LSC COMMUNICATIONS. Bank of America Merrill Lynch Leveraged Finance Conference

Transcription

1 LSC COMMUNICATIONS Bank of America Merrill Lynch Leveraged Finance Conference

2 LSC COMMUNICATIONS CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS + This presentation includes certain "forward-looking statements" within the meaning of, and subject to the safe harbor created by, Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the business, strategy and plans of LSC Communications and its expectations relating to future financial condition and performance. Statements that are not historical facts, including statements about LSC Communications management s beliefs and expectations, are forward-looking statements. Words such as "believes," "anticipates," "estimates," "expects," "intends," "aims," "potential," "will," "would," "could," "considered," "likely," "estimate" and variations of these words and similar future or conditional expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. While LSC Communications believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond LSC Communications control. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not occur. Actual results may differ materially from LSC Communications current expectations depending upon a number of factors affecting the business and risks associated with the performance of the business. These factors include such risks and uncertainties detailed in LSC Communications information statement, dated September 23, 2016, filed as an exhibit to our Current Report filed on Form 8-K filed on September 23, 2016 and LSC Communications periodic filings with the SEC. LSC Communications does not undertake to 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 statement or to reflect the occurrence of anticipated or unanticipated events. LSC COMMUNICATIONS 2

3 NON-GAAP FINANCIAL INFORMATION + This presentation contains certain non-gaap measures. The Company believes that these non-gaap measures, such as non-gaap adjusted EBITDA, non-gaap net income and free cash flow, when presented in conjunction with comparable GAAP measures, provide useful information about the Company s operating results and liquidity 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, non-gaap net income and free cash flow allow 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, non-gaap net income and free cash flow, 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, historic cost and age of assets, financing and capital structures, taxation positions or regimes, restructuring, impairment and other charges and gain or loss on certain equity investments and asset sales, the Company believes that non-gaap adjusted EBITDA and non-gaap net income can provide useful additional basis for comparing the current performance of the underlying operations being evaluated. By adjusting for the level of capital investment in operations, the Company believes that free cash flow can provide useful additional basis for understanding the Company s ability to generate cash after capital investment and provides a comparison to peers with differing capital intensity. LSC COMMUNICATIONS 3

4 COMPANY REPRESENTATIVES DREW COXHEAD Chief Financial Officer LSC Communications JANET HALPIN SVP, Treasurer and Investor Relations LSC Communications DAVID CLARK Senior Investor Relations Analyst LSC Communications LSC COMMUNICATIONS 4

5 AGENDA + Business Overview + Investment Highlights + Financial Overview + Q&A + Appendix LSC COMMUNICATIONS 5

6 BUSINESS OVERVIEW LSC COMMUNICATIONS 6

7 LSC COMMUNICATIONS: A LEADING PROVIDER OF PRINT AND PRINT-RELATED PRODUCTS, SERVICES AND TECHNOLOGY SOLUTIONS Business Overview + LSC Communications ( LSC or the Company ) is a worldwide leader in providing print, fulfillment and supply chain solutions to publishers, merchandisers and retailers + Specializes in publishing and retail-centric print services, such as books, magazines, catalogs, inserts, and directories + Manufactures and sells office products such as filing products, note-taking products, binders, tax and stock forms and envelopes + Serves >3,000 publishers, merchandisers, catalogers and retailers globally, offering leaner and more flexible supply chain solutions to support operating efficiency + LSC has 41 production facilities in the U.S and 12 international manufacturing facilities Segment Overview Diverse Products & Services Capabilities Across 2 Segments: Print and Office Products 15.0% Office Products 8.1% Europe 3.9% Directories $3.7B B 2015 sales 2015 sales 24.7% Books 48.3% Magazines, Catalogs, and Retail Inserts + ~22,000 employees globally Selected Clients Source: Company management and company filings. Note: 2015 net sales included $184mm from the acquisition of Courier, representing net sales from close date of 6/8/2015 to 12/31/2015. LSC COMMUNICATIONS 7

8 VALUE CREATION STRATEGY Grow core print and supply chain service offerings Continue operating excellence Deploy capital with discipline LSC COMMUNICATIONS 8

9 PRINT SEGMENT OVERVIEW Key Highlights/Strategies Net Sales ($mm) + Print segment produces magazines, catalogs, retail inserts, books and directories and also provides certain print-related services, including mail-list management and sortation and e-book formatting and distribution with operations in US, Europe, and Mexico + Serves > 3,000 publishers, merchandisers, catalogers and retailers globally, offering leaner and more flexible supply chain solutions to support operating efficiency Directories + Offers a wide range of products and services to customers: Europe - Magazines: Magazine publishers who use the Company s capabilities to print and distribute magazines through the mail directly to subscribers and through wholesalers to retailers - Catalogs: Retailers and other direct-to-buyer sellers who use the Company s production capabilities to print and distribute catalogs to customers through mail - Retail Inserts: Retailers who seek to include inserts in newspapers distributed to newspaper subscribers and in-store distribution 11.2% 10.1% 10.2% 10.3% Book Magazines, catalogs, and retail inserts Non-GAAP Adj. EBITDA Margin - Book: publishers who seek to print hardcover and softcover books, with soft or spiral binding serving the education, trade, religious and testing sectors + Serves the top 10 book publishers in North America, along with 9 of the top 10 catalogers and magazine publishers in the U.S. + Print represents ~85% of LSC Communications net sales (2015) Select Competitors + Designing and executing innovative supply chain strategies to increase speed to market and improve efficiencies across the distribution process + Best-in-class, proprietary co-service solution leverages mail volume to offer our clients significant cost savings Note: Reconciliation of non-gaap financials in appendix. Source: Company management, Company filings, PwC Research and Technavio. LSC COMMUNICATIONS 9

10 OFFICE PRODUCTS SEGMENT OVERVIEW Key Highlights/Strategies Net Sales ($mm) + LSC customers in the office products segment include office superstores, mass merchandisers and contract stationers + Offers a wide range of branded and private label products, primarily within the following five core categories - Filing products - Note-taking products - Binder products - Forms - Envelopes + LSC has product placement at 9 of the top 10 retailers + Top 5 supplies-vendor at both of the office supply superstores + LSC services 5 of the top 10 ecommerce retailers - Additional focus on ecommerce channel to capture market share with our premium branded products + Office Products represents ~15% of LSC Communications net sales (2015) + Further industry consolidation opportunities in Office Products Branded Products Net Sales Non-GAAP Adj. EBITDA Margin Note: Reconciliation of non-gaap financials in appendix. Source: Company management, Company filings, PwC Research and Technavio. LSC COMMUNICATIONS 10

11 LSC COMMUNICATIONS OUTLOOK BY PRODUCT/SEGMENT % of LTM (9/30/16) Net Sales Near-to-Medium Term Organic Growth Outlook Commentary Magazine, Catalog, Retail (7%) to (2%) Advertising spend shifting to electronic More stable catalog demand Books (2%) to 3% Supply chain management growth Modest electronic substitution Europe (4%) to 1% Product mix is primarily MCR, but also includes premedia and in-store marketing Directory (10%) to (15%) Rapid substitution continuing Total Print Segment: (4%) to (1%) Office Products 14% (2%) to 3% Modest industry declines Private label growth Blended LSC Outlook: (3%) to 0% Industry Outlook: Low to mid single digit decline LSC COMMUNICATIONS 11

12 INVESTMENT HIGHLIGHTS LSC COMMUNICATIONS 12

13 KEY INVESTMENT HIGHLIGHTS 1 Diverse Product and Service Profile 2 Significant Scale 3 Long-Standing Relationships with Customers 4 Sharp Focus on Cost Structure and Efficiency Improvement 5 Strong M&A Track Record 6 Financial Strength and Strong Cash Generation 7 Experienced Leadership Team LSC COMMUNICATIONS 13

14 1 DIVERSE PRODUCT AND SERVICE PROFILE Product and service diversity allows us to provide our customers with unique solutions that more narrow competitors cannot easily duplicate Education, Business and Consumer Publishing Case Study LSC has entered into an agreement with a leading company in education, business and consumer publishing LSC will provide complete supply chain management of 100% of this company s printed and other learning materials to include procurement and manufacturing, warehousing and distribution and inventory management for its North American operations Combines print, warehousing, fulfillment and supply chain management into a single workflow designed to increase speed to market and improve efficiencies across the distribution process OFFSET PRINTING DIGITAL PRINTING E-SERVICES WAREHOUSING/ FULFILLMENT SUPPLY CHAIN MANAGEMENT LSC COMMUNICATIONS 14

15 2 SIGNIFICANT SCALE MAXIMIZE EFFICIENCIES AND LOWER TOTAL OVERALL COST FOR CUSTOMERS NORTH AMERICA MEXICO POLAND Print Locations Office Products Locations >22,000 employees 41 manufacturing facilities in 21 U.S. states 12 international manufacturing facilities >3,000 customers LSC Communications global platform enables us to offer customers leaner, more flexible supply chain solutions and greater operational and organizational efficiencies LSC COMMUNICATIONS 15

16 3 LONG-STANDING RELATIONSHIPS WITH CUSTOMERS LEADING PUBLISHERS, RETAILERS AND MERCHANDISERS We print for: 9 OF THE TOP 10 catalogers 9 OF THE TOP 10 magazine publishers THE TOP 10 book publishers in North America In office products, we: Have product placement at 9 OF THE TOP 10 RETAILERS Service 5 OF THE TOP 10 ecommerce retailers Are a TOP 5 supplies-vendor at both of the office supply superstores LSC Communications is a proven, trusted partner with deep rooted relationships LSC COMMUNICATIONS 16

17 4 SHARP FOCUS ON COST STRUCTURE AND EFFICIENCY IMPROVEMENT Best-in-class safety metrics highlight our commitment to operating excellence Injury rate 47% below the industry average 17 facilities with 1+ years/1 million work hours without a Days Away Case Significant annual savings from manufacturing cost efficiency Facility consolidations have driven significant cost reductions Our approach to restructuring and facility consolidation has reduced fixed costs while maintaining service levels to customers Based on demand trends for certain product offerings, additional rationalization opportunities are expected Catalog Retail Short-Run Magazine Long-Run Magazine Book 2015 vs Total Cost per Unit Press Bind Total manufacturing cost: better worse Relentless productivity focus Substantially all manufacturing costs are considered variable Co-mail and Co-bind services offer customers significant savings in postage costs Driven by our significant scale, these list processing and sortation services greatly reduce postal costs compared to what an individual customer could obtain Increases in Co-mail and Co-bind volume in the last 3 years We continuously work to develop advanced technologies and solutions to enhance efficiencies, reduce time-to-market and deliver the best to our customers LSC COMMUNICATIONS 17

18 5 STRONG M&A TRACK RECORD Expanding Our Solutions and Services Offerings and Broadening Our Reach Go-forward M&A Criteria and Objectives Scale Von Hoffman (2007) Perry Judd s (2007) Poligrafia (2005) Office Products Esselte Corporation (NA operations) (2014) Cardinal Brands (2007) Moore Wallace (2004) Enhance existing product offerings Expand technological capabilities Provide synergy opportunities Attractive financial return on investment Capabilities, Solutions and Technology Courier (2015) Pro Line Printing (2008) Banta (2007) We have a proven ability to strategically acquire, integrate and rationalize quickly in a fragmented market LSC COMMUNICATIONS 18

19 6 FINANCIAL STRENGTH AND STRONG CASH GENERATION Net Sales ($mm) Free Cash Flow ($mm) 1 Net Sales Non-GAAP Adj. EBITDA Margin Maintain low leverage profile of 1.75x to 2.25x; pro forma for the transaction, opening secured and total leverage is expected to be 2.0x Disciplined approach to capital expenditures and cost management as well as focus on capital efficiency drives strong cash flow conversion Stable margins driven by productivity and acquisition synergies and improving product mix Stable cash flows to enable de-leveraging Lower working capital, restructuring and capital spending in recent years Note: Historical cash flows do not reflect interest payments and includes an allocation of pension income net sales included $184mm from the acquisition of Courier, representing net sales from close date of 6/8/2015 to 12/31/2015. Reconciliation of non-gaap financials in appendix. 1. Free cash flow excludes interest payments per Form 10 filing dated 9/16/2016 LSC COMMUNICATIONS 19

20 7 EXPERIENCED LEADERSHIP TEAM Tom Quinlan: Chairman and Chief Executive Officer Mr. Quinlan was RRD's President and CEO from April 2007 until October He joined RRD in 2004 and has served in various finance and operations capacities including as Chief Financial Officer. Prior to that time, Mr. Quinlan served in various finance positions at World Color Press, Inc., Walter Industries, Marsh & McLennan and Kidder Peabody. He has been a director of RRD since Sue Bettman: Chief Administrative Officer Ms. Bettman was RRD s Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer from January 2007 until October She served previously as Senior Vice President, General Counsel since March Drew Coxhead: Chief Financial Officer Mr. Coxhead was RRD s Senior Vice President and Chief Accounting Officer from October 2007 to October 2016, and Corporate Controller from October 2007 to January Prior to this, he served as Vice President, Assistant Controller since September From 1995 until 2006, Mr. Coxhead served in various capacities with RRD in financial planning, accounting, manufacturing management, operational finance and mergers and acquisitions. Jim Ellward: President Office Products Mr. Ellward was President of TOPS Products, the office products segment of RRD from July 2013 until October He previously served as Vice President of Sales since May 2008, and has held other management roles since joining the organization in November From 2001 until 2006, Mr. Ellward served in various sales capacities with RRD's book manufacturing division. Janet Halpin: Treasurer and Investor Relations Ms. Halpin was RRD s Senior Vice President and Treasurer from February 2010 to October Prior to this, she served as Vice President of Internal Audit since April Kent Hansen: Chief Accounting Officer and Controller Mr. Hansen joined LSC Communications in September Since 2015, Mr. Hansen was Vice President, Assistant Controller, of Baxalta, Incorporated, a biopharmaceutical company. From 2006 to 2015, Mr. Hansen served in various finance and accounting roles with Scientific Games Corporation (formerly WMS Industries, Inc.), including Director of Accounting and SEC Reporting, Assistant Controller, and Group Chief Financial Officer. Mr. Hansen's previous experience included roles in accounting and financial reporting at Accenture and as an auditor at Ernst and Young LLP. Dave Houck: Chief Information Officer Mr. Houck was RRD's Senior Vice President, Information Technology from January 2009 to October He joined RRD in 2005 as Vice President, Information Technology. Mr. Houck previously spent 15 years with Accenture specializing in IT Planning in the Media and Entertainment vertical focused on the printing industry. Rick Lane: Chief Strategy and Supply Chain Officer Mr. Lane was RRD s Executive Vice President of Global Business Solutions from 2005 to October 2016 and is responsible for products and materials sourcing, customer service and Global Print Management sales and operations. From 1989 to 1997, Mr. Lane served in various capacities within RRD in sales, strategy and operations and from 1997 to 2005, with other companies in strategic sales and operations roles. LSC Communications has an experienced management team with a proven ability to execute operationally and financially in a dynamic market environment LSC COMMUNICATIONS 20

21 FINANCIAL OVERVIEW LSC COMMUNICATIONS 21

22 RECENT FINANCIAL PERFORMANCE NET SALES AND GROWTH RATES (IN $MM) 2013PF 2014PF 2015PF LTM Q3 16 Net sales $ 3,741 $ 3,853 $ 3,743 $ 3,739 Stabilization of organic growth rates from -4.1% in 2015 to -2.5% in YTD 2016 driven by growth in books (1) Business unit net sales Key Performance Drivers Further expansion into end-to-end supply chain management Focus on cost structure and efficiency Level of excess industry capacity and price pressures 4,000 Office Products 3,000 Mag/Cat/Retail Europe Books 2,000 Directory 1, , ,036 1, , , LTM Q3'16 Business unit net sales Pace of electronic substitution Strength of economy and general advertising environment State education budgets and textbook adoption cycles Postal and distribution costs Expansion of Office Products brands Office products retailer store consolidation Shift in consumer preferences toward private label office products Source: Company management and company filings. Note: 2015 net sales included $184mm from the acquisition of Courier, representing net sales from close date of 6/8/2015 to 12/31/2015. Reconciliation of non-gaap financials and organic growth in appendix. (1) Organic growth rates pro forma for acquisitions and excluding impact of changes in fx rates and paper sales. LSC COMMUNICATIONS 22

23 HISTORICAL FINANCIAL PERFORMANCE Net Sales ($mm) Non-GAAP Adj. EBITDA ($mm) 5,000 4,000 $3,741 $3,853 $3,743 $3, $409 $392 $397 $399 3, , , LTM Q3' LTM Q3'16 % growth 3.0% (2.9%) NA % margin 10.9% 10.2% 10.6% 10.7% Free Cash Flow 1 ($mm) Capex ($mm) $234 $246 $233 $ $79 $60 $42 $ LTM Q3' LTM Q3'16 (2) (3) % conv. 57.1% 62.8% 58.7% 52.6% % intensity 2.1% 1.6% 1.1% 1.2% Note: Historical cash flows do not reflect interest payments and includes allocation of pension income net sales included $184mm from the acquisition of Courier, representing net sales from close date of 6/8/2015 to 12/31/2015. Reconciliation of non-gaap financials in appendix. 1. Reflects unadjusted cash flows excluding interest payments per Form 10 filing dated 9/16/ Represents free cash flow as a percent of Non-GAAP Adj. EBITDA. 3. Represents capital expenditures as a percent of net sales. LSC COMMUNICATIONS 23

24 LEVERAGE, LIQUIDITY AND DEBT MATURITY PROFILE $ millions Leverage at September 30, 2016 Short-Term and Current Portion of Long-Term Debt $ 52.1 Long-Term Debt Total Debt $ Non-GAAP Adjusted EBITDA LTM 9/30/2016* $ Non-GAAP Gross Leverage 2.0x Liquidity at September 30, 2016 Cash $ 54.8 Stated amount of the Credit Agreement Less: availability reduction from covenants Amount available under the Credit Agreement (1) Usage Borrowings under Credit Agreement - Letters of Credit (12.0) Net Available Liquidity (2) $ $500 $400 $300 Term Loan Debt Maturity Profile at 9/30/2016 Secured Notes $450 $200 $137 $100 $0 $13 $50 $48 $43 $43 $ (1) The Company has a $400.0 million senior secured revolving credit agreement (the Credit Agreement ) which expires on September 30, The Credit Agreement is subject to a number of covenants, including, but not limited to, a minimum Interest Coverage Ratio and a maximum 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. (2) Net available liquidity was reduced by $12.0 million of outstanding letters of credit. The Company expects additional letters of credit related to the Company s workers compensation plan which will further reduce the availability by approximately $35.0 million to $45.0 million. *Please refer to appendix for reconciliation of non-gaap measures LSC COMMUNICATIONS 24

25 LSC FINANCIAL POLICY Leverage and Liquidity Commitment to a conservative leverage target Targeting 1.75x to 2.25x gross leverage (1) 2.0x reported gross leverage (1) at September 30, 2016 Strong free cash flow (2) generation supports commitment to leverage target Combination of pre-payable and long term debt provides ability to efficiently pay down debt Supportive bank group with access to five year credit facility that provides for seasonal working capital needs and liquidity buffer Pension Plans US pension plans closed and frozen De-risking actions and liability driven investment structure reduces funded status volatility while minimizing required contributions Capital Expenditures Approximately 1.5% to 2.0% of net sales Mergers and Acquisitions Selectively pursue strategic acquisitions Strategy governed by target leverage Dividend Policy Board of Directors to review dividend quarterly 1. Gross leverage defined as total debt / LTM non-gaap adjusted EBITDA 2. Free cash flow defined as net cash provided by operating activities less capital expenditures LSC COMMUNICATIONS 25

26 FULL YEAR 2016 GUIDANCE (1) US Dollars Full Year 2016 Net Sales $3.6 - $3.7 billion Non-GAAP Adjusted EBITDA 10.2% % Depreciation and Amortization Interest Expense- Net $175 - $180 million $18 - $19 million Effective Tax Rate 34% - 35% Diluted Shares Approximately 32.5 million shares Certain components of the guidance given in the table above are provided on a non-gaap basis only, without providing a reconciliation to guidance provided on a GAAP basis. Information is presented in this manner, consistent with SEC rules, because the preparation of such a reconciliation could not be accomplished without "unreasonable efforts. The Company does not have access to certain information that would be necessary to provide such a reconciliation, including non-recurring items that are not indicative of the Company's ongoing operations. Such items include, but are not limited to, restructuring charges, impairment charges, spinoff-related transaction expenses, pension settlement charges, acquisition-related expenses, gains or losses on investments and business disposals, losses on debt extinguishment and other similar gains or losses not reflective of the Company's ongoing operations. The Company does not believe that excluding such items is likely to be significant to an assessment of the Company's ongoing operations, given that such excluded items are not indicators of business performance. (1) Full year 2016 guidance as of Q Earnings Call on November 10, 2016 and is not being reaffirmed here. LSC COMMUNICATIONS 26

27 We operate in large, highly fragmented markets with opportunities created by evolving technologies We are Excited About the Future of LSC Communications We create value by enabling publishers, retailers and merchandisers to succeed We are a worldwide leader with best-in-class capabilities, cost structure, scale and relationships We have a proven operating record and the financial strength needed to execute our strategy We are confident in our ability to deliver value to all of our stakeholders LSC COMMUNICATIONS 27

28 Q & A LSC COMMUNICATIONS 28

29 APPENDIX LSC COMMUNICATIONS 29

30 NON-GAAP FINANCIAL MEASURES ($ millions) Total LSC Communications Q1 Q Q2 Q2 YTD Q Q3 Q3 YTD Q4 Q LTM LTM LTM Net sales $3,742.9 $3,853.4 $3,741.0 $880.0 $860.9 $3,762.0 $906.1 $879.0 $1,786.1 $1,739.9 $3,789.1 $948.5 $999.0 $2,734.6 $2,738.9 $1,004.0 $3,738.6 Net income Restructuring, impairment and other charges, net Spinoff-related transaction expenses Pension settlement charge Acquisition-related expenses Purchase accounting inventory adjustments, net Gain on bargain purchase - (9.5) Loss on equity investment Depreciation and amortization Interest income-net (2.5) (3.9) (3.8) (0.3) (0.8) (2.0) (0.5) (0.8) (0.8) (1.6) (1.7) 0.5 (0.6) (0.3) (2.2) (0.3) (0.6) Income tax expense Non-GAAP Adjusted EBITDA $397.5 $391.9 $409.3 $95.0 $74.2 $418.3 $93.0 $88.5 $188.0 $162.7 $422.8 $101.0 $124.6 $289.0 $287.3 $110.2 $399.2 Non-GAAP Adjusted EBITDA margin 10.6% 10.2% 10.9% 10.8% 8.6% 11.1% 10.3% 10.1% 10.5% 9.4% 11.2% 10.6% 12.5% 10.6% 10.5% 11.0% 10.7% Net cash provided by operating activities $274.6 $306.7 $312.9 $14.0 $18.9 $269.7 $41.3 $55.3 $55.3 $74.2 $255.7 $80.9 $82.2 $136.2 $156.4 $118.2 $254.4 Capital expenditures (41.6) (60.4) (79.3) (11.9) (13.4) (40.1) (7.2) (9.5) (19.1) (22.9) (37.8) (15.8) (9.4) (34.9) (32.3) (9.3) (44.2) Free cash flow $233.0 $246.3 $233.6 $2.1 $5.5 $229.6 $34.1 $45.8 $36.2 $51.3 $217.9 $65.1 $72.8 $101.3 $124.1 $108.9 $210.2 LSC COMMUNICATIONS 30

31 NON-GAAP FINANCIAL MEASURES ($ millions) Print Segment Q1 Q Q2 Q2 YTD Q Q3 Q3 YTD Q4 Q LTM LTM LTM Magazines, catalogs and retail inserts $1,806.6 $2,035.9 $2,108.7 $406.8 $437.7 $1,775.7 $377.6 $422.9 $784.4 $860.6 $1,730.4 $407.1 $450.3 $1,191.5 $1,310.9 $495.7 $1,687.2 Books , ,094.6 Europe Directories Net sales $3,180.7 $3,353.1 $3,498.1 $752.2 $722.9 $3,210.0 $763.8 $730.5 $1,516.0 $1,453.4 $3,243.3 $821.4 $854.3 $2,337.4 $2,307.7 $873.0 $3,210.4 Income from operations Depreciation and amortization Restructuring, impairment and other charges, net Purchase accounting inventory adjustments, net Non-GAAP Adjusted EBITDA $324.0 $338.1 $390.9 $76.3 $61.3 $339.0 $78.5 $70.4 $154.8 $131.7 $347.1 $84.7 $102.7 $239.5 $234.4 $89.6 $329.1 Non-GAAP Adjusted EBITDA margin 10.2% 10.1% 11.2% 10.1% 8.5% 10.6% 10.3% 9.6% 10.2% 9.1% 10.7% 10.3% 12.0% 10.2% 10.2% 10.3% 10.3% Office Products Segment Q1 Q Q2 Q2 YTD Q Q3 Q3 YTD Q4 Q LTM LTM LTM Net sales $562.2 $500.3 $242.9 $127.8 $138.0 $552.0 $142.3 $148.5 $270.1 $286.5 $545.8 $127.1 $144.7 $397.2 $431.2 $131.0 $528.2 Income from operations Depreciation and amortization Restructuring, impairment and other charges, net Purchase accounting inventory adjustments, net (0.1) (0.1) Non-GAAP Adjusted EBITDA $65.7 $61.7 $30.7 $17.4 $14.2 $68.9 $17.0 $18.2 $34.4 $32.4 $67.7 $15.1 $18.9 $49.5 $51.3 $14.4 $63.9 Non-GAAP Adjusted EBITDA margin 11.7% 12.3% 12.6% 13.6% 10.3% 12.5% 11.9% 12.3% 12.7% 11.3% 12.4% 11.9% 13.1% 12.5% 11.9% 11.0% 12.1% LSC COMMUNICATIONS 31

32 ORGANIC GROWTH RATES ($ millions) Magazines, Catalogs, and Retail Inserts Books Europe Directories Total Print Total Office Products Total LSC 3Q 2015 YTD Net Sales as Reported $ 1,310.9 $ $ $ $ 2,307.7 $ $ 2,738.9 Pro forma (1) $ 1,310.9 $ $ $ $ 2,425.6 $ $ 2, Q 2016 YTD Net Sales as Reported 1, , ,734.6 As Reported % Change -9.1% 25.3% -6.1% -6.8% 1.3% -7.9% -0.2% Pro Forma % Change -9.1% 6.6% -6.1% -6.8% -3.6% -7.9% -4.3% Non-GAAP Adjustments: Impact of pass-through paper sales -3.8% 3.8% 0.0% -3.5% -1.0% 0.0% -0.8% Impact of changes in foreign exchange rates -1.0% 0.0% -4.7% 0.0% -0.9% -0.6% -1.0% 3Q YTD Organic % Change -4.3% 2.8% -1.4% -3.3% -1.7% -7.3% -2.5% 3Q 2015 Net Sales as Reported $ $ $ 77.9 $ 33.5 $ $ $ Q 2016 Net Sales as Reported As Reported % Change -9.6% 5.9% -7.4% -3.3% -3.9% -12.2% -5.1% Non-GAAP Adjustments: Impact of pass-through paper sales -4.3% 5.4% -1.3% 0.0% -0.6% 0.0% -0.5% Impact of changes in foreign exchange rates -0.9% 0.0% -3.3% 0.0% -0.8% -0.2% -0.7% 3Q Organic % Change -4.4% 0.5% -2.8% -3.3% -2.5% -12.0% -3.9% (1) Adjusted for net sales of acquired business: Courier LSC COMMUNICATIONS 32

33 W Wacker, Chicago, Illinois 60601