10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q  

(Mark One)      

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020  

OR  

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number

001-37729      

LSC Communications, Inc.

(Exact name of registrant as specified in its charter)

Delaware	36-4829580
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

191 N. Wacker Drive, Suite 1400

Chicago, IL 60606

(Address of principal executive offices, including zip code)

(773) 272-9200  

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  

Yes ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒    

As of May 1, 2020, 33,586,062 shares of common stock were outstanding.          

LSC COMMUNICATIONS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

TABLE OF CONTENTS

PART I

	Page
FINANCIAL INFORMATION
Item 1: Condensed Consolidated Financial Statements (unaudited)	3
Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	3
Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019	4
Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019	5
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	6
Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2020 and 2019	7
Notes to Condensed Consolidated Financial Statements	8
Item 2:  Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3: Quantitative and Qualitative Disclosures About Market Risk	47
Item 4: Controls and Procedures	47
Part II. Other Information	49
Item 1: Legal Proceedings	49
Item 1A: Risk Factors	49
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 4: Mine Safety Disclosures	53
Item 6: Exhibits	54
Signatures	58

2

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

LSC COMMUNICATIONS, INC.  

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)      

(UNAUDITED)               

	March 31,			December 31,
	2020			2019 (1)
ASSETS
Cash and cash equivalents	$	56		$	105
Receivables
Amortized cost		471			484
Less: Allowance for credit losses		(13	)		(12	)
Receivables, net		458			472
Inventories (Note 4)		156			170
Income tax receivable		5			5
Prepaid expenses and other current assets		52			36
Total current assets		727			788
Property, plant and equipment-net (Note 5)		424			440
Goodwill (Note 6)		52			52
Other intangible assets-net (Note 6)		116			120
Right-of-use assets for operating leases		155			163
Deferred income taxes		7			9
Other noncurrent assets		74			77
Total assets	$	1,555		$	1,649
LIABILITIES
Accounts payable	$	151		$	175
Accrued liabilities		224			211
Short-term debt and current portion of long-term debt (Note 9)		911			465
Short-term operating lease liabilities		40			42
Total current liabilities		1,326			893
Long-term debt (Note 9)		—			445
Pension liabilities		141			156
Restructuring and multi-employer pension liabilities (Note 7)		41			42
Long-term operating lease liabilities		123			129
Other noncurrent liabilities		55			56
Total liabilities	$	1,686		$	1,721
Commitments and contingencies (Note 8)
EQUITY
Common stock, $0.01 par value
Authorized: 65,000,000
Issued: 35,719,936 shares in 2020 (2019: 35,559,052)	$	—		$	—
Additional paid-in capital		836			835
Accumulated deficit		(417	)		(365	)
Accumulated other comprehensive loss (Note 13)		(525	)		(517	)
Treasury stock, at cost: 2,133,874 shares in 2020 (2019: 2,084,055)		(25	)		(25	)
Total equity		(131	)		(72	)
Total liabilities and equity	$	1,555		$	1,649

(1) As Adjusted, see Note 1, Overview and Basis of Presentation   

See Notes to the Condensed Consolidated Financial Statements  

3

LSC COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)      

(UNAUDITED)     

	Three Months Ended
	March 31,
	2020			2019 (1)
Net sales	$	701		$	845
Cost of sales		616			735
Selling, general and administrative expenses (exclusive of      depreciation and amortization)		75			85
Restructuring, impairment and other charges-net (Note 7)		26			13
Depreciation and amortization		27			31
(Loss) from operations		(43	)		(19	)
Interest expense-net (Note 9)		18			19
Settlement of retirement benefit obligations (Note 11)		—			132
Investment and other (income)-net		(10	)		(8	)
(Loss) before income taxes		(51	)		(162	)
Income tax expense (benefit)		1			(37	)
Net (loss)	$	(52	)	$	(125	)
Net (loss) per common share (Note 10)
Basic net (loss) per share	$	(1.56	)	$	(3.77	)
Diluted net (loss) per share	$	(1.56	)	$	(3.77	)
Weighted-average number of common shares outstanding:
Basic		33.6			33.3
Diluted		33.6			33.3

(1) As Adjusted, see Note 1, Overview and Basis of Presentation      

See Notes to the Condensed Consolidated Financial Statements

4

LSC COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(UNAUDITED)

	Three Months Ended
	March 31,
	2020			2019 (1)
Net (loss)	$	(52	)	$	(125	)
Other comprehensive (loss) income, net of tax (Note 13):
Translation adjustments		(11	)		1
Adjustment for net periodic pension plan cost		3			106
Other comprehensive (loss) income		(8	)		107
Comprehensive (loss)	$	(60	)	$	(18	)

The adjustments for net pension plan cost were net of income tax expense of $1 million and $36 million for the three months ended March 31, 2020 and 2019, respectively.  The tax expense for the three months ended March 31, 2019 was primarily due to the settlements of retirement benefit obligations that are discussed in Note 13, Comprehensive Income.    

(1) As Adjusted, see Note 1, Overview and Basis of Presentation  

See Notes to the Condensed Consolidated Financial Statements

5

LSC COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(UNAUDITED)

	Three Months Ended
	March 31,
	2020			2019 (1)
Cash Flows from Operating Activities
Net (loss)	$	(52	)	$	(125	)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Impairment charges		1			2
Depreciation and amortization		27			31
Provision for doubtful accounts receivable		1			3
Share-based compensation		1			3
Deferred income taxes		—			(34	)
Settlement of retirement benefit obligations		—			132
Other		2			1
Changes in operating assets and liabilities - net of acquisitions:
Accounts receivable-net		7			(2	)
Inventories		11			(24	)
Prepaid expenses and other current assets		(19	)		3
Accounts payable		(23	)		(33	)
Income taxes receivable		—			(4	)
Accrued liabilities and other		5			23
Net cash (used in) operating activities		(39	)		(24	)
Cash Flows from Investing Activities
Capital expenditures		(11	)		(28	)
Acquisitions of businesses, net of cash acquired		—			(3	)
Net proceeds from sales and purchases of investments and other assets		2			—
Net cash (used in) investing activities		(9	)		(31	)
Cash Flows from Financing Activities
Payments of current maturities and long-term debt		—			(11	)
Net proceeds from credit facility borrowings		—			67
Debt issuance costs		(1	)		—
Dividends paid		—			(9	)
Other financing activities		3			(1	)
Net cash provided by financing activities		2			46
Effect of exchange rate on cash and cash equivalents		(2	)		1
Net (decrease) in cash, cash equivalents and restricted cash		(48	)		(8	)
Cash, cash equivalents and restricted cash at beginning of year		106			24
Cash, cash equivalents and restricted cash at end of period	$	58		$	16
Reconciliation to the Consolidated Balance Sheets	As of
	March 31, 2020			December 31, 2019
Cash and cash equivalents	$	56		$	105
Restricted cash included in prepaid expenses and other current assets		2			1
Total cash, cash equivalents and restricted cash shown in the condensed consolidated      statements of cash flows	$	58		$	106

(1) As Adjusted, see Note 1, Overview and Basis of Presentation  

See Notes to the Condensed Consolidated Financial Statements   

6

LSC COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in millions)

(UNAUDITED)

															Accumulated
					Additional										Other
	Common Stock				Paid-in		Treasury Stock					(Accumulated			Comprehensive			Total
	Shares		Amount		Capital		Shares		Amount			Deficit)			(Loss) Income			Equity
Balance at December 31, 2019		36	$	—	$	835		2	$	(25	)	$	(365	)	$	(517	)	$	(72	)
Net (loss)		—		—		—		—		—			(52	)		—			(52	)
Share-based compensation		—		—		1		—		—			—			—			1
Other comprehensive (loss)		—		—		—		—		—			—			(8	)		(8	)
Balance at March 31, 2020		36	$	—	$	836		2	$	(25	)	$	(417	)	$	(525	)	$	(131	)

															Accumulated
					Additional										Other
	Common Stock				Paid-in		Treasury Stock					(Accumulated			Comprehensive			Total
	Shares		Amount		Capital		Shares		Amount			Deficit)			(Loss) Income			Equity
Balance at December 31, 2018	35		$	—	$	828		2	$	(24	)	$	(51	)	$	(575	)	$	178
Net (loss)		—		—		—		—		—			(125	)		—			(125	)
Issuance of share-based awards,      net of withholdings and other		1		—		—		—		(1	)		—			—			(1	)
Share-based compensation		—		—		3		—		—			—			—			3
Cash dividends paid		—		—		—		—		—			(9	)		—			(9	)
Other comprehensive income		—		—		—		—		—			—			107			107
Balance at March 31, 2019		36	$	—	$	831		2	$	(25	)	$	(185	)	$	(468	)	$	153

Refer to Note 1, Overview and Basis of Presentation, for information on the adjustments made to accumulated deficit and accumulated other comprehensive loss in both periods.

There were dividends declared per common share of $0.26 during the three months ended March 31, 2019 (none during the three months ended March 31, 2020).

See Notes to the Condensed Consolidated Financial Statements

7

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

Note 1.  Overview and Basis of Presentation

Description of Business

The principal business of LSC Communications, Inc., a Delaware corporation, and its direct or indirect wholly-owned subsidiaries (“LSC Communications,” “the Company,” “we,” “our” and “us”) is to offer a broad scope of traditional and digital print, print-related services and office products.  The Company serves the needs of publishers, merchandisers and retailers worldwide with a service offering that includes e-services, logistics, warehousing and fulfillment and supply chain management services.  The Company utilizes a broad portfolio of technology capabilities coupled with consultative attention to clients' needs to increase speed to market, reduce costs, provide postal savings to customers and improve efficiencies.  The Company prints magazines, catalogs, books and directories, and its office products offerings include filing products, envelopes, note-taking products, binder products, and forms. 

Voluntary Reorganization under Chapter 11

On April 13, 2020 (the “Petition Date”), the Company and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) (collectively, the “Chapter 11 Cases”).  The Chapter 11 Cases are being jointly administered under the caption In re LSC Communications, Inc., 20-10950.  We and our subsidiaries that are involved in the Chapter 11 Cases will continue to operate our businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code.

On April 15, 2020, the Bankruptcy Court entered orders granting interim approval of certain forms of relief that we requested, enabling us to conduct our business activities in the ordinary course, subject to the terms and conditions of such orders, including authorizing us to pay employee wages and benefits, to pay taxes and certain governmental fees and charges, to continue to operate our cash management system in the ordinary course, and to pay prepetition claims of certain of our vendors.  For goods and services provided following the Petition Date, the Company expects to continue to pay vendors under normal terms.  

During the pendency of the Chapter 11 Cases, attempts to prosecute, collect, secure or enforce remedies with respect to prepetition claims against the debtors, including litigation relating to the entities involved in the Chapter 11 Cases, are subject to the automatic stay provisions of section 362(a) of the Bankruptcy Code, as modified or amended by the terms of any order entered in the Chapter 11 Cases.  

We have obtained debtor-in-possession financing of up to $100 million which, together with our normal operating cash flows, will provide liquidity for the Company to operate as usual and fulfill ongoing commitments to stakeholders during the pendency of the Chapter 11 Cases.  Refer to Note 9, Debt, for information on the debtor-in-possession financing facility.

Going Concern

The accompanying condensed consolidated financial statements were prepared assuming that the Company will continue as a going concern and contemplate the continuity of our operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business.  Our ability to continue as a going concern is contingent upon our ability to comply with the covenants of the DIP Credit Agreement described in Note 9, Debt, and our ability to implement, subject to the Bankruptcy Court’s approval, a restructuring plan, among other factors.

While operating as debtors-in-possession under Chapter 11, we may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions in our debt agreements), for amounts other than those reflected in the accompanying condensed consolidated financial statements.  Further, the restructuring plan could materially change the amounts and classifications of assets and liabilities reported in the condensed consolidated financial statements.

8

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

As a result of the factors noted above, we believe there is substantial doubt about the Company’s ability to continue as a going concern.  The condensed consolidated financial statements included in this quarterly report on Form 10-Q do not include any adjustments related to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 

Coronavirus Pandemic (“COVID-19”)

During and subsequent to the first quarter of 2020, the novel coronavirus strain, known as COVID-19, continues to spread across the globe at an increasing rate. Measures taken by governmental authorities and private actors to limit the spread of this virus may interfere with the ability of the Company's employees, suppliers, and other business providers to carry out their assigned tasks or supply materials at ordinary levels of performance relative to the conduct of the business which may cause a material curtailment to certain business operations. Moreover, as a large part of the Company's business involves sales of books and other products used in schools and school facilities, if COVID-19 related measures continue to result in widespread and lengthy school closings, the Company's consolidated results of operations and financial condition will be adversely impacted.  Books sold in retail stores have also been adversely impacted as both large chains and independent stores have been forced to close.  Additionally, as COVID-19 has significantly impacted retailers' stores, distribution centers and supply chains, the Company expects to experience an adverse impact on our catalogs and office products businesses.  Disruption across many other industries has also significantly impacted demand for advertising, which is expected to result in page count and volume reductions in magazines.

We continue to monitor the situation, to assess further possible implications to our business and customers, and to take actions in an effort to mitigate adverse consequences. The Company has expanded its work-from-home policy for its non-manufacturing employees, has focused on obtaining protective equipment and implementing social distancing and other policies for its manufacturing employees and continues to adhere to guidance issued by governmental authorities.  The Company is unable to quantify the impact on our business at this time, but it could have a material adverse effect on our consolidated financial statements in the future.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law.  Refer to Note 12, Taxes, for more information on the CARES Act.

Basis of Presentation     

The condensed consolidated financial statements include the balance sheets and statements of operations, stockholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”).  All intercompany transactions have been eliminated in consolidation.  These unaudited condensed consolidated interim financial statements include estimates and assumptions of management that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates.  

As a result of the Company’s segment analysis in the fourth quarter of 2019, Mexico met the requirements to be classified as a reportable segment (previously included as a non-reportable segment).  All prior year amounts have been reclassified to conform to the Company’s current reporting structure.  Refer to Note 14, Segment Information, for reclassified balances for the three months ended March 31, 2019.

The Company adopted Accounting Standards Update No. 2016-13 “Financial Instruments-Credit Losses (Topic 326)” (“ASU 2016-13” or “ASC 326”) on January 1, 2020 using the modified retrospective adoption method.  As a result of the adoption, the Company separately disclosed the amortized cost amount of total receivables separately from the allowance for credit losses in the condensed consolidated balance sheet.  Refer to Note 2, Revenue Recognition, for more information.

Impact of Change in Accounting Principle

Beginning in the first quarter of 2020, the Company changed the method of accounting for the market-related value of assets for a class of assets within the U.S. Qualified Plan and Non-Qualified plans.  This class of assets is currently comprised of liability-hedging investments, which represents approximately 60% of the plans’ assets. Liability-hedging investments provide a natural hedge against the changes in the recorded amount of net periodic pension cost.  Refer to Note 11, Retirement Plans, in the Company’s Form

9

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

10-K for the fiscal year ended December 31, 2019 for disclosure by asset classifications.  The previous method of accounting was to use the market-related value of assets for all the plans’ assets when recognizing changes in fair value of plan assets ratably over a five-year period.  As a result of the change in method of accounting the Company will no longer use the market-related value of liability-hedging investments.  Instead, the fair value of liability-hedging investments will be immediately included in the calculation of net periodic pension cost. This change in accounting method is preferable because it accelerates the recognition of the fair value for this class of assets into net income or loss.  No change is being made to the accounting principle for the other classes of pension assets, which represent the remaining 40% of the pension asset portfolio for the plan.

The change in accounting principle requires retrospective application and prospective disclosure. Refer below for the restatements on previously issued financial statements.  Retrospective application was applied to periods beginning in 2017 as it was determined not to be possible to go further than that date due to the Company’s separation in 2016 from its prior parent company.  Prior to the separation in 2016, the U.S. Qualified and Non-Qualified pension plans were legally owned by the Company’s prior parent company.

The cumulative effect of the change on accumulated deficit was an increase in deficit of $9 million as of January 1, 2019 and a $9 million decrease in accumulated other comprehensive loss, as shown in the condensed statement of stockholders’ equity.  

The historical statements of cash flows are also being retrospectively restated as changes in net (loss) income, expense related to settlement of retirement obligations and pension income flow through the operating activities section with an offsetting impact to the change in accrued liabilities and other. There is no net impact to cash flows provided by (used in) operating activities.

The tables below represent the impact of the change in accounting principle on the condensed consolidated balance sheets and statement of stockholders’ equity for all periods since 2017:

	Previously Disclosed in Form 10-K						As Reported with Change
	As of December 31, 2017			Impact of Change			As of December 31, 2017
Equity
(Accumulated deficit)	$	(90	)	$	(7	)	$	(97	)
Accumulated other comprehensive loss		(476	)		7			(469	)

	Previously Disclosed in Form 10-K						As Reported with Change
	As of December 31, 2018			Impact of Change			As of December 31, 2018
Equity
(Accumulated deficit)	$	(42	)	$	(9	)	$	(51	)
Accumulated other comprehensive loss		(584	)		9			(575	)

	Previously Disclosed in Form 10-K						As Reported with Change
	As of December 31, 2019			Impact of Change			As of December 31, 2019
Equity
(Accumulated deficit)	$	(354	)	$	(11	)	$	(365	)
Accumulated other comprehensive loss		(528	)		11			(517	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	As of March 31, 2019			Impact of Change			As of March 31, 2019
Equity
(Accumulated deficit)	$	(177	)	$	(8	)	$	(185	)
Accumulated other comprehensive loss		(476	)		8			(468	)

10

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

	Previously Disclosed in Form 10-Q						As Reported with Change
	As of June 30, 2019			Impact of Change			As of June 30, 2019
Equity
(Accumulated deficit)	$	(209	)	$	(9	)	$	(218	)
Accumulated other comprehensive loss		(472	)		9			(463	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	As of September 30, 2019			Impact of Change			As of September 30, 2019
Equity
(Accumulated deficit)	$	(185	)	$	(10	)	$	(195	)
Accumulated other comprehensive loss		(472	)		10			(462	)

The tables below represent the impact of the change in accounting principle on the condensed consolidated statements of operations and comprehensive income for all periods since 2017:

	Previously Disclosed in Form 10-K						As Reported with Change
	Year Ended December 31, 2017			Impact of Change			Year Ended December 31, 2017
Investment and other (income) expense	$	(47	)	$	10		$	(37	)
(Loss) before income taxes		(44	)		(10	)		(54	)
Income tax expense (benefit)		13			(3	)		10
Net (loss)		(57	)		(7	)		(64	)
Basic net (loss) per share		(1.69	)		(0.22	)		(1.91	)
Diluted net (loss) per share		(1.69	)		(0.22	)		(1.91	)
Adjustment for net periodic pension plan      cost		34			7			41
Other comprehensive income		55			7			62
Comprehensive (loss)		(2	)		—			(2	)

	Previously Disclosed in Form 10-K						As Reported with Change
	Year Ended December 31, 2018			Impact of Change			Year Ended December 31, 2018
Investment and other (income) expense	$	(48	)	$	2		$	(46	)
Income (loss) before income taxes		10			(2	)		8
Income tax expense		33			—			33
Net (loss)		(23	)		(2	)		(25	)
Basic net (loss) per share		(0.67	)		(0.04	)		(0.71	)
Diluted net (loss) per share		(0.67	)		(0.04	)		(0.71	)
Adjustment for net periodic pension plan      cost		(4	)		2			(2	)
Other comprehensive (loss) income		(11	)		2			(9	)
Comprehensive (loss)		(34	)		—			(34	)

11

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

	Previously Disclosed in Form 10-K						As Reported with Change
	Year Ended December 31, 2019			Impact of Change			Year Ended December 31, 2019
Settlement of retirement benefit obligations	$	137		$	(3	)	$	134
Investment and other (income) expense		(37	)		6			(31	)
(Loss) before income taxes		(288	)		(3	)		(291	)
Income tax expense (benefit)		7			(1	)		6
Net (loss)		(295	)		(2	)		(297	)
Basic net (loss) per share		(8.82	)		(0.07	)		(8.89	)
Diluted net (loss) per share		(8.82	)		(0.07	)		(8.89	)
Adjustment for net periodic pension plan      cost		54			2			56
Other comprehensive income		56			2			58
Comprehensive (loss)		(239	)		—			(239	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	Three Months Ended March 31, 2019			Impact of Change			Three Months Ended March 31, 2019
Settlement of retirement benefit obligations	$	135		$	(3	)	$	132
Investment and other (income) expense		(10	)		2			(8	)
(Loss) income before income taxes		(163	)		1			(162	)
Income tax (benefit)		(37	)		—			(37	)
Net (loss) income		(126	)		1			(125	)
Basic net (loss) income per share		(3.79	)		0.02			(3.77	)
Diluted net (loss) income per share		(3.79	)		0.02			(3.77	)
Adjustment for net periodic pension plan      cost		107			(1	)		106
Other comprehensive income (loss)		108			(1	)		107
Comprehensive (loss)		(18	)		—			(18	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	Three Months Ended June 30, 2019			Impact of Change			Three Months Ended June 30, 2019
Settlement of retirement benefit obligations	$	1		$	—		$	1
Investment and other (income) expense		(9	)		1			(8	)
(Loss) before income taxes		(27	)		(1	)		(28	)
Income tax (benefit)		(3	)		—			(3	)
Net (loss)		(24	)		(1	)		(25	)
Basic net (loss) per share		(0.69	)		(0.03	)		(0.72	)
Diluted net (loss) per share		(0.69	)		(0.03	)		(0.72	)
Adjustment for net periodic pension plan      cost		3			1			4
Other comprehensive income		4			1			5
Comprehensive (loss)		(20	)		—			(20	)

12

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

	Previously Disclosed in Form 10-Q						As Reported with Change
	Three Months Ended September 30, 2019			Impact of Change			Three Months Ended September 30, 2019
Settlement of retirement benefit obligations	$	1			—		$	1
Investment and other (income) expense		(9	)		1			(8	)
Income (loss) before income taxes		24			(1	)		23
Income tax expense		—			—			—
Net income (loss)		24			(1	)		23
Basic net income (loss) per share		0.69			(0.03	)		0.66
Diluted net income (loss) per share		0.69			(0.03	)		0.66
Adjustment for net periodic pension plan      cost		2			1			3
Other comprehensive income		—			1			1
Comprehensive income		24			—			24

	Previously Disclosed in Form 10-Q						As Reported with Change
	Three Months Ended December 31, 2019			Impact of Change			Three Months Ended December 31, 2019
Settlement of retirement benefit obligations	$	—		$	—		$	—
Investment and other (income) expense		(9	)		2			(7	)
(Loss) before income taxes		(122	)		(2	)		(124	)
Income tax expense (benefit)		47			(1	)		46
Net (loss)		(169	)		(1	)		(170	)
Basic net (loss) per share		(5.02	)		(0.03	)		(5.05	)
Diluted net (loss) per share		(5.02	)		(0.03	)		(5.05	)

The tables below represent the impact of the change in accounting principle on the condensed consolidated balance sheet as of March 31, 2020 and the statements of operations and comprehensive income for the three months ended March 31, 2020:

	Previous Accounting Method						As Reported
	March 31, 2020			Impact of Change			March 31, 2020
Equity
(Accumulated deficit)	$	(408	)	$	(9	)	$	(417	)
Accumulated other comprehensive loss      (income)		(535	)		10			(525	)
Pension liabilities	142				(1	)		141

	Previous Accounting Method						As Reported
	March 31, 2020			Impact of Change			March 31, 2020
Investment and other (income)	$	(8	)	$	(2	)	$	(10	)
(Loss) income before income taxes		(53	)		2			(51	)
Income tax expense		1			—			1
Net (loss) income		(54	)		2			(52	)
Basic net (loss) income per share		(1.61	)		0.05			(1.56	)
Diluted net (loss) income per share		(1.61	)		0.05			(1.56	)
Adjustment for net periodic pension plan      cost		4			(1	)		3
Other comprehensive (loss)		(7	)		(1	)		(8	)
Comprehensive (loss) income		(61	)		1			(60	)

13

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

Note 2.  Revenue Recognition  

Disaggregated Revenue

The following tables provide information about disaggregated revenue by major products/service lines and timing of revenue recognition, and include a reconciliation of the disaggregated revenue with reportable segments for the three months ended March 31, 2020 and 2019.  

	Three Months Ended
	March 31, 2020
	Magazines,
	Catalogs
	and				Office
	Logistics		Book		Products		Mexico		Other		Total
Major Products / Service Lines
Book (a)	$	—	$	204	$	—	$	—	$	—	$	204
Magazines and Catalogs (b)	$	250	$	—	$	—	$	23	$	21	$	294
Logistics	$	77	$	—	$	—	$	—	$	—	$	77
Directories	$	—	$	—	$	—	$	—	$	14	$	14
Office Products	$	—	$	—	$	112	$	—	$	—	$	112
Total	$	327	$	204	$	112	$	23	$	35	$	701
Timing of Revenue Recognition
Products and services transferred at a      point in time	$	225	$	172	$	112	$	23	$	14	$	546
Products and services transferred over      time		102		32		—		—		21		155
Total	$	327	$	204	$	112	$	23	$	35	$	701

14

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

	Three Months Ended
	March 31, 2019
	Magazines,
	Catalogs
	and				Office
	Logistics		Book		Products		Mexico		Other		Total
Major Products / Service Lines
Book (a)	$	—	$	260	$	—	$	—	$	—	$	260
Magazines and Catalogs (b)	$	319	$	—	$	—	$	24	$	20	$	363
Logistics	$	84	$	—	$	—	$	—	$	—	$	84
Directories	$	—	$	—	$	—	$	—	$	19	$	19
Office Products	$	—	$	—	$	119	$	—	$	—	$	119
Total	$	403	$	260	$	119	$	24	$	39	$	845
Timing of Revenue Recognition
Products and services transferred at a      point in time	$	288	$	228	$	119	$	24	$	19	$	678
Products and services transferred over      time		115		32		—		—		20		167
Total	$	403	$	260	$	119	$	24	$	39	$	845

(a) Includes e-book formatting and supply chain management associated with book production    

(b) Includes premedia and co-mail        

Accounts Receivable

As disclosed in Note 1, Overview and Basis of Presentation, the Company adopted ASU 2016-13 on January 1, 2020 using the modified retrospective adoption method.  As a result of the adoption, the Company now records an allowance for credit losses on unbilled receivables which resulted in a de minimis amount of expense for the three months ended March 31, 2020.  There were no changes to the Company’s policy relating to its receivables.  To recognize the initial adoption, the Company recorded a de minimis increase to its January 1, 2020 balance for allowance for credit losses and an offsetting impact to accumulated deficit in the condensed consolidated balance sheet.    

Transactions affecting the allowances for doubtful accounts receivable balance during the three months ended March 31, 2020 were as follows:

	Three Months Ended
	March 31, 2020
Balance, beginning of year	$	12
Provisions charged to expense		1
Balance, end of period	$	13

There was a de minimis amount of write-offs and recoveries during the three months ended March 31, 2020.

15

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

Contract Balances

The following table provides changes in contract assets and liabilities during the three months ended March 31, 2020:

	Short-Term Contract Assets			Long-Term Contract Assets			Contract Liabilities
Beginning Balance, January 1, 2020	$	40		$	14		$	17
Additions to unbilled accounts receivable		17			—			—
Unbilled accounts receivable recognized in      trade receivables		(28	)		—			—
Payment of contract acquisition costs		—			—			—
Amortization of contract acquisition costs		—			(3	)		—
Write-off due to termination of contract      acquisition costs		—			—			—
Revenue recognized that was included in      contract liabilities as of January 1, 2020		—			—			(12	)
Increases due to cash received		—			—			11
Ending Balance, March 31, 2020	$	29		$	11		$	16

The trade receivables balance was $371 million and $366 million as of March 31, 2020 and December 31, 2019, respectively. There was a de minimis amount of credit losses recognized on short-term contract assets recorded during the three months ended March 31, 2020.

Note 3.  Leases

Lease Expense

The components of total net lease expense were as follows:

	Three Months Ended			Three Months Ended
	March 31, 2020			March 31, 2019
Operating lease expense	$	17		$	17
Sublease (income)		(2	)		(2	)
Variable lease expense		2			3
Total net lease expense	$	17		$	18

During each of the three months ended March 31, 2020 and 2019, the Company incurred a de minimis amount of finance lease cost, consisting of finance lease ROU asset amortization and interest on finance lease liabilities, and a de minimis amount of cost associated with short-term leases.

16

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

Cash Flow Information

Supplemental non-cash information related to leases is included below:

	Three Months Ended		Three Months Ended
	March 31, 2020		March 31, 2019
ROU assets acquired in exchange for      lease obligations:
ROU assets
Operating leases	$	4	$	2
Lease obligations
Operating leases	$	4	$	2

During the three months ended March 31, 2020 and 2019, the Company recorded $14 million and $16 million of operating cash outflows from operating leases, respectively.    

During each of the three months ended March 31, 2020 and 2019, the Company recorded a de minimis amount of cash outflows from financing leases.  No finance lease ROU assets or obligations were acquired during the three months ended March 31, 2020 and 2019.

Lease Terms and Discount Rates

Supplemental information regarding the weighted average lease term and discount rate for the lease liabilities as of March 31, 2020 is included below:  

	March 31, 2020
Weighted Average Remaining Lease Term (years)
Operating leases		4.9
Financing leases		2.0
Weighted Average Discount Rate
Operating leases		8.7	%
Financing leases		6.9	%

17

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

Lease Maturities

The annual maturities of lease liabilities as of March 31, 2020 were as follows:    

	Operating Leases
2020	$	39
2021		45
2022		34
2023		24
2024		19
2025 & thereafter		28
Total undiscounted lease payments		189
Imputed interest		(26	)
Total lease liabilities	$	163

During the three months ended March 31, 2020, the Company recorded a de minimis amount of maturities for finance lease liabilities.  As of March 31, 2020, the Company has additional operating leases that have not commenced for an undiscounted amount of $1 million.

Note 4.  Inventories

The components of the Company’s inventories, net of excess and obsolescence reserves for raw materials and finished goods, at March 31, 2020 and December 31, 2019 were as follows:        

	March 31,			December 31,
	2020			2019
Raw materials and manufacturing supplies	$	70		$	91
Work in process		38			38
Finished goods		89			87
Last in, first out reserve		(41	)		(46	)
Total	$	156		$	170

Note 5.  Property, Plant and Equipment

The components of the Company’s property, plant and equipment at March 31, 2020 and December 31, 2019 were as follows:

	March 31,			December 31,
	2020			2019
Land	$	34		$	35
Buildings		662			663
Machinery and equipment		2,989			3,006
		3,685			3,704
Less: Accumulated depreciation		(3,261	)		(3,264	)
Total	$	424		$	440

During the three months ended March 31, 2020 and 2019, depreciation expense was $21 million and $24 million, respectively.    Refer to Note 8, Restructuring, Impairment and Other Charges, for a discussion on impairment reviews performed as of March 31, 2020 and information on impairment recorded during the three months ended March 31, 2020 and 2019.

18

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

Assets Held for Sale

Primarily as a result of restructuring actions, certain facilities and equipment are considered held for sale. The net book value of assets held for sale was $6 million and $9 million at March 31, 2020 and December 31, 2019, respectively.  These assets are included in prepaid expenses and other current assets in the condensed consolidated balance sheets at the lower of their historical net book value or their estimated fair value, less estimated costs to sell.        

Note 6.  Goodwill and Other Intangible Assets  

The changes in the carrying amount of goodwill for the three months ended March 31, 2020 were as follows:

	Magazines,
	Catalogs						Office
	and Logistics			Book			Products			Mexico		Other			Total
Net book value as of December 31,      2019
Goodwill	$	523		$	354		$	110		$	—	$	5		$	992
Accumulated impairment losses		(502	)		(354	)		(79	)		—		(5	)		(940	)
Total		21			—			31			—		—			52
Net book value as of March 31, 2020
Goodwill		523			354			110			—		5			992
Accumulated impairment losses		(502	)		(354	)		(79	)		—		(5	)		(940	)
Total	$	21		$	—		$	31		$	—	$	—		$	52

The components of other intangible assets at March 31, 2020 and December 31, 2019 were as follows:  

	March 31, 2020							December 31, 2019
	Gross  Carrying		Accumulated			Net Book		Gross  Carrying		Accumulated			Net Book
	Amount		Amortization			Value		Amount		Amortization			Value
Customer relationships	$	248	$	(153	)	$	95	$	248	$	(149	)	$	99
Trade names		29		(8	)		21		29		(8	)		21
Total other intangible assets	$	277	$	(161	)	$	116	$	277	$	(157	)	$	120

During the three months ended March 31, 2020 and 2019, amortization expense for other intangible assets was $4 million and $5 million, respectively.

The following table outlines the estimated annual amortization expense related to all amortizable intangible assets:

For the year ending December 31,	Amount
2020	$	17
2021		15
2022		14
2023		13
2024		13
2025 and thereafter		48
Total	$	120

Refer to Note 7, Restructuring, Impairment and Other Charges, for information on the goodwill and intangible asset impairment reviews performed as of March 31, 2020.

19

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

Note 7.  Restructuring, Impairment and Other Charges

For the three months ended March 31, 2020 and 2019, the Company recorded the following net restructuring, impairment and other charges disclosed in the condensed consolidated statements of operations:        

			Other		Total
Three Months Ended	Employee		Restructuring		Restructuring				Other
March 31, 2020	Terminations		Charges		Charges		Impairment		Charges		Total
Magazines, Catalogs and Logistics	$	—	$	10	$	10	$	1	$	—	$	11
Book		1		2		3		—		—		3
Office Products		2		—		2		—		—		2
Mexico		—		—		—		—		—		—
Other		—		—		—		—		—		—
Corporate		—		10		10		—		—		10
Total	$	3	$	22	$	25	$	1	$	—	$	26

			Other		Total
Three Months Ended	Employee		Restructuring		Restructuring				Other
March 31, 2019	Terminations		Charges		Charges		Impairment		Charges		Total
Magazines, Catalogs and Logistics	$	5	$	4	$	9	$	2	$	—	$	11
Book		—		1		1		—		—		1
Office Products		—		—		—		—		—		—
Mexico		—		—		—		—		—		—
Other		—		—		—		—		—		—
Corporate		—		1		1		—		—		1
Total	$	5	$	6	$	11	$	2	$	—	$	13

Restructuring Charges

For the three months ended March 31, 2020, the Company incurred net other restructuring charges of $22 million, primarily due to facility costs and costs to move equipment, expenses associated with new revenue opportunities, and cost savings initiatives implemented in 2019.  For the three months ended March 31, 2020, the Company incurred charges of $3 million for an aggregate of 397 employees, of whom 197 were terminated as of or prior to March 31, 2020, primarily related to the closure of one facility in the Office Products segment.

For the three months ended March 31, 2019, the Company incurred charges of $5 million for an aggregate of 240 employees, primarily related to the closure of one facility in the Magazines, Catalogs and Logistics segment.  The Company incurred net other restructuring charges of $6 million for the three months ended March 31, 2019 primarily due to charges related to facility costs, as well as costs associated with new revenue opportunities and cost savings initiatives implemented during the quarter.  The Company recorded $2 million of net impairment charges related to machinery and equipment associated with facility closings in the Magazines, Catalogs and Logistics segment.

Impairment Reviews

The Company performs interim reviews of goodwill for indicators of impairment each quarter to assess whether an interim impairment review is required for any reporting unit.  Additionally, the Company evaluates the recoverability of other long-lived assets, including property, plant and equipment and certain identifiable intangible assets, whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. As part of its interim reviews, management analyzes operating results for the period compared to expected results as of the prior year’s review, key assumptions such as discount rates and

20

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

expected long-term growth rates, changes in the overall market value of the Company’s equity and debt securities, significant negative industry and economic trends, as well as other factors. 

Goodwill

Due the potential impact of COVID-19 on the company’s future performance, management determined that a further review of the reporting units’ goodwill for indicators of impairment was appropriate.  As discussed in Note 1, Overview and Basis of Presentation, COVID-19 has the potential to have a negative impact across several of the Company’s segments.  As of March 31, 2020, only two reporting units had goodwill: Office Products ($31 million) and logistics ($21 million).  

For the Office Products and logistics reporting units, management assessed goodwill impairment risk by first performing a qualitative review of entity specific, industry, market and general economic factors for each reporting unit. For both reporting units, the Company was not able to conclude that it is more likely than not that the fair values of our reporting units are greater than their carrying values, and therefore, a one-step method for determining goodwill impairment was applied as of March 31, 2020.

The Company performed a Step 1 impairment test of goodwill in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles-Goodwill and Other, which includes comparing the estimated fair value of each reporting unit to its carrying amount, including goodwill.  If the carrying amount of a reporting unit is greater than zero and its fair value exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. However, if the carrying amount of a reporting unit exceeds its fair value, the goodwill is considered impaired and a full or partial write-off of goodwill would be required.  

The Company determines the fair value of its reporting units using both the income approach and the market approach. The determination of the fair value using the income approach requires management to make significant estimates and assumptions related to projected operating results (including forecasted revenue and operating income), anticipated future cash flows, and discount rates. The determination of the fair value using the market approach requires management to make significant assumptions related to the multiples of earnings before interest, income taxes, depreciation and amortization (“EBITDA”) used in the calculation.  Additionally, the market approach estimates fair value using comparable marketplace fair value data from within a comparable industry grouping. The Company weighs both the income and market approach equally to estimate the concluded fair value of each reporting unit.

The determination of fair value and the allocation of that value to individual assets and liabilities requires the Company to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the selection of appropriate peer group companies; control premiums appropriate for acquisitions in the industries in which the Company competes; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, restructuring charges and capital expenditures. As part of its impairment test for its reporting units, the Company engages a third-party valuation firm to assist in the Company’s determination of certain assumptions used to estimate fair values.

As a result of the interim impairment tests Office Products and logistics, the Company did not recognize any goodwill impairment charges as the estimated fair values of the reporting units exceeded their respective carrying values by 10% and 32%, respectively.

Other Intangible Assets and Property, Plant and Equipment

Given the continued decline in demand in the magazines and catalogs reporting unit and the potential impact of COVID-19, management determined that a further review of the reporting unit’s property, plant and equipment and right-of-use assets for operating leases for recoverability was appropriate during the first quarter of 2020.  The Company performed a Step 1 recoverability test in accordance with Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment.  The recoverability test compares the estimated future undiscounted cash flows expected to result from the use of the asset group and its eventual disposition to the carrying value of the asset group; if the carrying value of the asset group exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset group’s carrying value over its fair value.  Based upon management’s updated projection of cash flows for this asset group, management determined that the estimated future undiscounted cash flows were in excess of the asset group’s carrying value, resulting in no impairment loss as a result of these tests in the first quarter of 2020.

21

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

In addition to the interim tests noted above, the Company reviewed the Office Products’ intangible assets and Books’ intangible assets and property, plant and equipment for recoverability. There were no impairment charges recorded as a result of the recoverability tests.

Future Interim Reviews

The Company will continue to perform interim reviews of goodwill for indicators of impairment each quarter to assess whether an interim impairment test is required for its goodwill balances or if recoverability tests are required for long-lived assets, including property, plant and equipment, and certain identifiable intangible assets, whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable.  Such reviews could result in future impairment charges, depending on the facts and circumstances in effect at the time of those reviews. 

Other Charges  

For each of the three months ended March 31, 2020 and 2019, the Company recorded de minimis amount of other charges for multiemployer pension plan withdrawal obligations unrelated to facility closures.  The total liability for the withdrawal obligations associated with the Company’s decision to withdraw from certain multiemployer pension plans included $3 million in accrued liabilities and $17 million in restructuring and multiemployer pension plan liabilities at March 31, 2020.    

The Company’s withdrawal liabilities could be affected by the financial stability of other employers participating in such plans and any decisions by those employers or the Company to withdraw from such plans in the future.  While it is not possible to quantify the potential impact of future events or circumstances, reductions in other employers’ participation in multiemployer pension plans, including certain plans from which the Company has previously withdrawn, could have a material effect on the Company’s previously estimated withdrawal liabilities and condensed consolidated balance sheets, statements of operations and cash flows.

Restructuring Reserve

The restructuring reserve as of December 31, 2019 and March 31, 2020, and changes during the three months ended March 31, 2020 were as follows:

	December 31,		Restructuring		Cash			March 31,
	2019		Charges		Paid			2020
Employee terminations	$	29	$	3	$	(5	)	$	27
Multiemployer pension plan withdrawal      obligations		31		1		(2	)		30
Other and lease termination		2		19		(13	)		8
Total	$	62	$	23	$	(20	)	$	65

The current portion of restructuring reserves of $41 million at March 31, 2020 was included in accrued liabilities, while the long-term portion of $24 million, which primarily related to multiemployer pension plan withdrawal obligations related to facility closures, was included in restructuring and multiemployer pension liabilities at March 31, 2020.        

The Company anticipates that payments associated with the employee terminations reflected in the above table will be substantially completed by March 31, 2021.  

Payments on all of the Company’s multiemployer pension plan withdrawal obligations are scheduled to be completed by 2034. Changes based on uncertainties in these estimated withdrawal obligations could affect the ultimate charges related to multiemployer pension plan withdrawal obligations.          

The restructuring liabilities classified as “other” consisted of other facility closing costs and costs associated with new revenue opportunities and cost savings initiatives implemented in 2019.

22

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

Note 8.  Commitments and Contingencies  

The Company is subject to laws and regulations relating to the protection of the environment.  The Company accrues for expenses associated with environmental remediation obligations when such amounts are probable and can be reasonably estimated. Such accruals are adjusted as new information develops or circumstances change and are generally not discounted.  The Company has been designated as a potentially responsible party or has received claims in nine active federal and state Superfund and other multiparty remediation sites. In addition to these sites, the Company may also have the obligation to remediate three other previously and currently owned facilities. At the Superfund sites, the Comprehensive Environmental Response, Compensation and Liability Act provides that the Company’s liability could be joint and several, meaning that the Company could be required to pay an amount in excess of its proportionate share of the remediation costs.

The Company’s understanding of the financial strength of other potentially responsible parties at the multiparty sites and of other liable parties at the previously owned facilities has been considered, where appropriate, in the determination of the Company’s estimated liability.  The Company established reserves, recorded in accrued liabilities and other noncurrent liabilities, that it believes are adequate to cover its share of the potential costs of remediation at each of the multiparty sites and the previously and currently owned facilities. It is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Company may undertake in the future.  However, in the opinion of management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material effect on the Company’s condensed consolidated balance sheets, statements of operations and cash flows.

From time to time, the Company’s customers and others file voluntary petitions for reorganization under United States bankruptcy laws. In such cases, certain pre-petition payments received by the Company from these parties could be considered preference items and subject to return.  In addition, the Company may be party to certain litigation arising in the ordinary course of business. Management believes that the final resolution of these preference items and litigation will not have a material effect on the Company’s consolidated balance sheets, statements of operations and cash flows.

Note 9.  Debt

The Company’s debt at March 31, 2020 and December 31, 2019 consisted of the following:   

	March 31,			December 31,
	2020			2019
Borrowings under the Revolving Credit Facility	$	249		$	249
Term Loan Facility due September 30, 2022 (a)		219			218
8.75% Senior Secured Notes due October 15, 2023		450			450
Finance lease and other obligations		1			2
Unamortized debt issuance costs		(8	)		(9	)
Total debt		911			910
Less: current portion		(911	)		(465	)
Long-term debt	$	—		$	445

(a) The borrowings under the Term Loan Facility are subject to a variable interest rate.  As of March 31, 2020 and December 31, 2019, the interest rate was 7.02% and 7.12%, respectively.      

__________________________________

On September 30, 2016, the Company issued $450 million of Senior Secured Notes (the “Senior Notes”). 

On September 30, 2016 the Company entered into a credit agreement (the “Credit Agreement”) that provides for (i) a senior secured term loan B facility in an aggregate principal amount of $375 million (the “Term Loan Facility”) and (ii) a senior secured revolving credit facility in an aggregate principal amount of $400 million (the “Revolving Credit Facility”), which was reduced to $300 million per the amendment effective on August 5, 2019.  The debt issuance costs and original issue discount are being amortized over the life of the facilities using the effective interest method.   

23

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

The Credit Agreement is subject to a number of covenants, including, but not limited to, a minimum Interest Coverage Ratio and a Consolidated Leverage Ratio, as defined in and calculated pursuant to the Credit Agreement, that, in part, restrict the Company’s ability to incur additional indebtedness, create liens, engage in mergers and consolidations, make restricted payments and dispose of certain assets. Each of these covenants is subject to important exceptions and qualifications.  

Credit Agreement Amendments

On December 20, 2018, the Company amended the Credit Agreement to, among other things, defer certain changes to the minimum Interest Coverage Ratio and the maximum Consolidated Leverage Ratio.  Effective August 5, 2019, the Company further amended the Credit Agreement to, among other things, defer certain changes to the minimum Interest Coverage Ratio and the maximum Consolidated Leverage Ratio.  The following summarizes the changes to the minimum Interest Coverage Ratio and the maximum Consolidated Leverage Ratio:

	Original	December 20, 2018	August 5, 2019
Maximum Consolidated Leverage Ratio
Current ratio	3.25 to 1.00	3.25 to 1.00	3.75 to 1.00
Step-down ratio	3.00 to 1.00	3.00 to 1.00	3.50 to 1.00 and 3.25 to 1.00
Step-down as of date (quarter ending on or after)	March 31, 2019	March 31, 2020	June 30, 2020 and March 31, 2021
Minimum Interest Coverage Ratio
Current ratio	3.25 to 1.00	3.25 to 1.00	2.50 to 1.00
Step-up ratio	3.50 to 1.00	3.50 to 1.00	2.75 to 1.00 and 3.00 to 1.00
Step-up as of date (quarter ending on or after)	March 31, 2019	March 31, 2020	September 30, 2020 and June 30, 2021

Other terms, including the outstanding principal, maturity date and other debt covenants remained the same under the December 20, 2018 amendment.    

The August 5, 2019 amendment resulted in a reduction in the Revolving Credit Facility aggregate principal amount from $400 million to $300 million and removed the general allowance to declare and pay annual dividends of up to $50 million.  The August 5, 2019 amendment included other changes that generally further restrict the Company’s ability to incur additional indebtedness, create liens, engage in mergers and consolidations, make restricted payments and dispose of certain assets.  The outstanding principal and maturity date of the Term Loan Facility remains the same, while the maturity date of the Revolving Credit Facility remains the same.     

Waiver, Forbearance Agreement and Fourth Amendment to Credit Agreement

Based on final results of operations for the year ended December 31, 2019, the Company concluded it was not in compliance with the Consolidated Leverage Ratio and Minimum Interest Ratio contained in the Credit Agreement as of December 31, 2019.  The noncompliance occurred on the last day of the fourth quarter due to the following: the Company’s Consolidated Leverage Ratio exceeded the maximum level permitted and the Company’s Minimum Interest Ratio was below the minimum level permitted.  On March 2, 2020, the Company entered into a Waiver, Forbearance Agreement and Fourth Amendment to Credit Agreement with lenders constituting a majority under the Credit Agreement that governs the Company’s Revolving Credit Facility and Term Loan Facility. The Waiver, Forbearance Agreement and Fourth Amendment to Credit Agreement waived the defaults or events of default that occurred as a result of the financial covenant noncompliance on December 31, 2019 and prevented the lenders from directing the Administrative Agent to accelerate the debt or exercise other remedies as a result of certain other potential defaults or events of default which may occur under the Credit Agreement (the “Potential Defaults”), through the period ended May 14, 2020 (such period, the “Forbearance Period”).  As a result of the noncompliance as of December, 31, 2019, the Company annual report on Form 10-K disclosed there was substantial doubt about the Company’s ability to continue as a going concern as of December 31, 2019.

24

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

Voluntary Reorganization under Chapter 11

The commencement of the Chapter 11 Cases constituted an event of default with respect to the Senior Notes, the Term Loan Facility and the Revolving Credit Facility (the “Debt Instruments”).  The Debt Instruments provide that as a result of the commencement of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable.  Any efforts to enforce payment obligations under the Debt Instruments will be automatically stayed as a result of the commencement of the Chapter 11 Cases, and the creditors’ right of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.

Debtor-in-Possession Financing

As previously disclosed, on April 15, 2020 (the “Closing Date”), the Company entered into a Superpriority Secured Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”), upon the entry of an interim order of the Bankruptcy Court granting interim approval of the DIP Credit Agreement, among the Company, as borrower, the lenders from time to time party thereto (the “DIP Lenders”) and Bank of America, N.A. as administrative agent (in such capacity, the “DIP Agent”), pursuant to which the DIP Lenders committed to provide a senior secured superpriority debtor-in-possession credit facility in an aggregate principal amount not to exceed $100 million (the “DIP Facility”).  

The DIP Facility consists of (i) revolving loans not to exceed an aggregate amount of $55 million (the “Revolving Loans”), subject to the limitation in the next succeeding sentence, and (ii) letters of credit not to exceed an aggregate amount of $45 million, with $5 million of that amount being available for the issuance of new letters of credit (together with the Revolving Loans, the “DIP Loan Commitments”).  During the interim period prior to the entry of a final order of the Bankruptcy Court authorizing the DIP Facility (the “Final Order”), the Company’s capacity to incur Revolving Loans is limited to an aggregate amount of up to $27.5 million.

Borrowings under the DIP Facility bear interest at a rate per annum equal to, at the Company’s option, either (i) the Alternate Base Rate (as defined in the DIP Credit Agreement) plus 5.75%, or (ii) LIBOR plus 6.75%.  Upon an event of default under the DIP Credit Agreement (an “Event of Default”), an additional 2.00% may be added to the Interest Rate.  In addition, the Company is required to pay (i) an unused line fee of 0.50% per annum (payable quarterly in arrears) on the average daily unused portion of the DIP Loan Commitments, (ii) a commitment fee of (x) 1.00% per annum on the DIP Loan Commitments, regardless of usage, plus (y) $100,000 per week for the first 20 weeks after the Closing Date, in each case, payable quarterly in arrears, (iii) a participation fee equal to 6.75% multiplied by the amounts available to be drawn under outstanding letters of credit, payable quarterly, and (iv) a fronting fee equal to 0.125% per annum on amounts available to be drawn under outstanding letters of credit, payable quarterly.

Proceeds of the loans made under the DIP Facility may be used only for the following purposes: (i) working capital and other general corporate purposes, including the payment of professional fees and expenses, (ii) to pay the reasonable fees and expenses of the DIP Agent and the DIP Lenders (including the reasonable fees and expenses of counsel and financial advisors), (iii) to pay claims in respect of certain prepetition creditors, (iv) to repay indebtedness owed to holders of the Prepetition Priority Payment Obligations (as defined in the DIP Credit Agreement) (the “Prepetition Revolving Lenders”), and (v) making adequate protection payments to the Prepetition Revolving Lenders, the Prepetition Term Lenders and the Prepetition Secured Noteholders (each as defined in the DIP Credit Agreement).

In connection with the DIP Credit Agreement, certain subsidiaries of the Company became parties to a guarantee agreement as guarantors (collectively, the “Guarantors,” and together with the Company, the “DIP Credit Parties”). Each of the Guarantors is a debtor and debtor-in-possession in the Chapter 11 Cases.  The Guarantors have guaranteed, on a joint and several basis, all of the obligations under the DIP Facility.  To secure the obligations under the DIP Facility, the Company and the Guarantors have granted liens on substantially all of their assets, whether now owned or hereafter acquired.

The DIP Facility will mature on the earliest of the following dates: (i) unless the Final Order is entered, May 15, 2020, (ii) the date upon which any Plan of Reorganization (as defined in the DIP Credit Agreement) becomes effective, or (iii) the six-month anniversary following the Petition Date, provided that such maturity may be extended with the consent of the Required Lenders (as defined in the DIP Credit Agreement) to a date no later than nine months after the Petition Date.

25

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

The DIP Credit Agreement contains representations, warranties and covenants that are customary for debtor-in-possession facilities of this type, including, but not limited to, certain case milestones, specified restrictions on indebtedness, liens, guarantee obligations, liquidations and dissolutions, sales of assets, leases, payment of dividends and other restricted payments, voluntary payments of other indebtedness, investments, loans and advances, transactions with affiliates, sale and leaseback transactions and compliance with case milestones. The DIP Credit Agreement also contains customary events of default for facilities of this type, including failure to achieve the milestones and the occurrence of certain events in the Chapter 11 Cases.

The DIP Facility is subject to final approval by the Bankruptcy Court.

Additional Debt Issuances Information

The fair values of the Senior Notes and Term Loan Facility that were determined using the market approach based upon interest rates available to the Company for borrowings with similar terms and maturities, were determined to be Level 2 under the fair value hierarchy.  The fair value of the Company’s debt was lower than its book value by approximately $546 million and $277 million at March 31, 2020 and December 31, 2019, respectively.  

There were $249 million of borrowings under the Revolving Credit Facility as of both March 31, 2020 and December 31, 2019.  The weighted-average interest rate on borrowings under the Company’s Revolving Credit Facility was 4.65% during the three months ended March 31, 2020.  

There was $18 million and $19 million of net interest expense during the three months ended March 31, 2020 and 2019, respectively.

Note 10.  Earnings Per Share

During the three months ended March 31, 2020 and 2019, no shares of common stock were purchased by the Company; however, a de minimis amount of shares were withheld from employees for tax liabilities upon vesting of equity awards.

Basic (loss) per share (“EPS”) is calculated by dividing net earnings attributable to the Company’s stockholders by the weighted average number of common shares outstanding for the period. In computing diluted EPS, basic EPS is adjusted for the assumed issuance of all potentially dilutive share-based awards, including stock options, restricted stock, restricted stock units, and performance share units.   

The following table shows the calculation of basic and diluted EPS, as well as a reconciliation of basic shares to diluted shares:

	Three Months Ended
	March 31,
	2020			2019 (1)
Net (loss) per common share:
Basic	$	(1.56	)	$	(3.77	)
Diluted	$	(1.56	)	$	(3.77	)
Numerator:
Net (loss)	$	(52	)	$	(125	)
Denominator:
Weighted average number of common shares           outstanding		33.6			33.3
Dilutive options and awards		—			—
Diluted weighted average number of common           shares outstanding		33.6			33.3

26

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

   Refer to Note 1, Overview and Basis of Presentation, for information on the restated balances for the three months ended March 31, 2019.

Note 11.  Retirement Plans

The Company is the sole sponsor of certain defined benefit pension plans that are included in the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019.  The assets and certain obligations of the defined benefit pension plans includes plans qualified under Section 401(a) of the Internal Revenue Code of 1986, the U.S. Qualified Plan and related non-qualified benefits (the “Non-Qualified Plan”).

The components of the estimated net pension loss (income) for the three months ended March 31, 2020 and 2019 were as follows:

	Three Months Ended
	March 31, 2020
	Qualified			Non-Qualified & International		Total
Interest cost	$	15		$	1	$	16
Expected return on plan assets		(30	)		—		(30	)
Amortization of actuarial loss		4			—		4
Net periodic benefit (income) loss	$	(11	)	$	1	$	(10	)

	Three Months Ended
	March 31, 2019
	Qualified			Non-Qualified & International		Total
Interest cost	$	20		$	1	$	21
Expected return on plan assets		(31	)		—		(31	)
Amortization of actuarial loss		3			—		3
Settlement of retirement obligations		132			—		132
Net periodic benefit loss	$	124		$	1	$	125

In the first quarter of 2020, the Company adopted a change in method of accounting for the market-related value of assets for a class of assets within the U.S. Qualified Plan and Non-Qualified plans.  The change in accounting method was retrospectively applied to periods in 2017, 2018 and 2019, and as a result, pension income shown above for the three months ended March 31, 2019 has been restated.  Refer to Note 1, Overview and Basis of Presentation, for more information.

In the first quarter of 2019, the Company completed a partial settlement of its retirement benefit obligations related to the U.S. Qualified Plan by purchasing a group annuity contract for certain retirees and beneficiaries from a third-party insurance company. As a result, the Company’s pension assets and liabilities were remeasured as of the settlement date.  As of the remeasurement date, the reduction in the reported pension obligation for the participants under the annuity contract was $477 million, and the reduction in plan assets was $466 million.  The Company recorded a non-cash settlement charge of $132 million in settlement of retirement benefit obligations in the condensed consolidated statement of operations in the first quarter of 2019.  This charge resulted from the recognition in earnings of a portion of the actuarial losses recorded in accumulated other comprehensive loss based on the proportion of the obligation settled.  

Settlement of retirement obligations is disclosed separately in the condensed consolidated statements of operations, while the remaining net periodic (loss) income for the three months ended March 31, 2020 and 2019 is included in the investment and other (income)-net.   

Note 12. Taxes

27

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

The CARES Act is intended to provide emergency relief to both businesses and individuals impacted by the COVID-19 pandemic.  

Income Taxes

The CARES Act enacted several provisions that may impact corporations including the carryback of certain net operating losses and the expensing of additional interest under certain circumstances.  The Company has estimated that these provisions will not result in a benefit for the three months ended March 31, 2020.  As the Company assesses additional guidance issued by the U.S. Treasury Department, the IRS and other standard-setting bodies related to the CARES Act, it may record an impact to the income tax provision.  

Payroll Taxes

The CARES Act allows companies to defer payments of the employer share (6.2% of wages) of Social Security payroll taxes from the date of enactment through December 31, 2020.  Fifty percent of the taxes deferred are required to be paid by December 31, 2021 with the remaining fifty percent by December 31, 2022. As of March 31, 2020, the Company accrued $2 million of payroll taxes that will benefit from this adoption. The Company expects to continue to defer payroll taxes through the end of 2020.

Note 13.  Comprehensive Income

The following table summarizes accumulated other comprehensive loss by component as of December 31, 2019 and March 31, 2020 and changes during the three months ended March 31, 2020.     

	Pension			Translation
	Plan Cost			Adjustments			Total
Balance at December 31, 2019	$	(464	)	$	(53	)	$	(517	)
Other comprehensive (loss) before reclassifications		—			(11	)		(11	)
Amounts reclassified from accumulated other comprehensive loss		3			—			3
Net change in accumulated other comprehensive income (loss)		3			(11	)		(8	)
Balance at March 31, 2020	$	(461	)	$	(64	)	$	(525	)

The following table summarizes accumulated other comprehensive loss by component as of December 31, 2018 and March 31, 2019 and changes during the three months ended March 31, 2019.

	Pension			Translation
	Plan Cost			Adjustments			Total
Balance at December 31, 2018	$	(520	)	$	(55	)	$	(575	)
Other comprehensive income before reclassifications		104			1			105
Amounts reclassified from accumulated other comprehensive loss		2			—			2
Net change in accumulated other comprehensive loss		106			1			107
Balance at March 31, 2019	$	(414	)	$	(54	)	$	(468	)

In the first quarter of 2020, the Company adopted a change in method of accounting for the market-related value of assets for a class of assets within the U.S. Qualified Plan and Non-Qualified plans.  The change in accounting method was retrospectively applied to periods in 2017, 2018 and 2019, and as a result, the pension rollforward for accumulated other comprehensive loss above and reclassification table below have been restated for the three months ended March 31, 2019.  Refer to Notes 1, Overview and Basis of Presentation, and 11, Retirement Plans, for more information.    

In the first quarter of 2019, the Company completed a partial settlement of its retirement benefit obligations and, as a result, the Company’s pension assets and liabilities were remeasured as of the settlement date.  The impact, net of tax, to the Company’s accumulated other comprehensive loss was a decrease of $104 million during the three months ended March 31, 2019 (including the restatement noted above).  Refer to Note 11, Retirement Plans, for more information.

28

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

Refer to the condensed consolidated statements of comprehensive income for the components of comprehensive (loss) income for the three months ended March 31, 2020 and 2019.

Reclassifications from accumulated other comprehensive loss for the three months ended March 31, 2020 and 2019 were as follows:  

	Three Months Ended
	March 31,
	2020		2019 (1)
Amortization of pension plan cost:
Net actuarial loss (a)	$	4	$	3
Reclassifications before tax		4		3
Income tax expense		1		1
Reclassifications, net of tax	$	3	$	2

(a) Amortization of pension plan cost is included in the calculation of net periodic pension plan (income) expense that is recognized in investment and other income-net in the condensed consolidated statements of operations (see Note 11, Retirement Plans).    

(1) As Adjusted – Refer to the narrative above on the change in accounting method.    

Note 14.  Segment Information

As a result of the Company’s segment analysis in the fourth quarter of 2019, Mexico met the requirements to be classified as a reportable segment (previously included as a non-reportable segment).  All prior year amounts have been reclassified to conform to the Company’s current reporting structure.  

The Company’s segment and product and service offerings are summarized below

Magazines, Catalogs and Logistics

The Magazines, Catalogs and Logistics segment primarily produces magazines and catalogs and provides logistics solutions to the Company and other third parties.  The segment also provides certain other print-related services, including mail services.  The segment has operations primarily in the U.S.  The Magazines, Catalogs and Logistics segment is divided into two reporting units: magazines and catalogs; and logistics.

Book

The Book segment produces books for publishers primarily in the U.S.  The segment also provides supply-chain management services and warehousing and fulfillment services, as well as e-book formatting for book publishers.  

Office Products

The Office Products segment manufactures and sells branded and private label products in five core categories: filing products, envelopes, note-taking products, binder products, and forms. 

Mexico

Mexico produces magazines, catalogs, statements, forms, and labels. 

29

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

Other

The Other grouping consists of the following non-reportable segments: Directories and Print Management.  Print Management provides outsourced print procurement and management services.  

Corporate

Corporate consists of unallocated selling, general and administrative activities and associated expenses including executive, legal, finance, communications, certain facility costs and LIFO inventory provisions.  In addition, share-based compensation expense is included in Corporate and not allocated to the operating segments.

Information by Segment

The Company has disclosed income (loss) from operations as the primary measure of segment earnings (loss).  This is the measure of profitability used by the Company’s chief operating decision-maker and is most consistent with the presentation of profitability reported with the condensed consolidated financial statements.   

			Income (Loss)					Depreciation
Three Months Ended	Net		from			Assets of		and		Capital
March 31, 2020	Sales		Operations			Operations		Amortization		Expenditures
Magazines, Catalogs and Logistics	$	327	$	(35	)	$	597	$	11	$	7
Book		204		(9	)		468		12		4
Office Products		112		7			282		3		—
Mexico		23		3			51		1		—
Total reportable segments		666		(34	)		1,398		27		11
Other		35		3			29		—		—
Corporate		—		(12	)		128		—		—
Total operations	$	701	$	(43	)	$	1,555	$	27	$	11

			Income (Loss)					Depreciation
Three Months Ended	Net		from			Assets of		and		Capital
March 31, 2019	Sales		Operations			Operations		Amortization		Expenditures
Magazines, Catalogs and Logistics	$	403	$	(31	)	$	795	$	15	$	10
Book		260		13			647		12		17
Office Products		119		8			329		3		—
Mexico		24		3			68		1		1
Total reportable segments		806		(7	)		1,839		31		28
Other		39		1			22		—		—
Corporate		—		(13	)		86		—		—
Total operations	$	845	$	(19	)	$	1,947	$	31	$	28

Restructuring, impairment and other charges by segment for the three months ended March 31, 2020 and 2019 are disclosed in Note 7, Restructuring, Impairment and Other Charges.

30

LSC Communications, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three Months Ended March 31, 2020 and 2019

(tabular amounts in millions, except per share data)

Note 15.  New Accounting Pronouncements

In August 2018, the FASB issued Accounting Standards Update No. 2018-14 “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”).  ASU 2018-14 modifies the annual disclosure requirements for employers that sponsor defined benefit pension plans.  ASU 2018-14 is effective for 2020 year-end disclosures.  Early adoption of ASU 2018-14 is permitted; however, the Company plans to adopt the standard for the 2020 year-end disclosures. The Company does not anticipate a significant impact.

In December 2019, the FASB issued Accounting Standards Update No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12").  ASU 2019-12 removes certain exceptions for intraperiod tax allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes, including a modification in the guidance for franchise taxes that are partially based on income and recognizing deferred taxes for a subsequent step-up in the tax basis of goodwill.  ASU 2019-12 is effective in the first quarter of 2021.  Early adoption of ASU 2019-12 is permitted; however, the Company plans to adopt the standard in the first quarter of 2021.  The Company is in the process of assessing the impact of the new standard.  

31

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     

The following is management’s discussion and analysis of the financial condition of LSC Communications, Inc. as of March 31, 2020 and December 31, 2019 and the results of operations for the three months ended March 31, 2020 and 2019.  This commentary should be read in conjunction with the condensed consolidated financial statements and accompanying notes included in Item 1, Condensed Consolidated Financial Statements.  Refer to the Company’s annual report on Form 10-K, as filed with the Securities and Exchange Commission (“SEC”) on March 2, 2020, for management’s discussion and analysis of the financial condition of the company as of December 31, 2019 and December 31, 2018, and the results of operations for the years ended December 31, 2019, 2018 and 2017.                                     

Company Overview

The principal business of LSC Communications, Inc., a Delaware corporation, and its direct or indirect wholly-owned subsidiaries (“LSC Communications,” “the Company,” “we,” “our” and “us”) is to offer a broad scope of traditional and digital print, print-related services and office products.

Voluntary Reorganization under Chapter 11

As a result of the commencement of the Chapter 11 Cases, the Company’s operations and ability to develop and execute its business plan are subject to the risks and uncertainties associated with the reorganization process under the Bankruptcy Code.  Following the outcome of the Chapter 11 Cases, the amount and composition of the Company’s assets, liabilities, officers and/or directors, and the description of the Company’s operations, properties, liquidity and capital resources included in this quarterly report may be significantly different.

DIP Financing

See Note 9, Debt, for information on the DIP Facility, which provides up to $100 million of financing in the form of revolving loans and letters of credit.

Going Concern

The accompanying condensed consolidated financial statements were prepared assuming that the Company will continue as a going concern and contemplate the continuity of our operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business.  Our ability to continue as a going concern is contingent upon our ability to comply with the covenants of the DIP Credit Agreement described in Note 9, Debt, and our ability to implement, subject to the Bankruptcy Court’s approval, a restructuring plan, among other factors.

While operating as debtors-in-possession under Chapter 11, we may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions in our debt agreements), for amounts other than those reflected in the accompanying condensed consolidated financial statements.  Further, the restructuring plan could materially change the amounts and classifications of assets and liabilities reported in the condensed consolidated financial statements.

As a result of the factors noted above, we believe there is substantial doubt about the Company’s ability to continue as a going concern.  The condensed consolidated financial statements included in this quarterly report on Form 10-Q do not include any adjustments related to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 

32

Coronavirus Pandemic (“COVID-19”)

During and subsequent to the first quarter of 2020, the novel coronavirus strain, known as COVID-19, continues to spread across the globe at an increasing rate. Measures taken by governmental authorities and private actors to limit the spread of this virus may interfere with the ability of the Company's employees, suppliers, and other business providers to carry out their assigned tasks or supply materials at ordinary levels of performance relative to the conduct of the business which may cause a material curtailment to certain business operations. Moreover, as a large part of the Company's business involves sales of books and other products used in schools and school facilities, if COVID-19 related measures continue to result in widespread and lengthy school closings, the Company's condensed consolidated results of operations and financial condition will be adversely impacted.  Books sold in retail stores have also been adversely impacted as both large chains and independent stores have been forced to close.  Additionally, as COVID-19 has significantly impacted retailers' stores, distribution centers and supply chains, the Company expects to experience an adverse impact on our catalogs and office products businesses.  Disruption across many other industries has also significantly impact demand for advertising, which is expected to result in page count and volume reductions in magazines.

We continue to monitor the situation, to assess further possible implications to our business and customers, and to take actions in an effort to mitigate adverse consequences. The Company has expanded its work-from-home policy for its non-manufacturing employees, has focused on obtaining protective equipment and implementing social distancing and other policies for its manufacturing employees and continues to adhere to guidance issued by governmental authorities.  The Company is unable to quantify the impact on our business at this time, but it could have a material adverse effect on our condensed consolidated financial statements in the future.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law.  Refer to Note 12, Taxes, for more information on the CARES Act.

Segment Descriptions

As a result of the Company’s segment analysis in the fourth quarter of 2019, Mexico met the requirements to be classified as a reportable segment (previously included as a non-reportable segment).  All prior year amounts have been reclassified to conform to the Company’s current reporting structure.  

The Company’s segment and product and service offerings are summarized below

Magazines, Catalogs and Logistics

The Magazines, Catalogs and Logistics segment primarily produces magazines and catalogs and provides logistics solutions to the Company and other third parties.  The segment also provides certain other print-related services, including mail services.  The segment has operations primarily in the U.S.  The Magazines, Catalogs and Logistics segment is divided into two reporting units: magazines and catalogs; and logistics.

Book

The Book segment produces books for publishers primarily in the U.S.  The segment also provides supply-chain management services and warehousing and fulfillment services, as well as e-book formatting for book publishers.  

Office Products

The Office Products segment manufactures and sells branded and private label products in five core categories: filing products, envelopes, note-taking products, binder products, and forms. 

Mexico

Mexico produces magazines, catalogs, statements, forms, and labels. 

33

Other

The Other grouping consists of the following non-reportable segments: Directories and Print Management.  Print Management provides outsourced print procurement and management services.  

Corporate

Corporate consists of unallocated selling, general and administrative activities and associated expenses including executive, legal, finance, communications, certain facility costs and last in, first out (“LIFO”) inventory provisions.  In addition, share-based compensation expense is included in Corporate and not allocated to the operating segments.

Outlook

Competitive Environment

According to the December 2019 IBIS World industry report “Printing in the U.S.,” estimated total annual printing industry revenue is approximately $80 billion, of which approximately $13 billion relates to our core segments of the print market and an additional approximately $33 billion pertains to related segments of the print market in which we are able to offer certain products. Despite consolidation in recent years, including several acquisitions completed by LSC Communications, the industry remains highly fragmented and LSC Communications is one of the largest players in our segment of the print market.  The print and related services industry, in general, continues to have excess capacity and LSC Communications remains diligent in proactively identifying plant consolidation opportunities to keep our capacity in line with demand.  Across the Company’s range of print products and services, competition is based primarily on the ability to deliver products for the lowest total cost, a factor driven not only by price, but also by materials and distribution costs.  We expect that prices for print products and services will continue to be a focal point for customers in coming years. 

Value-added services, such as LSC Communications’ co-mail, logistics and supply chain management offerings, enable customers to lower their total costs. Technological changes, including the electronic distribution of documents and data, online distribution and hosting of media content, and advances in digital printing, print-on-demand and internet technologies, continue to impact the market for our products and services.  

The Company’s product and service offerings have been impacted by the following:

• The impact of digital technologies has been felt in many print products.  Digital technologies have impacted printed magazines as advertising spending continues to move from print to electronic media.  

• Catalogs have experienced volume reductions as our customers allocate more of their spending to online resources and also face competition from online retailers resulting in retailer compression.

• The effect of COVID-19 in 2020 on the industries the Company services.

• The Company has seen an unprecedented drop in demand for magazines and catalogs, with the faster pace of decline in demand primarily due to the accelerated impact of digital disruption of demand for printed materials.

• Educational books within the college market continue to be impacted by electronic substitution and other trends.  The K-12 educational sector continues to be focused on increasing digital distribution but there has been inconsistent adoption across school systems.

• E-book substitution has impacted overall consumer print trade book volume, although e-book adoption rates have stabilized and industry-wide print book volume has been growing in recent years.  

• Electronic communication and transaction technology has also continued to drive electronic substitution in directory printing, in part driven by cost pressures at key customers.

The future impact of technology on our business is difficult to predict; however, it is likely to result in additional expenditures to restructure impacted operations or develop new technologies. In addition, we have made targeted acquisitions and investments in our existing business to offer customers innovative services and solutions. Such acquisitions and investments include the acquisitions of Print Logistics in 2018 and Clark Group, Quality Park, Publishers Press, CREEL, Fairrington, and HudsonYards in 2017, which expanded our logistics, printing, digital, office products, and premedia capabilities, and Continuum in 2016, which expanded our print management capabilities.  These acquisitions and investments further secure our position as a technology leader in the industry.

34

Technological advancement and innovation continues to affect the overall demand for most of the products in our Office Products segment.  However, the overall market for our products remains large and we believe share growth is attainable.  We compete against a range of both domestic and international competitors in each of our product categories within the segment.  Due to the increasing percentage of private label products in the market, resellers have created a highly competitive environment where purchasing decisions are based largely on price, quality and the supplier’s ability to service the customer.  As consumer preferences shift towards private label, resellers have increased the pressure on suppliers to better differentiate their product offering, oftentimes through product exclusivity, product innovation and development of private label products.  We have experienced robust growth within our e-commerce channel, where a significant majority of our sales are branded products.

We have implemented a number of strategic initiatives to reduce our overall cost structure and improve efficiency, including the restructuring, reorganization and integration of operations and streamlining of administrative and support activities.  Future cost reduction initiatives are likely to include the reorganization of operations and the consolidation of facilities.  Implementing such initiatives might result in future restructuring or impairment charges, which may be substantial.  We also review our operations and management structure on a regular basis to appropriately balance risks and opportunities to maximize efficiencies and to support our long-term strategic goals.

During late 2018 and early 2019, the Company performed a comprehensive review of the Company’s entire operations to identify new revenue opportunities and cost savings.  This review covered substantially all aspects of the Company – both operational and support functions – and involved key personnel from throughout the organization.  The resulting revenue opportunities and cost savings initiatives were approved by senior management in the first quarter of 2019 and are expected to be implemented over the next three years.  While the Company realized the benefits beginning in 2019 and expects to realize benefits at various points over the next three years, the Company has incurred $15 million of expense, of which $5 million was incurred during the three months ended March 31, 2020, relating to the implementation of certain identified initiatives.  As the Company continues to implement the identified initiatives, the Company expects to incur additional expense; however, the Company expects the resulting benefits (additional revenue and/or cost savings) to significantly exceed the additional expense.

Raw Materials  

We negotiate with suppliers to maximize our purchasing efficiencies.  The primary raw materials we use in our printed products are paper and ink.  We negotiate with paper suppliers to maximize our purchasing efficiencies and use a wide variety of paper grades and formats. In addition, a substantial amount of paper used in our printed products is supplied directly by customers.  Variations in the cost and supply of certain paper grades used in the manufacturing process may affect our consolidated financial results.  Generally, customers directly absorb the impact of changing prices on customer-supplied paper.  For paper that we purchase, we have historically passed most changes in price through to our customers.  We entered into a paper consignment agreement at the end of 2019 that will encompass substantially all of LSC Communications’ purchased paper by mid-2020 to reduce our working capital.

Contractual arrangements and industry practice should support our continued ability to pass on any future paper price increases, but there is no assurance that market conditions will continue to enable us to successfully do so.  Higher paper prices and tight paper supplies may have an impact on customers’ demand for printed products.  We also resell waste paper and other print-related by-products and may be impacted by changes in prices for these by-products.

We use a wide variety of ink formulations and colors in our manufacturing processes. Variations in the cost and supply of certain ink formulations may affect our consolidated financial results. We have undertaken various strategic initiatives to try to mitigate any foreseeable supply disruptions with respect to our ink requirements, including entering into a long term supply arrangement with a single supplier for a substantial portion of our ink supply.  Certain contractual protections exist in our relationship with such supplier, such as price and quality protections and an ability to seek alternative sources of ink if the supplier breaches or is unable to perform certain of its obligations, which are intended to mitigate the risk of ink-related supply disruptions.

The primary materials used in the Office Products segment are paper, steel and polypropylene substrates. We negotiate with leading paper, plastic and steel suppliers to maximize our purchasing efficiencies.  All of these materials are available from a number of domestic and international suppliers and we are not dependent upon any single supplier for any of these materials.  We believe that adequate supply is available for each of these materials for the foreseeable future, although higher paper prices may have an impact on demand for our products.

Changes in material prices, including paper, may impact the Company’s operating margins as there may be a lag between when the Company experiences the changes and when they are absorbed by our customers.  

35

Except for our long-term supply arrangement regarding ink and paper consignment agreement, we do not consider ourselves to be dependent upon any single vendor as a source of supply for our businesses, and we believe that sufficient alternative sources for the same, similar or alternative products are available.

Changes in the price of raw materials, crude oil and other energy costs impact our manufacturing costs. Crude oil and energy prices continue to be volatile. Should prices increase, we generally cannot pass on to customers the impact of higher energy prices on our manufacturing costs.  We do enter into fixed price contracts for a portion of our natural gas purchases to mitigate the impact of changes in energy prices.  We cannot predict sudden changes in energy prices and the impact that possible future changes in energy prices might have upon either future operating costs or customer demand and the related impact either will have on the Company’s condensed consolidated statements of operations, balance sheets and cash flows.

Pension Benefit Plans

The funded status of the Company’s pension benefit plans is dependent upon many factors, including returns on invested assets and the level of certain market interest rates.  Market conditions may lead to changes in the discount rates (used to value the year-end benefit obligations of the plans) and the market value of the securities held by the plans, which could significantly increase or decrease the funded status of the plans.  The Company reviews its actuarial assumptions on an annual basis as of December 31.  Based on current estimates, the Company expects to make cash contributions of approximately $6 million to its pension benefit plans for the full year in 2020, of which $1 million has been contributed during the three months ended March 31, 2020.  

Beginning in the first quarter of 2020, the Company changed the method of accounting for the market-related value of assets for a class of assets within the U.S. Qualified Plan and Non-Qualified plans.  The change in accounting method was retrospectively applied to periods in 2017, 2018 and 2019.  Refer to Note 1, Overview and Basis of Presentation, for more information.

Based on the fair value of assets and the estimated discount rate used to value benefit obligations as of March 31, 2020, the Company estimates the unfunded status of the pension benefit plans to be approximately $113 million compared to $162 million at December 31, 2019.     

See Note 11, Retirement Plans, for more information on the Company’s pension benefit plans.

Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies disclosed in the annual report on Form 10-K for the year-ended December 31, 2019.      

36

FINANCIAL REVIEW

In the financial review that follows, the Company discusses its condensed consolidated balance sheets, statements of operations, cash flows and certain other information.  This discussion should be read in conjunction with the Company’s condensed consolidated financial statements and the related notes.

Results of Operations for the three months ended March 31, 2020 as Compared to the three months ended March 31, 2019

The following table shows the results of operations for the three months ended March 31, 2020 and 2019, which reflects the results of the acquired businesses from the relevant acquisition dates:

	Three Months Ended
	March 31,
	2020			2019			$ Change			% Change
	(in millions, except percentages)
Net sales	$	701		$	845		$	(144	)		(17.0	%)
Cost of sales		616			735			(119	)		(16.2	%)
Cost of sales as a % of net sales		87.9	%		87.0	%
Selling, general and administrative expenses (exclusive of depreciation      and amortization)		75			85			(10	)		(11.8	%)
Selling, general and administrative expenses as a % of net sales		10.7	%		10.1	%
Restructuring, impairment and other charges-net		26			13			13			100.0	%
Depreciation and amortization		27			31			(4	)		(12.9	%)
(Loss) from operations	$	(43	)	$	(19	)	$	(24	)		126.3	%

Condensed Consolidated Results              

Net sales for the three months ended March 31, 2020 were $701 million, a decrease of $144 million, or 17.0%, compared to the three months ended March 31, 2019.  Net sales were impacted by lower volume in magazines, catalogs and book products and a $41 million decrease in pass-through paper sales.

Total cost of sales decreased $119 million, or 16.2%, for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, primarily driven by lower volume and cost control initiatives.

As a percentage of net sales, cost of sales increased from 87.0% for the three months ended March 31, 2019 to 87.9% for three months ended March 31, 2020 primarily due to lower volume.

Selling, general and administrative expenses decreased $10 million, or 11.8%, for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, primarily due to higher expenses in 2019 related to the previously terminated merger agreement, lower volume and cost control initiatives.

For the three months ended March 31, 2020, the Company recorded restructuring, impairment and other charges of $26 million. The charges primarily included:  

• Net other restructuring charges of $22 million primarily due to facility costs, expenses to move equipment, costs associated with new revenue opportunities and cost savings initiatives implemented in 2019; and

• Employee termination costs of $3 million related to an aggregate of 397 employees, of whom 197 were terminated as of or prior to March 31, 2020 primarily related to the closure of one facility closure in the Office Products segment.

For the three months ended March 31, 2019, the Company recorded restructuring, impairment and other charges of $13 million. The charges primarily included:    

• Net other restructuring charges of $6 million primarily due to charges related to facility costs and costs associated with new revenue opportunities and cost savings initiatives implemented during the quarter;

37

• Employee termination costs of $5 million related to an aggregate of 240 employees, of whom 16 were terminated as of or prior to March 31, 2019 primarily related to the closure of one facility in the Magazines, Catalogs and Logistics segment; and

• $2 million of net impairment charges related to machinery and equipment associated with facility closings in the Magazines, Catalogs and Logistics segment.

Depreciation and amortization decreased $4 million to $27 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, due to decreased capital spending in recent years compared to historical levels.

	Three Months Ended
	March 31,
	2020			2019 (1)			$ Change			% Change
	(in millions, except percentages)
Interest expense-net	$	18		$	19		$	(1	)		(5.3	%)
Settlement of retirement benefit obligations		—			132			(132	)		(100.0	%)
Investment and other (income)-net		(10	)		(8	)		(2	)		25.0	%

Refer to Note 11, Retirement Plans, for information on the non-cash settlement charge related to retirement benefit obligations. Investment and other (income)-net primarily relates to the Company’s pension benefit plans in both years.  

	Three Months Ended
	March 31,
	2020			2019 (1)			$ Change
	(in millions, except percentages)
Net (loss) before income taxes	$	(51	)	$	(162	)	$	111
Income tax expense (benefit)		1			(37	)		38
Effective income tax rate		(2.7	%)		22.7	%

The effective income tax rate for the three months ended March 31, 2020 was (2.7)% compared to 22.7% for the three months ended March 31, 2019.  The effective income tax rate for the three months ended March 31, 2020 reflects the company’s limited ability to benefit U.S. results as the Company has a valuation allowance recorded on its U.S. deferred tax assets.  

The effective income tax rate for the three months ended March 31, 2019 reflects the impact of nondeductible merger costs and share-based compensation awards that either lapsed or vested.    

(1) As Adjusted - Refer to Note 1, Overview and Basis of Presentation, for information on restated balances.

Information by Segment

The following tables summarize net sales, income (loss) from operations and certain items impacting comparability within each of the reportable segments and Corporate.  The descriptions of the reporting units generally reflect the primary products provided by each reporting unit.

Magazines, Catalogs and Logistics  

	Three Months Ended
	March 31,
	2020			2019			Change
	(in millions, except percentages)
Net sales	$	327		$	403		$	(76	)
(Loss) from operations		(35	)		(31	)		(4	)
Operating margin		(10.7	%)		(7.7	%)	(300) bps
Restructuring, impairment and other charges-net		11			11			—

38

Net sales for the Magazines, Catalogs and Logistics segment for the three months ended March 31, 2020 were $327 million, a decrease of $76 million, or 18.9%, compared to the three months ended March 31, 2019.  The Magazines, Catalogs and Logistics segment’s net sales decreased primarily due to lower volume in magazines, catalogs and logistics and a $28 million decrease in pass-through paper sales.

The change in Magazines, Catalogs and Logistics segment loss from operations and operating margins was primarily due to lower volume, partially offset by cost control initiatives.    

Book

	Three Months Ended
	March 31,
	2020			2019			Change
	(in millions, except percentages)
Net sales	$	204		$	260		$	(56	)
(Loss) income from operations		(9	)		13			(22	)
Operating margin		(4.4	%)		5.0	%	(940 bps)
Restructuring, impairment and other charges-net		3			1			2

Net sales for the Book segment for the three months ended March 31, 2020 were $204 million, a decrease of $56 million, or 21.4%, compared to the three months ended March 31, 2019, primarily due to lower volume in educational and digitally-printed books and a $9 million decrease in pass-through paper sales.

The decrease in the operating income and margins was driven by lower volume and higher restructuring, impairment and other charges.

Office Products

	Three Months Ended
	March 31,
	2020			2019			Change
	(in millions, except percentages)
Net sales	$	112		$	119		$	(7	)
Income from operations		7			8			(1	)
Operating margin		6.3	%		6.7	%	(40) bps
Restructuring, impairment and other charges-net		2			—			2

Net sales for the Office Products segment for the three months ended March 31, 2020 were $112 million, a decrease of $7 million, or 5.6%, compared to the three months ended March 31, 2019, largely as a result of lower volume in envelopes and notetaking products, partially offset by higher volume in filing products.

The decrease in Office Products segment income from operations and operating margin was primarily due to higher restructuring, impairment and other charges and lower volume, partially offset by cost control initiatives.

Mexico

	Three Months Ended
	March 31,
	2020			2019			Change
	(in millions, except percentages)
Net sales	$	23		$	24		$	(1	)
Income from operations		3			3			—
Operating margin		13.0	%		12.5	%	50 bps

39

Net sales for the Mexico segment were $23 million for the three months ended March 31, 2020, a decrease of $1 million or 3.6%, compared to the three months ended March 31, 2019.  There were no significant changes to net sales or income from operations for the three months ended March 31, 2020 compared to the same period in 2019.

Other

	Three Months Ended
	March 31,
	2020			2019			Change
	(in millions, except percentages)
Net sales	$	35		$	39		$	(4	)
Income from operations		3			1			2
Operating margin		8.6	%		2.5	%	610 bps

Net sales for the Other grouping for the three months ended March 31, 2020 were $35 million, a decrease of $4 million, or 10.6%, compared to the three months ended March 31, 2019, primarily due to a $4 million decrease in pass-through paper sales and lower directories volume.

The increase in income from operations and change in operating margins was primarily due to cost control initiatives and mix of work.

Corporate   

The following table summarizes unallocated operating expenses and certain items impacting comparability within the activities presented as Corporate:   

	Three Months Ended
	March 31,
	2020		2019		Change
	(in millions)
Total operating expenses	$	12	$	13	$	(1	)
Significant components of total operating      expenses:
Restructuring, impairment and other charges-net		10		1		9
Share-based compensation expenses		1		3		(2	)
Expenses related to acquisitions, merger agreement      and dispositions		—		7		(7	)

Non-GAAP Measures   

The Company believes that certain non-GAAP measures, such as Non-GAAP adjusted EBITDA, provide useful information about the Company’s operating results and enhance the overall ability to assess the Company’s financial performance.  The Company uses these measures, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business.  Non-GAAP adjusted EBITDA allows investors to make a more meaningful comparison between the Company’s core business operating results over different periods of time.  The Company believes that Non-GAAP adjusted EBITDA, when viewed with the Company’s results under GAAP and the accompanying reconciliations, provides useful information about the Company’s business without regard to potential distortions.  By eliminating potential differences in results of operations between periods caused by factors such as depreciation and amortization methods and restructuring, impairment and other charges, the Company believes that Non-GAAP adjusted EBITDA can provide a useful additional basis for comparing the current performance of the underlying operations being evaluated.

Non-GAAP adjusted EBITDA is not presented in accordance with GAAP and has important limitations as an analytical tool.  Readers should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP.  In addition, these measures are defined differently by different companies in our industry and, accordingly, such measures may not be comparable to similarly-titled measures of other companies.          

40

Non-GAAP adjusted EBITDA excludes restructuring, impairment and other charges-net, share-based compensation expense, settlement of retirement benefit obligations, and expenses related to acquisitions, merger agreement and dispositions.  In the first quarter of 2020, the Company began including share-based compensation expense as a non-GAAP measure.  As the share-based compensation expense recorded in the current period represents expense for previously issued grants that will vest at a lower share price than originally expensed, management determined that share-based compensation expense represents a non-GAAP measure.  Share-based compensation expense was $1 million and $3 million during the three months ended March 31, 2020 and 2019, respectively. The reconciliation for the three months ended March 31, 2019 below has been restated to reflect this change.

A reconciliation of GAAP net income to non-GAAP adjusted EBITDA for the three months ended March 31, 2020 and 2019 is presented in the following table:

	Three Months Ended
	March 31,
	2020			2019 (1)
	(in millions)
Net (loss)	$	(52	)	$	(125	)
Restructuring, impairment and other charges-      net		26			13
Share-based compensation expense		1			3
Settlement of retirement benefit obligations		—			132
Expenses related to acquisitions, merger      agreement and dispositions		—			7
Depreciation and amortization		27			31
Interest expense-net		18			19
Income tax expense (benefit)		1			(37	)
Non-GAAP adjusted EBITDA	$	21		$	43

The adjustments to arrive at non-GAAP adjusted EBITDA are summarized below:     

• Restructuring, impairment and other charges-net: Refer to Results of Operations for the Three Months Ended March 31, 2020 as Compared to the Three Months Ended March 31, 2019 for information on the charges.

• Share-based compensation expense: The Company incurred $1 million and $3 million of expenses during the three months ended March 31, 2020 and 2019, respectively, in relation to its share-based compensation plans.  There were no new plans granted in 2020.

• Settlement of retirement obligations: Refer to Note 11, Retirement Plans, for more information on the settlement charges.

• Expenses related to acquisitions, merger agreement and dispositions: The three months ended March 31, 2019 included charges of $7 million primarily related to the previously terminated merger agreement.

(1) As Adjusted - Refer to Note 1, Overview and Basis of Presentation, for information on restated balances.

LIQUIDITY AND CAPITAL RESOURCES  

The following sections describe the Company’s cash flows for the three months ended March 31, 2020 and 2019.

	Three Months Ended
	March 31,
	2020			2019
	(in millions)
Net cash (used in) operating activities	$	(39	)	$	(24	)
Net cash (used in) investing activities		(9	)		(31	)
Net cash provided by financing      activities		2			46

41

Cash Flows from Operating Activities

Operating cash inflows are largely attributable to sales of the Company’s products.  Operating cash outflows are largely attributable to recurring expenditures for raw materials, labor, rent, interest, taxes and other operating activities.  

Net cash used in operating activities was $39 million for the three months ended March 31, 2020 compared to $24 million for the three months ended March 31, 2019. The change was primarily due to a decrease in sales volume, an increase in restructuring payments and an increase in prepaid expenses, partially offset by improvements in timing of customer payments received and vendor payments made and by a decrease in inventory.

Cash Flows from Investing Activities

Net cash used in investing activities for the three months ended March 31, 2020 was $9 million compared to $31 million for the same period in 2019.  The decrease was primarily due to $17 million of lower capital expenditures during the three months ended March 31, 2020 compared to the same period in 2019.

Cash Flows from Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2020 was $2 million compared to $46 million for the same period in 2019. There was minimal financing activity during the three months ended March 31, 2020 compared to the following significant activity during the three months ended March 31, 2019:

• $67 million of net proceeds from credit facility borrowings;

• $11 million in payments of current maturities and long-term debt; and

• $9 million of dividends paid.

Dividends

As a result of the DIP Credit Agreement, the Company is restricted from issuing dividend payments.

LIQUIDITY

Cash and cash equivalents were $56 million and $105 million as of March 31, 2020 and December 31, 2019, respectively.

The Company’s cash balances are held in several locations throughout the world, including amounts held outside of the United States.  Cash and cash equivalents as of March 31, 2020 included $40 million in the U.S. and $16 million at international locations.

Until September 30, 2019, the Company maintained cash pooling structures that enabled participating international locations to draw on the pools’ cash resources to meet local liquidity needs.  Foreign cash balances were permitted to be loaned from certain cash pools to U.S. operating entities on a temporary basis in order to reduce the Company’s short-term borrowing costs or for other purposes.   The pooling structure was discontinued in October 2019. As of March 31, 2020, the Company had $249 million of borrowings under the Revolving Credit Facility and had no availability to further draw. Additionally, the Company had $51 million in outstanding letters of credit issued under the Revolving Credit Facility as of March 31, 2020.

Debt Issuances

On September 30, 2016, the Company issued $450 million of Senior Secured Notes (the “Senior Notes”).  

On September 30, 2016 the Company entered into a credit agreement (the “Credit Agreement”) that provides for (i) a senior secured term loan B facility in an aggregate principal amount of $375 million (the “Term Loan Facility”) and (ii) a senior secured revolving credit facility in an aggregate principal amount of $400 million (the “Revolving Credit Facility”), which was reduced to $300 million per the amendment effective on August 5, 2019.  The debt issuance costs and original issue discount are being amortized over the life of the facilities using the effective interest method. 

42

The Credit Agreement is subject to a number of covenants, including, but not limited to, a minimum Interest Coverage Ratio and a Consolidated Leverage Ratio, as defined in and calculated pursuant to the Credit Agreement, that, in part, restrict the Company’s ability to incur additional indebtedness, create liens, engage in mergers and consolidations, make restricted payments and dispose of certain assets. Each of these covenants is subject to important exceptions and qualifications.  

Credit Agreement Amendments

On December 20, 2018, the Company amended the Credit Agreement to, among other things, defer certain changes to the minimum Interest Coverage Ratio and the maximum Consolidated Leverage Ratio.  Effective August 5, 2019, the Company further amended the Credit Agreement to, among other things, defer certain changes to the minimum Interest Coverage Ratio and the maximum Consolidated Leverage Ratio.  The following summarizes the changes to the minimum Interest Coverage Ratio and the maximum Consolidated Leverage Ratio: 

	Original	December 20, 2018	August 5, 2019
Maximum Consolidated Leverage Ratio
Current ratio	3.25 to 1.00	3.25 to 1.00	3.75 to 1.00
Step-down ratio	3.00 to 1.00	3.00 to 1.00	3.50 to 1.00 and 3.25 to 1.00
Step-down as of date (quarter ending on or after)	March 31, 2019	March 31, 2020	June 30, 2020 and March 31, 2021
Minimum Interest Coverage Ratio
Current ratio	3.25 to 1.00	3.25 to 1.00	2.50 to 1.00
Step-up ratio	3.50 to 1.00	3.50 to 1.00	2.75 to 1.00 and 3.00 to 1.00
Step-up as of date (quarter ending on or after)	March 31, 2019	March 31, 2020	September 30, 2020 and June 30, 2021

Other terms, including the outstanding principal, maturity date and other debt covenants remained the same under the December 20, 2018 amendment.    

The August 5, 2019 amendment resulted in a reduction in the Revolving Credit Facility aggregate principal amount from $400 million to $300 million and removed the general allowance to pay annual dividends of up to $50 million.  The August 5, 2019 amendment included other changes that generally further restrict the Company’s ability to incur additional indebtedness, create liens, engage in mergers and consolidations, make restricted payments and dispose of certain assets.  The outstanding principal and maturity date of the Term Loan Facility remains the same, while the maturity date of the Revolving Credit Facility remains the same.

Waiver, Forbearance Agreement and Fourth Amendment to Credit Agreement

Based on final results of operations for the year ended December 31, 2019, the Company concluded it was not in compliance with the Consolidated Leverage Ratio and Minimum Interest Ratio contained in the Credit Agreement as of December 31, 2019.  The noncompliance occurred on the last day of the fourth quarter due to the following: the Company’s Consolidated Leverage Ratio exceeded the maximum level permitted and the Company’s Minimum Interest Ratio was below the minimum level permitted.  On March 2, 2020, the Company entered into a Waiver, Forbearance Agreement and Fourth Amendment to Credit Agreement with lenders constituting a majority under the Credit Agreement that governs the Company’s Revolving Credit Facility and Term Loan Facility. The Waiver, Forbearance Agreement and Fourth Amendment to Credit Agreement waived the defaults or events of default that occurred as a result of the financial covenant noncompliance on December 31, 2019 and prevented the lenders from directing the Administrative Agent to accelerate the debt or exercise other remedies as a result of certain other potential defaults or events of default which may occur under the Credit Agreement (the “Potential Defaults”), through the period ended May 14, 2020 (such period, the “Forbearance Period”).  As a result of the noncompliance as of December, 31, 2019, the Company annual report on Form 10-K disclosed there was substantial doubt about the Company’s ability to continue as a going concern.

43

Voluntary Reorganization under Chapter 11

The commencement of the Chapter 11 Cases constituted an event of default with respect to the Senior Notes, the Term Loan Facility and the Revolving Credit Facility (the “Debt Instruments”).  The Debt Instruments provide that as a result of the commencement of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable.  Any efforts to enforce payment obligations under the Debt Instruments will be automatically stayed as a result of the commencement of the Chapter 11 Cases, and the creditors’ right of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.

Debtor-in-Possession Financing

As previously disclosed, on April 15, 2020 (the “Closing Date”), the Company entered into a Superpriority Secured Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”), upon the entry of an interim order of the Bankruptcy Court granting interim approval of the DIP Credit Agreement, among the Company, as borrower, the lenders from time to time party thereto (the “DIP Lenders”) and Bank of America, N.A. as administrative agent (in such capacity, the “DIP Agent”), pursuant to which the DIP Lenders committed to provide a senior secured superpriority debtor-in-possession credit facility in an aggregate principal amount not to exceed $100 million (the “DIP Facility”).  

The DIP Facility consists of (i) revolving loans not to exceed an aggregate amount of $55 million (the “Revolving Loans”), subject to the limitation in the next succeeding sentence, and (ii) letters of credit not to exceed an aggregate amount of $45 million, with $5 million of that amount being available for the issuance of new letters of credit (together with the Revolving Loans, the “DIP Loan Commitments”).  During the interim period prior to the entry of a final order of the Bankruptcy Court authorizing the DIP Facility (the “Final Order”), the Company’s capacity to incur Revolving Loans is limited to an aggregate amount of up to $27.5 million.

Borrowings under the DIP Facility bear interest at a rate per annum equal to, at the Company’s option, either (i) the Alternate Base Rate (as defined in the DIP Credit Agreement) plus 5.75%, or (ii) LIBOR plus 6.75%.  Upon an event of default under the DIP Credit Agreement (an “Event of Default”), an additional 2.00% may be added to the Interest Rate.  In addition, the Company is required to pay (i) an unused line fee of 0.50% per annum (payable quarterly in arrears) on the average daily unused portion of the DIP Loan Commitments, (ii) a commitment fee of (x) 1.00% per annum on the DIP Loan Commitments, regardless of usage, plus (y) $100,000 per week for the first 20 weeks after the Closing Date, in each case, payable quarterly in arrears, (iii) a participation fee equal to 6.75% multiplied by the amounts available to be drawn under outstanding letters of credit, payable quarterly, and (iv) a fronting fee equal to 0.125% per annum on amounts available to be drawn under outstanding letters of credit, payable quarterly.

Proceeds of the loans made under the DIP Facility may be used only for the following purposes: (i) working capital and other general corporate purposes, including the payment of professional fees and expenses, (ii) to pay the reasonable fees and expenses of the DIP Agent and the DIP Lenders (including the reasonable fees and expenses of counsel and financial advisors), (iii) to pay claims in respect of certain prepetition creditors, (iv) to repay indebtedness owed to holders of the Prepetition Priority Payment Obligations (as defined in the DIP Credit Agreement) (the “Prepetition Revolving Lenders”), and (v) making adequate protection payments to the Prepetition Revolving Lenders, the Prepetition Term Lenders and the Prepetition Secured Noteholders (each as defined in the DIP Credit Agreement).

In connection with the DIP Credit Agreement, certain subsidiaries of the Company became parties to a guarantee agreement as guarantors (collectively, the “Guarantors,” and together with the Company, the “DIP Credit Parties”). Each of the Guarantors is a debtor and debtor-in-possession in the Chapter 11 Cases.  The Guarantors have guaranteed, on a joint and several basis, all of the obligations under the DIP Facility.  To secure the obligations under the DIP Facility, the Company and the Guarantors have granted liens on substantially all of their assets, whether now owned or hereafter acquired.

The DIP Facility will mature on the earliest of the following dates: (i) unless the Final Order is entered, May 15, 2020, (ii) the date upon which any Plan of Reorganization (as defined in the DIP Credit Agreement) becomes effective, or (iii) the six-month anniversary following the Petition Date, provided that such maturity may be extended with the consent of the Required Lenders (as defined in the DIP Credit Agreement) to a date no later than nine months after the Petition Date.

The DIP Credit Agreement contains representations, warranties and covenants that are customary for debtor-in-possession facilities of this type, including, but not limited to, certain case milestones, specified restrictions on indebtedness, liens, guarantee obligations, liquidations and dissolutions, sales of assets, leases, payment of dividends and other restricted payments, voluntary payments of other indebtedness, investments, loans and advances, transactions with affiliates, sale and leaseback transactions and compliance with case milestones. The DIP Credit Agreement also contains customary events of default for facilities of this type, including failure to achieve the milestones and the occurrence of certain events in the Chapter 11 Cases.

44

The DIP Facility is subject to final approval by the Bankruptcy Court.

Other Information

The Company’s debt maturities as of March 31, 2020 are shown in the following table:

	Debt Maturity Schedule
	Total		2020		2021		2022		2023		2024		Thereafter
	(in millions)
Borrowings under the Credit      Agreement	$	471	$	471	$	—	$	—	$	—	$	—	$	—
Senior secured notes		450		450		—		—		—		—		—
Finance lease obligations and      other borrowings		1		1		—		—		—		—		—
Total (a)	$	922	$	922	$	—	$	—	$	—	$	—	$	—

(a) Excludes unamortized debt issuance costs of $3 million and $5 million related to the Company’s Term Loan Facility and 8.75% Senior Notes due October 15, 2023, respectively, and a discount of $3 million related to the Company’s Term Loan Facility.  These amounts do not represent contractual obligations with a fixed amount or maturity date.   

On March 4, 2020, Moody's Investors Service (“Moody’s) downgraded the Company’s credit ratings as noted below.  There was no change to the outlook which remained at negative.  Refer below for S&P Global Rating (“S&P) under which the Company has an issuer credit rating of CCC+.

	Moody's		S&P
	Prior Rating	New Rating	Current Rating
Corporate family	B3	Ca	not applicable
Revolving Credit Facility	Ba3	B3	B
Term Loan Facility	B3	Ca	CCC+
Senior Notes	B3	Ca	CCC+

MANAGEMENT OF MARKET RISK

The Company is exposed to interest rate risk on its variable debt and price risk on its fixed-rate debt.  At March 31, 2020, the Company’s variable-interest borrowings were $471 million, or approximately 51.1%, of the Company’s total debt.

The Company assesses market risk based on changes in interest rates utilizing a sensitivity analysis that measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change in interest rates.  Using this sensitivity analysis, such changes would not have a material effect on interest income or expense and cash flows and would change the fair values of fixed-rate debt at March 31, 2020 by approximately $10 million.  

The Company is exposed to the impact of foreign currency fluctuations in certain countries in which it operates. The exposure to foreign currency movements is limited in many countries because the operating revenues and expenses of its various subsidiaries and business units are substantially in the local currency of the country in which they operate.  To the extent that borrowings, sales, purchases, revenues, expenses or other transactions are not in the local currency of the subsidiary, the Company is exposed to currency risk and may enter into foreign exchange forward contracts to hedge the currency risk.  The Company is primarily exposed to the currencies of the Canadian dollar and Mexican peso.  The Company does not use derivative financial instruments for trading or speculative purposes.

45

OTHER INFORMATION

Litigation and Contingent Liabilities

For a discussion of certain litigation involving the Company, see Note 8, Commitments and Contingencies, to the condensed consolidated financial statements.

New Accounting Pronouncements and Pending Accounting Standards

Recently issued accounting standards and their estimated effect on the Company’s condensed consolidated financial statements are described in Note 15, New Accounting Pronouncements, and throughout the notes to the condensed consolidated financial statements.  

Available Information

The Company maintains an Internet website at www.lsccom.com where the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on form 8-K and all amendments to those reports are available without charge, as soon as reasonably practicable following the time they are filed with, or furnished to, the SEC. The Principles of Corporate Governance of the Company’s Board of Directors, the charters of the Audit, Human Resources and Corporate Responsibility and Governance Committees of the Board of Directors and the Company’s Principles of Ethical Business Conduct are also available on the Investor Relations portion of www.lsccom.com, and will be provided, free of charge, to any stockholder who requests a copy. References to the Company’s website address do not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of this document.

CAUTIONARY STATEMENT  

The Company has made forward-looking statements in this quarterly report on Form 10-Q that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the Company.  Generally, forward-looking statements include information concerning possible or assumed future actions, events, or results of operations of the Company.

These statements may include, or be preceded or followed by, the words “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “continues,” “believes,” “may,” “will,” “goals” or variations of such words and similar expressions.  Examples of forward-looking statements include, but are not limited to, statements, beliefs and expectations regarding our business strategies, market potential, future financial performance, dividends, results of pending legal matters, our goodwill and other intangible assets, price volatility and cost environment, our liquidity, our funding sources, expected pension contributions, capital expenditures and funding, our financial covenants, repayments of debt, off-balance sheet arrangements and contractual obligations, our accounting policies, general views about future operating results and other events or developments that we expect or anticipate will occur in the future.  These forward-looking statements are subject to a number of important factors, including those factors disclosed in Item 1A, Risk Factors, in section Part II of this quarterly report on Form 10-Q, and Item 1A, Risk Factors, in section Part I in the Company’s annual report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 2, 2020, that could cause our actual results to differ materially from those indicated in any such forward-looking statements. These factors include, but are not limited to:

• our ability to generate sufficient liquidity to satisfy our obligations as they become due;

• the competitive market for our products and industry fragmentation affecting our prices;  

• inability to improve operating efficiency to meet changing market conditions;

• changes in technology, including electronic substitution and migration of paper based documents to digital data formats;

• the volatility and disruption of the capital and credit markets, and adverse changes in the global economy;

• the effects of global market and economic conditions on our customers;

• the effect of economic weakness and constrained advertising;

• uncertainty about future economic conditions;

• increased competition as a result of consolidation among our competitors;

• our ability to successfully integrate future acquisitions;

• factors that affect customer demand, including changes in postal rates, postal regulations, delivery systems and service levels, changes in advertising markets and customers’ budgetary constraints;

46

• the effects of seasonality on our core businesses;

• the effects of increases in capital expenditures;

• changes in the availability or costs of key print production materials (such as paper, ink, energy, and other raw materials), the tight labor market, the availability of labor at our vendors or in prices received for the sale of by-products;  

• performance issues with key suppliers;

• our ability to maintain our brands and reputation;

• the retention of existing, and continued attraction of additional customers and key employees, including management;

• the effect of economic and political conditions on a regional, national or international basis;

• the effects of operating in international markets, including fluctuations in currency exchange rates;

• changes in environmental laws and regulations affecting our business;

• the ability to gain customer acceptance of our new products and technologies;

• the effect of a material breach of or disruption to the security of any of our or our vendors’ systems;

• the failure to properly use and protect customer and employee information and data;

• the effect of increased costs of providing health care and other benefits to our employees;

• the effect of catastrophic events;

• the ability to maintain adequate payment terms with key vendors in light of recent credit downgrades;

• the impact of tax legislation, including the CARES Act;

• increases in requirements to fund or pay withdrawal costs or required contributions related to the Company’s pension plans; and

• the effect of COVID-19 on our business.

Because forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.  Undue reliance should not be placed on such statements, which speak only as of the date of this document or the date of any document that may be incorporated by reference into this document.

Consequently, readers of this quarterly report on Form 10-Q should consider these forward-looking statements only as the Company’s current plans, estimates and beliefs.  The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.  The Company undertakes no obligation to update or revise any forward-looking statements in this quarterly report on Form 10-Q to reflect any new events or any change in conditions or circumstances.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Management of Market Risk in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.  There have been no significant changes to the Company’s market risk since December 31, 2019.  For a discussion of exposure to market risk, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures about Market Risk, disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 2, 2020.  

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) and Rule 15d-15(e) of the Securities Exchange Act of 1934, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934.  As of March 31, 2020 an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures as of March 31, 2020 were effective in ensuring information required to be disclosed in the Company’s SEC reports was recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information was accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  

47

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.      

48

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a discussion of certain litigation involving the Company, see Note 8, Commitments and Contingencies, to the condensed consolidated financial statements.     

Voluntary Reorganization under Chapter 11  

As discussed more fully in Note 1, Overview and Basis of Presentation, to the condensed consolidated financial statements, on April 13, 2020 (the “Petition Date”), the Company and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) (collectively, the “Chapter 11 Cases”).  The Chapter 11 Cases are being jointly administered under the caption In re LSC Communications, Inc., 20-10950.  We and our subsidiaries that are involved in the Chapter 11 Cases will continue to operate our businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code.

On April 15, 2020, the Bankruptcy Court entered orders granting interim approval of certain forms of relief that we requested, enabling the Company to conduct our business activities in the ordinary course, subject to the terms and conditions of such orders, including authorizing us to pay employee wages and benefits, to pay taxes and certain governmental fees and charges, to continue to operate our cash management system in the ordinary course, and to pay prepetition claims of certain of our vendors.  For goods and services provided following the Petition Date, the Company expects to continue to pay vendors under normal terms.  

ITEM 1A. RISK FACTORS  

Other than the risk factors noted below, there have been no significant changes to the risk factors disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 2, 2020:

We are subject to the risks and uncertainties associated with Chapter 11 proceedings.

For the duration of the Chapter 11 Cases, our operations and our ability to develop and execute our business plan, as well as our continuation as a going concern, are subject to the risks and uncertainties associated with bankruptcy, including:

• our ability to develop, confirm and consummate a Chapter 11 plan of reorganization or alternative restructuring transaction;

• our ability to obtain Bankruptcy Court approval with respect to motions filed in the Chapter 11 Cases from time to time;

• our ability to maintain our relationships with our suppliers, service providers, customers, employees and other third parties;

• our ability to maintain contracts that are critical to our operations;

• our ability to develop and execute our business plan;

• our ability to obtain acceptable and appropriate financing;

• the ability of third parties to seek and obtain Bankruptcy Court approval to terminate contracts and other agreements with us;

• the ability of third parties to seek and obtain Bankruptcy Court approval to terminate or shorten the exclusivity period for us to propose and confirm a Chapter 11 plan, to appoint a Chapter 11 trustee, or to convert the Chapter 11 Cases to a Chapter 7 proceeding; and

• the actions and decisions of our creditors and other third parties who have interests in our Chapter 11 Cases that may be inconsistent with our plans.

Because of the risks and uncertainties associated with the Chapter 11 Cases, we cannot accurately predict or quantify the ultimate impact of events that will occur during the Chapter 11 Cases that may be inconsistent with our plans.

49

Operating under Bankruptcy Court protection for a long period of time may harm our business.

A long period of operations under Bankruptcy Court protection could have a material adverse effect on our business, financial condition, results of operations and liquidity.  During the pendency of the Chapter 11 Cases, our senior management will be required to spend a significant amount of time and effort dealing with the reorganization instead of focusing exclusively on our business operations.  A prolonged period of operating under Bankruptcy Court protection also may make it more difficult to retain management and other key personnel necessary to the success and growth of our business.  In addition, the longer the Chapter 11 Cases continue, the more likely it is that our customers and suppliers will lose confidence in our ability to reorganize our business successfully and will seek to establish alternative commercial relationships.  Furthermore, so long as the Chapter 11 Cases continue, we will be required to incur substantial costs for professional fees and other expenses associated with the administration of the Chapter 11 Cases.

We may not be able to obtain confirmation of a Chapter 11 plan of reorganization or complete any Bankruptcy Court-approved sales of our Company or assets, or we may not be able to realize adequate consideration for such sales.

In connection with the Chapter 11 Cases, we may attempt to sell all or certain of our assets pursuant to a sale under section 363 of the Bankruptcy Code or otherwise reorganize the Company pursuant to a Chapter 11 plan of reorganization (each, a “Transaction”).  There can be no assurance that we will be successful in completing any Transactions because there may not be buyers willing to enter into any Transactions, we may not receive sufficient consideration for such assets, or there may be objections from our stakeholders.  If we are unable to complete these Transactions, it may be necessary to seek additional funding sources or possibly convert to a Chapter 7 liquidation process.  If these Transactions are completed, they may not generate the anticipated or desired outcomes.

Additionally, to successfully obtain confirmation of a plan of reorganization, we must meet certain statutory requirements with respect to adequacy of disclosure with respect to the Chapter 11 plan of reorganization, solicit and obtain the requisite acceptances of such a plan and fulfill other statutory conditions for confirmation of such plan, which have not occurred to date.  

Even if a Chapter 11 plan of reorganization is consummated, we may not be able to achieve our stated goals and there is substantial doubt regarding our ability to continue as a going concern.

Even if a Chapter 11 plan of reorganization is consummated, we may continue to face a number of risks, such as further deterioration in economic conditions, changes in our industry, changes in demand for our products and increasing expenses.  Some of these risks become more acute when a case under the Bankruptcy Code continues for a protracted period without indication of how or when the case may be completed.  As a result of these risks and others, we cannot guarantee that any Chapter 11 plan of reorganization will achieve our stated goals.

As a result of the Chapter 11 Cases, our financial results may be volatile and may not reflect historical trends.

During the Chapter 11 Cases, we expect our financial results to continue to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our consolidated financial statements.  As a result, our historical financial performance is likely not indicative of our financial performance after the date of the bankruptcy filing.  In addition, if we emerge from the Chapter 11 Cases, the amounts reported in subsequent consolidated financial statements may materially change relative to historical consolidated financial statements, including as a result of revisions to our operating plans pursuant to a plan of reorganization.  We also may be required to adopt fresh-start accounting, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets.  Our financial results after the application of fresh-start accounting also may be different from historical trends.

We may be subject to claims that will not be discharged in the Chapter 11 proceedings, which could have a material adverse effect on our financial condition and results of operations.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation.  With few exceptions, all claims that arose prior to confirmation of a plan of reorganization (i) would be subject to compromise and/or treatment under the plan of reorganization and/or (ii) would be discharged in accordance with the terms of such plan of reorganization.  Any claims not ultimately discharged through the plan of reorganization could be asserted against the reorganized entities and may have an adverse effect on our financial condition and results of operations on a post-reorganization basis.

50

We may experience increased levels of employee attrition as a result of the Chapter 11 Cases.

As a result of the Chapter 11 Cases, we may experience increased levels of employee attrition, and our employees likely will face considerable distraction and uncertainty.  A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations.  Our ability to engage, motivate and retain key employees or take other measures intended to motivate and incent key employees to remain with us through the pendency of the Chapter 11 Cases is limited by restrictions on implementation of incentive programs under the Bankruptcy Code.  The loss of services of members of our senior management team could impair our ability to execute our strategy and implement operational initiatives, which would be likely to have a material adverse effect on our business, financial condition and results of operations.

In certain instances, a Chapter 11 proceeding may be converted to a proceeding under Chapter 7.

There can be no assurance as to whether we will successfully reorganize and emerge from the Chapter 11 Cases or, if we do successfully reorganize, as to when we would emerge from the Chapter 11 Cases.  If the Bankruptcy Court finds that it would be in the best interest of creditors and/or the Debtors, the Bankruptcy Court may convert our Chapter 11 Cases to proceedings under Chapter 7. In such event, a Chapter 7 trustee would be appointed or elected to liquidate the Debtors’ assets for distribution in accordance with the priorities established by the Bankruptcy Code.  The Debtors believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to the Debtors’ creditors than those provided for in a Chapter 11 plan of reorganization because of (i) the likelihood that the assets would have to be sold or otherwise disposed of in a disorderly fashion over a short period of time rather than reorganizing or selling in a controlled manner the Debtors’ businesses as a going concern, (ii) additional administrative expenses

involved in the appointment of a Chapter 7 trustee, and (iii) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of operations.

We are subject to risks and uncertainties with respect to the actions and decisions of our creditors and other third parties who have interests in our Chapter 11 Cases that may be inconsistent with our plans.

These risks and uncertainties could significantly affect our business and operations in various ways.  For example, negative publicity or events associated with the Chapter 11 Cases have adversely affected, and could continue to adversely affect, our relationships with our vendors and employees, as well as with customers, which in turn could adversely affect our operations and financial condition.  In addition, pursuant to the Bankruptcy Code, we need Bankruptcy Court approval for transactions outside the ordinary course of business, which may limit our ability to respond to certain events in a timely manner or take advantage of certain opportunities.  Because of the risks and uncertainties associated with the Chapter 11 Cases, we cannot predict or quantify the ultimate impact that events occurring during the pendency of the Chapter 11 Cases will have on our business, financial condition, results of operations, or the certainty as to our ability to continue as a going concern.  As a result of the Chapter 11 Cases, realization of assets and liquidation of liabilities are subject to uncertainty.  While operating under the protection of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, we may sell or otherwise dispose of a portion

or all of our assets and liquidate or settle liabilities for amounts other than those reflected in our consolidated financial statements. Further, a plan of reorganization could materially change the amounts and classifications reported in our consolidated historical financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization.

Trading in our securities during the pendency of the Chapter 11 Cases poses substantial risks.  

The Company’s stockholders are cautioned that it is possible that the Company’s stockholders will receive nothing in exchange for their common stock upon the Company’s emergence from bankruptcy and that the common stock will have no value and that trading in securities of the Company during the pendency of the Chapter 11 Cases will be highly speculative and will pose substantial risks.  It is possible the Company’s outstanding common stock and other securities may be cancelled and extinguished upon confirmation of a restructuring plan by the Bankruptcy Court.  In such an event, the Company’s stockholders and other security holders would not be entitled to receive or retain any cash, securities or other property on account of their cancelled securities.  Trading prices for the Company’s common stock and other securities may bear little or no relation to actual recovery, if any, by holders thereof in the Company’s Chapter 11 Cases.  Accordingly, the Company urges extreme caution with respect to existing and future investments in its securities.

51

The Debtors may be unable to comply with restrictions or with budget, liquidity or other covenants imposed by the agreements governing the DIP Facility.  Such non-compliance could result in an event of default under the DIP Credit Agreement that, if not cured or waived, would have a material adverse effect on our business, financial condition and results of operations.

The agreements governing the DIP Facility impose a number of restrictions on the Debtors.  Specifically, the terms of the credit agreements governing the DIP financing impose certain obligations including, among other things, affirmative covenants requiring the Company to provide financial information, budgets and other information to the agents under the DIP financing, and negative covenants restricting the Debtors’ ability to incur additional indebtedness, grant liens, dispose of assets, pay dividends or take certain other actions, in each case except as permitted by the terms and conditions of the DIP Credit Agreement.  Covenants under the DIP Credit Agreement include general affirmative covenants such as compliance with all applicable laws, preservation and maintenance of collateral and property (including maintenance of adequate insurance policies regarding collateral), preservation of the Debtors’ corporate existence, compliance with certain case milestones and use of the loans under the DIP Facility in accordance with the approved budget, as well as negative covenants such as prohibiting the Debtors from incurring or permitting any other debt, investments, liens or dispositions unless specifically permitted.  

The DIP Credit Agreement includes a series of milestones related to the Chapter 11 Cases.  The milestones require the Company to achieve a series of intermediate milestones and failure to comply with these covenants or milestones would result in an event of default under the DIP Credit Agreement and permit the DIP Lenders to accelerate the loans and otherwise exercise remedies under the loan documentation for the DIP Facility.  Our ability to comply with these provisions may be affected by events beyond our control and our failure to comply, or obtain a waiver in the event we cannot comply with a covenant or achieve a milestone, could result in an event of default under the agreements governing the DIP Facility.

We may not have sufficient cash to maintain our operations during the Chapter 11 Cases or fund our emergence from the bankruptcy.

Because of our financial condition, we will have heightened exposure to, and less ability to withstand, the operating risks that are customary in our industry, such as fluctuations in input prices and currency exchange rates.  Any of these factors could result in the need for substantial additional funding.  A number of other factors, including the Chapter 11 Cases, our financial results in recent years, our substantial indebtedness and the competitive environment we face, adversely affect the availability and terms of funding that might be available to us during, and upon emergence from, Chapter 11.  As such, we may not be able to source capital at rates acceptable to us, or at all, to fund our current operations or our exit from bankruptcy.  The inability to obtain necessary additional funding on acceptable terms would have a material adverse impact on us and on our ability to sustain our operations.

Our business, results of operations and financial condition may be adversely affected by pandemic infectious diseases, particularly the novel coronavirus strain known as COVID-19.

Pandemic infectious diseases, such as the current COVID-19 strain, may adversely impact our business, condensed consolidated results of operations and financial condition. COVID-19, as well as measures taken by governmental authorities and private actors to limit the spread of this virus, may interfere with the ability of our employees, suppliers, and other business providers to carry out their assigned tasks or supply materials at ordinary levels of performance relative to the conduct of our business which may cause us to materially curtail certain of our business operations. Moreover, as a large part of the Company's business involves sales of books and other products used in schools and school facilities, if COVID-19 related measures continue to result in widespread and lengthy school closings, the Company's condensed consolidated results of operations and financial condition will be adversely impacted.  Additionally, as COVID-19 has significantly impacted retailers' stores, distribution centers and supply chains, the Company expects to experience an adverse impact on our catalogs and office products businesses.  Disruption across many other industries has also significantly impact demand for advertising, which is expected to result in page count and volume reductions in magazines.

52

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

					Total Number
					of Shares Purchased		Dollar Value of Shares
	Total Number				as Part of		that May Yet be
	of Shares		Average Price		Publicly Announced		Purchased Under the
	Purchased (a)		Paid per Share		Plans or Programs		Plans or Programs
January 1, 2020  - January 31, 2020		—	$	—		—	$	—
February 1, 2020 - February 29, 2020		—		—		—	$	—
March 1, 2020 - March 31, 2020		49,819		0.13		—	$	—
Total		49,819	$	0.13		—

(a) Shares withheld for tax liabilities upon vesting of equity awards  

Dividends

As a result of the DIP Credit Agreement, the Company is restricted from issuing dividend payments.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable     

53

ITEM 6. EXHIBITS

3.1 Amended and Restated Certificate of Incorporation of LSC Communications, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 3, 2016)

3.2 Amended and Restated By-laws of LSC Communications, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on October 3, 2016)  

4.1 Indenture, dated as of September 30, 2016, among LSC Communications, Inc., the subsidiary guarantors party thereto and Wells Fargo Bank, National Association, as Trustee and as Collateral Agent (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on October 3, 2016)

4.2 Description of the LSC Communications, Inc. Securities Registered under Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed on March 2, 2020)

4.3 Rights Agreement, which includes as Exhibit A the forms of Rights Certificate and Election to Exercise and as Exhibit B the form of Certificate of Designation and Terms of the Participating Preferred Stock. (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 2, 2020)

10.1     Credit Agreement, dated as of September 30, 2016, among LSC Communications, Inc., the lenders party thereto, Bank Of America, N.A., as Administrative Agent Swing Line Lender and an L/C Issuer, Citigroup Global Markets Inc. and JPMorgan Chase Bank, N.A., as Co-Syndication Agents (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 3, 2016)

10.2 Amendment No. 1 to Credit Agreement dated as of November 17, 2017, by and among LSC Communications, Inc., the other Loan Parties, the 2017 Refinancing Term Lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, filed on May 3, 2018)

10.3 Amendment No. 2 to Credit Agreement dated as of December 20, 2018, by and among LSC Communications, Inc. the other Loan Parties, the Lenders party thereto and Bank of America, N. A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed on February 19, 2019))

10.4 Amendment No. 3 to Credit Agreement dated as of August 2, 2019, by and among LSC Communications, Inc., the other Loan Parties, the Lenders party thereto and Bank of America, N. A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 5, 2019)

10.5 Waiver, Forbearance Agreement and Fourth Amendment to Credit Agreement dated as of March 2, 2020, by and among LSC Communications, Inc., the other Loan Parties, the Lenders party thereto and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed on March 2, 2020)

10.6 Amended and Restated LSC Communications, Inc. 2016 Performance Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 23, 2017)*

10.7 Amendment to Amended and Restated LSC Communications, Inc. 2016 Performance Incentive Plan dated October 17, 2019 (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed on November 7, 2019)*

54

10.8 LSC Communications, Inc. Nonqualified Deferred Compensation Plan, amended and restated effective as of August 1, 2018 (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on August 2, 2018)*  

10.9 LSC Unfunded Supplemental Pension Plan effective October 1, 2016 (incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on February 23, 2017)*

10.10 Supplemental Executive Retirement Plan-B for Designated Executives effective January 1, 2001 as amended effective December 31, 2004, January 1, 2005 and September 30, 2016 (the “SERP-B”) (incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on February 23, 2017)*

10.11 LSC Communications Annual Incentive Plan as amended and restated effective January 17, 2019 (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed on February 19, 2019)*

10.12 Assignment of Employment Agreement and Acceptance of Assignment, dated as of September 29, 2016, between LSC Communications, Inc., R. R. Donnelley & Sons Company and Thomas J. Quinlan III (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on October 3, 2016)*

10.13 Amendment to Employment Agreement, dated as of October 25, 2017, between LSC Communications, Inc. and Thomas J. Quinlan III (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 31, 2017)*  

10.14 Employment Agreement Waiver, dated as of April 1, 2020, between LSC Communications, Inc. and Thomas J. Quinlan III (filed herewith)*

10.15 Key Employee Severance Plan effective October 25, 2017 (incorporated by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed on November 2, 2017)*

10.16 Form of Participation Agreement for the Key Employee Severance Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on January 19, 2018)*

10.17 Participation Agreement between Suzanne S. Bettman and the Company, dated as of January 24, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 26, 2018)*

10.18 Participation Agreement between Andrew B. Coxhead and the Company, dated as of January 24, 2018 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 26, 2018)*

10.19 Participation Agreement between David B. McCree and the Company, dated as of February 26, 2018 (filed herewith)*

10.20 Participation Agreement between Matthew K. Roberts and the Company, dated as of January 21, 2019 (filed herewith)*

10.21 Participation Agreement between George B. Zengo  and the Company, dated as of March 1, 2018 (filed herewith)*

10.22 Participation Agreement between Sarah L. Hoxie and the Company, dated as of January 23, 2020 (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed on March 2, 2020)*

10.23 Form of Stock Option Award Agreement (for 2009 to 2012) converted from R. R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on February 23, 2017)*

10.24 Form of Performance Restricted Stock Award (for 2017) (incorporated by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed on May 4, 2017)*

55

10.25 Form of Performance Unit Award Agreement (for 2018) (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed on February 22, 2018)*

10.26 Form of Stock Unit Award Agreement (for 2017) (incorporated by reference to Exhibit 10.30 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed on May 4, 2017)*

10.27 Form of Restricted Stock Unit Award Agreement (for 2018) (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed on February 22, 2018)*

10.28 Form of Restricted Stock Unit Award Agreement (for 2019) (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed on February 19, 2019)*

10.29 Form of LTIP Performance-Vested Award Agreement (for 2020) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 18, 2020)*

10.30 Form of LTIP Cash-Vested Award Agreement (for 2020) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 18, 2020)*

10.31 Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, filed on November 10, 2016)*

10.32 Policy on Retirement Benefits, Phantom Stock Grants and Stock Options for Directors as amended to March 2000 (incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on February 23, 2017)*

10.33 Non-Employee Director Compensation Plan effective as of October 30, 2018 (incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed on February 19, 2019)*

10.34 Non-Employee Director Compensation Plan effective as of February 12, 2020 (incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed on March 2, 2020)*

10.35 Form of Director Restricted Stock Unit Award (for 2014-2016) converted from R. R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on February 23, 2017)*  

10.36 Form of Director Restricted Stock Unit Award Agreement (for 2018) (incorporated by reference to Exhibit 10.21 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed on November 2, 2017)*

10.37 Form of Retention Bonus Letter (incorporated by reference to Exhibit 10.31 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed on August 8, 2019)*

14.1 Code of Ethics for the Chief Executive Officer and Senior Financial Officers (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on February 23, 2017)

18 Preferability Letter of Independent Registered Public Accounting Firm dated May 6, 2020 (filed herewith)

31.1 Certification by Thomas J. Quinlan, III, Chief Executive Officer, required by Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934 (filed herewith)

31.2 Certification by Andrew B. Coxhead, Chief Financial Officer, required by Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934 (filed herewith)

32.1 Certification by Thomas J. Quinlan, III, Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code (filed herewith)

56

32.2 Certification by Andrew B. Coxhead, Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code (filed herewith)

101.INS XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 The cover page from the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2020, has been formatted in Inline XBRL.

* Management contract or compensatory plan or arrangement

57

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LSC COMMUNICATIONS, INC.
By:	/s/ ANDREW B. COXHEAD
	Andrew B. Coxhead
	Chief Financial Officer
By:	/s/ SARAH L. HOXIE
	Sarah L. Hoxie
	Corporate Controller and Principal Accounting Officer

Date: May 6, 2020

58

EX-10.14

Exhibit 10.14

March 31, 2020

Mr. Thomas J. Quinlan III

At the address on file with the Company

Dear Tom:

This letter documents our recent discussions regarding your Amended and Restated Employment Agreement with LSC Communications, Inc. (together with its affiliates, the “Company”).  As we have agreed, going forward, your severance benefits will be provided under the Company’s Separation Pay Plan.  By signing this letter, you agree and acknowledge that, beginning on the date of this letter, you waive, release, forfeit and relinquish any and all right, claim, title and interest in and to the severance entitlements arising under Article II of your Employment Agreement.  Notwithstanding the foregoing, your rights of indemnification under the Company’s and any of its subsidiaries’ organizational documents, any plan or agreement at law or otherwise and your rights thereunder to director’s and officer’s liability insurance coverage shall survive any termination of your employment.

Except as expressly provided above, your Employment Agreement will remain in full force and effect.  The laws of the State of Illinois, without giving effect to its conflict of laws principles, govern all matters arising out of or relating to this letter, including its interpretation, construction, performance and enforcement.  

[Signature Page Follows]

If this letter correctly describes our understanding, please execute and deliver a counterpart of this signature page, which will become a binding agreement on our receipt.

Very truly yours,
LSC Communications, Inc.
By:	/s/ Suzanne S. Bettman
	Name:	Suzanne S. Bettman
	Title:	General Counsel

I agree with and accept the terms of this letter:

_/s/ Thomas J. Quinlan III__________

Name: Thomas J. Quinlan III

Date: April 1, 2020

[Signature Page to Waiver Letter]

EX-10.19

Exhibit 10.19

LSC Communications US, LLC.

Participation Agreement

February 20, 2018

Dave McCree

LSC Communications

99 Park Avenue 14^th Floor

New York, NY  10016

Re: Notice of Participation in the Key Employee Severance Plan

Dear Dave:

LSC Communications, Inc. (the “Company”) is pleased to inform you that you have been selected as a participant in the Company’s LSC Communications US, LLC Key Employee Severance Plan (the “Severance Plan”), which is operated as a sub-plan under the LSC Separation Pay Plan. Capitalized terms that are used in this Participation Agreement but that are not defined herein shall have the meanings set forth in the Severance Plan.

Severance Plan Benefits

Under Section 5(a) of the Severance Plan, in the event you incur a Qualifying Termination, which for purposes of the Severance Plan includes a termination of your employment by the Company without Cause (unless otherwise set forth in this Participation Agreement, then so long as you fulfill the Severance Plan’s requirements (e.g., executing a Separation Agreement and General Release), then you would be entitled to the following benefits:

• Salary continuation for 12 months;

• Payment of 100% of your target annual bonus;

• A lump-sum payment which will represent the current difference between your monthly medical insurance cost immediately prior to the applicable Qualifying Termination and the monthly cost for COBRA for 12 months and may be used for any purpose, including to offset the cost of electing COBRA coverage; and

• Six months of outplacement assistance from a provider selected by the Company.

The salary continuation and target bonus payments amounts set forth above will be paid as provided in the Severance Plan beginning approximately 60 days following your Qualifying Termination and ending on the first anniversary of the Qualifying Termination.

LSC COMMUNICATIONS

lsccom.com | 773.272.9202 | 191 N. Wacker Drive, Suite 1400, Chicago, IL 60606

Under Section 5(b) of the Severance Plan, in the event that your Qualifying Termination or a termination of your employment for Good Reason (as defined below) occurs within two years following the date of a Change in Control of the Company, then so long as you fulfill the Severance Plan’s requirements (e.g., executing a Separation Agreement and General Release), then you would be entitled to the following benefits:

• Salary continuation for 18 months;

• Payment of 150% of your target annual bonus;

• A lump-sum payment which will represent the current difference between your monthly medical insurance cost immediately prior to the applicable Qualifying Termination and the monthly cost for COBRA for 18 months and may be used for any purpose, including to offset the cost of electing COBRA coverage; and

• Six months of outplacement assistance from a provider selected by the Company.

The salary continuation and target bonus payments amounts set forth above will be paid as provided in the Severance Plan beginning approximately 60 days following your Qualifying Termination and ending on the 18th month anniversary of the Qualifying Termination.

Notwithstanding anything in the Severance Plan to the contrary (including Section 4(d) thereof) and regardless of whether a Qualifying Termination occurs before, on or after a Change in Control, the Separation Agreement and General Release shall not include any non-competition or non-solicitation covenants.  The only restrictive covenants you are required to comply with as a condition to receiving severance benefits under the Severance Plan are set forth below in Annex A to this Participation Agreement.  

Restrictive Covenants

By signing below, you acknowledge and agree to comply with the restrictive covenants set forth on Annex A to this Participation Agreement and incorporated herein by reference.

Additional Terms

a. Resignations.  Upon termination of your employment for any reason, you shall resign from such offices and directorships, if any, of the Company that you may hold from time to time.

b. Indemnification. Your rights of indemnification under the Company’s organizational documents, any plan or agreement at law or otherwise and your rights thereunder to director’s and officer’s liability insurance coverage for, in both cases, actions as an officer of the Company shall survive your termination of employment.

2

LSC COMMUNICATIONS

lsccom.com | 773.272.9202 | 191 N. Wacker Drive, Suite 1400, Chicago, IL 60606

For purposes of the Severance Plan and this Participation Agreement, “Good Reason” means, without your express written consent, the occurrence of any of the following events:

i. A material reduction by the Company in your rate of annual base salary or annual target bonus opportunity as the same may be increased from time to time; or

ii. Any requirement of the Company that your office be more than seventy-five (75) miles from New York, NY.

Notwithstanding the foregoing, a Good Reason event shall not be deemed to have occurred if the Company cures such action, failure or breach within ten (10) days after receipt of notice thereof given by you. Your right to terminate employment for Good Reason shall not be affected by your incapacities due to mental or physical illness and your continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason, provided, however, that you must provide notice of termination of employment within ninety (90) days following the initial existence of the event constituting Good Reason or such event shall not constitute Good Reason under the Severance Plan or this Participation Agreement.

Administrative Provisions

Your eligibility to receive the benefits described above, and the timing of your receipt of those benefits, is in all cases subject to the terms of the Severance Plan, a copy of which can be obtained by contacting the Company’s Chief Human Resources Officer.

Please note, your participation in the Severance Plan is subject to your execution of this Participation Agreement and the letter from the Company, dated as of February 20, 2018 to which this Participation Agreement is appended. Until you sign such letter and this Participation Agreement below where indicated and return it to Scott Bigelow, you will not be eligible for the benefits described above in this notice even if a Qualifying Termination were to otherwise occur. If you fail to sign and return such letter and this Participation Agreement by March 6, 2018 then you will lose the opportunity to participate in the Severance Plan.

We thank you for your continued services to the Company.

Sincerely,

/s/ R. Scott Bigelow_____________________________

R. Scott Bigelow, Chief Human Resources Officer

By signing below, you agree to be bound by the terms of this Participation Agreement and the Severance Plan.

3

LSC COMMUNICATIONS

lsccom.com | 773.272.9202 | 191 N. Wacker Drive, Suite 1400, Chicago, IL 60606

/s/ David B. McCree____________________

Participant

Date: February 26, 2018_________________

4

LSC COMMUNICATIONS

lsccom.com | 773.272.9202 | 191 N. Wacker Drive, Suite 1400, Chicago, IL 60606

Annex A

Restrictive Covenants

You and the Company recognize that, due to the nature of your employment and relationship with the Company, you will have access to and develop confidential business information, proprietary information, and trade secrets relating to the business and operations of the Company and its affiliates. You acknowledge that such information is valuable to the business of the Company and its affiliates, and that disclosure to, or use for the benefit of, any person or entity other than the Company or its affiliates, would cause substantial damage to the Company. You further acknowledge that your duties for the Company include the opportunity to develop and maintain relationships with the Company’s customers, employees, representatives and agents on behalf of the Company and that access to and development of those close relationships with the Company’s customers render your services special, unique and extraordinary. As a result of your position and customer contacts, you recognize that you will gain valuable information about (i) the Company’s relationship with its customers, their buying habits, special needs, and purchasing policies, (ii) the Company’s pricing policies, purchasing policies, profit structures, and margin needs, (iii) the skills, capabilities and other employment-related information relating to Company employees, and (iv) other matters of which you would not otherwise know and that is not otherwise readily available. You recognize that the good will and relationships described herein are assets and extremely valuable to the Company, and that loss of or damage to those relationships would destroy or diminish the value of the Company. In consideration of the covenants and agreements of the Company herein contained, the payments to be made by the Company pursuant to the Severance Plan and this Participation Agreement, you agree as follows:

1. Noncompetition and Non-solicitation of Customers and Employees

a. Non-competition. You agree that, from the date of your termination of employment for any reason, including a termination initiated by the Company with or without Cause, and for 12 months thereafter, you will not, directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director or in any other individual or representative capacity, worldwide, engage in any business which is competitive with the business of the Company. You may, however, own stock or the rights to own stock in a company covered by this paragraph that is publicly owned and regularly traded on any national exchange or in the over-the-counter market, so long as your holdings of stock or rights to own stock do not exceed the lesser of (i) 1% of the capital stock entitled to vote in the election of directors or (ii) the combined value of the stock or rights to acquire stock does not exceed your gross annual earnings from the Company.

b.Non-solicitation of Customers. You agree that you shall not, while employed by the Company and for a period of 12 months from the date of your termination of employment for any reason, including your termination initiated by the Company with or without Cause, directly or indirectly, either on your own behalf or on behalf of any other person, firm or entity, solicit or provide services that are the same as or similar to the services the Company provided or offered while you were employed by the Company to any customer or prospective customer of the Company (i) with whom you had direct contact during the last two years of your employment with the Company or

about whom you learned confidential information as a result of your employment with the Company, or (ii) with whom any person over whom you had supervisory authority at any time had direct contact during the last two years of your employment with the Company or about whom such person learned confidential information as a result of his or her employment with the Company.

c.Non-solicitation of Employees. You shall not, while employed by the Company and for a period of two years following your termination of employment for any reason, including your termination of employment initiated by the Company with or without Cause, either directly or indirectly solicit, induce or encourage any individual who was a Company employee at the time of, or within six months prior to, your termination of employment, to terminate their employment with the Company or accept employment with any entity, including but not limited to a competitor, supplier or customer of the Company, nor shall you cooperate with any others in doing or attempting to do so. As used herein, the term "solicit, induce or encourage" includes, but is not limited to, (i) initiating communications with a Company employee relating to possible employment, (ii) offering bonuses or other compensation to encourage a Company employee to terminate his or her employment with the Company and accept employment with any entity, including but not limited to a competitor, supplier or customer of the Company, or (iii) referring Company employees to personnel or agents employed by any entity, including but not limited to competitors, suppliers or customers of the Company.

2. Confidential Information.

a. Definition of Confidential Information.  Employee agrees that the confidentiality obligations set forth in the Company’s policies shall continue in full force and effect from and after the date hereof.  In addition, Employee acknowledges that his position with the Company created a relationship of high trust and confidence with respect to Confidential Information owned by the Company, its customers or suppliers that may have been learned or developed by Employee while employed by the Company. For purposes of this Agreement, “Confidential Information” means all information that meets one or more of the following three conditions: (i) it has not been made available generally to the public either by  the Company or by a third party with  the Company’s consent, (ii) it is useful or of value to  the Company’s current or anticipated business or research and development activities or those of a customer or supplier of the Company, or (iii) it either has been identified as confidential to Employee by the Company  (orally or in writing) or it has been maintained as confidential from outside parties and is recognized as intended for internal disclosure only. Confidential Information includes, but is not limited to, “Trade Secrets” to the full extent of the definition of that term under Delaware law. It does not include “general skills, knowledge and experience” as those terms are defined under Delaware law.

b. Examples of Confidential Information.  Confidential Information includes, but is not limited to: computer programs, unpatented inventions, discoveries or improvements; marketing, manufacturing, organizational, research and development, and business plans; proposed benefit designs; vendor lists,

relationship information and pricing; company policies; sales forecasts; personnel information (including the identity of  Company employees, their responsibilities, competence, abilities, and compensation); medical information about employees; pricing and nonpublic financial information; lists of current and prospective customers and information on customers or their employees; information concerning planned or pending acquisitions or divestitures; and information concerning purchases of major equipment or property.

c. General Skills, Knowledge and Experience.  Employee may take and use the general skills, knowledge and experience that Employee has learned or developed in Employee’s position or positions with the Company.

d. Confidentiality Obligations.  Employee will not (i) disclose, directly or indirectly, any Confidential Information to anyone outside of the Company or to any employees of the Company not authorized to receive such information or (ii) use any Confidential Information other than as may be necessary to perform Employee’s obligations under this Separation Agreement. In no event will Employee disclose any Confidential Information to, or use any Confidential Information for the benefit of any other person or entity, including without limitation any current or future competitor, supplier or customer of the Company, or any future employer of Employee.

e. Duration. With respect to Trade Secrets, Employee’s obligations under subparagraph (d) shall continue indefinitely or until such Trade Secret information has been made available generally to the public either by the Company or by a third party with the Company’s consent or is otherwise not considered a Trade Secret under Delaware law. With respect to Confidential Information that is not a Trade Secret (hereinafter referred to as “Proprietary Information”), Employee’s obligations under subparagraph (d) shall continue in duration until the first to occur of the following: (a) the expiration of 60 months after the Separation Date or (b) the Proprietary Information has been made available generally to the public either by the Company or by a third party with the Company’s consent.

3. Obligation upon Subsequent Employment. If you accept employment with any future employer during the time period that you are entitled to receive salary continuation (regardless of whether you actually receive severance benefits during that period), you will deliver a copy of this Annex A to such employer and advise such employer concerning the existence of your obligations under this Participation Agreement.

4. Company’s Right to Injunctive Relief. By execution of this Participation Agreement, you acknowledge and agree that the Company would be damaged irreparably if any provision under this Annex A were breached by you and money damages would be an inadequate remedy for any such nonperformance or breach. Accordingly, the Company and its successors or permitted assigns in order to protect its interests, shall pursue, in addition to other rights and remedies existing in its favor, an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). With respect to such enforcement,

the prevailing party in such litigation shall be entitled to recover from the other party any and all attorneys’ fees, costs and expenses incurred by or on behalf of that party in enforcing or attempting to enforce any provision under this Annex A or any other rights under this Participation Agreement.

EX-10.20

Exhibit 10.20

LSC Communications US, LLC.

Participation Agreement

January 21, 2019

Matt Roberts

LSC Communications

184 Shuman Blvd., Ste. #130 
Naperville, IL 60563 

Re: Notice of Participation in the Key Employee Severance Plan

Dear Matt:

LSC Communications, Inc. (the “Company”) is pleased to inform you that you have been selected as a participant in the Company’s LSC Communications US, LLC Key Employee Severance Plan (the “Severance Plan”), which is operated as a sub-plan under the LSC Separation Pay Plan. Capitalized terms that are used in this Participation Agreement but that are not defined herein shall have the meanings set forth in the Severance Plan.

Severance Plan Benefits

Under Section 5(a) of the Severance Plan, in the event you incur a Qualifying Termination, which for purposes of the Severance Plan includes a termination of your employment by the Company without Cause (unless otherwise set forth in this Participation Agreement, then so long as you fulfill the Severance Plan’s requirements (e.g., executing a Separation Agreement and General Release), then you would be entitled to the following benefits:

• Salary continuation for 12 months;

• Payment of 100% of your target annual bonus;

• A lump-sum payment which will represent the current difference between your monthly medical insurance cost immediately prior to the applicable Qualifying Termination and the monthly cost for COBRA for 12 months and may be used for any purpose, including to offset the cost of electing COBRA coverage; and

• 6 months of outplacement assistance from a provider selected by the Company.

The salary continuation and target bonus payments amounts set forth above will be paid as provided in the Severance Plan beginning approximately 60 days following your Qualifying Termination and ending on the ninth month anniversary of the Qualifying Termination.

Under Section 5(b) of the Severance Plan, in the event that your Qualifying Termination or a termination of your employment for Good Reason (as defined below) occurs within

two years following the date of a Change in Control of the Company, then so long as you fulfill the Severance Plan’s requirements (e.g., executing a Separation Agreement and General Release), then you would be entitled to the following benefits:

• Salary continuation for 18 months;

• Payment of 150% of your target annual bonus;

• A lump-sum payment which will represent the current difference between your monthly medical insurance cost immediately prior to the applicable Qualifying Termination and the monthly cost for COBRA for 18 months and may be used for any purpose, including to offset the cost of electing COBRA coverage; and

• Six months of outplacement assistance from a provider selected by the Company.

The salary continuation and target bonus payments amounts set forth above will be paid as provided in the Severance Plan beginning approximately 60 days following your Qualifying Termination and ending on the 18th month anniversary of the Qualifying Termination.

Notwithstanding anything in the Severance Plan to the contrary (including Section 4(d) thereof) and regardless of whether a Qualifying Termination occurs before, on or after a Change in Control, the Separation Agreement and General Release shall not include any non-competition or non-solicitation covenants.  The only restrictive covenants you are required to comply with as a condition to receiving severance benefits under the Severance Plan are set forth below in Annex A to this Participation Agreement.  

Restrictive Covenants

By signing below, you acknowledge and agree to comply with the restrictive covenants set forth on Annex A to this Participation Agreement and incorporated herein by reference.

Additional Terms

a. Resignations.  Upon termination of your employment for any reason, you shall resign from such offices and directorships, if any, of the Company that you may hold from time to time.

b. Indemnification. Your rights of indemnification under the Company’s organizational documents, any plan or agreement at law or otherwise and your rights thereunder to director’s and officer’s liability insurance coverage for, in both cases, actions as an officer of the Company shall survive your termination of employment.

For purposes of the Severance Plan and this Participation Agreement, “Good Reason” means, without your express written consent, the occurrence of any of the following events:

2

i. A material reduction by the Company in your rate of annual base salary or annual target bonus opportunity as the same may be increased from time to time; or

ii. Any requirement of the Company that your office be more than seventy-five (75) miles from Warrenville, IL.

Notwithstanding the foregoing, a Good Reason event shall not be deemed to have occurred if the Company cures such action, failure or breach within ten (10) days after receipt of notice thereof given by you. Your right to terminate employment for Good Reason shall not be affected by your incapacities due to mental or physical illness and your continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason, provided, however, that you must provide notice of termination of employment within ninety (90) days following the initial existence of the event constituting Good Reason or such event shall not constitute Good Reason under the Severance Plan or this Participation Agreement.

Administrative Provisions

Your eligibility to receive the benefits described above, and the timing of your receipt of those benefits, is in all cases subject to the terms of the Severance Plan, a copy of which can be obtained by contacting the Company’s Chief Human Resources Officer.

Please note, your participation in the Severance Plan is subject to your execution of this Participation Agreement. Until you sign this Participation Agreement below where indicated and return it to Scott Bigelow, you will not be eligible for the benefits described above in this notice even if a Qualifying Termination were to otherwise occur. If you fail to sign and return this Participation Agreement by February 8, 2019 then you will lose the opportunity to participate in the Severance Plan.

We thank you for your continued services to the Company.

Sincerely,

/s/ Margie Rodino____________________________

Margie Rodino, SVP Human Resources

By signing below, you agree to be bound by the terms of this Participation Agreement and the Severance Plan.

/s/ Matthew K. Roberts_________________

Participant

Date: January 21, 2019__________________

3

Annex A

Restrictive Covenants

You and the Company recognize that, due to the nature of your employment and relationship with the Company, you will have access to and develop confidential business information, proprietary information, and trade secrets relating to the business and operations of the Company and its affiliates. You acknowledge that such information is valuable to the business of the Company and its affiliates, and that disclosure to, or use for the benefit of, any person or entity other than the Company or its affiliates, would cause substantial damage to the Company. You further acknowledge that your duties for the Company include the opportunity to develop and maintain relationships with the Company’s customers, employees, representatives and agents on behalf of the Company and that access to and development of those close relationships with the Company’s customers render your services special, unique and extraordinary. As a result of your position and customer contacts, you recognize that you will gain valuable information about (i) the Company’s relationship with its customers, their buying habits, special needs, and purchasing policies, (ii) the Company’s pricing policies, purchasing policies, profit structures, and margin needs, (iii) the skills, capabilities and other employment-related information relating to Company employees, and (iv) other matters of which you would not otherwise know and that is not otherwise readily available. You recognize that the good will and relationships described herein are assets and extremely valuable to the Company, and that loss of or damage to those relationships would destroy or diminish the value of the Company. In consideration of the covenants and agreements of the Company herein contained, the payments to be made by the Company pursuant to the Severance Plan and this Participation Agreement, you agree as follows:

1. Noncompetition and Non-solicitation of Customers and Employees

a. Non-competition. You agree that, from the date of your termination of employment for any reason, including a termination initiated by the Company with or without Cause, and for nine months thereafter, you will not, directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director or in any other individual or representative capacity, worldwide, engage in any business which is competitive with the business of the Company. You may, however, own stock or the rights to own stock in a company covered by this paragraph that is publicly owned and regularly traded on any national exchange or in the over-the-counter market, so long as your holdings of stock or rights to own stock do not exceed the lesser of (i) 1% of the capital stock entitled to vote in the election of directors or (ii) the combined value of the stock or rights to acquire stock does not exceed your gross annual earnings from the Company.

b.Non-solicitation of Customers. You agree that you shall not, while employed by the Company and for a period of nine months from the date of your termination of employment for any reason, including your termination initiated by the Company with or without Cause, directly or indirectly, either on your own behalf or on behalf of any other person, firm or entity, solicit or provide services that are the same as or similar to the services the Company provided or offered while you were employed by the Company to any customer or prospective customer of the Company (i) with whom you had direct contact during the last two years of your employment with the Company or

about whom you learned confidential information as a result of your employment with the Company, or (ii) with whom any person over whom you had supervisory authority at any time had direct contact during the last two years of your employment with the Company or about whom such person learned confidential information as a result of his or her employment with the Company.

c.Non-solicitation of Employees. You shall not, while employed by the Company and for a period of two years following your termination of employment for any reason, including your termination of employment initiated by the Company with or without Cause, either directly or indirectly solicit, induce or encourage any individual who was a Company employee at the time of, or within six months prior to, your termination of employment, to terminate their employment with the Company or accept employment with any entity, including but not limited to a competitor, supplier or customer of the Company, nor shall you cooperate with any others in doing or attempting to do so. As used herein, the term "solicit, induce or encourage" includes, but is not limited to, (i) initiating communications with a Company employee relating to possible employment, (ii) offering bonuses or other compensation to encourage a Company employee to terminate his or her employment with the Company and accept employment with any entity, including but not limited to a competitor, supplier or customer of the Company, or (iii) referring Company employees to personnel or agents employed by any entity, including but not limited to competitors, suppliers or customers of the Company.

2. Confidential Information.

a. Definition of Confidential Information.  Employee agrees that the confidentiality obligations set forth in the Company’s policies shall continue in full force and effect from and after the date hereof.  In addition, Employee acknowledges that his position with the Company created a relationship of high trust and confidence with respect to Confidential Information owned by the Company, its customers or suppliers that may have been learned or developed by Employee while employed by the Company. For purposes of this Agreement, “Confidential Information” means all information that meets one or more of the following three conditions: (i) it has not been made available generally to the public either by  the Company or by a third party with  the Company’s consent, (ii) it is useful or of value to  the Company’s current or anticipated business or research and development activities or those of a customer or supplier of the Company, or (iii) it either has been identified as confidential to Employee by the Company  (orally or in writing) or it has been maintained as confidential from outside parties and is recognized as intended for internal disclosure only. Confidential Information includes, but is not limited to, “Trade Secrets” to the full extent of the definition of that term under Delaware law. It does not include “general skills, knowledge and experience” as those terms are defined under Delaware law.

b. Examples of Confidential Information.  Confidential Information includes, but is not limited to: computer programs, unpatented inventions, discoveries or improvements; marketing, manufacturing, organizational, research and development, and business plans; proposed benefit designs; vendor lists,

relationship information and pricing; company policies; sales forecasts; personnel information (including the identity of  Company employees, their responsibilities, competence, abilities, and compensation); medical information about employees; pricing and nonpublic financial information; lists of current and prospective customers and information on customers or their employees; information concerning planned or pending acquisitions or divestitures; and information concerning purchases of major equipment or property.

c. General Skills, Knowledge and Experience.  Employee may take and use the general skills, knowledge and experience that Employee has learned or developed in Employee’s position or positions with the Company.

d. Confidentiality Obligations.  Employee will not (i) disclose, directly or indirectly, any Confidential Information to anyone outside of the Company or to any employees of the Company not authorized to receive such information or (ii) use any Confidential Information other than as may be necessary to perform Employee’s obligations under this Separation Agreement. In no event will Employee disclose any Confidential Information to, or use any Confidential Information for the benefit of any other person or entity, including without limitation any current or future competitor, supplier or customer of the Company, or any future employer of Employee.

e. Duration. With respect to Trade Secrets, Employee’s obligations under subparagraph (d) shall continue indefinitely or until such Trade Secret information has been made available generally to the public either by the Company or by a third party with the Company’s consent or is otherwise not considered a Trade Secret under Delaware law. With respect to Confidential Information that is not a Trade Secret (hereinafter referred to as “Proprietary Information”), Employee’s obligations under subparagraph (d) shall continue in duration until the first to occur of the following: (a) the expiration of 60 months after the Separation Date or (b) the Proprietary Information has been made available generally to the public either by the Company or by a third party with the Company’s consent.

3. Obligation upon Subsequent Employment. If you accept employment with any future employer during the time period that you are entitled to receive salary continuation (regardless of whether you actually receive severance benefits during that period), you will deliver a copy of this Annex A to such employer and advise such employer concerning the existence of your obligations under this Participation Agreement.

4. Company’s Right to Injunctive Relief. By execution of this Participation Agreement, you acknowledge and agree that the Company would be damaged irreparably if any provision under this Annex A were breached by you and money damages would be an inadequate remedy for any such nonperformance or breach. Accordingly, the Company and its successors or permitted assigns in order to protect its interests, shall pursue, in addition to other rights and remedies existing in its favor, an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). With respect to such enforcement,

the prevailing party in such litigation shall be entitled to recover from the other party any and all attorneys’ fees, costs and expenses incurred by or on behalf of that party in enforcing or attempting to enforce any provision under this Annex A or any other rights under this Participation Agreement.

EX-10.21

Exhibit 10.21

LSC Communications US, LLC.

Participation Agreement

February 20, 2018

George Zengo

LSC Communications

200 Connecticut Avenue #4G

Norwalk, CT  06854

Re: Notice of Participation in the Key Employee Severance Plan

Dear George:

LSC Communications, Inc. (the “Company”) is pleased to inform you that you have been selected as a participant in the Company’s LSC Communications US, LLC Key Employee Severance Plan (the “Severance Plan”), which is operated as a sub-plan under the LSC Separation Pay Plan. Capitalized terms that are used in this Participation Agreement but that are not defined herein shall have the meanings set forth in the Severance Plan.

Severance Plan Benefits

Under Section 5(a) of the Severance Plan, in the event you incur a Qualifying Termination, which for purposes of the Severance Plan includes a termination of your employment by the Company without Cause (unless otherwise set forth in this Participation Agreement, then so long as you fulfill the Severance Plan’s requirements (e.g., executing a Separation Agreement and General Release), then you would be entitled to the following benefits:

• Salary continuation for 12 months;

• Payment of 100% of your target annual bonus;

• A lump-sum payment which will represent the current difference between your monthly medical insurance cost immediately prior to the applicable Qualifying Termination and the monthly cost for COBRA for 12 months and may be used for any purpose, including to offset the cost of electing COBRA coverage; and

• Six months of outplacement assistance from a provider selected by the Company.

The salary continuation and target bonus payments amounts set forth above will be paid as provided in the Severance Plan beginning approximately 60 days following your Qualifying Termination and ending on the first anniversary of the Qualifying Termination.

LSC COMMUNICATIONS

lsccom.com | 773.272.9202 | 191 N. Wacker Drive, Suite 1400, Chicago, IL 60606

Under Section 5(b) of the Severance Plan, in the event that your Qualifying Termination or a termination of your employment for Good Reason (as defined below) occurs within two years following the date of a Change in Control of the Company, then so long as you fulfill the Severance Plan’s requirements (e.g., executing a Separation Agreement and General Release), then you would be entitled to the following benefits:

• Salary continuation for 18 months;

• Payment of 150% of your target annual bonus;

• A lump-sum payment which will represent the current difference between your monthly medical insurance cost immediately prior to the applicable Qualifying Termination and the monthly cost for COBRA for 18 months and may be used for any purpose, including to offset the cost of electing COBRA coverage; and

• Six months of outplacement assistance from a provider selected by the Company.

The salary continuation and target bonus payments amounts set forth above will be paid as provided in the Severance Plan beginning approximately 60 days following your Qualifying Termination and ending on the 18th month anniversary of the Qualifying Termination.

Notwithstanding anything in the Severance Plan to the contrary (including Section 4(d) thereof) and regardless of whether a Qualifying Termination occurs before, on or after a Change in Control, the Separation Agreement and General Release shall not include any non-competition or non-solicitation covenants.  The only restrictive covenants you are required to comply with as a condition to receiving severance benefits under the Severance Plan are set forth below in Annex A to this Participation Agreement.  

Restrictive Covenants

By signing below, you acknowledge and agree to comply with the restrictive covenants set forth on Annex A to this Participation Agreement and incorporated herein by reference.

Additional Terms

a. Resignations.  Upon termination of your employment for any reason, you shall resign from such offices and directorships, if any, of the Company that you may hold from time to time.

b. Indemnification. Your rights of indemnification under the Company’s organizational documents, any plan or agreement at law or otherwise and your rights thereunder to director’s and officer’s liability insurance coverage for, in both cases, actions as an officer of the Company shall survive your termination of employment.

2

LSC COMMUNICATIONS

lsccom.com | 773.272.9202 | 191 N. Wacker Drive, Suite 1400, Chicago, IL 60606

For purposes of the Severance Plan and this Participation Agreement, “Good Reason” means, without your express written consent, the occurrence of any of the following events:

i. A material reduction by the Company in your rate of annual base salary or annual target bonus opportunity as the same may be increased from time to time; or

ii. Any requirement of the Company that your office be more than seventy-five (75) miles from Norwalk, CT.

Notwithstanding the foregoing, a Good Reason event shall not be deemed to have occurred if the Company cures such action, failure or breach within ten (10) days after receipt of notice thereof given by you. Your right to terminate employment for Good Reason shall not be affected by your incapacities due to mental or physical illness and your continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason, provided, however, that you must provide notice of termination of employment within ninety (90) days following the initial existence of the event constituting Good Reason or such event shall not constitute Good Reason under the Severance Plan or this Participation Agreement.

Administrative Provisions

Your eligibility to receive the benefits described above, and the timing of your receipt of those benefits, is in all cases subject to the terms of the Severance Plan, a copy of which can be obtained by contacting the Company’s Chief Human Resources Officer.

Please note, your participation in the Severance Plan is subject to your execution of this Participation Agreement and the letter from the Company, dated as of February 20, 2018 to which this Participation Agreement is appended. Until you sign such letter and this Participation Agreement below where indicated and return it to Scott Bigelow, you will not be eligible for the benefits described above in this notice even if a Qualifying Termination were to otherwise occur. If you fail to sign and return such letter and this Participation Agreement by March 6, 2018 then you will lose the opportunity to participate in the Severance Plan.

We thank you for your continued services to the Company.

Sincerely,

/s/ R. Scott Bigelow______________________

R. Scott Bigelow, Chief Human Resources Officer

By signing below, you agree to be bound by the terms of this Participation Agreement and the Severance Plan.

/s/ George B. Zengo________

Participant

Date: March 1, 2018

3

LSC COMMUNICATIONS

lsccom.com | 773.272.9202 | 191 N. Wacker Drive, Suite 1400, Chicago, IL 60606

Annex A

Restrictive Covenants

You and the Company recognize that, due to the nature of your employment and relationship with the Company, you will have access to and develop confidential business information, proprietary information, and trade secrets relating to the business and operations of the Company and its affiliates. You acknowledge that such information is valuable to the business of the Company and its affiliates, and that disclosure to, or use for the benefit of, any person or entity other than the Company or its affiliates, would cause substantial damage to the Company. You further acknowledge that your duties for the Company include the opportunity to develop and maintain relationships with the Company’s customers, employees, representatives and agents on behalf of the Company and that access to and development of those close relationships with the Company’s customers render your services special, unique and extraordinary. As a result of your position and customer contacts, you recognize that you will gain valuable information about (i) the Company’s relationship with its customers, their buying habits, special needs, and purchasing policies, (ii) the Company’s pricing policies, purchasing policies, profit structures, and margin needs, (iii) the skills, capabilities and other employment-related information relating to Company employees, and (iv) other matters of which you would not otherwise know and that is not otherwise readily available. You recognize that the good will and relationships described herein are assets and extremely valuable to the Company, and that loss of or damage to those relationships would destroy or diminish the value of the Company. In consideration of the covenants and agreements of the Company herein contained, the payments to be made by the Company pursuant to the Severance Plan and this Participation Agreement, you agree as follows:

1. Noncompetition and Non-solicitation of Customers and Employees

a. Non-competition. You agree that, from the date of your termination of employment for any reason, including a termination initiated by the Company with or without Cause, and for 12 months thereafter, you will not, directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director or in any other individual or representative capacity, worldwide, engage in any business which is competitive with the business of the Company. You may, however, own stock or the rights to own stock in a company covered by this paragraph that is publicly owned and regularly traded on any national exchange or in the over-the-counter market, so long as your holdings of stock or rights to own stock do not exceed the lesser of (i) 1% of the capital stock entitled to vote in the election of directors or (ii) the combined value of the stock or rights to acquire stock does not exceed your gross annual earnings from the Company.

b.Non-solicitation of Customers. You agree that you shall not, while employed by the Company and for a period of 12 months from the date of your termination of employment for any reason, including your termination initiated by the Company with or without Cause, directly or indirectly, either on your own behalf or on behalf of any other person, firm or entity, solicit or provide services that are the same as or similar to the services the Company provided or offered while you were employed by the Company to any customer or prospective customer of the Company (i) with whom you had direct contact during the last two years of your employment with the Company or

about whom you learned confidential information as a result of your employment with the Company, or (ii) with whom any person over whom you had supervisory authority at any time had direct contact during the last two years of your employment with the Company or about whom such person learned confidential information as a result of his or her employment with the Company.

c.Non-solicitation of Employees. You shall not, while employed by the Company and for a period of two years following your termination of employment for any reason, including your termination of employment initiated by the Company with or without Cause, either directly or indirectly solicit, induce or encourage any individual who was a Company employee at the time of, or within six months prior to, your termination of employment, to terminate their employment with the Company or accept employment with any entity, including but not limited to a competitor, supplier or customer of the Company, nor shall you cooperate with any others in doing or attempting to do so. As used herein, the term "solicit, induce or encourage" includes, but is not limited to, (i) initiating communications with a Company employee relating to possible employment, (ii) offering bonuses or other compensation to encourage a Company employee to terminate his or her employment with the Company and accept employment with any entity, including but not limited to a competitor, supplier or customer of the Company, or (iii) referring Company employees to personnel or agents employed by any entity, including but not limited to competitors, suppliers or customers of the Company.

2. Confidential Information.

a. Definition of Confidential Information.  Employee agrees that the confidentiality obligations set forth in the Company’s policies shall continue in full force and effect from and after the date hereof.  In addition, Employee acknowledges that his position with the Company created a relationship of high trust and confidence with respect to Confidential Information owned by the Company, its customers or suppliers that may have been learned or developed by Employee while employed by the Company. For purposes of this Agreement, “Confidential Information” means all information that meets one or more of the following three conditions: (i) it has not been made available generally to the public either by  the Company or by a third party with  the Company’s consent, (ii) it is useful or of value to  the Company’s current or anticipated business or research and development activities or those of a customer or supplier of the Company, or (iii) it either has been identified as confidential to Employee by the Company  (orally or in writing) or it has been maintained as confidential from outside parties and is recognized as intended for internal disclosure only. Confidential Information includes, but is not limited to, “Trade Secrets” to the full extent of the definition of that term under Delaware law. It does not include “general skills, knowledge and experience” as those terms are defined under Delaware law.

b. Examples of Confidential Information.  Confidential Information includes, but is not limited to: computer programs, unpatented inventions, discoveries or improvements; marketing, manufacturing, organizational, research and development, and business plans; proposed benefit designs; vendor lists,

relationship information and pricing; company policies; sales forecasts; personnel information (including the identity of  Company employees, their responsibilities, competence, abilities, and compensation); medical information about employees; pricing and nonpublic financial information; lists of current and prospective customers and information on customers or their employees; information concerning planned or pending acquisitions or divestitures; and information concerning purchases of major equipment or property.

c. General Skills, Knowledge and Experience.  Employee may take and use the general skills, knowledge and experience that Employee has learned or developed in Employee’s position or positions with the Company.

d. Confidentiality Obligations.  Employee will not (i) disclose, directly or indirectly, any Confidential Information to anyone outside of the Company or to any employees of the Company not authorized to receive such information or (ii) use any Confidential Information other than as may be necessary to perform Employee’s obligations under this Separation Agreement. In no event will Employee disclose any Confidential Information to, or use any Confidential Information for the benefit of any other person or entity, including without limitation any current or future competitor, supplier or customer of the Company, or any future employer of Employee.

e. Duration. With respect to Trade Secrets, Employee’s obligations under subparagraph (d) shall continue indefinitely or until such Trade Secret information has been made available generally to the public either by the Company or by a third party with the Company’s consent or is otherwise not considered a Trade Secret under Delaware law. With respect to Confidential Information that is not a Trade Secret (hereinafter referred to as “Proprietary Information”), Employee’s obligations under subparagraph (d) shall continue in duration until the first to occur of the following: (a) the expiration of 60 months after the Separation Date or (b) the Proprietary Information has been made available generally to the public either by the Company or by a third party with the Company’s consent.

3. Obligation upon Subsequent Employment. If you accept employment with any future employer during the time period that you are entitled to receive salary continuation (regardless of whether you actually receive severance benefits during that period), you will deliver a copy of this Annex A to such employer and advise such employer concerning the existence of your obligations under this Participation Agreement.

4. Company’s Right to Injunctive Relief. By execution of this Participation Agreement, you acknowledge and agree that the Company would be damaged irreparably if any provision under this Annex A were breached by you and money damages would be an inadequate remedy for any such nonperformance or breach. Accordingly, the Company and its successors or permitted assigns in order to protect its interests, shall pursue, in addition to other rights and remedies existing in its favor, an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). With respect to such enforcement,

the prevailing party in such litigation shall be entitled to recover from the other party any and all attorneys’ fees, costs and expenses incurred by or on behalf of that party in enforcing or attempting to enforce any provision under this Annex A or any other rights under this Participation Agreement.

EX-18

Exhibit 18

May 6, 2020

LSC Communications, Inc.
191 N. Wacker Dr.
Chicago, IL 60606

Dear Sirs/Madams:

At your request, we have read the description included in your Quarterly Report on Form 10-Q to the Securities and Exchange Commission for the quarter ended March 31, 2020, of the facts relating to the change in accounting method for certain defined benefit pension plan costs in 2020. Note 1 to such financial statements contains a description of your adoption of a change in accounting method for determining the market-related value of liability-hedging investments for the US Qualified and Non-Qualified Plans from a calculated method to a fair value method. We believe, on the basis of the facts set forth and other information furnished to us by appropriate officials of LSC Communications, Inc. that the accounting change described in your Form 10-Q is to an alternative accounting principle that is preferable under the circumstances.

We have not audited any consolidated financial statements of LSC Communications, Inc. and its subsidiaries as of any date or for any period subsequent to December 31, 2019. Therefore, we are unable to express, and we do not express, an opinion on the facts set forth in the above-mentioned Form 10-Q, on the related information furnished to us by officials of LSC Communications, Inc. or on the financial position, results of operations, or cash flows of LSC Communications, Inc. and its subsidiaries as of any date or for any period subsequent to December 31, 2019.

Yours truly,

/s/ DELOITTE & TOUCHE LLP

Chicago, IL

 

EX-31.1

Exhibit 31.1

Certification Pursuant to Rule 13a-14(a) and Rule 15d-14(a)

of the Securities Exchange Act of 1934

I, Thomas J. Quinlan, III, certify that:  

1. I have reviewed this Quarterly Report on Form 10-Q of LSC Communications, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and  

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2020        

/s/    THOMAS J. QUINLAN, III

Thomas J. Quinlan, III

  Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to Rule 13a-14(a) and Rule 15d-14(a)

of the Securities Exchange Act of 1934

I, Andrew B. Coxhead, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of LSC Communications, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and  

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2020       

/s/    ANDREW B. COXHEAD

Andrew B. Coxhead

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

CERTIFICATION PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b)

AND SECTION 1350 OF CHAPTER 63 OF TITLE 18

OF THE UNITED STATES CODE (18 U.S.C. 1350),

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of LSC Communications, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas J. Quinlan, III, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 6, 2020

/s/  THOMAS J. QUINLAN, III

Thomas J. Quinlan, III

Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

CERTIFICATION PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b)

AND SECTION 1350 OF CHAPTER 63 OF TITLE 18

OF THE UNITED STATES CODE (18 U.S.C. 1350),

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of LSC Communications (the “Company”) on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew B. Coxhead, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 6, 2020

/s/  ANDREW B. COXHEAD

Andrew B. Coxhead

Chief Financial Officer

XML

Property, Plant and Equipment - Narrative (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Property Plant And Equipment [Line Items]
Depreciation expense	$ 21	$ 24
Prepaid expenses and other current assets
Property Plant And Equipment [Line Items]
Net book value of assets held for sale	$ 6		$ 9

XML

Goodwill and Other Intangible Assets - Schedule of Estimated Annual Amortization Expense Related to all Amortizable Intangible Assets (Detail) $ in Millions	Mar. 31, 2020 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
2020	$ 17
2021	15
2022	14
2023	13
2024	13
2025 and thereafter	48
Total	$ 120

XML

Segment Information - Narrative (Detail)	3 Months Ended
	Mar. 31, 2020 Segment Category
Magazines, Catalogs and Logistics
Segment Reporting Information [Line Items]
Number of reporting units | Segment	2
Office Products
Segment Reporting Information [Line Items]
Number of core product categories | Category	5

XML

Taxes - Narrative (Detail) - USD ($)	9 Months Ended	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2022	Dec. 31, 2021	Mar. 31, 2020
Income Tax [Line Items]
CARES act of 2020, amount of payroll taxes accrued				$ 2,000,000
C A R E S Act Of2020 provision benefit				$ 0
Scenario Plan
Income Tax [Line Items]
CARES act of 2020, percentage of deferred payments of employer share of wages on social security payroll taxes	6.20%
CARES act of 2020, percentage of deferred social security payroll taxes to be paid		50.00%	50.00%

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement Of Stockholders Equity [Abstract]
Dividends declared per common share	$ 0	$ 0.26

XML

Inventories

3 Months Ended

Mar. 31, 2020

Inventory Disclosure [Abstract]

Inventories

Note 4.  Inventories

The components of the Company’s inventories, net of excess and obsolescence reserves for raw materials and finished goods, at March 31, 2020 and December 31, 2019 were as follows:        

	March 31,			December 31,
	2020			2019
Raw materials and manufacturing supplies	$	70		$	91
Work in process		38			38
Finished goods		89			87
Last in, first out reserve		(41	)		(46	)
Total	$	156		$	170

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 8.  Commitments and Contingencies  

The Company is subject to laws and regulations relating to the protection of the environment.  The Company accrues for expenses associated with environmental remediation obligations when such amounts are probable and can be reasonably estimated. Such accruals are adjusted as new information develops or circumstances change and are generally not discounted.  The Company has been designated as a potentially responsible party or has received claims in nine active federal and state Superfund and other multiparty remediation sites. In addition to these sites, the Company may also have the obligation to remediate three other previously and currently owned facilities. At the Superfund sites, the Comprehensive Environmental Response, Compensation and Liability Act provides that the Company’s liability could be joint and several, meaning that the Company could be required to pay an amount in excess of its proportionate share of the remediation costs.

The Company’s understanding of the financial strength of other potentially responsible parties at the multiparty sites and of other liable parties at the previously owned facilities has been considered, where appropriate, in the determination of the Company’s estimated liability.  The Company established reserves, recorded in accrued liabilities and other noncurrent liabilities, that it believes are adequate to cover its share of the potential costs of remediation at each of the multiparty sites and the previously and currently owned facilities. It is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Company may undertake in the future.  However, in the opinion of management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material effect on the Company’s condensed consolidated balance sheets, statements of operations and cash flows.

From time to time, the Company’s customers and others file voluntary petitions for reorganization under United States bankruptcy laws. In such cases, certain pre-petition payments received by the Company from these parties could be considered preference items and subject to return.  In addition, the Company may be party to certain litigation arising in the ordinary course of business. Management believes that the final resolution of these preference items and litigation will not have a material effect on the Company’s consolidated balance sheets, statements of operations and cash flows.

XML

Segment Information (Tables)

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Schedule of Segment Reporting Information

The Company has disclosed income (loss) from operations as the primary measure of segment earnings (loss).  This is the measure of profitability used by the Company’s chief operating decision-maker and is most consistent with the presentation of profitability reported with the condensed consolidated financial statements.   

			Income (Loss)					Depreciation
Three Months Ended	Net		from			Assets of		and		Capital
March 31, 2020	Sales		Operations			Operations		Amortization		Expenditures
Magazines, Catalogs and Logistics	$	327	$	(35	)	$	597	$	11	$	7
Book		204		(9	)		468		12		4
Office Products		112		7			282		3		—
Mexico		23		3			51		1		—
Total reportable segments		666		(34	)		1,398		27		11
Other		35		3			29		—		—
Corporate		—		(12	)		128		—		—
Total operations	$	701	$	(43	)	$	1,555	$	27	$	11

			Income (Loss)					Depreciation
Three Months Ended	Net		from			Assets of		and		Capital
March 31, 2019	Sales		Operations			Operations		Amortization		Expenditures
Magazines, Catalogs and Logistics	$	403	$	(31	)	$	795	$	15	$	10
Book		260		13			647		12		17
Office Products		119		8			329		3		—
Mexico		24		3			68		1		1
Total reportable segments		806		(7	)		1,839		31		28
Other		39		1			22		—		—
Corporate		—		(13	)		86		—		—
Total operations	$	845	$	(19	)	$	1,947	$	31	$	28

XML

Debt (Tables)

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Schedule of the Company's Debt

The Company’s debt at March 31, 2020 and December 31, 2019 consisted of the following:   

	March 31,			December 31,
	2020			2019
Borrowings under the Revolving Credit Facility	$	249		$	249
Term Loan Facility due September 30, 2022 (a)		219			218
8.75% Senior Secured Notes due October 15, 2023		450			450
Finance lease and other obligations		1			2
Unamortized debt issuance costs		(8	)		(9	)
Total debt		911			910
Less: current portion		(911	)		(465	)
Long-term debt	$	—		$	445

(a) The borrowings under the Term Loan Facility are subject to a variable interest rate.  As of March 31, 2020 and December 31, 2019, the interest rate was 7.02% and 7.12%, respectively.      

Summary of Changes to Minimum Interest Coverage Ratio and Maximum Consolidated Leverage Ratio

The following summarizes the changes to the minimum Interest Coverage Ratio and the maximum Consolidated Leverage Ratio:

	Original	December 20, 2018	August 5, 2019
Maximum Consolidated Leverage Ratio
Current ratio	3.25 to 1.00	3.25 to 1.00	3.75 to 1.00
Step-down ratio	3.00 to 1.00	3.00 to 1.00	3.50 to 1.00 and 3.25 to 1.00
Step-down as of date (quarter ending on or after)	March 31, 2019	March 31, 2020	June 30, 2020 and March 31, 2021
Minimum Interest Coverage Ratio
Current ratio	3.25 to 1.00	3.25 to 1.00	2.50 to 1.00
Step-up ratio	3.50 to 1.00	3.50 to 1.00	2.75 to 1.00 and 3.00 to 1.00
Step-up as of date (quarter ending on or after)	March 31, 2019	March 31, 2020	September 30, 2020 and June 30, 2021

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	[1]
Cash Flows from Operating Activities
Net (loss)	$ (52)	$ (125)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Impairment charges	1	2
Depreciation and amortization	27	31
Provision for doubtful accounts receivable	1	3
Share-based compensation	1	3
Deferred income taxes	0	(34)
Settlement of retirement benefit obligations	0	132
Other	2	1
Changes in operating assets and liabilities - net of acquisitions:
Accounts receivable-net	7	(2)
Inventories	11	(24)
Prepaid expenses and other current assets	(19)	3
Accounts payable	(23)	(33)
Income taxes receivable	0	(4)
Accrued liabilities and other	5	23
Net cash (used in) operating activities	(39)	(24)
Cash Flows from Investing Activities
Capital expenditures	(11)	(28)
Acquisitions of businesses, net of cash acquired	0	(3)
Net proceeds from sales and purchases of investments and other assets	2	0
Net cash (used in) investing activities	(9)	(31)
Cash Flows from Financing Activities
Payments of current maturities and long-term debt	0	(11)
Net proceeds from credit facility borrowings	0	67
Debt issuance costs	(1)	0
Dividends paid	0	(9)
Other financing activities	3	(1)
Net cash provided by financing activities	2	46
Effect of exchange rate on cash and cash equivalents	(2)	1
Net (decrease) in cash, cash equivalents and restricted cash	(48)	(8)
Cash, cash equivalents and restricted cash at beginning of year	106	24
Cash, cash equivalents and restricted cash at end of period	$ 58	$ 16

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Common stock, Authorized	65,000,000	65,000,000
Common stock, Issued	35,719,936	35,559,052
Treasury stock, shares	2,133,874	2,084,055

XML

Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Taxes

Note 12. Taxes

The CARES Act is intended to provide emergency relief to both businesses and individuals impacted by the COVID-19 pandemic.  

Income Taxes

The CARES Act enacted several provisions that may impact corporations including the carryback of certain net operating losses and the expensing of additional interest under certain circumstances.  The Company has estimated that these provisions will not result in a benefit for the three months ended March 31, 2020.  As the Company assesses additional guidance issued by the U.S. Treasury Department, the IRS and other standard-setting bodies related to the CARES Act, it may record an impact to the income tax provision.  

Payroll Taxes

The CARES Act allows companies to defer payments of the employer share (6.2% of wages) of Social Security payroll taxes from the date of enactment through December 31, 2020.  Fifty percent of the taxes deferred are required to be paid by December 31, 2021 with the remaining fifty percent by December 31, 2022. As of March 31, 2020, the Company accrued $2 million of payroll taxes that will benefit from this adoption. The Company expects to continue to defer payroll taxes through the end of 2020.

XML

Overview and Basis of Presentation (Tables)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Summary of Impact of Change in Accounting Principle on Condensed Consolidated Balance Sheets, Statements of Stockholders' Equity and Statements of Operations and Comprehensive Income

The tables below represent the impact of the change in accounting principle on the condensed consolidated balance sheets and statement of stockholders’ equity for all periods since 2017:

	Previously Disclosed in Form 10-K						As Reported with Change
	As of December 31, 2017			Impact of Change			As of December 31, 2017
Equity
(Accumulated deficit)	$	(90	)	$	(7	)	$	(97	)
Accumulated other comprehensive loss		(476	)		7			(469	)

	Previously Disclosed in Form 10-K						As Reported with Change
	As of December 31, 2018			Impact of Change			As of December 31, 2018
Equity
(Accumulated deficit)	$	(42	)	$	(9	)	$	(51	)
Accumulated other comprehensive loss		(584	)		9			(575	)

	Previously Disclosed in Form 10-K						As Reported with Change
	As of December 31, 2019			Impact of Change			As of December 31, 2019
Equity
(Accumulated deficit)	$	(354	)	$	(11	)	$	(365	)
Accumulated other comprehensive loss		(528	)		11			(517	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	As of March 31, 2019			Impact of Change			As of March 31, 2019
Equity
(Accumulated deficit)	$	(177	)	$	(8	)	$	(185	)
Accumulated other comprehensive loss		(476	)		8			(468	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	As of June 30, 2019			Impact of Change			As of June 30, 2019
Equity
(Accumulated deficit)	$	(209	)	$	(9	)	$	(218	)
Accumulated other comprehensive loss		(472	)		9			(463	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	As of September 30, 2019			Impact of Change			As of September 30, 2019
Equity
(Accumulated deficit)	$	(185	)	$	(10	)	$	(195	)
Accumulated other comprehensive loss		(472	)		10			(462	)

The tables below represent the impact of the change in accounting principle on the condensed consolidated statements of operations and comprehensive income for all periods since 2017:

	Previously Disclosed in Form 10-K						As Reported with Change
	Year Ended December 31, 2017			Impact of Change			Year Ended December 31, 2017
Investment and other (income) expense	$	(47	)	$	10		$	(37	)
(Loss) before income taxes		(44	)		(10	)		(54	)
Income tax expense (benefit)		13			(3	)		10
Net (loss)		(57	)		(7	)		(64	)
Basic net (loss) per share		(1.69	)		(0.22	)		(1.91	)
Diluted net (loss) per share		(1.69	)		(0.22	)		(1.91	)
Adjustment for net periodic pension plan      cost		34			7			41
Other comprehensive income		55			7			62
Comprehensive (loss)		(2	)		—			(2	)

	Previously Disclosed in Form 10-K						As Reported with Change
	Year Ended December 31, 2018			Impact of Change			Year Ended December 31, 2018
Investment and other (income) expense	$	(48	)	$	2		$	(46	)
Income (loss) before income taxes		10			(2	)		8
Income tax expense		33			—			33
Net (loss)		(23	)		(2	)		(25	)
Basic net (loss) per share		(0.67	)		(0.04	)		(0.71	)
Diluted net (loss) per share		(0.67	)		(0.04	)		(0.71	)
Adjustment for net periodic pension plan      cost		(4	)		2			(2	)
Other comprehensive (loss) income		(11	)		2			(9	)
Comprehensive (loss)		(34	)		—			(34	)

	Previously Disclosed in Form 10-K						As Reported with Change
	Year Ended December 31, 2019			Impact of Change			Year Ended December 31, 2019
Settlement of retirement benefit obligations	$	137		$	(3	)	$	134
Investment and other (income) expense		(37	)		6			(31	)
(Loss) before income taxes		(288	)		(3	)		(291	)
Income tax expense (benefit)		7			(1	)		6
Net (loss)		(295	)		(2	)		(297	)
Basic net (loss) per share		(8.82	)		(0.07	)		(8.89	)
Diluted net (loss) per share		(8.82	)		(0.07	)		(8.89	)
Adjustment for net periodic pension plan      cost		54			2			56
Other comprehensive income		56			2			58
Comprehensive (loss)		(239	)		—			(239	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	Three Months Ended March 31, 2019			Impact of Change			Three Months Ended March 31, 2019
Settlement of retirement benefit obligations	$	135		$	(3	)	$	132
Investment and other (income) expense		(10	)		2			(8	)
(Loss) income before income taxes		(163	)		1			(162	)
Income tax (benefit)		(37	)		—			(37	)
Net (loss) income		(126	)		1			(125	)
Basic net (loss) income per share		(3.79	)		0.02			(3.77	)
Diluted net (loss) income per share		(3.79	)		0.02			(3.77	)
Adjustment for net periodic pension plan      cost		107			(1	)		106
Other comprehensive income (loss)		108			(1	)		107
Comprehensive (loss)		(18	)		—			(18	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	Three Months Ended June 30, 2019			Impact of Change			Three Months Ended June 30, 2019
Settlement of retirement benefit obligations	$	1		$	—		$	1
Investment and other (income) expense		(9	)		1			(8	)
(Loss) before income taxes		(27	)		(1	)		(28	)
Income tax (benefit)		(3	)		—			(3	)
Net (loss)		(24	)		(1	)		(25	)
Basic net (loss) per share		(0.69	)		(0.03	)		(0.72	)
Diluted net (loss) per share		(0.69	)		(0.03	)		(0.72	)
Adjustment for net periodic pension plan      cost		3			1			4
Other comprehensive income		4			1			5
Comprehensive (loss)		(20	)		—			(20	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	Three Months Ended September 30, 2019			Impact of Change			Three Months Ended September 30, 2019
Settlement of retirement benefit obligations	$	1			—		$	1
Investment and other (income) expense		(9	)		1			(8	)
Income (loss) before income taxes		24			(1	)		23
Income tax expense		—			—			—
Net income (loss)		24			(1	)		23
Basic net income (loss) per share		0.69			(0.03	)		0.66
Diluted net income (loss) per share		0.69			(0.03	)		0.66
Adjustment for net periodic pension plan      cost		2			1			3
Other comprehensive income		—			1			1
Comprehensive income		24			—			24

	Previously Disclosed in Form 10-Q						As Reported with Change
	Three Months Ended December 31, 2019			Impact of Change			Three Months Ended December 31, 2019
Settlement of retirement benefit obligations	$	—		$	—		$	—
Investment and other (income) expense		(9	)		2			(7	)
(Loss) before income taxes		(122	)		(2	)		(124	)
Income tax expense (benefit)		47			(1	)		46
Net (loss)		(169	)		(1	)		(170	)
Basic net (loss) per share		(5.02	)		(0.03	)		(5.05	)
Diluted net (loss) per share		(5.02	)		(0.03	)		(5.05	)

The tables below represent the impact of the change in accounting principle on the condensed consolidated balance sheet as of March 31, 2020 and the statements of operations and comprehensive income for the three months ended March 31, 2020:

	Previous Accounting Method						As Reported
	March 31, 2020			Impact of Change			March 31, 2020
Equity
(Accumulated deficit)	$	(408	)	$	(9	)	$	(417	)
Accumulated other comprehensive loss      (income)		(535	)		10			(525	)
Pension liabilities	142				(1	)		141

	Previous Accounting Method						As Reported
	March 31, 2020			Impact of Change			March 31, 2020
Investment and other (income)	$	(8	)	$	(2	)	$	(10	)
(Loss) income before income taxes		(53	)		2			(51	)
Income tax expense		1			—			1
Net (loss) income		(54	)		2			(52	)
Basic net (loss) income per share		(1.61	)		0.05			(1.56	)
Diluted net (loss) income per share		(1.61	)		0.05			(1.56	)
Adjustment for net periodic pension plan      cost		4			(1	)		3
Other comprehensive (loss)		(7	)		(1	)		(8	)
Comprehensive (loss) income		(61	)		1			(60	)

XML

Leases - Narrative (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Leases [Abstract]
Operating cash outflows from operating leases	$ 14,000,000	$ 16,000,000
Finance lease ROU assets or obligations acquired	0	$ 0
Additional operating leases not commenced, undiscounted amount	$ 1,000,000

XML

Revenue Recognition - Schedule of Changes in the Contract Assets and Liabilities (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($)
Contract Liabilities
Beginning Balance	$ 17
Revenue recognized that was included in contract liabilities as of January 1, 2020	(12)
Increases due to cash received	11
Ending Balance	16
Short-Term Contract Assets
Contract Assets
Beginning Balance	40
Additions to unbilled accounts receivable	17
Unbilled accounts receivable recognized in trade receivables	(28)
Amortization of contract acquisition costs	0
Write-off due to termination of contract acquisition costs	0
Ending Balance	29
Long-Term Contract Assets
Contract Assets
Beginning Balance	14
Additions to unbilled accounts receivable	0
Unbilled accounts receivable recognized in trade receivables	0
Payment of contract acquisition costs	0
Amortization of contract acquisition costs	(3)
Write-off due to termination of contract acquisition costs	0
Ending Balance	$ 11

XML

Restructuring, Impairment and Other Charges - Schedule of Changes in the Restructuring Reserve (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($)
Restructuring Cost And Reserve [Line Items]
Balance at the beginning	$ 62
Restructuring Charges	23
Cash Paid	(20)
Balance at the end	65
Employee terminations
Restructuring Cost And Reserve [Line Items]
Balance at the beginning	29
Restructuring Charges	3
Cash Paid	(5)
Balance at the end	27
Other and lease termination
Restructuring Cost And Reserve [Line Items]
Balance at the beginning	2
Restructuring Charges	19
Cash Paid	(13)
Balance at the end	8
Multiemployer pension plan withdrawal obligations
Restructuring Cost And Reserve [Line Items]
Balance at the beginning	31
Restructuring Charges	1
Cash Paid	(2)
Balance at the end	$ 30

XML

Debt - Schedule of the Company's Debt (Parenthetical) (Detail)	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Term Loan Facility due September 30, 2022
Debt Instrument [Line Items]
Debt instrument, maturity date	Sep. 30, 2022
Debt instrument, variable interest rate	7.02%	7.12%
8.75% Senior Secured Notes due October 15, 2023
Debt Instrument [Line Items]
Debt instrument, interest rate	8.75%
Debt instrument, maturity date	Oct. 15, 2023

XML

Earnings Per Share - Calculation of Basic and Diluted EPS as Well as Reconciliation of Basic Shares to Diluted Shares (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	[1]
Net (loss) per common share:
Basic	$ (1.56)	$ (3.77)
Diluted	$ (1.56)	$ (3.77)
Numerator:
Net (loss)	$ (52)	$ (125)
Denominator:
Weighted average number of common shares outstanding	33.6	33.3
Dilutive options and awards	0.0	0.0
Diluted weighted average number of common shares outstanding	33.6	33.3

[1] Overview and Basis of Presentation, for information on the restated balances for the three months ended March 31, 2019.

XML

Comprehensive Income

3 Months Ended

Mar. 31, 2020

Equity [Abstract]

Comprehensive Income

Note 13.  Comprehensive Income

The following table summarizes accumulated other comprehensive loss by component as of December 31, 2019 and March 31, 2020 and changes during the three months ended March 31, 2020.     

	Pension			Translation
	Plan Cost			Adjustments			Total
Balance at December 31, 2019	$	(464	)	$	(53	)	$	(517	)
Other comprehensive (loss) before reclassifications		—			(11	)		(11	)
Amounts reclassified from accumulated other comprehensive loss		3			—			3
Net change in accumulated other comprehensive income (loss)		3			(11	)		(8	)
Balance at March 31, 2020	$	(461	)	$	(64	)	$	(525	)

The following table summarizes accumulated other comprehensive loss by component as of December 31, 2018 and March 31, 2019 and changes during the three months ended March 31, 2019.

	Pension			Translation
	Plan Cost			Adjustments			Total
Balance at December 31, 2018	$	(520	)	$	(55	)	$	(575	)
Other comprehensive income before reclassifications		104			1			105
Amounts reclassified from accumulated other comprehensive loss		2			—			2
Net change in accumulated other comprehensive loss		106			1			107
Balance at March 31, 2019	$	(414	)	$	(54	)	$	(468	)

In the first quarter of 2020, the Company adopted a change in method of accounting for the market-related value of assets for a class of assets within the U.S. Qualified Plan and Non-Qualified plans.  The change in accounting method was retrospectively applied to periods in 2017, 2018 and 2019, and as a result, the pension rollforward for accumulated other comprehensive loss above and reclassification table below have been restated for the three months ended March 31, 2019.  Refer to Notes 1, Overview and Basis of Presentation, and 11, Retirement Plans, for more information.    

In the first quarter of 2019, the Company completed a partial settlement of its retirement benefit obligations and, as a result, the Company’s pension assets and liabilities were remeasured as of the settlement date.  The impact, net of tax, to the Company’s accumulated other comprehensive loss was a decrease of $104 million during the three months ended March 31, 2019 (including the restatement noted above).  Refer to Note 11, Retirement Plans, for more information.

Refer to the condensed consolidated statements of comprehensive income for the components of comprehensive (loss) income for the three months ended March 31, 2020 and 2019.

Reclassifications from accumulated other comprehensive loss for the three months ended March 31, 2020 and 2019 were as follows:  

	Three Months Ended
	March 31,
	2020		2019 (1)
Amortization of pension plan cost:
Net actuarial loss (a)	$	4	$	3
Reclassifications before tax		4		3
Income tax expense		1		1
Reclassifications, net of tax	$	3	$	2

(a) Amortization of pension plan cost is included in the calculation of net periodic pension plan (income) expense that is recognized in investment and other income-net in the condensed consolidated statements of operations (see Note 11, Retirement Plans).    

(1) As Adjusted – Refer to the narrative above on the change in accounting method.    

XML

Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2020

Revenue From Contract With Customer [Abstract]

Schedule of Disaggregated Revenue

The following tables provide information about disaggregated revenue by major products/service lines and timing of revenue recognition, and include a reconciliation of the disaggregated revenue with reportable segments for the three months ended March 31, 2020 and 2019.

	Three Months Ended
	March 31, 2020
	Magazines,
	Catalogs
	and				Office
	Logistics		Book		Products		Mexico		Other		Total
Major Products / Service Lines
Book (a)	$	—	$	204	$	—	$	—	$	—	$	204
Magazines and Catalogs (b)	$	250	$	—	$	—	$	23	$	21	$	294
Logistics	$	77	$	—	$	—	$	—	$	—	$	77
Directories	$	—	$	—	$	—	$	—	$	14	$	14
Office Products	$	—	$	—	$	112	$	—	$	—	$	112
Total	$	327	$	204	$	112	$	23	$	35	$	701
Timing of Revenue Recognition
Products and services transferred at a      point in time	$	225	$	172	$	112	$	23	$	14	$	546
Products and services transferred over      time		102		32		—		—		21		155
Total	$	327	$	204	$	112	$	23	$	35	$	701

	Three Months Ended
	March 31, 2019
	Magazines,
	Catalogs
	and				Office
	Logistics		Book		Products		Mexico		Other		Total
Major Products / Service Lines
Book (a)	$	—	$	260	$	—	$	—	$	—	$	260
Magazines and Catalogs (b)	$	319	$	—	$	—	$	24	$	20	$	363
Logistics	$	84	$	—	$	—	$	—	$	—	$	84
Directories	$	—	$	—	$	—	$	—	$	19	$	19
Office Products	$	—	$	—	$	119	$	—	$	—	$	119
Total	$	403	$	260	$	119	$	24	$	39	$	845
Timing of Revenue Recognition
Products and services transferred at a      point in time	$	288	$	228	$	119	$	24	$	19	$	678
Products and services transferred over      time		115		32		—		—		20		167
Total	$	403	$	260	$	119	$	24	$	39	$	845

(a) Includes e-book formatting and supply chain management associated with book production    

(b) Includes premedia and co-mail        

Schedule of Transactions Affecting Allowance for Doubtful Accounts Receivable

Transactions affecting the allowances for doubtful accounts receivable balance during the three months ended March 31, 2020 were as follows:

	Three Months Ended
	March 31, 2020
Balance, beginning of year	$	12
Provisions charged to expense		1
Balance, end of period	$	13

Schedule of Changes in the Contract Assets and Liabilities

The following table provides changes in contract assets and liabilities during the three months ended March 31, 2020:

	Short-Term Contract Assets			Long-Term Contract Assets			Contract Liabilities
Beginning Balance, January 1, 2020	$	40		$	14		$	17
Additions to unbilled accounts receivable		17			—			—
Unbilled accounts receivable recognized in      trade receivables		(28	)		—			—
Payment of contract acquisition costs		—			—			—
Amortization of contract acquisition costs		—			(3	)		—
Write-off due to termination of contract      acquisition costs		—			—			—
Revenue recognized that was included in      contract liabilities as of January 1, 2020		—			—			(12	)
Increases due to cash received		—			—			11
Ending Balance, March 31, 2020	$	29		$	11		$	16

XML

Leases - Supplemental Non-cash Information Related to Leases (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
ROU assets acquired in exchange for lease obligations:
ROU assets, Operating leases	$ 4	$ 2
Lease obligations, Operating leases	$ 4	$ 2

XML

Recenue Recognition - Schedule of Transactions Affecting Allowance for Doubtful Accounts Receivable (Detail) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2020	Mar. 31, 2019	[1]
Revenue From Contract With Customer [Abstract]
Balance, beginning of year	[1]	$ 12
Provisions charged to expense		1	$ 3
Balance, end of period		$ 13

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

Retirement Plans - Components of Estimated Net Pension (Income) Loss (Detail) - Pension Benefits - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Defined Benefit Plan Disclosure [Line Items]
Interest cost	$ 16	$ 21
Expected return on plan assets	(30)	(31)
Amortization of actuarial loss	4	3
Settlement of retirement obligations		132
Net periodic benefit (income) loss	(10)	125
Qualified
Defined Benefit Plan Disclosure [Line Items]
Interest cost	15	20
Expected return on plan assets	(30)	(31)
Amortization of actuarial loss	4	3
Settlement of retirement obligations		132
Net periodic benefit (income) loss	(11)	124
Non-Qualified & International
Defined Benefit Plan Disclosure [Line Items]
Interest cost	1	1
Expected return on plan assets	0	0
Amortization of actuarial loss	0	0
Settlement of retirement obligations		0
Net periodic benefit (income) loss	$ 1	$ 1

XML

Restructuring, Impairment and Other Charges - Restructuring Reserve - Narrative (Detail) $ in Millions	Mar. 31, 2020 USD ($)
Restructuring And Related Activities [Abstract]
Current restructuring reserve	$ 41
Noncurrent restructuring reserve	$ 24

XML

Debt - Narrative (Detail) - USD ($)			3 Months Ended
		Apr. 15, 2020	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Aug. 05, 2019	Sep. 30, 2016
Debt Instrument [Line Items]
Amount of difference between fair value and book value			$ 546,000,000		$ 277,000,000
Weighted average interest rate on borrowings			4.65%
Net interest expense			$ 18,000,000	$ 19,000,000
Revolving Credit Facility
Debt Instrument [Line Items]
Credit facility borrowings			249,000,000		249,000,000
Credit Agreements | Revolving Credit Facility
Debt Instrument [Line Items]
Debt instrument, principal amount			400,000,000				$ 400,000,000
Allowable annual dividend payment under credit agreement			50,000,000
Amended Credit Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Debt instrument, principal amount						$ 300,000,000
Senior Secured Notes
Debt Instrument [Line Items]
Senior secured notes			450,000,000		450,000,000		450,000,000
Term Loan Facility due September 30, 2022
Debt Instrument [Line Items]
Credit facility borrowings	[1]		$ 219,000,000		$ 218,000,000
Term Loan Facility due September 30, 2022 | Credit Agreements
Debt Instrument [Line Items]
Debt instrument, principal amount							$ 375,000,000
DIP Facility | Subsequent Event
Debt Instrument [Line Items]
Additional interest rate upon event of default		2.00%
Percentage of unused line fee		0.50%
Percentage of commitment fee		1.00%
Commitment fee amount		$ 100,000
Percentage of participation fee		6.75%
Percentage of fronting fee		0.125%
DIP Facility | Subsequent Event | Alternate Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate		5.75%
DIP Facility | Subsequent Event | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate		6.75%
DIP Facility | Subsequent Event | Maximum
Debt Instrument [Line Items]
Debtor-in-possession financing		$ 100,000,000
DIP Facility | Revolving Credit Facility | Subsequent Event | Maximum
Debt Instrument [Line Items]
Debtor-in-possession financing		55,000,000
Maximum capacity to incur revolving Loans		27,500,000
DIP Facility | Letters of Credit | Subsequent Event | Maximum
Debt Instrument [Line Items]
Debtor-in-possession financing		45,000,000
DIP Loan Commitments | Letters of Credit | Subsequent Event
Debt Instrument [Line Items]
Debtor-in-possession financing		$ 5,000,000

[1] The borrowings under the Term Loan Facility are subject to a variable interest rate.  As of March 31, 2020 and December 31, 2019, the interest rate was 7.02% and 7.12%, respectively.

XML

Goodwill and Other Intangible Assets - Schedule of Changes in the Carrying Amount of Goodwill (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Goodwill [Line Items]
Goodwill gross	$ 992	$ 992
Accumulated impairment losses	(940)	(940)
Goodwill	52	52	[1]
Magazines, Catalogs and Logistics
Goodwill [Line Items]
Goodwill gross	523	523
Accumulated impairment losses	(502)	(502)
Goodwill	21	21
Book
Goodwill [Line Items]
Goodwill gross	354	354
Accumulated impairment losses	(354)	(354)
Goodwill	0	0
Office Products
Goodwill [Line Items]
Goodwill gross	110	110
Accumulated impairment losses	(79)	(79)
Goodwill	31	31
Mexico
Goodwill [Line Items]
Goodwill gross	0	0
Accumulated impairment losses	0	0
Goodwill	0	0
Other
Goodwill [Line Items]
Goodwill gross	5	5
Accumulated impairment losses	(5)	(5)
Goodwill	$ 0	$ 0

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

Restructuring, Impairment and Other Charges - Schedule of Net Restructuring, Impairment and Other Charges Disclosed in Consolidated Statements of Operations (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Restructuring Cost And Reserve [Line Items]
Employee Terminations	$ 3	$ 5
Other Restructuring Charges	22	6
Total Restructuring Charges	25	11
Impairment	1	2
Other Charges	0	0
Total	26	13
Magazines, Catalogs and Logistics
Restructuring Cost And Reserve [Line Items]
Employee Terminations		5
Impairment		2
Total Operating Segments | Magazines, Catalogs and Logistics
Restructuring Cost And Reserve [Line Items]
Employee Terminations	0	5
Other Restructuring Charges	10	4
Total Restructuring Charges	10	9
Impairment	1	2
Other Charges	0	0
Total	11	11
Total Operating Segments | Book
Restructuring Cost And Reserve [Line Items]
Employee Terminations	1	0
Other Restructuring Charges	2	1
Total Restructuring Charges	3	1
Impairment	0	0
Other Charges	0	0
Total	3	1
Total Operating Segments | Office Products
Restructuring Cost And Reserve [Line Items]
Employee Terminations	2	0
Other Restructuring Charges	0	0
Total Restructuring Charges	2	0
Impairment	0	0
Other Charges	0	0
Total	2	0
Total Operating Segments | Mexico
Restructuring Cost And Reserve [Line Items]
Employee Terminations	0	0
Other Restructuring Charges	0	0
Total Restructuring Charges	0	0
Impairment	0	0
Other Charges	0	0
Total	0	0
Total Operating Segments | Other
Restructuring Cost And Reserve [Line Items]
Employee Terminations	0	0
Other Restructuring Charges	0	0
Total Restructuring Charges	0	0
Impairment	0	0
Other Charges	0	0
Total	0	0
Corporate
Restructuring Cost And Reserve [Line Items]
Employee Terminations	0	0
Other Restructuring Charges	10	1
Total Restructuring Charges	10	1
Impairment	0	0
Other Charges	0	0
Total	$ 10	$ 1

XML

Comprehensive Income - Schedule of Reclassifications From Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2020	Mar. 31, 2019	[2]
Amortization of Pension Plan Cost: Net Actuarial Loss
Reclassification from Accumulated Other Comprehensive Loss
Reclassifications before tax	[1]	$ 4	$ 3
Accumulated Defined Benefit Plans Adjustment
Reclassification from Accumulated Other Comprehensive Loss
Reclassifications before tax		4	3
Income tax expense		1	1
Reclassifications, net of tax		$ 3	$ 2

[1] (a) Amortization of pension plan cost is included in the calculation of net periodic pension plan (income) expense that is recognized in investment and other income-net in the condensed consolidated statements of operations (see Note 11, Retirement Plans).

[2] (1) As Adjusted – Refer to the narrative above on the change in accounting method

XML

Retirement Plans - Narrative (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2019 USD ($)
Compensation And Retirement Disclosure [Abstract]
Reduction in pension obligation under the annuity contract	$ 477
Reduction in net benefit plan asset	466
Pension non-cash settlement expense	$ 132

XML

Debt

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Debt

Note 9.  Debt

The Company’s debt at March 31, 2020 and December 31, 2019 consisted of the following:   

	March 31,			December 31,
	2020			2019
Borrowings under the Revolving Credit Facility	$	249		$	249
Term Loan Facility due September 30, 2022 (a)		219			218
8.75% Senior Secured Notes due October 15, 2023		450			450
Finance lease and other obligations		1			2
Unamortized debt issuance costs		(8	)		(9	)
Total debt		911			910
Less: current portion		(911	)		(465	)
Long-term debt	$	—		$	445

(a) The borrowings under the Term Loan Facility are subject to a variable interest rate.  As of March 31, 2020 and December 31, 2019, the interest rate was 7.02% and 7.12%, respectively.      

__________________________________

On September 30, 2016, the Company issued $450 million of Senior Secured Notes (the “Senior Notes”). 

On September 30, 2016 the Company entered into a credit agreement (the “Credit Agreement”) that provides for (i) a senior secured term loan B facility in an aggregate principal amount of $375 million (the “Term Loan Facility”) and (ii) a senior secured revolving credit facility in an aggregate principal amount of $400 million (the “Revolving Credit Facility”), which was reduced to $300 million per the amendment effective on August 5, 2019.  The debt issuance costs and original issue discount are being amortized over the life of the facilities using the effective interest method.   

The Credit Agreement is subject to a number of covenants, including, but not limited to, a minimum Interest Coverage Ratio and a Consolidated Leverage Ratio, as defined in and calculated pursuant to the Credit Agreement, that, in part, restrict the Company’s ability to incur additional indebtedness, create liens, engage in mergers and consolidations, make restricted payments and dispose of certain assets. Each of these covenants is subject to important exceptions and qualifications.  

Credit Agreement Amendments

On December 20, 2018, the Company amended the Credit Agreement to, among other things, defer certain changes to the minimum Interest Coverage Ratio and the maximum Consolidated Leverage Ratio.  Effective August 5, 2019, the Company further amended the Credit Agreement to, among other things, defer certain changes to the minimum Interest Coverage Ratio and the maximum Consolidated Leverage Ratio.  The following summarizes the changes to the minimum Interest Coverage Ratio and the maximum Consolidated Leverage Ratio:

	Original	December 20, 2018	August 5, 2019
Maximum Consolidated Leverage Ratio
Current ratio	3.25 to 1.00	3.25 to 1.00	3.75 to 1.00
Step-down ratio	3.00 to 1.00	3.00 to 1.00	3.50 to 1.00 and 3.25 to 1.00
Step-down as of date (quarter ending on or after)	March 31, 2019	March 31, 2020	June 30, 2020 and March 31, 2021
Minimum Interest Coverage Ratio
Current ratio	3.25 to 1.00	3.25 to 1.00	2.50 to 1.00
Step-up ratio	3.50 to 1.00	3.50 to 1.00	2.75 to 1.00 and 3.00 to 1.00
Step-up as of date (quarter ending on or after)	March 31, 2019	March 31, 2020	September 30, 2020 and June 30, 2021

Other terms, including the outstanding principal, maturity date and other debt covenants remained the same under the December 20, 2018 amendment.    

The August 5, 2019 amendment resulted in a reduction in the Revolving Credit Facility aggregate principal amount from $400 million to $300 million and removed the general allowance to declare and pay annual dividends of up to $50 million.  The August 5, 2019 amendment included other changes that generally further restrict the Company’s ability to incur additional indebtedness, create liens, engage in mergers and consolidations, make restricted payments and dispose of certain assets.  The outstanding principal and maturity date of the Term Loan Facility remains the same, while the maturity date of the Revolving Credit Facility remains the same.     

Waiver, Forbearance Agreement and Fourth Amendment to Credit Agreement

Based on final results of operations for the year ended December 31, 2019, the Company concluded it was not in compliance with the Consolidated Leverage Ratio and Minimum Interest Ratio contained in the Credit Agreement as of December 31, 2019.  The noncompliance occurred on the last day of the fourth quarter due to the following: the Company’s Consolidated Leverage Ratio exceeded the maximum level permitted and the Company’s Minimum Interest Ratio was below the minimum level permitted.  On March 2, 2020, the Company entered into a Waiver, Forbearance Agreement and Fourth Amendment to Credit Agreement with lenders constituting a majority under the Credit Agreement that governs the Company’s Revolving Credit Facility and Term Loan Facility. The Waiver, Forbearance Agreement and Fourth Amendment to Credit Agreement waived the defaults or events of default that occurred as a result of the financial covenant noncompliance on December 31, 2019 and prevented the lenders from directing the Administrative Agent to accelerate the debt or exercise other remedies as a result of certain other potential defaults or events of default which may occur under the Credit Agreement (the “Potential Defaults”), through the period ended May 14, 2020 (such period, the “Forbearance Period”).  As a result of the noncompliance as of December, 31, 2019, the Company annual report on Form 10-K disclosed there was substantial doubt about the Company’s ability to continue as a going concern as of December 31, 2019.

Voluntary Reorganization under Chapter 11

The commencement of the Chapter 11 Cases constituted an event of default with respect to the Senior Notes, the Term Loan Facility and the Revolving Credit Facility (the “Debt Instruments”).  The Debt Instruments provide that as a result of the commencement of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable.  Any efforts to enforce payment obligations under the Debt Instruments will be automatically stayed as a result of the commencement of the Chapter 11 Cases, and the creditors’ right of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.

Debtor-in-Possession Financing

As previously disclosed, on April 15, 2020 (the “Closing Date”), the Company entered into a Superpriority Secured Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”), upon the entry of an interim order of the Bankruptcy Court granting interim approval of the DIP Credit Agreement, among the Company, as borrower, the lenders from time to time party thereto (the “DIP Lenders”) and Bank of America, N.A. as administrative agent (in such capacity, the “DIP Agent”), pursuant to which the DIP Lenders committed to provide a senior secured superpriority debtor-in-possession credit facility in an aggregate principal amount not to exceed $100 million (the “DIP Facility”).  

The DIP Facility consists of (i) revolving loans not to exceed an aggregate amount of $55 million (the “Revolving Loans”), subject to the limitation in the next succeeding sentence, and (ii) letters of credit not to exceed an aggregate amount of $45 million, with $5 million of that amount being available for the issuance of new letters of credit (together with the Revolving Loans, the “DIP Loan Commitments”).  During the interim period prior to the entry of a final order of the Bankruptcy Court authorizing the DIP Facility (the “Final Order”), the Company’s capacity to incur Revolving Loans is limited to an aggregate amount of up to $27.5 million.

Borrowings under the DIP Facility bear interest at a rate per annum equal to, at the Company’s option, either (i) the Alternate Base Rate (as defined in the DIP Credit Agreement) plus 5.75%, or (ii) LIBOR plus 6.75%.  Upon an event of default under the DIP Credit Agreement (an “Event of Default”), an additional 2.00% may be added to the Interest Rate.  In addition, the Company is required to pay (i) an unused line fee of 0.50% per annum (payable quarterly in arrears) on the average daily unused portion of the DIP Loan Commitments, (ii) a commitment fee of (x) 1.00% per annum on the DIP Loan Commitments, regardless of usage, plus (y) $100,000 per week for the first 20 weeks after the Closing Date, in each case, payable quarterly in arrears, (iii) a participation fee equal to 6.75% multiplied by the amounts available to be drawn under outstanding letters of credit, payable quarterly, and (iv) a fronting fee equal to 0.125% per annum on amounts available to be drawn under outstanding letters of credit, payable quarterly.

Proceeds of the loans made under the DIP Facility may be used only for the following purposes: (i) working capital and other general corporate purposes, including the payment of professional fees and expenses, (ii) to pay the reasonable fees and expenses of the DIP Agent and the DIP Lenders (including the reasonable fees and expenses of counsel and financial advisors), (iii) to pay claims in respect of certain prepetition creditors, (iv) to repay indebtedness owed to holders of the Prepetition Priority Payment Obligations (as defined in the DIP Credit Agreement) (the “Prepetition Revolving Lenders”), and (v) making adequate protection payments to the Prepetition Revolving Lenders, the Prepetition Term Lenders and the Prepetition Secured Noteholders (each as defined in the DIP Credit Agreement).

In connection with the DIP Credit Agreement, certain subsidiaries of the Company became parties to a guarantee agreement as guarantors (collectively, the “Guarantors,” and together with the Company, the “DIP Credit Parties”). Each of the Guarantors is a debtor and debtor-in-possession in the Chapter 11 Cases.  The Guarantors have guaranteed, on a joint and several basis, all of the obligations under the DIP Facility.  To secure the obligations under the DIP Facility, the Company and the Guarantors have granted liens on substantially all of their assets, whether now owned or hereafter acquired.

The DIP Facility will mature on the earliest of the following dates: (i) unless the Final Order is entered, May 15, 2020, (ii) the date upon which any Plan of Reorganization (as defined in the DIP Credit Agreement) becomes effective, or (iii) the six-month anniversary following the Petition Date, provided that such maturity may be extended with the consent of the Required Lenders (as defined in the DIP Credit Agreement) to a date no later than nine months after the Petition Date.

The DIP Credit Agreement contains representations, warranties and covenants that are customary for debtor-in-possession facilities of this type, including, but not limited to, certain case milestones, specified restrictions on indebtedness, liens, guarantee obligations, liquidations and dissolutions, sales of assets, leases, payment of dividends and other restricted payments, voluntary payments of other indebtedness, investments, loans and advances, transactions with affiliates, sale and leaseback transactions and compliance with case milestones. The DIP Credit Agreement also contains customary events of default for facilities of this type, including failure to achieve the milestones and the occurrence of certain events in the Chapter 11 Cases.

The DIP Facility is subject to final approval by the Bankruptcy Court.

Additional Debt Issuances Information

The fair values of the Senior Notes and Term Loan Facility that were determined using the market approach based upon interest rates available to the Company for borrowings with similar terms and maturities, were determined to be Level 2 under the fair value hierarchy.  The fair value of the Company’s debt was lower than its book value by approximately $546 million and $277 million at March 31, 2020 and December 31, 2019, respectively.  

There were $249 million of borrowings under the Revolving Credit Facility as of both March 31, 2020 and December 31, 2019.  The weighted-average interest rate on borrowings under the Company’s Revolving Credit Facility was 4.65% during the three months ended March 31, 2020.  

There was $18 million and $19 million of net interest expense during the three months ended March 31, 2020 and 2019, respectively.

XML

Overview and Basis of Presentation

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Overview and Basis of Presentation

Note 1.  Overview and Basis of Presentation

Description of Business

The principal business of LSC Communications, Inc., a Delaware corporation, and its direct or indirect wholly-owned subsidiaries (“LSC Communications,” “the Company,” “we,” “our” and “us”) is to offer a broad scope of traditional and digital print, print-related services and office products.  The Company serves the needs of publishers, merchandisers and retailers worldwide with a service offering that includes e-services, logistics, warehousing and fulfillment and supply chain management services.  The Company utilizes a broad portfolio of technology capabilities coupled with consultative attention to clients' needs to increase speed to market, reduce costs, provide postal savings to customers and improve efficiencies.  The Company prints magazines, catalogs, books and directories, and its office products offerings include filing products, envelopes, note-taking products, binder products, and forms. 

Voluntary Reorganization under Chapter 11

On April 13, 2020 (the “Petition Date”), the Company and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) (collectively, the “Chapter 11 Cases”).  The Chapter 11 Cases are being jointly administered under the caption In re LSC Communications, Inc., 20-10950.  We and our subsidiaries that are involved in the Chapter 11 Cases will continue to operate our businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code.

On April 15, 2020, the Bankruptcy Court entered orders granting interim approval of certain forms of relief that we requested, enabling us to conduct our business activities in the ordinary course, subject to the terms and conditions of such orders, including authorizing us to pay employee wages and benefits, to pay taxes and certain governmental fees and charges, to continue to operate our cash management system in the ordinary course, and to pay prepetition claims of certain of our vendors.  For goods and services provided following the Petition Date, the Company expects to continue to pay vendors under normal terms.  

During the pendency of the Chapter 11 Cases, attempts to prosecute, collect, secure or enforce remedies with respect to prepetition claims against the debtors, including litigation relating to the entities involved in the Chapter 11 Cases, are subject to the automatic stay provisions of section 362(a) of the Bankruptcy Code, as modified or amended by the terms of any order entered in the Chapter 11 Cases.  

We have obtained debtor-in-possession financing of up to $100 million which, together with our normal operating cash flows, will provide liquidity for the Company to operate as usual and fulfill ongoing commitments to stakeholders during the pendency of the Chapter 11 Cases.  Refer to Note 9, Debt, for information on the debtor-in-possession financing facility.

Going Concern

The accompanying condensed consolidated financial statements were prepared assuming that the Company will continue as a going concern and contemplate the continuity of our operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business.  Our ability to continue as a going concern is contingent upon our ability to comply with the covenants of the DIP Credit Agreement described in Note 9, Debt, and our ability to implement, subject to the Bankruptcy Court’s approval, a restructuring plan, among other factors.

While operating as debtors-in-possession under Chapter 11, we may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions in our debt agreements), for amounts other than those reflected in the accompanying condensed consolidated financial statements.  Further, the restructuring plan could materially change the amounts and classifications of assets and liabilities reported in the condensed consolidated financial statements.

As a result of the factors noted above, we believe there is substantial doubt about the Company’s ability to continue as a going concern.  The condensed consolidated financial statements included in this quarterly report on Form 10-Q do not include any adjustments related to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 

Coronavirus Pandemic (“COVID-19”)

During and subsequent to the first quarter of 2020, the novel coronavirus strain, known as COVID-19, continues to spread across the globe at an increasing rate. Measures taken by governmental authorities and private actors to limit the spread of this virus may interfere with the ability of the Company's employees, suppliers, and other business providers to carry out their assigned tasks or supply materials at ordinary levels of performance relative to the conduct of the business which may cause a material curtailment to certain business operations. Moreover, as a large part of the Company's business involves sales of books and other products used in schools and school facilities, if COVID-19 related measures continue to result in widespread and lengthy school closings, the Company's consolidated results of operations and financial condition will be adversely impacted.  Books sold in retail stores have also been adversely impacted as both large chains and independent stores have been forced to close.  Additionally, as COVID-19 has significantly impacted retailers' stores, distribution centers and supply chains, the Company expects to experience an adverse impact on our catalogs and office products businesses.  Disruption across many other industries has also significantly impacted demand for advertising, which is expected to result in page count and volume reductions in magazines.

We continue to monitor the situation, to assess further possible implications to our business and customers, and to take actions in an effort to mitigate adverse consequences. The Company has expanded its work-from-home policy for its non-manufacturing employees, has focused on obtaining protective equipment and implementing social distancing and other policies for its manufacturing employees and continues to adhere to guidance issued by governmental authorities.  The Company is unable to quantify the impact on our business at this time, but it could have a material adverse effect on our consolidated financial statements in the future.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law.  Refer to Note 12, Taxes, for more information on the CARES Act.

Basis of Presentation     

The condensed consolidated financial statements include the balance sheets and statements of operations, stockholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”).  All intercompany transactions have been eliminated in consolidation.  These unaudited condensed consolidated interim financial statements include estimates and assumptions of management that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates.  

As a result of the Company’s segment analysis in the fourth quarter of 2019, Mexico met the requirements to be classified as a reportable segment (previously included as a non-reportable segment).  All prior year amounts have been reclassified to conform to the Company’s current reporting structure.  Refer to Note 14, Segment Information, for reclassified balances for the three months ended March 31, 2019.

The Company adopted Accounting Standards Update No. 2016-13 “Financial Instruments-Credit Losses (Topic 326)” (“ASU 2016-13” or “ASC 326”) on January 1, 2020 using the modified retrospective adoption method.  As a result of the adoption, the Company separately disclosed the amortized cost amount of total receivables separately from the allowance for credit losses in the condensed consolidated balance sheet.  Refer to Note 2, Revenue Recognition, for more information.

Impact of Change in Accounting Principle

Beginning in the first quarter of 2020, the Company changed the method of accounting for the market-related value of assets for a class of assets within the U.S. Qualified Plan and Non-Qualified plans.  This class of assets is currently comprised of liability-hedging investments, which represents approximately 60% of the plans’ assets. Liability-hedging investments provide a natural hedge against the changes in the recorded amount of net periodic pension cost.  Refer to Note 11, Retirement Plans, in the Company’s Form

10-K for the fiscal year ended December 31, 2019 for disclosure by asset classifications.  The previous method of accounting was to use the market-related value of assets for all the plans’ assets when recognizing changes in fair value of plan assets ratably over a five-year period.  As a result of the change in method of accounting the Company will no longer use the market-related value of liability-hedging investments.  Instead, the fair value of liability-hedging investments will be immediately included in the calculation of net periodic pension cost. This change in accounting method is preferable because it accelerates the recognition of the fair value for this class of assets into net income or loss.  No change is being made to the accounting principle for the other classes of pension assets, which represent the remaining 40% of the pension asset portfolio for the plan.

The change in accounting principle requires retrospective application and prospective disclosure. Refer below for the restatements on previously issued financial statements.  Retrospective application was applied to periods beginning in 2017 as it was determined not to be possible to go further than that date due to the Company’s separation in 2016 from its prior parent company.  Prior to the separation in 2016, the U.S. Qualified and Non-Qualified pension plans were legally owned by the Company’s prior parent company.

The cumulative effect of the change on accumulated deficit was an increase in deficit of $9 million as of January 1, 2019 and a $9 million decrease in accumulated other comprehensive loss, as shown in the condensed statement of stockholders’ equity.  

The historical statements of cash flows are also being retrospectively restated as changes in net (loss) income, expense related to settlement of retirement obligations and pension income flow through the operating activities section with an offsetting impact to the change in accrued liabilities and other. There is no net impact to cash flows provided by (used in) operating activities.

The tables below represent the impact of the change in accounting principle on the condensed consolidated balance sheets and statement of stockholders’ equity for all periods since 2017:

	Previously Disclosed in Form 10-K						As Reported with Change
	As of December 31, 2017			Impact of Change			As of December 31, 2017
Equity
(Accumulated deficit)	$	(90	)	$	(7	)	$	(97	)
Accumulated other comprehensive loss		(476	)		7			(469	)

	Previously Disclosed in Form 10-K						As Reported with Change
	As of December 31, 2018			Impact of Change			As of December 31, 2018
Equity
(Accumulated deficit)	$	(42	)	$	(9	)	$	(51	)
Accumulated other comprehensive loss		(584	)		9			(575	)

	Previously Disclosed in Form 10-K						As Reported with Change
	As of December 31, 2019			Impact of Change			As of December 31, 2019
Equity
(Accumulated deficit)	$	(354	)	$	(11	)	$	(365	)
Accumulated other comprehensive loss		(528	)		11			(517	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	As of March 31, 2019			Impact of Change			As of March 31, 2019
Equity
(Accumulated deficit)	$	(177	)	$	(8	)	$	(185	)
Accumulated other comprehensive loss		(476	)		8			(468	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	As of June 30, 2019			Impact of Change			As of June 30, 2019
Equity
(Accumulated deficit)	$	(209	)	$	(9	)	$	(218	)
Accumulated other comprehensive loss		(472	)		9			(463	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	As of September 30, 2019			Impact of Change			As of September 30, 2019
Equity
(Accumulated deficit)	$	(185	)	$	(10	)	$	(195	)
Accumulated other comprehensive loss		(472	)		10			(462	)

The tables below represent the impact of the change in accounting principle on the condensed consolidated statements of operations and comprehensive income for all periods since 2017:

	Previously Disclosed in Form 10-K						As Reported with Change
	Year Ended December 31, 2017			Impact of Change			Year Ended December 31, 2017
Investment and other (income) expense	$	(47	)	$	10		$	(37	)
(Loss) before income taxes		(44	)		(10	)		(54	)
Income tax expense (benefit)		13			(3	)		10
Net (loss)		(57	)		(7	)		(64	)
Basic net (loss) per share		(1.69	)		(0.22	)		(1.91	)
Diluted net (loss) per share		(1.69	)		(0.22	)		(1.91	)
Adjustment for net periodic pension plan      cost		34			7			41
Other comprehensive income		55			7			62
Comprehensive (loss)		(2	)		—			(2	)

	Previously Disclosed in Form 10-K						As Reported with Change
	Year Ended December 31, 2018			Impact of Change			Year Ended December 31, 2018
Investment and other (income) expense	$	(48	)	$	2		$	(46	)
Income (loss) before income taxes		10			(2	)		8
Income tax expense		33			—			33
Net (loss)		(23	)		(2	)		(25	)
Basic net (loss) per share		(0.67	)		(0.04	)		(0.71	)
Diluted net (loss) per share		(0.67	)		(0.04	)		(0.71	)
Adjustment for net periodic pension plan      cost		(4	)		2			(2	)
Other comprehensive (loss) income		(11	)		2			(9	)
Comprehensive (loss)		(34	)		—			(34	)

	Previously Disclosed in Form 10-K						As Reported with Change
	Year Ended December 31, 2019			Impact of Change			Year Ended December 31, 2019
Settlement of retirement benefit obligations	$	137		$	(3	)	$	134
Investment and other (income) expense		(37	)		6			(31	)
(Loss) before income taxes		(288	)		(3	)		(291	)
Income tax expense (benefit)		7			(1	)		6
Net (loss)		(295	)		(2	)		(297	)
Basic net (loss) per share		(8.82	)		(0.07	)		(8.89	)
Diluted net (loss) per share		(8.82	)		(0.07	)		(8.89	)
Adjustment for net periodic pension plan      cost		54			2			56
Other comprehensive income		56			2			58
Comprehensive (loss)		(239	)		—			(239	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	Three Months Ended March 31, 2019			Impact of Change			Three Months Ended March 31, 2019
Settlement of retirement benefit obligations	$	135		$	(3	)	$	132
Investment and other (income) expense		(10	)		2			(8	)
(Loss) income before income taxes		(163	)		1			(162	)
Income tax (benefit)		(37	)		—			(37	)
Net (loss) income		(126	)		1			(125	)
Basic net (loss) income per share		(3.79	)		0.02			(3.77	)
Diluted net (loss) income per share		(3.79	)		0.02			(3.77	)
Adjustment for net periodic pension plan      cost		107			(1	)		106
Other comprehensive income (loss)		108			(1	)		107
Comprehensive (loss)		(18	)		—			(18	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	Three Months Ended June 30, 2019			Impact of Change			Three Months Ended June 30, 2019
Settlement of retirement benefit obligations	$	1		$	—		$	1
Investment and other (income) expense		(9	)		1			(8	)
(Loss) before income taxes		(27	)		(1	)		(28	)
Income tax (benefit)		(3	)		—			(3	)
Net (loss)		(24	)		(1	)		(25	)
Basic net (loss) per share		(0.69	)		(0.03	)		(0.72	)
Diluted net (loss) per share		(0.69	)		(0.03	)		(0.72	)
Adjustment for net periodic pension plan      cost		3			1			4
Other comprehensive income		4			1			5
Comprehensive (loss)		(20	)		—			(20	)

	Previously Disclosed in Form 10-Q						As Reported with Change
	Three Months Ended September 30, 2019			Impact of Change			Three Months Ended September 30, 2019
Settlement of retirement benefit obligations	$	1			—		$	1
Investment and other (income) expense		(9	)		1			(8	)
Income (loss) before income taxes		24			(1	)		23
Income tax expense		—			—			—
Net income (loss)		24			(1	)		23
Basic net income (loss) per share		0.69			(0.03	)		0.66
Diluted net income (loss) per share		0.69			(0.03	)		0.66
Adjustment for net periodic pension plan      cost		2			1			3
Other comprehensive income		—			1			1
Comprehensive income		24			—			24

	Previously Disclosed in Form 10-Q						As Reported with Change
	Three Months Ended December 31, 2019			Impact of Change			Three Months Ended December 31, 2019
Settlement of retirement benefit obligations	$	—		$	—		$	—
Investment and other (income) expense		(9	)		2			(7	)
(Loss) before income taxes		(122	)		(2	)		(124	)
Income tax expense (benefit)		47			(1	)		46
Net (loss)		(169	)		(1	)		(170	)
Basic net (loss) per share		(5.02	)		(0.03	)		(5.05	)
Diluted net (loss) per share		(5.02	)		(0.03	)		(5.05	)

The tables below represent the impact of the change in accounting principle on the condensed consolidated balance sheet as of March 31, 2020 and the statements of operations and comprehensive income for the three months ended March 31, 2020:

	Previous Accounting Method						As Reported
	March 31, 2020			Impact of Change			March 31, 2020
Equity
(Accumulated deficit)	$	(408	)	$	(9	)	$	(417	)
Accumulated other comprehensive loss      (income)		(535	)		10			(525	)
Pension liabilities	142				(1	)		141

	Previous Accounting Method						As Reported
	March 31, 2020			Impact of Change			March 31, 2020
Investment and other (income)	$	(8	)	$	(2	)	$	(10	)
(Loss) income before income taxes		(53	)		2			(51	)
Income tax expense		1			—			1
Net (loss) income		(54	)		2			(52	)
Basic net (loss) income per share		(1.61	)		0.05			(1.56	)
Diluted net (loss) income per share		(1.61	)		0.05			(1.56	)
Adjustment for net periodic pension plan      cost		4			(1	)		3
Other comprehensive (loss)		(7	)		(1	)		(8	)
Comprehensive (loss) income		(61	)		1			(60	)

XML

Property, Plant and Equipment

3 Months Ended

Mar. 31, 2020

Property Plant And Equipment [Abstract]

Property, Plant and Equipment

Note 5.  Property, Plant and Equipment

The components of the Company’s property, plant and equipment at March 31, 2020 and December 31, 2019 were as follows:

	March 31,			December 31,
	2020			2019
Land	$	34		$	35
Buildings		662			663
Machinery and equipment		2,989			3,006
		3,685			3,704
Less: Accumulated depreciation		(3,261	)		(3,264	)
Total	$	424		$	440

During the three months ended March 31, 2020 and 2019, depreciation expense was $21 million and $24 million, respectively.    Refer to Note 8, Restructuring, Impairment and Other Charges, for a discussion on impairment reviews performed as of March 31, 2020 and information on impairment recorded during the three months ended March 31, 2020 and 2019.

Assets Held for Sale

Primarily as a result of restructuring actions, certain facilities and equipment are considered held for sale. The net book value of assets held for sale was $6 million and $9 million at March 31, 2020 and December 31, 2019, respectively.  These assets are included in prepaid expenses and other current assets in the condensed consolidated balance sheets at the lower of their historical net book value or their estimated fair value, less estimated costs to sell.        

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement Of Income And Comprehensive Income [Abstract]
Adjustments for net pension plan cost, tax expense	$ 1	$ 36

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019	[1]
ASSETS
Cash and cash equivalents	$ 56	$ 105
Receivables
Amortized cost	471	484
Less: Allowance for credit losses	(13)	(12)
Receivables, net	458	472
Inventories (Note 4)	156	170
Income tax receivable	5	5
Prepaid expenses and other current assets	52	36
Total current assets	727	788
Property, plant and equipment-net (Note 5)	424	440
Goodwill (Note 6)	52	52
Other intangible assets-net (Note 6)	116	120
Right-of-use assets for operating leases	155	163
Deferred income taxes	7	9
Other noncurrent assets	74	77
Total assets	1,555	1,649
LIABILITIES
Accounts payable	151	175
Accrued liabilities	224	211
Short-term debt and current portion of long-term debt (Note 9)	911	465
Short-term operating lease liabilities	40	42
Total current liabilities	1,326	893
Long-term debt (Note 9)	0	445
Pension liabilities	141	156
Restructuring and multi-employer pension liabilities (Note 7)	41	42
Long-term operating lease liabilities	123	129
Other noncurrent liabilities	55	56
Total liabilities	1,686	1,721
Commitments and contingencies (Note 8)
EQUITY
Common stock, $0.01 par value Authorized: 65,000,000 Issued: 35,719,936 shares in 2020 (2019: 35,559,052)	0	0
Additional paid-in capital	836	835
Accumulated deficit	(417)	(365)
Accumulated other comprehensive loss (Note 13)	(525)	(517)
Treasury stock, at cost: 2,133,874 shares in 2020 (2019: 2,084,055)	(25)	(25)
Total equity	(131)	(72)
Total liabilities and equity	$ 1,555	$ 1,649

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2020

Equity [Abstract]

Summary of Changes in Accumulated Other Comprehensive Loss

The following table summarizes accumulated other comprehensive loss by component as of December 31, 2019 and March 31, 2020 and changes during the three months ended March 31, 2020.

	Pension			Translation
	Plan Cost			Adjustments			Total
Balance at December 31, 2019	$	(464	)	$	(53	)	$	(517	)
Other comprehensive (loss) before reclassifications		—			(11	)		(11	)
Amounts reclassified from accumulated other comprehensive loss		3			—			3
Net change in accumulated other comprehensive income (loss)		3			(11	)		(8	)
Balance at March 31, 2020	$	(461	)	$	(64	)	$	(525	)

The following table summarizes accumulated other comprehensive loss by component as of December 31, 2018 and March 31, 2019 and changes during the three months ended March 31, 2019.

	Pension			Translation
	Plan Cost			Adjustments			Total
Balance at December 31, 2018	$	(520	)	$	(55	)	$	(575	)
Other comprehensive income before reclassifications		104			1			105
Amounts reclassified from accumulated other comprehensive loss		2			—			2
Net change in accumulated other comprehensive loss		106			1			107
Balance at March 31, 2019	$	(414	)	$	(54	)	$	(468	)

Schedule of Reclassifications From Accumulated Other Comprehensive Loss

Reclassifications from accumulated other comprehensive loss for the three months ended March 31, 2020 and 2019 were as follows:  

	Three Months Ended
	March 31,
	2020		2019 (1)
Amortization of pension plan cost:
Net actuarial loss (a)	$	4	$	3
Reclassifications before tax		4		3
Income tax expense		1		1
Reclassifications, net of tax	$	3	$	2

(a) Amortization of pension plan cost is included in the calculation of net periodic pension plan (income) expense that is recognized in investment and other income-net in the condensed consolidated statements of operations (see Note 11, Retirement Plans).    

(1) As Adjusted – Refer to the narrative above on the change in accounting method.    

XML

Restructuring, Impairment and Other Charges (Tables)

3 Months Ended

Mar. 31, 2020

Restructuring And Related Activities [Abstract]

Schedule of Net Restructuring, Impairment and Other Charges Disclosed in Consolidated Statements of Operations

For the three months ended March 31, 2020 and 2019, the Company recorded the following net restructuring, impairment and other charges disclosed in the condensed consolidated statements of operations:        

			Other		Total
Three Months Ended	Employee		Restructuring		Restructuring				Other
March 31, 2020	Terminations		Charges		Charges		Impairment		Charges		Total
Magazines, Catalogs and Logistics	$	—	$	10	$	10	$	1	$	—	$	11
Book		1		2		3		—		—		3
Office Products		2		—		2		—		—		2
Mexico		—		—		—		—		—		—
Other		—		—		—		—		—		—
Corporate		—		10		10		—		—		10
Total	$	3	$	22	$	25	$	1	$	—	$	26

			Other		Total
Three Months Ended	Employee		Restructuring		Restructuring				Other
March 31, 2019	Terminations		Charges		Charges		Impairment		Charges		Total
Magazines, Catalogs and Logistics	$	5	$	4	$	9	$	2	$	—	$	11
Book		—		1		1		—		—		1
Office Products		—		—		—		—		—		—
Mexico		—		—		—		—		—		—
Other		—		—		—		—		—		—
Corporate		—		1		1		—		—		1
Total	$	5	$	6	$	11	$	2	$	—	$	13

Schedule of Changes in the Restructuring Reserve

The restructuring reserve as of December 31, 2019 and March 31, 2020, and changes during the three months ended March 31, 2020 were as follows:

	December 31,		Restructuring		Cash			March 31,
	2019		Charges		Paid			2020
Employee terminations	$	29	$	3	$	(5	)	$	27
Multiemployer pension plan withdrawal      obligations		31		1		(2	)		30
Other and lease termination		2		19		(13	)		8
Total	$	62	$	23	$	(20	)	$	65

XML

Retirement Plans

3 Months Ended

Mar. 31, 2020

Compensation And Retirement Disclosure [Abstract]

Retirement Plans

Note 11.  Retirement Plans

The Company is the sole sponsor of certain defined benefit pension plans that are included in the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019.  The assets and certain obligations of the defined benefit pension plans includes plans qualified under Section 401(a) of the Internal Revenue Code of 1986, the U.S. Qualified Plan and related non-qualified benefits (the “Non-Qualified Plan”).

The components of the estimated net pension loss (income) for the three months ended March 31, 2020 and 2019 were as follows:

	Three Months Ended
	March 31, 2020
	Qualified			Non-Qualified & International		Total
Interest cost	$	15		$	1	$	16
Expected return on plan assets		(30	)		—		(30	)
Amortization of actuarial loss		4			—		4
Net periodic benefit (income) loss	$	(11	)	$	1	$	(10	)

	Three Months Ended
	March 31, 2019
	Qualified			Non-Qualified & International		Total
Interest cost	$	20		$	1	$	21
Expected return on plan assets		(31	)		—		(31	)
Amortization of actuarial loss		3			—		3
Settlement of retirement obligations		132			—		132
Net periodic benefit loss	$	124		$	1	$	125

In the first quarter of 2020, the Company adopted a change in method of accounting for the market-related value of assets for a class of assets within the U.S. Qualified Plan and Non-Qualified plans.  The change in accounting method was retrospectively applied to periods in 2017, 2018 and 2019, and as a result, pension income shown above for the three months ended March 31, 2019 has been restated.  Refer to Note 1, Overview and Basis of Presentation, for more information.

In the first quarter of 2019, the Company completed a partial settlement of its retirement benefit obligations related to the U.S. Qualified Plan by purchasing a group annuity contract for certain retirees and beneficiaries from a third-party insurance company. As a result, the Company’s pension assets and liabilities were remeasured as of the settlement date.  As of the remeasurement date, the reduction in the reported pension obligation for the participants under the annuity contract was $477 million, and the reduction in plan assets was $466 million.  The Company recorded a non-cash settlement charge of $132 million in settlement of retirement benefit obligations in the condensed consolidated statement of operations in the first quarter of 2019.  This charge resulted from the recognition in earnings of a portion of the actuarial losses recorded in accumulated other comprehensive loss based on the proportion of the obligation settled.  

Settlement of retirement obligations is disclosed separately in the condensed consolidated statements of operations, while the remaining net periodic (loss) income for the three months ended March 31, 2020 and 2019 is included in the investment and other (income)-net.   

XML

New Accounting Pronouncements

3 Months Ended

Mar. 31, 2020

Accounting Changes And Error Corrections [Abstract]

New Accounting Pronouncements

Note 15.  New Accounting Pronouncements

In August 2018, the FASB issued Accounting Standards Update No. 2018-14 “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”).  ASU 2018-14 modifies the annual disclosure requirements for employers that sponsor defined benefit pension plans.  ASU 2018-14 is effective for 2020 year-end disclosures.  Early adoption of ASU 2018-14 is permitted; however, the Company plans to adopt the standard for the 2020 year-end disclosures. The Company does not anticipate a significant impact.

In December 2019, the FASB issued Accounting Standards Update No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12").  ASU 2019-12 removes certain exceptions for intraperiod tax allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes, including a modification in the guidance for franchise taxes that are partially based on income and recognizing deferred taxes for a subsequent step-up in the tax basis of goodwill.  ASU 2019-12 is effective in the first quarter of 2021.  Early adoption of ASU 2019-12 is permitted; however, the Company plans to adopt the standard in the first quarter of 2021.  The Company is in the process of assessing the impact of the new standard.  

XML

Inventories (Tables)

3 Months Ended

Mar. 31, 2020

Inventory Disclosure [Abstract]

Components of the Company's Inventories

The components of the Company’s inventories, net of excess and obsolescence reserves for raw materials and finished goods, at March 31, 2020 and December 31, 2019 were as follows:        

	March 31,			December 31,
	2020			2019
Raw materials and manufacturing supplies	$	70		$	91
Work in process		38			38
Finished goods		89			87
Last in, first out reserve		(41	)		(46	)
Total	$	156		$	170

XML

Debt - Schedule of the Company's Debt (Detail) - USD ($) $ in Millions		Mar. 31, 2020	Dec. 31, 2019		Sep. 30, 2016
Debt Instrument [Line Items]
Finance lease and other obligations		$ 1	$ 2
Unamortized debt issuance costs		(8)	(9)
Total debt		911	910
Less: current portion		(911)	(465)	[1]
Long-term debt		0	445	[1]
Borrowings under the Revolving Credit Facility
Debt Instrument [Line Items]
Term Loan Facility		249	249
Term Loan Facility due September 30, 2022
Debt Instrument [Line Items]
Term Loan Facility	[2]	219	218
8.75% Senior Secured Notes due October 15, 2023
Debt Instrument [Line Items]
Senior Secured Notes		$ 450	$ 450		$ 450

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

[2] The borrowings under the Term Loan Facility are subject to a variable interest rate.  As of March 31, 2020 and December 31, 2019, the interest rate was 7.02% and 7.12%, respectively.

XML

Earnings Per Share - Narrative (Detail) - shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Earnings Per Share [Abstract]
Repurchase of common stock, shares	0	0

XML

Leases - Supplemental Information Regarding Weighted Average Lease Term and Discount Rate (Detail)	Mar. 31, 2020
Weighted Average Remaining Lease Term (years)
Operating leases	4 years 10 months 24 days
Financing leases	2 years
Weighted Average Discount Rate
Operating leases	8.70%
Financing leases	6.90%

XML

Revenue Recognition - Narrative (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Disaggregation Of Revenue [Abstract]
Trade receivables	$ 371	$ 366

XML

Overview and Basis of Presentation - Summary of Impact of Change in Accounting Principle on Condensed Consolidated Statements of Operations and Comprehensive Income (Detail) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended						12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019		Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Overview And Basis Of Presentation [Line Items]
Settlement of retirement benefit obligations	$ 0				$ 132
Investment and other (income) expense	(10)				(8)
Income (loss) before income taxes	(51)				(162)
Income tax expense (benefit)	1				(37)
Net (loss) income	$ (52)				$ (125)	[1]
Basic net (loss) per share	$ (1.56)				$ (3.77)	[1]
Diluted net (loss) per share	$ (1.56)				$ (3.77)	[1]
Adjustment for net periodic pension plan cost	$ 3				$ 106
Other comprehensive income (loss)	(8)				107
Comprehensive (loss) income	(60)				(18)
Change in Accounting Principle on Retirement Plans
Overview And Basis Of Presentation [Line Items]
Settlement of retirement benefit obligations		$ 0	$ 1	$ 1	132		$ 134
Investment and other (income) expense	(10)	(7)	(8)	(8)	(8)		(31)	$ (46)	$ (37)
Income (loss) before income taxes	(51)	(124)	23	(28)	(162)		(291)	8	(54)
Income tax expense (benefit)	1	46	0	(3)	(37)		6	33	10
Net (loss) income	$ (52)	$ (170)	$ 23	$ (25)	$ (125)		$ (297)	$ (25)	$ (64)
Basic net (loss) per share	$ (1.56)	$ (5.05)	$ 0.66	$ (0.72)	$ (3.77)		$ (8.89)	$ (0.71)	$ (1.91)
Diluted net (loss) per share	$ (1.56)	$ (5.05)	$ 0.66	$ (0.72)	$ (3.77)		$ (8.89)	$ (0.71)	$ (1.91)
Adjustment for net periodic pension plan cost	$ 3		$ 3	$ 4	$ 106		$ 56	$ (2)	$ 41
Other comprehensive income (loss)	(8)		1	5	107		58	(9)	62
Comprehensive (loss) income	(60)		24	(20)	(18)		(239)	(34)	(2)
Change in Accounting Principle on Retirement Plans | Previously Disclosed in Form 10-K and 10-Q
Overview And Basis Of Presentation [Line Items]
Settlement of retirement benefit obligations		$ 0	1	1	135		137
Investment and other (income) expense	(8)	(9)	(9)	(9)	(10)		(37)	(48)	(47)
Income (loss) before income taxes	(53)	(122)	24	(27)	(163)		(288)	10	(44)
Income tax expense (benefit)	1	47	0	(3)	(37)		7	33	13
Net (loss) income	$ (54)	$ (169)	$ 24	$ (24)	$ (126)		$ (295)	$ (23)	$ (57)
Basic net (loss) per share	$ (1.61)	$ (5.02)	$ 0.69	$ (0.69)	$ (3.79)		$ (8.82)	$ (0.67)	$ (1.69)
Diluted net (loss) per share	$ (1.61)	$ (5.02)	$ 0.69	$ (0.69)	$ (3.79)		$ (8.82)	$ (0.67)	$ (1.69)
Adjustment for net periodic pension plan cost	$ 4		$ 2	$ 3	$ 107		$ 54	$ (4)	$ 34
Other comprehensive income (loss)	(7)		0	4	108		56	(11)	55
Comprehensive (loss) income	(61)		24	(20)	(18)		(239)	(34)	(2)
Change in Accounting Principle on Retirement Plans | Impact of Change
Overview And Basis Of Presentation [Line Items]
Settlement of retirement benefit obligations		$ 0	0	0	(3)		(3)
Investment and other (income) expense	(2)	2	1	1	2		6	2	10
Income (loss) before income taxes	2	(2)	(1)	(1)	1		(3)	(2)	(10)
Income tax expense (benefit)	0	(1)	0	0	0		(1)	0	(3)
Net (loss) income	$ 2	$ (1)	$ (1)	$ (1)	$ 1		$ (2)	$ (2)	$ (7)
Basic net (loss) per share	$ 0.05	$ (0.03)	$ (0.03)	$ (0.03)	$ 0.02		$ (0.07)	$ (0.04)	$ (0.22)
Diluted net (loss) per share	$ 0.05	$ (0.03)	$ (0.03)	$ (0.03)	$ 0.02		$ (0.07)	$ (0.04)	$ (0.22)
Adjustment for net periodic pension plan cost	$ (1)		$ 1	$ 1	$ (1)		$ 2	$ 2	$ 7
Other comprehensive income (loss)	(1)		1	1	(1)		2	2	7
Comprehensive (loss) income	$ 1		$ 0	$ 0	$ 0		$ 0	$ 0	$ 0

[1] Overview and Basis of Presentation, for information on the restated balances for the three months ended March 31, 2019.

XML

Segment Information - Schedule of Segment Reporting Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Segment Reporting Information [Line Items]
Net Sales	$ 701	$ 845
Income (Loss) from Operations	(43)	(19)
Assets of Operations	1,555	1,947
Depreciation and Amortization	27	31	[1]
Capital Expenditures	11	28	[1]
Magazines, Catalogs and Logistics
Segment Reporting Information [Line Items]
Net Sales	327	403
Book
Segment Reporting Information [Line Items]
Net Sales	204	260
Office Products
Segment Reporting Information [Line Items]
Net Sales	112	119
Mexico
Segment Reporting Information [Line Items]
Net Sales	23	24
Other
Segment Reporting Information [Line Items]
Net Sales	35	39
Income (Loss) from Operations	3	1
Assets of Operations	29	22
Depreciation and Amortization	0	0
Capital Expenditures	0	0
Total Operating Segments
Segment Reporting Information [Line Items]
Net Sales	666	806
Income (Loss) from Operations	(34)	(7)
Assets of Operations	1,398	1,839
Depreciation and Amortization	27	31
Capital Expenditures	11	28
Total Operating Segments | Magazines, Catalogs and Logistics
Segment Reporting Information [Line Items]
Net Sales	327	403
Income (Loss) from Operations	(35)	(31)
Assets of Operations	597	795
Depreciation and Amortization	11	15
Capital Expenditures	7	10
Total Operating Segments | Book
Segment Reporting Information [Line Items]
Net Sales	204	260
Income (Loss) from Operations	(9)	13
Assets of Operations	468	647
Depreciation and Amortization	12	12
Capital Expenditures	4	17
Total Operating Segments | Office Products
Segment Reporting Information [Line Items]
Net Sales	112	119
Income (Loss) from Operations	7	8
Assets of Operations	282	329
Depreciation and Amortization	3	3
Capital Expenditures	0	0
Total Operating Segments | Mexico
Segment Reporting Information [Line Items]
Net Sales	23	24
Income (Loss) from Operations	3	3
Assets of Operations	51	68
Depreciation and Amortization	1	1
Capital Expenditures	0	1
Corporate
Segment Reporting Information [Line Items]
Net Sales	0	0
Income (Loss) from Operations	(12)	(13)
Assets of Operations	128	86
Depreciation and Amortization	0	0
Capital Expenditures	$ 0	$ 0

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

Comprehensive Income - Schedule of Changes in Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020		Mar. 31, 2019
Accumulated Other Comprehensive Income Loss [Line Items]
Balance	$ (72)	[1]	$ 178
Balance	(131)		153
Pension Plan Cost
Accumulated Other Comprehensive Income Loss [Line Items]
Balance	(464)		(520)
Other comprehensive income (loss) before reclassifications	0		104
Amounts reclassified from accumulated other comprehensive loss	3		2
Net change in accumulated other comprehensive income (loss)	3		106
Balance	(461)		(414)
Translation Adjustments
Accumulated Other Comprehensive Income Loss [Line Items]
Balance	(53)		(55)
Other comprehensive income (loss) before reclassifications	(11)		1
Amounts reclassified from accumulated other comprehensive loss	0		0
Net change in accumulated other comprehensive income (loss)	(11)		1
Balance	(64)		(54)
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income Loss [Line Items]
Balance	(517)		(575)
Other comprehensive income (loss) before reclassifications	(11)		105
Amounts reclassified from accumulated other comprehensive loss	3		2
Net change in accumulated other comprehensive income (loss)	(8)		107
Balance	$ (525)		$ (468)

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

Property, Plant and Equipment - Components of Company's Property, Plant and Equipment (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Property Plant And Equipment [Abstract]
Land	$ 34	$ 35
Buildings	662	663
Machinery and equipment	2,989	3,006
Property, plant and equipment, gross	3,685	3,704
Less: Accumulated depreciation	(3,261)	(3,264)
Total	$ 424	$ 440	[1]

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

Goodwill and Other Intangible Assets - Narrative (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Goodwill And Intangible Assets Disclosure [Abstract]
Amortization expense for other intangible assets	$ 4	$ 5

XML

Restructuring, Impairment and Other Charges - Other Charges - Narrative (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019	[1]
Restructuring Cost And Reserve [Line Items]
Accrued liabilities	$ 224	$ 211
Other noncurrent liabilities	55	$ 56
Multiemployer pension plan withdrawal obligations
Restructuring Cost And Reserve [Line Items]
Accrued liabilities	3
Other noncurrent liabilities	$ 17

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

Overview and Basis of Presentation - Narrative (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2020	Apr. 15, 2020	Jan. 01, 2019
Accumulated Deficit
Overview And Basis Of Presentation [Line Items]
Cumulative effect of change			$ (9,000,000)
Accumulated Other Comprehensive Loss
Overview And Basis Of Presentation [Line Items]
Cumulative effect of change			$ 9,000,000
U.S. Qualified Pension Plan
Overview And Basis Of Presentation [Line Items]
Percentage of remaining pension asset portfolio for plan	40.00%
Change in Accounting Principle on Retirement Plans | U.S. Qualified Pension Plan
Overview And Basis Of Presentation [Line Items]
Percentage of fair value of liability hedging assets on plan assets	60.00%
DIP Facility | Subsequent Event | Maximum
Overview And Basis Of Presentation [Line Items]
Debtor-in-possession financing		$ 100,000,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Net sales	$ 701	$ 845
Type of Revenue [Extensible List]	lksd:ProductAndServicesMember	lksd:ProductAndServicesMember
Cost of sales	$ 616	$ 735
Type of Cost, Good or Service [Extensible List]	lksd:ProductAndServicesMember	lksd:ProductAndServicesMember
Selling, general and administrative expenses (exclusive of depreciation and amortization)	$ 75	$ 85
Restructuring, impairment and other charges-net (Note 7)	26	13
Depreciation and amortization	27	31	[1]
(Loss) from operations	(43)	(19)
Interest expense-net (Note 9)	18	19
Settlement of retirement benefit obligations (Note 11)	0	132
Investment and other (income)-net	(10)	(8)
(Loss) before income taxes	(51)	(162)
Income tax expense (benefit)	1	(37)
Net (loss)	$ (52)	$ (125)	[2]
Net (loss) per common share (Note 10)
Basic net (loss) per share	$ (1.56)	$ (3.77)	[2]
Diluted net (loss) per share	$ (1.56)	$ (3.77)	[2]
Weighted-average number of common shares outstanding:
Basic	33.6	33.3	[2]
Diluted	33.6	33.3	[2]

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

[2] Overview and Basis of Presentation, for information on the restated balances for the three months ended March 31, 2019.

XML

Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Calculation of Basic and Diluted EPS as Well as Reconciliation of Basic Shares to Diluted Shares

The following table shows the calculation of basic and diluted EPS, as well as a reconciliation of basic shares to diluted shares:

	Three Months Ended
	March 31,
	2020			2019 (1)
Net (loss) per common share:
Basic	$	(1.56	)	$	(3.77	)
Diluted	$	(1.56	)	$	(3.77	)
Numerator:
Net (loss)	$	(52	)	$	(125	)
Denominator:
Weighted average number of common shares           outstanding		33.6			33.3
Dilutive options and awards		—			—
Diluted weighted average number of common           shares outstanding		33.6			33.3

   Refer to Note 1, Overview and Basis of Presentation, for information on the restated balances for the three months ended March 31, 2019.

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Parenthetical) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Reconciliation to the Consolidated Balance Sheets
Cash and cash equivalents	$ 56	$ 105	[1]
Restricted cash included in prepaid expenses and other current assets	$ 2	$ 1
Restricted Cash Equivalents, Current, Asset, Statement of Financial Position [Extensible List]	us-gaap:PrepaidExpenseAndOtherAssetsCurrent	us-gaap:PrepaidExpenseAndOtherAssetsCurrent
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$ 58	$ 106

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

Property, Plant and Equipment (Tables)

3 Months Ended

Mar. 31, 2020

Property Plant And Equipment [Abstract]

Components of Company's Property, Plant and Equipment

The components of the Company’s property, plant and equipment at March 31, 2020 and December 31, 2019 were as follows:

	March 31,			December 31,
	2020			2019
Land	$	34		$	35
Buildings		662			663
Machinery and equipment		2,989			3,006
		3,685			3,704
Less: Accumulated depreciation		(3,261	)		(3,264	)
Total	$	424		$	440

XML

Leases

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

Note 3.  Leases

Lease Expense

The components of total net lease expense were as follows:

	Three Months Ended			Three Months Ended
	March 31, 2020			March 31, 2019
Operating lease expense	$	17		$	17
Sublease (income)		(2	)		(2	)
Variable lease expense		2			3
Total net lease expense	$	17		$	18

During each of the three months ended March 31, 2020 and 2019, the Company incurred a de minimis amount of finance lease cost, consisting of finance lease ROU asset amortization and interest on finance lease liabilities, and a de minimis amount of cost associated with short-term leases.

Cash Flow Information

Supplemental non-cash information related to leases is included below:

	Three Months Ended		Three Months Ended
	March 31, 2020		March 31, 2019
ROU assets acquired in exchange for      lease obligations:
ROU assets
Operating leases	$	4	$	2
Lease obligations
Operating leases	$	4	$	2

During the three months ended March 31, 2020 and 2019, the Company recorded $14 million and $16 million of operating cash outflows from operating leases, respectively.    

During each of the three months ended March 31, 2020 and 2019, the Company recorded a de minimis amount of cash outflows from financing leases.  No finance lease ROU assets or obligations were acquired during the three months ended March 31, 2020 and 2019.

Lease Terms and Discount Rates

Supplemental information regarding the weighted average lease term and discount rate for the lease liabilities as of March 31, 2020 is included below:  

	March 31, 2020
Weighted Average Remaining Lease Term (years)
Operating leases		4.9
Financing leases		2.0
Weighted Average Discount Rate
Operating leases		8.7	%
Financing leases		6.9	%

Lease Maturities

The annual maturities of lease liabilities as of March 31, 2020 were as follows:    

	Operating Leases
2020	$	39
2021		45
2022		34
2023		24
2024		19
2025 & thereafter		28
Total undiscounted lease payments		189
Imputed interest		(26	)
Total lease liabilities	$	163

During the three months ended March 31, 2020, the Company recorded a de minimis amount of maturities for finance lease liabilities.  As of March 31, 2020, the Company has additional operating leases that have not commenced for an undiscounted amount of $1 million.

XML

Restructuring, Impairment and Other Charges

3 Months Ended

Mar. 31, 2020

Restructuring And Related Activities [Abstract]

Restructuring, Impairment and Other Charges

Note 7.  Restructuring, Impairment and Other Charges

For the three months ended March 31, 2020 and 2019, the Company recorded the following net restructuring, impairment and other charges disclosed in the condensed consolidated statements of operations:        

			Other		Total
Three Months Ended	Employee		Restructuring		Restructuring				Other
March 31, 2020	Terminations		Charges		Charges		Impairment		Charges		Total
Magazines, Catalogs and Logistics	$	—	$	10	$	10	$	1	$	—	$	11
Book		1		2		3		—		—		3
Office Products		2		—		2		—		—		2
Mexico		—		—		—		—		—		—
Other		—		—		—		—		—		—
Corporate		—		10		10		—		—		10
Total	$	3	$	22	$	25	$	1	$	—	$	26

			Other		Total
Three Months Ended	Employee		Restructuring		Restructuring				Other
March 31, 2019	Terminations		Charges		Charges		Impairment		Charges		Total
Magazines, Catalogs and Logistics	$	5	$	4	$	9	$	2	$	—	$	11
Book		—		1		1		—		—		1
Office Products		—		—		—		—		—		—
Mexico		—		—		—		—		—		—
Other		—		—		—		—		—		—
Corporate		—		1		1		—		—		1
Total	$	5	$	6	$	11	$	2	$	—	$	13

Restructuring Charges

For the three months ended March 31, 2020, the Company incurred net other restructuring charges of $22 million, primarily due to facility costs and costs to move equipment, expenses associated with new revenue opportunities, and cost savings initiatives implemented in 2019.  For the three months ended March 31, 2020, the Company incurred charges of $3 million for an aggregate of 397 employees, of whom 197 were terminated as of or prior to March 31, 2020, primarily related to the closure of one facility in the Office Products segment.

For the three months ended March 31, 2019, the Company incurred charges of $5 million for an aggregate of 240 employees, primarily related to the closure of one facility in the Magazines, Catalogs and Logistics segment.  The Company incurred net other restructuring charges of $6 million for the three months ended March 31, 2019 primarily due to charges related to facility costs, as well as costs associated with new revenue opportunities and cost savings initiatives implemented during the quarter.  The Company recorded $2 million of net impairment charges related to machinery and equipment associated with facility closings in the Magazines, Catalogs and Logistics segment.

Impairment Reviews

The Company performs interim reviews of goodwill for indicators of impairment each quarter to assess whether an interim impairment review is required for any reporting unit.  Additionally, the Company evaluates the recoverability of other long-lived assets, including property, plant and equipment and certain identifiable intangible assets, whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. As part of its interim reviews, management analyzes operating results for the period compared to expected results as of the prior year’s review, key assumptions such as discount rates and

expected long-term growth rates, changes in the overall market value of the Company’s equity and debt securities, significant negative industry and economic trends, as well as other factors. 

Goodwill

Due the potential impact of COVID-19 on the company’s future performance, management determined that a further review of the reporting units’ goodwill for indicators of impairment was appropriate.  As discussed in Note 1, Overview and Basis of Presentation, COVID-19 has the potential to have a negative impact across several of the Company’s segments.  As of March 31, 2020, only two reporting units had goodwill: Office Products ($31 million) and logistics ($21 million).  

For the Office Products and logistics reporting units, management assessed goodwill impairment risk by first performing a qualitative review of entity specific, industry, market and general economic factors for each reporting unit. For both reporting units, the Company was not able to conclude that it is more likely than not that the fair values of our reporting units are greater than their carrying values, and therefore, a one-step method for determining goodwill impairment was applied as of March 31, 2020.

The Company performed a Step 1 impairment test of goodwill in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles-Goodwill and Other, which includes comparing the estimated fair value of each reporting unit to its carrying amount, including goodwill.  If the carrying amount of a reporting unit is greater than zero and its fair value exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. However, if the carrying amount of a reporting unit exceeds its fair value, the goodwill is considered impaired and a full or partial write-off of goodwill would be required.  

The Company determines the fair value of its reporting units using both the income approach and the market approach. The determination of the fair value using the income approach requires management to make significant estimates and assumptions related to projected operating results (including forecasted revenue and operating income), anticipated future cash flows, and discount rates. The determination of the fair value using the market approach requires management to make significant assumptions related to the multiples of earnings before interest, income taxes, depreciation and amortization (“EBITDA”) used in the calculation.  Additionally, the market approach estimates fair value using comparable marketplace fair value data from within a comparable industry grouping. The Company weighs both the income and market approach equally to estimate the concluded fair value of each reporting unit.

The determination of fair value and the allocation of that value to individual assets and liabilities requires the Company to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the selection of appropriate peer group companies; control premiums appropriate for acquisitions in the industries in which the Company competes; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, restructuring charges and capital expenditures. As part of its impairment test for its reporting units, the Company engages a third-party valuation firm to assist in the Company’s determination of certain assumptions used to estimate fair values.

As a result of the interim impairment tests Office Products and logistics, the Company did not recognize any goodwill impairment charges as the estimated fair values of the reporting units exceeded their respective carrying values by 10% and 32%, respectively.

Other Intangible Assets and Property, Plant and Equipment

Given the continued decline in demand in the magazines and catalogs reporting unit and the potential impact of COVID-19, management determined that a further review of the reporting unit’s property, plant and equipment and right-of-use assets for operating leases for recoverability was appropriate during the first quarter of 2020.  The Company performed a Step 1 recoverability test in accordance with Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment.  The recoverability test compares the estimated future undiscounted cash flows expected to result from the use of the asset group and its eventual disposition to the carrying value of the asset group; if the carrying value of the asset group exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset group’s carrying value over its fair value.  Based upon management’s updated projection of cash flows for this asset group, management determined that the estimated future undiscounted cash flows were in excess of the asset group’s carrying value, resulting in no impairment loss as a result of these tests in the first quarter of 2020.

In addition to the interim tests noted above, the Company reviewed the Office Products’ intangible assets and Books’ intangible assets and property, plant and equipment for recoverability. There were no impairment charges recorded as a result of the recoverability tests.

Future Interim Reviews

The Company will continue to perform interim reviews of goodwill for indicators of impairment each quarter to assess whether an interim impairment test is required for its goodwill balances or if recoverability tests are required for long-lived assets, including property, plant and equipment, and certain identifiable intangible assets, whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable.  Such reviews could result in future impairment charges, depending on the facts and circumstances in effect at the time of those reviews. 

Other Charges  

For each of the three months ended March 31, 2020 and 2019, the Company recorded de minimis amount of other charges for multiemployer pension plan withdrawal obligations unrelated to facility closures.  The total liability for the withdrawal obligations associated with the Company’s decision to withdraw from certain multiemployer pension plans included $3 million in accrued liabilities and $17 million in restructuring and multiemployer pension plan liabilities at March 31, 2020.    

The Company’s withdrawal liabilities could be affected by the financial stability of other employers participating in such plans and any decisions by those employers or the Company to withdraw from such plans in the future.  While it is not possible to quantify the potential impact of future events or circumstances, reductions in other employers’ participation in multiemployer pension plans, including certain plans from which the Company has previously withdrawn, could have a material effect on the Company’s previously estimated withdrawal liabilities and condensed consolidated balance sheets, statements of operations and cash flows.

Restructuring Reserve

The restructuring reserve as of December 31, 2019 and March 31, 2020, and changes during the three months ended March 31, 2020 were as follows:

	December 31,		Restructuring		Cash			March 31,
	2019		Charges		Paid			2020
Employee terminations	$	29	$	3	$	(5	)	$	27
Multiemployer pension plan withdrawal      obligations		31		1		(2	)		30
Other and lease termination		2		19		(13	)		8
Total	$	62	$	23	$	(20	)	$	65

The current portion of restructuring reserves of $41 million at March 31, 2020 was included in accrued liabilities, while the long-term portion of $24 million, which primarily related to multiemployer pension plan withdrawal obligations related to facility closures, was included in restructuring and multiemployer pension liabilities at March 31, 2020.        

The Company anticipates that payments associated with the employee terminations reflected in the above table will be substantially completed by March 31, 2021.  

Payments on all of the Company’s multiemployer pension plan withdrawal obligations are scheduled to be completed by 2034. Changes based on uncertainties in these estimated withdrawal obligations could affect the ultimate charges related to multiemployer pension plan withdrawal obligations.          

The restructuring liabilities classified as “other” consisted of other facility closing costs and costs associated with new revenue opportunities and cost savings initiatives implemented in 2019.

XML

Comprehensive Income - Narrative (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Pension Plan Cost
Accumulated Other Comprehensive Income Loss [Line Items]
Net impact to accumulated other comprehensive loss	$ 0	$ 104

XML

Restructuring, Impairment and Other Charges - Narrative (Detail)	3 Months Ended
	Mar. 31, 2020 USD ($) Employee Facility	Mar. 31, 2019 USD ($) Employee Facility		Dec. 31, 2019 USD ($)
Restructuring Cost And Reserve [Line Items]
Other restructuring charges, net	$ 22,000,000	$ 6,000,000
Employee-related termination costs	$ 3,000,000	5,000,000
Number of employees used to determine employee termination costs | Employee	397
Impairment charges related to machinery and equipment	$ 1,000,000	2,000,000
Goodwill	52,000,000			$ 52,000,000	[1]
Impairment charges	$ 1,000,000	2,000,000	[1]
Office Products
Restructuring Cost And Reserve [Line Items]
Number of facilities closed | Facility	1
Goodwill	$ 31,000,000			31,000,000
Goodwill impairment charges	$ 0
Estimated fair value exceeds carrying value percentage	10.00%
Impairment of definite-lived intangible assets	$ 0
Magazines, Catalogs and Logistics
Restructuring Cost And Reserve [Line Items]
Employee-related termination costs		$ 5,000,000
Number of employees used to determine employee termination costs | Employee		240
Number of facilities closed | Facility		1
Impairment charges related to machinery and equipment		$ 2,000,000
Goodwill	21,000,000			21,000,000
Logistics
Restructuring Cost And Reserve [Line Items]
Goodwill	21,000,000
Goodwill impairment charges	$ 0
Estimated fair value exceeds carrying value percentage	32.00%
Magazines and Catalogs
Restructuring Cost And Reserve [Line Items]
Impairment charges	$ 0
Books
Restructuring Cost And Reserve [Line Items]
Goodwill	0			$ 0
Impairment charges	$ 0
Termination One
Restructuring Cost And Reserve [Line Items]
Number of employees who were terminated as of date | Employee	197

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

Inventories - Components of the Company's Inventories (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Inventory Net [Abstract]
Raw materials and manufacturing supplies	$ 70	$ 91
Work in process	38	38
Finished goods	89	87
Last in, first out reserve	(41)	(46)
Total	$ 156	$ 170	[1]

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

Goodwill and Other Intangible Assets - Components of Other Intangible Assets (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Schedule Of Other Intangible Assets [Line Items]
Gross Carrying Amount, total other intangible assets	$ 277	$ 277
Accumulated Amortization, total other intangible assets	(161)	(157)
Net Book Value, total other intangible assets	116	120
Customer Relationships
Schedule Of Other Intangible Assets [Line Items]
Gross Carrying Amount, total other intangible assets	248	248
Accumulated Amortization, total other intangible assets	(153)	(149)
Net Book Value, total other intangible assets	95	99
Trade Names
Schedule Of Other Intangible Assets [Line Items]
Gross Carrying Amount, total other intangible assets	29	29
Accumulated Amortization, total other intangible assets	(8)	(8)
Net Book Value, total other intangible assets	$ 21	$ 21

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) shares in Millions, $ in Millions	Total		Common Stock	Additional Paid-in Capital	Treasury Stock	(Accumulated Deficit)	Accumulated Other Comprehensive (Loss) Income
Balance at Dec. 31, 2018	$ 178		$ 0	$ 828	$ (24)	$ (51)	$ (575)
Balance (in shares) at Dec. 31, 2018			35		2
Net (loss)	(125)	[1]	$ 0	0	$ 0	(125)	0
Issuance of share-based awards, net of withholdings and other	(1)		$ 0	0	$ (1)	0	0
Issuance of share-based awards, net of withholdings and other (in shares)			1		0
Share-based compensation	3		$ 0	3	$ 0	0	0
Cash dividends paid	(9)		0	0	0	(9)	0
Other comprehensive income (loss)	107		0	0	0	0	107
Balance at Mar. 31, 2019	153		$ 0	831	$ (25)	(185)	(468)
Balance (in shares) at Mar. 31, 2019			36		2
Balance at Dec. 31, 2018	178		$ 0	828	$ (24)	(51)	(575)
Balance (in shares) at Dec. 31, 2018			35		2
Balance at Dec. 31, 2019	(72)	[2]	$ 0	835	$ (25)	(365)	(517)
Balance (in shares) at Dec. 31, 2019			36		2
Net (loss)	(52)		$ 0	0	$ 0	(52)	0
Share-based compensation	1		0	1	0	0	0
Other comprehensive income (loss)	(8)		0	0	0	0	(8)
Balance at Mar. 31, 2020	$ (131)		$ 0	$ 836	$ (25)	$ (417)	$ (525)
Balance (in shares) at Mar. 31, 2020			36		2

[1] Overview and Basis of Presentation, for information on the restated balances for the three months ended March 31, 2019.

[2] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

Retirement Plans (Tables)

3 Months Ended

Mar. 31, 2020

Compensation And Retirement Disclosure [Abstract]

Components of Estimated Net Pension Loss (Income)

The components of the estimated net pension loss (income) for the three months ended March 31, 2020 and 2019 were as follows:

	Three Months Ended
	March 31, 2020
	Qualified			Non-Qualified & International		Total
Interest cost	$	15		$	1	$	16
Expected return on plan assets		(30	)		—		(30	)
Amortization of actuarial loss		4			—		4
Net periodic benefit (income) loss	$	(11	)	$	1	$	(10	)

	Three Months Ended
	March 31, 2019
	Qualified			Non-Qualified & International		Total
Interest cost	$	20		$	1	$	21
Expected return on plan assets		(31	)		—		(31	)
Amortization of actuarial loss		3			—		3
Settlement of retirement obligations		132			—		132
Net periodic benefit loss	$	124		$	1	$	125

XML

Goodwill and Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Changes in the Carrying Amount of Goodwill

The changes in the carrying amount of goodwill for the three months ended March 31, 2020 were as follows:

	Magazines,
	Catalogs						Office
	and Logistics			Book			Products			Mexico		Other			Total
Net book value as of December 31,      2019
Goodwill	$	523		$	354		$	110		$	—	$	5		$	992
Accumulated impairment losses		(502	)		(354	)		(79	)		—		(5	)		(940	)
Total		21			—			31			—		—			52
Net book value as of March 31, 2020
Goodwill		523			354			110			—		5			992
Accumulated impairment losses		(502	)		(354	)		(79	)		—		(5	)		(940	)
Total	$	21		$	—		$	31		$	—	$	—		$	52

Components of Other Intangible Assets

The components of other intangible assets at March 31, 2020 and December 31, 2019 were as follows:  

	March 31, 2020							December 31, 2019
	Gross  Carrying		Accumulated			Net Book		Gross  Carrying		Accumulated			Net Book
	Amount		Amortization			Value		Amount		Amortization			Value
Customer relationships	$	248	$	(153	)	$	95	$	248	$	(149	)	$	99
Trade names		29		(8	)		21		29		(8	)		21
Total other intangible assets	$	277	$	(161	)	$	116	$	277	$	(157	)	$	120

Schedule of Estimated Annual Amortization Expense Related to all Amortizable Intangible Assets

The following table outlines the estimated annual amortization expense related to all amortizable intangible assets:

For the year ending December 31,	Amount
2020	$	17
2021		15
2022		14
2023		13
2024		13
2025 and thereafter		48
Total	$	120

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement Of Income And Comprehensive Income [Abstract]
Net (loss)	$ (52)	$ (125)	[1]
Other comprehensive (loss) income, net of tax (Note 13):
Translation adjustments	(11)	1
Adjustment for net periodic pension plan cost	3	106
Other comprehensive (loss) income	(8)	107
Comprehensive (loss)	$ (60)	$ (18)

[1] Overview and Basis of Presentation, for information on the restated balances for the three months ended March 31, 2019.

XML

Overview and Basis of Presentation - Summary of Impact of Change in Accounting Principle on Condensed Consolidated Balance Sheets and Statements of Stockholders' Equity (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019		Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
EQUITY
Accumulated deficit	$ (417)	$ (365)	[1]
Accumulated other comprehensive loss (income)	525	517	[1]
Pension liabilities	141	156	[1]
Change in Accounting Principle on Retirement Plans
EQUITY
Accumulated deficit	(417)	(365)		$ (195)	$ (218)	$ (185)	$ (51)	$ (97)
Accumulated other comprehensive loss (income)	(525)	(517)		(462)	(463)	(468)	(575)	(469)
Pension liabilities	141
Change in Accounting Principle on Retirement Plans | Previously Disclosed in Form 10-K and 10-Q
EQUITY
Accumulated deficit	(408)	(354)		(185)	(209)	(177)	(42)	(90)
Accumulated other comprehensive loss (income)	(535)	(528)		(472)	(472)	(476)	(584)	(476)
Pension liabilities	142
Change in Accounting Principle on Retirement Plans | Impact of Change
EQUITY
Accumulated deficit	(9)	(11)		(10)	(9)	(8)	(9)	(7)
Accumulated other comprehensive loss (income)	10	$ 11		$ 10	$ 9	$ 8	$ 9	$ 7
Pension liabilities	$ (1)

[1] As Adjusted, see Note 1, Overview and Basis of Presentation

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 01, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
No Trading Symbol Flag	true
Entity Registrant Name	LSC Communications, Inc.
Entity Central Index Key	0001669812
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		33,586,062
Entity File Number	001-37729
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	36-4829580
Entity Address, Address Line One	191 N. Wacker Drive, Suite 1400
Entity Address, City or Town	Chicago
Entity Address, State or Province	IL
Entity Address, Postal Zip Code	60606
City Area Code	773
Local Phone Number	272-9200
Document Quarterly Report	true
Document Transition Report	false

XML

Revenue Recognition

3 Months Ended

Mar. 31, 2020

Revenue From Contract With Customer [Abstract]

Revenue Recognition

Note 2.  Revenue Recognition  

Disaggregated Revenue

The following tables provide information about disaggregated revenue by major products/service lines and timing of revenue recognition, and include a reconciliation of the disaggregated revenue with reportable segments for the three months ended March 31, 2020 and 2019.  

	Three Months Ended
	March 31, 2020
	Magazines,
	Catalogs
	and				Office
	Logistics		Book		Products		Mexico		Other		Total
Major Products / Service Lines
Book (a)	$	—	$	204	$	—	$	—	$	—	$	204
Magazines and Catalogs (b)	$	250	$	—	$	—	$	23	$	21	$	294
Logistics	$	77	$	—	$	—	$	—	$	—	$	77
Directories	$	—	$	—	$	—	$	—	$	14	$	14
Office Products	$	—	$	—	$	112	$	—	$	—	$	112
Total	$	327	$	204	$	112	$	23	$	35	$	701
Timing of Revenue Recognition
Products and services transferred at a      point in time	$	225	$	172	$	112	$	23	$	14	$	546
Products and services transferred over      time		102		32		—		—		21		155
Total	$	327	$	204	$	112	$	23	$	35	$	701

	Three Months Ended
	March 31, 2019
	Magazines,
	Catalogs
	and				Office
	Logistics		Book		Products		Mexico		Other		Total
Major Products / Service Lines
Book (a)	$	—	$	260	$	—	$	—	$	—	$	260
Magazines and Catalogs (b)	$	319	$	—	$	—	$	24	$	20	$	363
Logistics	$	84	$	—	$	—	$	—	$	—	$	84
Directories	$	—	$	—	$	—	$	—	$	19	$	19
Office Products	$	—	$	—	$	119	$	—	$	—	$	119
Total	$	403	$	260	$	119	$	24	$	39	$	845
Timing of Revenue Recognition
Products and services transferred at a      point in time	$	288	$	228	$	119	$	24	$	19	$	678
Products and services transferred over      time		115		32		—		—		20		167
Total	$	403	$	260	$	119	$	24	$	39	$	845

(a) Includes e-book formatting and supply chain management associated with book production    

(b) Includes premedia and co-mail        

Accounts Receivable

As disclosed in Note 1, Overview and Basis of Presentation, the Company adopted ASU 2016-13 on January 1, 2020 using the modified retrospective adoption method.  As a result of the adoption, the Company now records an allowance for credit losses on unbilled receivables which resulted in a de minimis amount of expense for the three months ended March 31, 2020.  There were no changes to the Company’s policy relating to its receivables.  To recognize the initial adoption, the Company recorded a de minimis increase to its January 1, 2020 balance for allowance for credit losses and an offsetting impact to accumulated deficit in the condensed consolidated balance sheet.    

Transactions affecting the allowances for doubtful accounts receivable balance during the three months ended March 31, 2020 were as follows:

	Three Months Ended
	March 31, 2020
Balance, beginning of year	$	12
Provisions charged to expense		1
Balance, end of period	$	13

There was a de minimis amount of write-offs and recoveries during the three months ended March 31, 2020.

Contract Balances

The following table provides changes in contract assets and liabilities during the three months ended March 31, 2020:

	Short-Term Contract Assets			Long-Term Contract Assets			Contract Liabilities
Beginning Balance, January 1, 2020	$	40		$	14		$	17
Additions to unbilled accounts receivable		17			—			—
Unbilled accounts receivable recognized in      trade receivables		(28	)		—			—
Payment of contract acquisition costs		—			—			—
Amortization of contract acquisition costs		—			(3	)		—
Write-off due to termination of contract      acquisition costs		—			—			—
Revenue recognized that was included in      contract liabilities as of January 1, 2020		—			—			(12	)
Increases due to cash received		—			—			11
Ending Balance, March 31, 2020	$	29		$	11		$	16

The trade receivables balance was $371 million and $366 million as of March 31, 2020 and December 31, 2019, respectively. There was a de minimis amount of credit losses recognized on short-term contract assets recorded during the three months ended March 31, 2020.

XML

Goodwill and Other Intangible Assets

3 Months Ended

Mar. 31, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Note 6.  Goodwill and Other Intangible Assets  

The changes in the carrying amount of goodwill for the three months ended March 31, 2020 were as follows:

	Magazines,
	Catalogs						Office
	and Logistics			Book			Products			Mexico		Other			Total
Net book value as of December 31,      2019
Goodwill	$	523		$	354		$	110		$	—	$	5		$	992
Accumulated impairment losses		(502	)		(354	)		(79	)		—		(5	)		(940	)
Total		21			—			31			—		—			52
Net book value as of March 31, 2020
Goodwill		523			354			110			—		5			992
Accumulated impairment losses		(502	)		(354	)		(79	)		—		(5	)		(940	)
Total	$	21		$	—		$	31		$	—	$	—		$	52

The components of other intangible assets at March 31, 2020 and December 31, 2019 were as follows:  

	March 31, 2020							December 31, 2019
	Gross  Carrying		Accumulated			Net Book		Gross  Carrying		Accumulated			Net Book
	Amount		Amortization			Value		Amount		Amortization			Value
Customer relationships	$	248	$	(153	)	$	95	$	248	$	(149	)	$	99
Trade names		29		(8	)		21		29		(8	)		21
Total other intangible assets	$	277	$	(161	)	$	116	$	277	$	(157	)	$	120

During the three months ended March 31, 2020 and 2019, amortization expense for other intangible assets was $4 million and $5 million, respectively.

The following table outlines the estimated annual amortization expense related to all amortizable intangible assets:

For the year ending December 31,	Amount
2020	$	17
2021		15
2022		14
2023		13
2024		13
2025 and thereafter		48
Total	$	120

Refer to Note 7, Restructuring, Impairment and Other Charges, for information on the goodwill and intangible asset impairment reviews performed as of March 31, 2020.

XML

Leases (Tables)

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Components of Total Net Lease Expense

The components of total net lease expense were as follows:

	Three Months Ended			Three Months Ended
	March 31, 2020			March 31, 2019
Operating lease expense	$	17		$	17
Sublease (income)		(2	)		(2	)
Variable lease expense		2			3
Total net lease expense	$	17		$	18

Supplemental Non-cash Information Related to Leases

Supplemental non-cash information related to leases is included below:

	Three Months Ended		Three Months Ended
	March 31, 2020		March 31, 2019
ROU assets acquired in exchange for      lease obligations:
ROU assets
Operating leases	$	4	$	2
Lease obligations
Operating leases	$	4	$	2

Supplemental Information Regarding Weighted Average Lease Term and Discount Rate

Supplemental information regarding the weighted average lease term and discount rate for the lease liabilities as of March 31, 2020 is included below:

	March 31, 2020
Weighted Average Remaining Lease Term (years)
Operating leases		4.9
Financing leases		2.0
Weighted Average Discount Rate
Operating leases		8.7	%
Financing leases		6.9	%

Schedule of Annual Maturities of Lease Liabilities

The annual maturities of lease liabilities as of March 31, 2020 were as follows:

	Operating Leases
2020	$	39
2021		45
2022		34
2023		24
2024		19
2025 & thereafter		28
Total undiscounted lease payments		189
Imputed interest		(26	)
Total lease liabilities	$	163

XML

Earnings per Share

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Earnings Per Share

Note 10.  Earnings Per Share

During the three months ended March 31, 2020 and 2019, no shares of common stock were purchased by the Company; however, a de minimis amount of shares were withheld from employees for tax liabilities upon vesting of equity awards.

Basic (loss) per share (“EPS”) is calculated by dividing net earnings attributable to the Company’s stockholders by the weighted average number of common shares outstanding for the period. In computing diluted EPS, basic EPS is adjusted for the assumed issuance of all potentially dilutive share-based awards, including stock options, restricted stock, restricted stock units, and performance share units.   

The following table shows the calculation of basic and diluted EPS, as well as a reconciliation of basic shares to diluted shares:

	Three Months Ended
	March 31,
	2020			2019 (1)
Net (loss) per common share:
Basic	$	(1.56	)	$	(3.77	)
Diluted	$	(1.56	)	$	(3.77	)
Numerator:
Net (loss)	$	(52	)	$	(125	)
Denominator:
Weighted average number of common shares           outstanding		33.6			33.3
Dilutive options and awards		—			—
Diluted weighted average number of common           shares outstanding		33.6			33.3

   Refer to Note 1, Overview and Basis of Presentation, for information on the restated balances for the three months ended March 31, 2019.

XML

Segment Information

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Segment Information

Note 14.  Segment Information

As a result of the Company’s segment analysis in the fourth quarter of 2019, Mexico met the requirements to be classified as a reportable segment (previously included as a non-reportable segment).  All prior year amounts have been reclassified to conform to the Company’s current reporting structure.  

The Company’s segment and product and service offerings are summarized below

Magazines, Catalogs and Logistics

The Magazines, Catalogs and Logistics segment primarily produces magazines and catalogs and provides logistics solutions to the Company and other third parties.  The segment also provides certain other print-related services, including mail services.  The segment has operations primarily in the U.S.  The Magazines, Catalogs and Logistics segment is divided into two reporting units: magazines and catalogs; and logistics.

Book

The Book segment produces books for publishers primarily in the U.S.  The segment also provides supply-chain management services and warehousing and fulfillment services, as well as e-book formatting for book publishers.  

Office Products

The Office Products segment manufactures and sells branded and private label products in five core categories: filing products, envelopes, note-taking products, binder products, and forms. 

Mexico

Mexico produces magazines, catalogs, statements, forms, and labels. 

Other

The Other grouping consists of the following non-reportable segments: Directories and Print Management.  Print Management provides outsourced print procurement and management services.  

Corporate

Corporate consists of unallocated selling, general and administrative activities and associated expenses including executive, legal, finance, communications, certain facility costs and LIFO inventory provisions.  In addition, share-based compensation expense is included in Corporate and not allocated to the operating segments.

Information by Segment

The Company has disclosed income (loss) from operations as the primary measure of segment earnings (loss).  This is the measure of profitability used by the Company’s chief operating decision-maker and is most consistent with the presentation of profitability reported with the condensed consolidated financial statements.   

			Income (Loss)					Depreciation
Three Months Ended	Net		from			Assets of		and		Capital
March 31, 2020	Sales		Operations			Operations		Amortization		Expenditures
Magazines, Catalogs and Logistics	$	327	$	(35	)	$	597	$	11	$	7
Book		204		(9	)		468		12		4
Office Products		112		7			282		3		—
Mexico		23		3			51		1		—
Total reportable segments		666		(34	)		1,398		27		11
Other		35		3			29		—		—
Corporate		—		(12	)		128		—		—
Total operations	$	701	$	(43	)	$	1,555	$	27	$	11

			Income (Loss)					Depreciation
Three Months Ended	Net		from			Assets of		and		Capital
March 31, 2019	Sales		Operations			Operations		Amortization		Expenditures
Magazines, Catalogs and Logistics	$	403	$	(31	)	$	795	$	15	$	10
Book		260		13			647		12		17
Office Products		119		8			329		3		—
Mexico		24		3			68		1		1
Total reportable segments		806		(7	)		1,839		31		28
Other		39		1			22		—		—
Corporate		—		(13	)		86		—		—
Total operations	$	845	$	(19	)	$	1,947	$	31	$	28

Restructuring, impairment and other charges by segment for the three months ended March 31, 2020 and 2019 are disclosed in Note 7, Restructuring, Impairment and Other Charges.

XML

Commitments and Contingencies - Narrative (Detail)	Mar. 31, 2020 Facility
Commitments And Contingencies Disclosure [Abstract]
Number of sites cited as potentially responsible party	9
Number of previously and currently owned sites with potential remediation obligations	3

XML

Debt - Summary of Changes to Interest Coverage Ratio and Maximum Consolidated Leverage Ratio (Detail) - Amended Credit Agreement	Aug. 05, 2019	Dec. 20, 2018	Sep. 30, 2016
Debt Instrument [Line Items]
Step-down as of date (quarter ending on or after)		Mar. 31, 2020	Mar. 31, 2019
Step-up as of date (quarter ending on or after)		Mar. 31, 2020	Mar. 31, 2019
Covenant One
Debt Instrument [Line Items]
Step-down as of date (quarter ending on or after)	Jun. 30, 2020
Step-up as of date (quarter ending on or after)	Sep. 30, 2020
Covenant Two
Debt Instrument [Line Items]
Step-down as of date (quarter ending on or after)	Mar. 31, 2021
Step-up as of date (quarter ending on or after)	Jun. 30, 2021
Current Ratio | Minimum
Debt Instrument [Line Items]
Maximum Consolidated Leverage Ratio	3.75	3.25	3.25
Minimum Interest Coverage Ratio	2.50	3.25	3.25
Current Ratio | Maximum
Debt Instrument [Line Items]
Maximum Consolidated Leverage Ratio	1.00	1.00	1.00
Minimum Interest Coverage Ratio	1.00	1.00	1.00
Step-Down Ratio | Minimum
Debt Instrument [Line Items]
Maximum Consolidated Leverage Ratio		3.00	3.00
Step-Down Ratio | Minimum | Covenant One
Debt Instrument [Line Items]
Maximum Consolidated Leverage Ratio	3.50
Step-Down Ratio | Minimum | Covenant Two
Debt Instrument [Line Items]
Maximum Consolidated Leverage Ratio	3.25
Step-Down Ratio | Maximum
Debt Instrument [Line Items]
Maximum Consolidated Leverage Ratio		1.00	1.00
Step-Down Ratio | Maximum | Covenant One
Debt Instrument [Line Items]
Maximum Consolidated Leverage Ratio	1.00
Step-Down Ratio | Maximum | Covenant Two
Debt Instrument [Line Items]
Maximum Consolidated Leverage Ratio	1.00
Step-Up Ratio | Minimum
Debt Instrument [Line Items]
Minimum Interest Coverage Ratio		3.50	3.50
Step-Up Ratio | Minimum | Covenant One
Debt Instrument [Line Items]
Minimum Interest Coverage Ratio	2.75
Step-Up Ratio | Minimum | Covenant Two
Debt Instrument [Line Items]
Minimum Interest Coverage Ratio	3.00
Step-Up Ratio | Maximum
Debt Instrument [Line Items]
Minimum Interest Coverage Ratio		1.00	1.00
Step-Up Ratio | Maximum | Covenant One
Debt Instrument [Line Items]
Minimum Interest Coverage Ratio	1.00
Step-Up Ratio | Maximum | Covenant Two
Debt Instrument [Line Items]
Minimum Interest Coverage Ratio	1.00

XML

Leases - Components of Total Net Lease Expense (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Leases [Abstract]
Operating lease expense	$ 17	$ 17
Sublease (income)	(2)	(2)
Variable lease expense	2	3
Total net lease expense	$ 17	$ 18

XML

Revenue Recognition - Schedule of Disaggregated Revenue (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Disaggregation Of Revenue [Line Items]
Revenue	$ 701	$ 845
Book
Disaggregation Of Revenue [Line Items]
Revenue	204	260
Magazines and Catalogs
Disaggregation Of Revenue [Line Items]
Revenue	294	363
Logistics
Disaggregation Of Revenue [Line Items]
Revenue	77	84
Directories
Disaggregation Of Revenue [Line Items]
Revenue	14	19
Office Products
Disaggregation Of Revenue [Line Items]
Revenue	112	119
Magazines, Catalogs and Logistics
Disaggregation Of Revenue [Line Items]
Revenue	327	403
Magazines, Catalogs and Logistics | Book
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Magazines, Catalogs and Logistics | Magazines and Catalogs
Disaggregation Of Revenue [Line Items]
Revenue	250	319
Magazines, Catalogs and Logistics | Logistics
Disaggregation Of Revenue [Line Items]
Revenue	77	84
Magazines, Catalogs and Logistics | Directories
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Magazines, Catalogs and Logistics | Office Products
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Book
Disaggregation Of Revenue [Line Items]
Revenue	204	260
Book | Book
Disaggregation Of Revenue [Line Items]
Revenue	204	260
Book | Magazines and Catalogs
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Book | Logistics
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Book | Directories
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Book | Office Products
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Office Products
Disaggregation Of Revenue [Line Items]
Revenue	112	119
Office Products | Book
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Office Products | Magazines and Catalogs
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Office Products | Logistics
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Office Products | Directories
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Office Products | Office Products
Disaggregation Of Revenue [Line Items]
Revenue	112	119
Mexico
Disaggregation Of Revenue [Line Items]
Revenue	23	24
Mexico | Book
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Mexico | Magazines and Catalogs
Disaggregation Of Revenue [Line Items]
Revenue	23	24
Mexico | Logistics
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Mexico | Directories
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Mexico | Office Products
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Other
Disaggregation Of Revenue [Line Items]
Revenue	35	39
Other | Book
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Other | Magazines and Catalogs
Disaggregation Of Revenue [Line Items]
Revenue	21	20
Other | Logistics
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Other | Directories
Disaggregation Of Revenue [Line Items]
Revenue	14	19
Other | Office Products
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Products and Services Transferred at a Point in Time
Disaggregation Of Revenue [Line Items]
Revenue	546	678
Products and Services Transferred at a Point in Time | Magazines, Catalogs and Logistics
Disaggregation Of Revenue [Line Items]
Revenue	225	288
Products and Services Transferred at a Point in Time | Book
Disaggregation Of Revenue [Line Items]
Revenue	172	228
Products and Services Transferred at a Point in Time | Office Products
Disaggregation Of Revenue [Line Items]
Revenue	112	119
Products and Services Transferred at a Point in Time | Mexico
Disaggregation Of Revenue [Line Items]
Revenue	23	24
Products and Services Transferred at a Point in Time | Other
Disaggregation Of Revenue [Line Items]
Revenue	14	19
Products and Services Transferred Over Time
Disaggregation Of Revenue [Line Items]
Revenue	155	167
Products and Services Transferred Over Time | Magazines, Catalogs and Logistics
Disaggregation Of Revenue [Line Items]
Revenue	102	115
Products and Services Transferred Over Time | Book
Disaggregation Of Revenue [Line Items]
Revenue	32	32
Products and Services Transferred Over Time | Office Products
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Products and Services Transferred Over Time | Mexico
Disaggregation Of Revenue [Line Items]
Revenue	0	0
Products and Services Transferred Over Time | Other
Disaggregation Of Revenue [Line Items]
Revenue	$ 21	$ 20

XML

Leases - Schedule of Annual Maturities of Lease Liabilities (Detail) $ in Millions	Mar. 31, 2020 USD ($)
Operating Leases
2020	$ 39
2021	45
2022	34
2023	24
2024	19
2025 & thereafter	28
Total undiscounted lease payments	189
Imputed interest	(26)
Total lease liabilities	$ 163