december 31 2020 2019 see note 16 “employee retirement plans” details level 1 level 2 inputs related employee retirement plans note 16 employee retirement plans defined contribution plans quadgraphics inc diversified plan comprised participantdirected 401k contributions company match profit sharing contributions total participant assets 22 billion december 31 2020 company 401k matching contributions 117 million 154 million years ended december 31 2020 2019 respectively company’s esop holds profit sharing contributions company stock made discretion company’s board directors profit sharing contributions years ended december 31 2020 2019 defined benefit plans company assumed various funded unfunded frozen pension plans portion fulltime employees united states part acquisition world color press 2010 benefits generally based upon years service compensation plans funded conformity applicable government regulations company funds least minimum amount required qualified plans using actuarial cost methods assumptions acceptable government regulations components net pension income years ended december 31 2020 2019 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated underfunded pension obligations calculated using generally accepted actuarial methods measured annually december 31 following table provides reconciliation projected benefit obligation fair value plan assets funded status pension plans december 31 2020 2019 net underfunded defined benefit plan obligations decreased 223 million year ended december 31 2020 decrease primarily due actual return pension plan assets 170 year ended december 31 2020 expected return plan assets assumption 575 78 million employer contributions asset increase partially offset 83 basis point decrease pension discount rate 320 december 31 2019 237 december 31 2020 amounts recognized consolidated balance sheets december 31 2020 2019 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated following table provides reconciliation company’s accumulated comprehensive loss prior deferred tax effects december 31 2020 2019 actuarial gains losses excess 10 greater projected benefit obligation marketrelated value plan assets recognized component net periodic benefit costs average remaining service period plan’s active employees unrecognized prior service costs credits also recognized component net periodic benefit cost average remaining service period plan’s active employees weighted average assumptions used determine net periodic benefit costs years ended december 31 2020 2019 follows weighted average assumptions used determine pension benefit obligations december 31 2020 2019 follows company determines assumed discount rate based index highquality corporate bond yields matchedfunding yield curve analysis measurement date estimated company contributions benefit payments 2021 company expects make cash contributions 41 million qualified defined benefit pension plans expects make estimated benefit payments 17 million nonqualified defined benefit pension plans actual pension contributions may differ based funding calculations company may choose make additional discretionary contributions estimated benefit payments may differ based actual experience quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated estimated future benefit payments plans behalf plan participants estimate plans’ present value future benefit payments made funded qualified plans unfunded nonqualified plans plan participants december 31 2020 follows plan assets investment strategy company follows disciplined investment strategy provides diversification investments asset class foreign currency sector company pension committee approved investment policy pension plan establishes longterm asset mix targets based several factors including following funded status historical returns achieved worldwide investment markets time horizon pension plan’s obligations investment risk allocation range asset class developed whereby mix equity securities debt securities used provide appropriate riskadjusted longterm return plan assets thirdparty investment managers employed invest assets passivelyindexed activelymanaged strategies investment returns risks monitored ongoing basis derivatives used certain times hedge foreign currency exposure gains losses derivatives offset corresponding change value hedged assets derivatives strictly used hedging purposes speculative purposes current target allocations plan assets weighted average basis 30 equity securities 70 debt securities including cash equivalents actual asset allocation december 31 2020 december 31 2019 approximately 30 equity securities 70 debt securities equity investments diversified country issuer industry sector debt securities primarily consist government bonds corporate bonds diversified industries expected longterm rate return assets assumption selected first identifying expected range longterm rates return major asset class expected longterm rates return developed based longterm historical averages current expectations future returns anticipated inflation rates expected longterm rate return plan assets calculated weighting asset class quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair values company’s pension plan assets december 31 2020 2019 asset category follows 1these investments consist privately placed funds valued based nav funds based fair value fund’s underlying investments accordance asc subtopic 82010 certain investments measured fair value using nav per share equivalent practical expedient classified fair value hierarchy level 3 assets december 31 2020 2019 see note 15 “ financial instruments fair value measurements” definitions fair value levels company segregated plan assets following major categories levels determining fair value december 31 2020 cash equivalents carrying value approximates fair value assets classified level 1 debt securities category consists bonds shortterm fixed income securities fixed income pooled funds fair valued based compilation primarily observable market information broker quotes overthecounter markets classified level 2 equity securities category consists equity pooled funds classified level 2 fair value hierarchy level 2 assets valued using quoted prices markets active broker dealer quotations methods significant input observable measurement date valuation methodologies described may generate fair value calculation may indicative net realizable value future fair values company believes valuation methodologies used appropriate use different methodologies assumptions calculating fair value could result different amounts company invests various assets valuation determined nav company believes nav representative fair value reporting date significant restrictions redemption investments reasons indicate investment would redeemed amount different nav quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated fair value measurements commoncollective trusts calculated using nav redemption restrictions years ended december 31 2020 2019 follows risk management directly invested funds concentration risk monitored specific guidelines investment manager mandates investment manager mandates developed company’s external investment advisor specify diversification standards maximum exposure per issuer concentration limits per type security industry country applicable investments made pooled funds investment mandates funds reviewed company’s external investment advisor determine investment objectives guidelines consistent company’s overall pension plan risk management objectives managing plan assets management reviews manages risk associated funded status risk interest rate risk market risk counterparty risk liquidity risk operational risk liability management asset class diversification central company’s risk management approach integral overall investment strategy given process place ensure proper diversification portfolio management believes company pension plan assets exposed significant concentration risk multiemployer pension plans company previously participated number mepps terms collective bargaining agreements cover number employees risks participating mepps different single employer plans following aspects •assets contributed mepps one company may used provide benefits employees participating companies •if participating company stops contributing plan unfunded obligations plan may borne remaining participating companies •if company stops participating mepps continues business company would required pay amount referred withdrawal liability based unfunded status plan quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated company withdrawn significant mepps replaced union sponsored “promise pay future” defined benefit plans company sponsored “pay go” defined contribution plan two mepps gciu gcc significantly underfunded require company pay withdrawal liability fund pro rata share underfunding plan year full withdrawal completed result decision withdraw company accrued estimated withdrawal liability based information provided plan’s trustee part purchase price allocation world color press gciu plan defined benefit plan provides retirement benefits total permanent disability benefits preretirement death benefits participating union employees company funded status gciu plan classified critical declining based gciu plan’s 2020 certification united states department labor funded percentage plan less 65 plan projected become insolvent 2031 result gciu plan implemented rehabilitation plan improve plan’s funded status 2019 company gciu reached settlement agreement claims scheduled payments april 2032 gcc plan defined benefit plan provides retirement benefits disability benefits early retirement benefits participating union employees company funded status gcc plan classified critical declining based gcc plan’s 2020 certification united states department labor funded percentage plan less 65 plan projected become insolvent 2023 result gcc plan implemented rehabilitation plan improve plan’s funded status 2016 company gcc reached settlement agreement claims scheduled payments february 2024 company made payments totaling 114 million 104 million years ended december 31 2020 2019 respectively company reserved 357 million estimate total mepps withdrawal liability december 31 2020 322 million recorded longterm liabilities 35 million recorded current liabilities consolidated balance sheets note 17 loss per share attributable quad common shareholders basic earnings loss per share attributable quad common shareholders computed net earnings loss attributable quad common shareholders divided basic weighted average common shares outstanding calculation diluted earnings loss per share attributable quad common shareholders includes effect dilutive equity incentive instruments company uses treasury stock method calculate effect outstanding dilutive equity incentive instruments requires company compute total proceeds sum amount employee must pay upon exercise award amount unearned stockbased compensation costs attributed future services equity incentive instruments total employee proceeds exercise exceed average fair value equity incentive instrument period antidilutive effect earnings per share periods net earnings accordingly company excludes calculation due net loss incurred years ended december 31 2020 2019 assumed exercise equity incentive instruments antidilutive therefore included diluted loss per share calculation quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reconciliations numerator denominator basic diluted per share computations company’s common stock years ended december 31 2020 2019 summarized follows note 18 equity incentive programs shareholders company approved quadgraphics inc 2020 omnibus incentive plan “2020 plan” company’s annual meeting shareholders held may 18 2020 “annual meeting” two complementary purposes 1 attract retain outstanding individuals serve directors officers employees 2 increase shareholder value company’s previous plan quadgraphics inc 2010 omnibus plan “2010 plan” terminated date approval 2020 plan new awards granted 2010 plan awards granted 2010 plan outstanding may 18 2020 remain outstanding continue governed 2010 plan 2020 plan provides aggregate 3000000 shares class common stock reserved issuance plus shares still available issuance recredited 2010 plan awards 2020 plan may consist incentive awards stock options stock appreciation rights performance shares performance share units shares class common stock restricted stock “rs” restricted stock units “rsu” deferred stock units “dsu” stockbased awards determined company’s board directors stock option granted exercise price less 100 fair market value class common stock date grant 3580483 shares class common stock reserved issuance 2020 plan december 31 2020 including 3000000 shares class common stock approved issuance annual meeting 580483 shares class common stock remaining available issuance transferred 2010 plan authorized unissued shares treasury shares may used issuance company’s equity incentive programs company plans either quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated use treasury shares class common stock issue shares class common stock meet stock requirements awards future company recognizes compensation expense based estimated grant date fair values sharebased awards issued employees nonemployee directors including stock options performance shares performance share units restricted stock restricted stock units deferred stock units company recognizes compensation costs awards expected vest straightline basis requisite three four year service period awards except dsu awards fully vested expensed grant date company estimated number awards expected vest based part historical forfeiture rates also based management’s expectations employee turnover within specific employee groups receiving type award forfeitures estimated time grant revised necessary subsequent periods actual forfeitures differ estimates equity incentive compensation expense equity incentive compensation expense recorded primarily selling general administrative expenses consolidated statements operations includes expense income recognized liability awards remeasured quarterly basis total compensation expense recognized related equity incentive programs years ended december 31 2020 2019 follows total future compensation expense related equity incentive programs granted december 31 2020 estimated 93 million consists entirely expense rs rsu awards estimated future compensation expense 68 million 2021 23 million 2022 02 million 2023 stock options vest four years vesting first year onethird vesting upon second third fourth anniversary dates defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee options expire later tenth anniversary grant date 24 months termination death 36 months termination normal retirement disability 90 days termination employment reason options credited dividend declarations except november 18 2011 grants stock options granted employees quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated stock options granted years ended december 31 2020 2019 compensation expense recognized related stock options years ended december 31 2020 2019 future compensation expense stock options granted december 31 2020 following table summary stock option activity year ended december 31 2020 intrinsic value options outstanding exercisable december 31 2020 2019 based fair value stock price outstanding options vested december 31 2020 stock options exercised years ended december 31 2020 2019 restricted stock restricted stock units restricted stock restricted stock unit awards consist shares rights shares company’s class stock awarded employees company awards restricted subject substantial risk forfeiture restrictions sale transfer employee rsu awards typically granted eligible employees outside united states defined individual grant agreements acceleration vesting may occur change control death disability normal retirement grantee grantees receiving rs grants able exercise full voting rights receive full credit dividends vesting period dividends paid rs grantee within 45 days full vesting grantees receiving rsus entitled vote earn dividends upon vesting rsus settled either cash payment equal fair market value rsus vesting date issuance company class stock following table summary rs rsu award activity year ended december 31 2020 first quarter 2019 company issued rsu awards connection acquisition periscope accounted liability awards vest march 1 2022 awards recorded fair value initial issuance date remeasured fair value reporting period change fair value quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated recorded selling general administrative expense consolidated statements operations change fair value awards classified liabilities resulted income 01 million year ended december 31 2020 december 31 2020 fair value rsu awards classified liabilities 05 million included longterm liabilities consolidated balance sheets general rs rsu awards vest third anniversary grant date provided holder share continuously employed company vesting date compensation expense recognized rs rsus classified equity 97 million 138 million years ended december 31 2020 2019 respectively deferred stock units deferred stock units awards rights shares company’s class stock awarded nonemployee directors company following table summary dsu award activity year ended december 31 2020 dsu award entitles grantee receive one share class stock upon earlier separation date grantee second anniversary grant date could subject acceleration change control death disability defined individual dsu grant agreement grantees dsu awards may exercise voting rights credited dividend equivalents dividend equivalents converted additional dsu awards based closing price class stock compensation expense recognized dsus 10 million 09 million years ended december 31 2020 2019 respectively dsu awards fully vested grant date compensation expense recognized date grant quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated note 19 shareholders’ equity company three classes common stock follows share data millions accordance articles incorporation class common share one vote per share class b class c common share ten votes per share matters voted upon company’s shareholders liquidation rights three classes stock company also 05 million shares 001 par value preferred stock authorized none issued december 31 2020 2019 company present plans issue preferred stock july 30 2018 company’s board directors authorized share repurchase program 1000 million company’s outstanding class common stock authorization share repurchases may made company’s discretion time open market andor privately negotiated transactions permitted federal securities laws legal requirements timing manner price amount repurchase depend economic market conditions share price trading volume applicable legal requirements factors program may suspended discontinued time company currently prohibited repurchasing capital stock covenant relief period accordance fourth amendment april 28 2014 senior secured credit facility completed june 29 2020 shares company’s class stock repurchased years ended december 31 2020 2019 december 31 2020 1000 million authorized repurchases remaining program quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated accordance articles incorporation dividends paid equally three classes common shares following table details dividend activity related outstanding shares common stock years ended december 31 2020 2019 note 20 accumulated comprehensive loss changes accumulated comprehensive loss component net tax years ended december 31 2020 2019 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated reclassifications accumulated comprehensive loss net loss year ended december 31 2019 details reclassifications accumulated comprehensive loss net loss year ended december 31 2020 follows note 21 segment information worldwide marketing solutions partner quad leverages 50year heritage platform excellence innovation strong culture social purpose create better way clients employees communities company’s operating reportable segments aligned chief operating decision maker company currently manages business company’s operating reportable segments including product service offerings “corporate” category follows •united states print related services •international •corporate united states print related services united states print related services segment predominantly comprised company’s united states printing operations managed one integrated platform includes retail inserts publications catalogs special interest publications journals direct mail directories instore marketing promotion packaging newspapers custom print products commercial specialty printed products global paper procurement together marketing complementary services including consumer insights audience targeting personalization media planning placement process optimization campaign planning creation premedia production videography photography digital execution print execution logistics segment also includes manufacture ink international segment consists company’s printing operations europe latin america including operations england france germany poland argentina colombia mexico peru well investments printing operations brazil india segment provides printed products marketing complementary services consistent united states print related services segment december 31 2020 company unrestricted subsidiaries defined company’s senior unsecured notes indenture quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated corporate consists unallocated general administrative activities associated expenses including part executive legal finance well certain expenses income frozen employee retirement plans pension benefit plans following summary segment information years ended december 31 2020 2019 capital expenditures shown table includes capital expenditures discontinued operations periods presented restructuring impairment transactionrelated charges years ended december 31 2020 2019 described note 5 “restructuring impairment transactionrelated charges” included operating income loss results segment reconciliation operating income continuing operations loss continuing operations income taxes equity loss unconsolidated entity reported consolidated statements operations years ended december 31 2020 2019 follows quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated total assets segment december 31 2020 2019 shown following table total assets discontinued operations included within united states print related services segment periods presented note 22 geographic area information table presents company’s net sales longlived assets years ended december 31 2020 2019 geographic region amounts table differ segment data presented note 21 “segment information” operating segment includes operations multiple geographic regions based company’s management reporting structure note 23 new accounting pronouncements march 2020 financial accounting standards board “fasb” issued accounting standards update 202004 “reference rate reform topic 848 facilitation effects reference rate reform financial reporting” “asu 202004” provides optional guidance limited period time ease potential burden accounting reference rate reform asu 202004 permits entities apply certain expedients exceptions contracts hedging relationships transactions impacted anticipated transition away use libor interbank offered rates alternative reference rates optional guidance effective march 12 quadgraphics inc notes consolidated financial statements millions except share per share data unless otherwise indicated 2020 december 31 2022 company evaluating impact adoption asu 202004 consolidated financial statements december 2019 fasb issued accounting standards update 201912 “income taxes topic 740 simplifying accounting income taxes” “asu 201912” enhances simplifies various aspects income tax accounting guidance including requirements tax basis stepup goodwill obtained transaction business combination ownership changes investments accounting hybrid tax regimes interimperiod accounting enacted changes tax law limitation tax benefit yeartodate losses guidance effective interim annual periods beginning december 15 2020 early adoption permitted company adopted standard january 1 2021 company evaluated impact adoption asu 201912 consolidated financial statements believes material financial impact august 2018 fasb issued accounting standards update 201814 “compensationretirement benefitsdefined benefit plansgeneral subtopic 71520 disclosure frameworkchanges disclosure requirements defined benefit plans” adds removes clarifies yearend disclosure requirements related defined benefit pension postretirement plans guidance effective annual periods ending december 15 2020 early adoption permitted new guidance require retrospective adoption approach company adopted standard year ended december 31 2020 included required disclosures within note 16 “employee retirement plans” item 9 item 15 exhibits financial statement schedules 1consolidated financial statementsthe consolidated financial statements listed accompanying index consolidated financial statements filed part annual report form 10k 2financial statement scheduleall financial statement schedules omitted since required information present amounts sufficient require submission schedules information required included consolidated financial statements notes thereto 3exhibitsthe exhibits listed accompanying exhibit index filed part annual report form 10k index consolidated financial statements page form 10k report independent registered public accounting firm consolidated statements operations three years period ended december 31 consolidated balance sheets december 31 2010 2009 consolidated statements cash flows three years period ended december 31 consolidated statements redeemable equity common stock equity noncontrolling interests notes consolidated financial statements signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized 23rd day march 2011 quadgraphics inc j joel quadracci j joel quadracci chairman president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index disclosure schedules agreement filed herewith registrant agrees furnish supplementally copy schedules securities exchange commission upon request management contract compensatory plan arrangementitem 15 exhibits financial statement schedules 1 consolidated financial statementsthe consolidated financial statements listed accompanying index consolidated financial statements filed part annual report form 10k 2 financial statement scheduleall financial statement schedules omitted since required information present amounts sufficient require submission schedules information required included consolidated financial statements notes thereto 3 exhibitsthe exhibits listed accompanying exhibit index filed part annual report form 10k index consolidated financial statements signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized 8th day march 2013 quadgraphics inc j joel quadracci j joel quadracci chairman president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index schedules exhibits annexes agreement filed herewith registrant agrees furnish supplementally copy schedule exhibit annex securities exchange commission upon request management contract compensatory plan arrangement accordance rule 406t regulation st information exhibits shall deemed filed purposes section 18 securities exchange act 1934 amended otherwise subject liability section shall incorporated reference registration statement document filed securities act 1933 amended except expressly set forth specific reference filingitem 15 exhibits financial statement schedules 1 consolidated financial statementsthe consolidated financial statements listed accompanying index consolidated financial statements filed part annual report form 10k 2 financial statement scheduleall financial statement schedules omitted since required information present amounts sufficient require submission schedules information required included consolidated financial statements notes thereto 3 exhibitsthe exhibits listed accompanying exhibit index filed part annual report form 10k index consolidated financial statements signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized 27th day february 2014 quadgraphics inc j joel quadracci j joel quadracci chairman president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index schedules exhibits annexes agreement filed herewith registrant agrees furnish supplementally copy schedule exhibit annex securities exchange commission upon request management contract compensatory plan arrangement accordance rule 406t regulation st information exhibits shall deemed filed purposes section 18 securities exchange act 1934 amended otherwise subject liability section shall incorporated reference registration statement document filed securities act 1933 amended except expressly set forth specific reference filingitem 15 exhibits financial statement schedules 1 consolidated financial statementsthe consolidated financial statements listed accompanying index consolidated financial statements filed part annual report form 10k 2 financial statement scheduleall financial statement schedules omitted since required information present amounts sufficient require submission schedules information required included consolidated financial statements notes thereto 3 exhibitsthe exhibits listed accompanying exhibit index filed part annual report form 10k index consolidated financial statements signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized 2nd day march 2015 quadgraphics inc j joel quadracci j joel quadracci chairman president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index schedules exhibits annexes agreement filed herewith registrant agrees furnish supplementally copy schedule exhibit annex securities exchange commission upon request management contract compensatory plan arrangementitem 15 exhibit index financial statement schedules 1 consolidated financial statementsthe consolidated financial statements listed accompanying index consolidated financial statements filed part annual report form 10k 2 financial statement scheduleall financial statement schedules omitted since required information present amounts sufficient require submission schedules information required included consolidated financial statements notes thereto 3 exhibitsthe exhibits listed accompanying exhibit index filed part annual report form 10k index consolidated financial statements exhibit index exhibits listed exhibit index filed part annual report form 10k exhibit number exhibit description 99 proxy statement 2018 annual meeting shareholders filed securities exchange commission regulation 14a within 120 days december 31 2017 except extent specifically incorporated reference proxy statement 2018 annual meeting shareholders shall deemed filed securities exchange commission part annual report form 10k 101 financial statements annual report form 10k quadgraphics inc year ended december 31 2017 formatted extensible business reporting language xbrl consolidated statements operations ii consolidated statements comprehensive income loss iii consolidated balance sheets iv consolidated statements cash flows v consolidated statements shareholders equity vi notes consolidated financial statements vii document entity information management contract compensatory plan arrangement item 16 form 10k summary none signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized 21st day february 2018 quadgraphics inc j joel quadracci j joel quadracci chairman president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicateditem 15 exhibit index financial statement schedules 1 consolidated financial statementsthe consolidated financial statements listed accompanying index consolidated financial statements filed part annual report form 10k 2 financial statement scheduleall financial statement schedules omitted since required information present amounts sufficient require submission schedules information required included consolidated financial statements notes thereto 3 exhibitsthe exhibits listed accompanying “exhibit index” filed part annual report form 10k index consolidated financial statements exhibit index exhibits listed exhibit index filed part annual report form 10k disclosure schedules similar attachments agreement filed herewith registrant agrees furnish supplementally copy schedules attachments securities exchange commission upon request management contract compensatory plan arrangement item 16 form 10k summary none signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized 20th day february 2019 quadgraphics inc j joel quadracci j joel quadracci chairman president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicateditem 15 exhibit index financial statement schedules 1 consolidated financial statementsthe consolidated financial statements listed accompanying index consolidated financial statements filed part annual report form 10k 2 financial statement scheduleall financial statement schedules omitted since required information present amounts sufficient require submission schedules information required included consolidated financial statements notes thereto 3 exhibitsthe exhibits listed accompanying “exhibit index” filed part annual report form 10k index consolidated financial statements exhibit index exhibits listed exhibit index filed part annual report form 10k management contract compensatory plan arrangement item 16 form 10k summary none signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized 19th day february 2020 quadgraphics inc j joel quadracci j joel quadracci chairman president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicateditem 15 exhibits financial statement schedules 1 consolidated financial statementsthe consolidated financial statements listed accompanying index consolidated financial statements filed part annual report form 10k 2 financial statement scheduleall financial statement schedules omitted since required information present amounts sufficient require submission schedules information required included consolidated financial statements notes thereto 3 exhibitsthe exhibits listed accompanying exhibit index filed part annual report form 10k index consolidated financial statements signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized 29th day february 2012 quadgraphics inc j joel quadracci j joel quadracci chairman president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index disclosure schedules agreement filed herewith registrant agrees furnish supplementally copy schedules securities exchange commission upon request management contract compensatory plan arrangement accordance rule 406t regulation st information exhibits shall deemed filed purposes section 18 securities exchange act 1934 amended otherwise subject liability section shall incorporated reference registration statement document filed securities act 1933 amended except expressly set forth specific reference filingitem 15 exhibits financial statement schedules 1 consolidated financial statementsthe consolidated financial statements listed accompanying index consolidated financial statements filed part annual report form 10k 2 financial statement scheduleall financial statement schedules omitted since required information present amounts sufficient require submission schedules information required included consolidated financial statements notes thereto 3 exhibitsthe exhibits listed accompanying exhibit index filed part annual report form 10k index consolidated financial statements signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized 23rd day february 2016 quadgraphics inc j joel quadracci j joel quadracci chairman president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index management contract compensatory plan arrangementitem 15 exhibits financial statement schedules 1 consolidated financial statementsthe consolidated financial statements listed accompanying index consolidated financial statements filed part annual report form 10k 2 financial statement scheduleall financial statement schedules omitted since required information present amounts sufficient require submission schedules information required included consolidated financial statements notes thereto 3 exhibitsthe exhibits listed accompanying exhibit index filed part annual report form 10k index consolidated financial statements signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized 22nd day february 2017 quadgraphics inc j joel quadracci j joel quadracci chairman president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index management contract compensatory plan arrangementitem 15 exhibit index financial statement schedules 1consolidated financial statementsthe consolidated financial statements listed accompanying index consolidated financial statements filed part annual report form 10k 2financial statement scheduleall financial statement schedules omitted since required information present amounts sufficient require submission schedules information required included consolidated financial statements notes thereto 3exhibitsthe exhibits listed accompanying “exhibit index” filed part annual report form 10k index consolidated financial statements exhibit index exhibits listed exhibit index filed part annual report form 10k management contract compensatory plan arrangement item 16 form 10k summary none signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized 24th day february 2021 quadgraphics inc bys j joel quadracci j joel quadracci chairman president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated