bank of america merrill lynch leveraged finance...

LSC COMMUNICATIONS

Bank of America Merrill Lynch

Leveraged Finance Conference

11.30.2016

LSC COMMUNICATIONS | 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.


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.


COMPANY REPRESENTATIVES

JANET HALPIN

SVP, Treasurer and Investor Relations

LSC Communications

DREW COXHEAD

Chief Financial Officer

LSC Communications

DAVID CLARK

Senior Investor Relations Analyst

LSC Communications


AGENDA

+ Business Overview

+ Investment Highlights

+ Financial Overview

+ Q&A

+ Appendix


BUSINESS OVERVIEW


LSC COMMUNICATIONS: A LEADING PROVIDER OF PRINT AND PRINT-RELATED

PRODUCTS, SERVICES AND TECHNOLOGY SOLUTIONS

Business Overview Segment Overview – Diverse Products & Services Capabilities Across 2 Segments:

Print and Office Products

+ 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

+ ~22,000 employees globally

Selected Clients

$3.7B 2015 sales

3.9% Directories

15.0% Office Products 24.7%

Books

8.1% Europe

48.3% Magazines, Catalogs, and Retail Inserts

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.

$3.7 B 2015 sales

VALUE CREATION STRATEGY

Grow core

print and

supply chain

service

offerings

Deploy

capital with

discipline

Continue

operating

excellence



PRINT SEGMENT OVERVIEW

Key Highlights/Strategies Net Sales ($mm)

Note: Reconciliation of non-GAAP financials in appendix.

Source: Company management, Company filings, PwC Research and Technavio.

Select Competitors

Directories

Europe

Book

Magazines, catalogs,

and retail inserts

+ 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

+ Offers a wide range of products and services to customers:

- 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

- 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)

+ 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

11.2%

10.2% 10.3% 10.1%

Non-GAAP Adj.

EBITDA Margin

http://www.bertelsmann.de/


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

Note: Reconciliation of non-GAAP financials in appendix.

Source: Company management, Company filings, PwC Research and Technavio.

Branded Products

Net Sales Non-GAAP Adj.

EBITDA Margin


LSC COMMUNICATIONS OUTLOOK BY PRODUCT/SEGMENT

% of LTM (9/30/16)

Net Sales Commentary

Blended LSC Outlook:

Industry Outlook:

Near-to-Medium Term

Organic Growth Outlook

Total Print Segment: • (4%) to (1%)

• (3%) to 0%

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

Office

Products • (2%) to 3%

• Modest industry declines

• Private label growth

• Low to mid single digit decline

14%


INVESTMENT HIGHLIGHTS


KEY INVESTMENT HIGHLIGHTS

3 Long-Standing Relationships with Customers

2 Significant Scale

4 Sharp Focus on Cost Structure and Efficiency Improvement

1 Diverse Product and Service Profile

5 Strong M&A Track Record

6 Financial Strength and Strong Cash Generation

7 Experienced Leadership Team


DIVERSE PRODUCT AND SERVICE PROFILE 1

Product and service diversity allows us to provide our customers with

unique solutions that more narrow competitors cannot easily duplicate

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

E-SERVICES OFFSET

PRINTING WAREHOUSING/

FULFILLMENT

SUPPLY CHAIN

MANAGEMENT

DIGITAL

PRINTING

Education, Business and Consumer Publishing Case Study


SIGNIFICANT SCALE MAXIMIZE EFFICIENCIES AND LOWER TOTAL OVERALL COST FOR CUSTOMERS

2

>22,000 employees

>3,000 customers

41 manufacturing facilities

in 21 U.S. states

12 international

manufacturing facilities

NORTH AMERICA MEXICO

POLAND

Print Locations

Office Products Locations

LSC Communications’ global platform enables us to offer customers leaner, more

flexible supply chain solutions and greater operational and organizational efficiencies


LONG-STANDING RELATIONSHIPS WITH CUSTOMERS LEADING PUBLISHERS, RETAILERS AND MERCHANDISERS

3

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


SHARP FOCUS ON COST STRUCTURE AND EFFICIENCY

IMPROVEMENT 4

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

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

• Relentless productivity focus

• Substantially all manufacturing costs are

considered variable

Total manufacturing cost: better worse

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

Co-mail and Co-bind services offer

customers significant savings in postage costs Press Bind

Catalog

Retail

Short-Run Magazine

Long-Run Magazine

Book

2015 vs. 2011

Total Cost per Unit

We continuously work to develop advanced technologies and solutions to

enhance efficiencies, reduce time-to-market and deliver the best to our customers


STRONG M&A TRACK RECORD 5

Capabilities, Solutions and Technology

Courier (2015)

Pro Line Printing (2008)

Banta (2007)

Office Products

Esselte Corporation (NA operations) (2014)

Cardinal Brands (2007)

Moore Wallace (2004)

Go-forward M&A

Criteria and Objectives

Enhance existing product offerings

Expand technological capabilities

Provide synergy opportunities

Attractive financial return on investment

Scale

Von Hoffman (2007)

Perry Judd’s (2007)

Poligrafia (2005)

Expanding Our Solutions and Services

Offerings and Broadening Our Reach

We have a proven ability to strategically acquire,

integrate and rationalize quickly in a fragmented market


FINANCIAL STRENGTH AND STRONG CASH GENERATION 6

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

Net Sales Non-GAAP Adj. EBITDA Margin

Net Sales ($mm) Free Cash Flow ($mm) 1

Note: Historical cash flows do not reflect interest payments and includes an allocation of pension income. 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 in appendix.

1. Free cash flow excludes interest payments per Form 10 filing dated 9/16/2016


EXPERIENCED LEADERSHIP TEAM 7

Tom Quinlan: Chairman and Chief Executive Officer Mr. Quinlan was RRD's President and CEO from April 2007 until

October 2016. 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 2007.

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 2016. She served previously as Senior Vice President,

General Counsel since March 2004.

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 2013. Prior to this, he served as Vice

President, Assistant Controller since September 2006. 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 2016. He previously

served as Vice President of Sales since May 2008, and has held other

management roles since joining the organization in November 2006.

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 2016. Prior to this, she served as Vice President of

Internal Audit since April 2008.

Kent Hansen: Chief Accounting Officer and Controller Mr. Hansen joined LSC Communications in September 2016. 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 2016. 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


FINANCIAL OVERVIEW


RECENT FINANCIAL PERFORMANCE

Key Performance Drivers NET SALES AND GROWTH RATES (IN $MM)

2013PF 2014PF 2015PF LTM Q3’16

Net sales 3,741 $ 3,853 $ 3,743 $ 3,739 $

Business unit net sales

Office Products

Mag/Cat/Retail

Europe

Books

Directory

Stabilization of organic growth rates from -4.1% in 2015 to

-2.5% in YTD 2016 driven by growth in books (1)

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.

177 149 144 137

827 787 925 1,095

385 381 305

291

2,109 2,036 1,807

1,687

243 500 562 528

0

1,000

2,000

3,000

4,000

2013 2014 2015 LTM Q3'16 Business unit net sales

• Further expansion into end-to-end supply

chain management

• Focus on cost structure and efficiency

• Level of excess industry capacity and

price pressures

• 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


HISTORICAL FINANCIAL PERFORMANCE

Note: Historical cash flows do not reflect interest payments and includes allocation of pension income. 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 in appendix.

1. Reflects unadjusted cash flows excluding interest payments per Form 10 filing dated 9/16/2016.

2. Represents free cash flow as a percent of Non-GAAP Adj. EBITDA.

3. Represents capital expenditures as a percent of net sales.

Net Sales ($mm) Non-GAAP Adj. EBITDA ($mm)

Capex ($mm) Free Cash Flow 1 ($mm)

$3,741 $3,853 $3,743 $3,739

0

1,000

2,000

3,000

4,000

5,000

2013 2014 2015 LTM Q3'16

$409 $392 $397 $399

0

100

200

300

400

500

2013 2014 2015 LTM Q3'16

$234 $246

$233

$210

0

50

100

150

200

250

300

2013 2014 2015 LTM Q3'16

$79

$60

$42 $44

0

20

40

60

80

100

2013 2014 2015 LTM Q3'16

(3) (2)

% growth 3.0% (2.9%) NA % margin 10.9% 10.2% 10.6% 10.7%

% conv. 57.1% 62.8% 58.7% 52.6% % intensity 2.1% 1.6% 1.1% 1.2%

$13

$50 $48 $43 $43 $43

$137

$450

$0

$100

$200

$300

$400

$500

2016 2017 2018 2019 2020 2021 2022 2023

Term Loan

Secured Notes


LEVERAGE, LIQUIDITY AND DEBT MATURITY PROFILE

Debt Maturity Profile at 9/30/2016

(1)The Company has a $400.0 million senior secured revolving credit agreement (the “Credit Agreement”) which expires on September 30, 2021. 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

Cash 54.8$

Stated amount of the Credit Agreement 400.0

-

Amount available under the Credit Agreement(1) 400.0

Usage

Borrowings under Credit Agreement -

Letters of Credit (12.0)

Net Available Liquidity(2)442.8$

Less: availability reduction from covenants

Liquidity at September 30, 2016Leverage at September 30, 2016

Short-Term and Current Portion of Long-Term Debt 52.1$

Long-Term Debt 755.7

Total Debt 807.8$

Non-GAAP Adjusted EBITDA LTM 9/30/2016* 399.2$

Non-GAAP Gross Leverage 2.0x

$ millions


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


FULL YEAR 2016 GUIDANCE (1)

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 Q3 2016 Earnings Call on November 10, 2016 and is not being reaffirmed here.

US Dollars Full Year 2016

Net Sales $3.6 - $3.7 billion

Non-GAAP Adjusted EBITDA 10.2% - 10.4%

Depreciation and Amortization $175 - $180 million

Interest Expense- Net $18 - $19 million

Effective Tax Rate 34% - 35%

Diluted Shares Approximately 32.5 million shares

We are Excited

About the Future of

LSC Communications

We operate in large, highly fragmented markets

with opportunities created by evolving

technologies

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



Q & A


APPENDIX


NON-GAAP FINANCIAL MEASURES

($ millions)

Total LSC CommunicationsQ1 2016 Q2 2016 Q4 Q3 2016

2015 2014 2013 2016 2015 LTM 2016 2015 2016 2015 LTM 2016 2015 2016 2015 2015 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 73.6 58.0 94.5 31.0 9.1 95.5 28.0 11.8 59.0 20.9 111.7 38.1 14.7 97.1 35.6 38.0 135.1

Restructuring, impairment and other

charges, net56.5 131.5 79.3 2.9 5.9 53.5 5.1 21.1 8.0 27.0 37.5 3.2 25.4 11.2 52.4 4.1 15.3

Spinoff-related transaction expenses - - - - - - - - - - - 0.6 - 0.6 - - 0.6

Pension settlement charge - - - - - - 0.5 - 0.5 - 0.5 - - 0.5 - - 0.5

Acquisition-related expenses 13.8 1.4 1.0 - 10.5 3.3 - 3.1 - 13.6 0.2 - 0.1 - 13.7 0.1 0.1

Purchase accounting inventory

adjustments, net10.8 2.2 - - - 10.8 - 3.2 - 3.2 7.6 - 6.7 - 9.9 0.9 0.9

Gain on bargain purchase - (9.5) - - - - - - - - - - - - - - -

Loss on equity investment - - 2.5 - - - - - - - - - - - - - -

Depreciation and amortization 181.4 182.0 193.7 45.5 43.1 183.8 43.6 43.0 89.1 86.1 184.4 40.6 48.1 129.7 134.2 47.2 176.9

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 63.9 30.2 42.1 15.9 6.4 73.4 16.3 7.1 32.2 13.5 82.6 18.0 30.2 50.2 43.7 20.2 70.4

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

Q1 Q2 Q2 YTD Q3 Q3 YTD


NON-GAAP FINANCIAL MEASURES

($ millions)

Print SegmentQ1 2016 Q2 2016 Q4 Q3 2016

2015 2014 2013 2016 2015 LTM 2016 2015 2016 2015 LTM 2016 2015 2016 2015 2015 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 925.0 787.3 827.0 242.8 177.4 990.4 288.0 201.0 530.8 378.4 1,077.4 309.8 292.6 840.6 671.0 254.0 1,094.6

Europe 304.7 381.3 385.1 70.0 74.8 299.9 66.6 69.5 136.6 144.3 297.0 72.1 77.9 208.7 222.2 82.5 291.2

Directories 144.4 148.6 177.3 32.6 33.0 144.0 31.6 37.1 64.2 70.1 138.5 32.4 33.5 96.6 103.6 40.8 137.4

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 95.9 46.8 126.6 32.2 18.3 109.8 34.2 7.7 66.4 26.0 136.3 46.7 27.8 113.1 53.8 42.1 155.2



charges, net53.1 126.9 78.9 3.0 4.6 51.5 5.1 20.6 8.1 25.2 36.0 1.2 24.2 9.3 49.4 3.7 13.0


adjustments, net10.8 - - - - 10.8 - 3.2 - 3.2 7.6 - 6.7 - 9.9 0.9 0.9



Office Products SegmentQ1 2016 Q2 2016 Q4 Q3 2016

2015 2014 2013 2016 2015 LTM 2016 2015 2016 2015 LTM 2016 2015 2016 2015 2015 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 46.8 39.8 24.1 13.8 8.5 52.1 13.2 13.9 27.0 22.4 51.4 11.2 14.1 38.2 36.5 10.3 48.5



charges, net3.2 4.6 0.4 (0.1) 1.3 1.8 - 0.5 (0.1) 1.8 1.3 0.2 1.1 0.1 2.9 0.3 0.4


adjustments, net- 2.2 - - - - - - - - - - - - - - -






ORGANIC GROWTH RATES

($ millions)

Magazines,

Catalogs, and

Retail Inserts

Books Europe Directories Total PrintTotal Office

ProductsTotal LSC

3Q 2015 YTD Net Sales as Reported 1,310.9$ 671.0$ 222.2$ 103.6$ 2,307.7$ 431.2$ 2,738.9$

Pro forma (1) - 117.9 - - 117.9 - 117.9

1,310.9$ 788.9$ 222.2$ 103.6$ 2,425.6$ 431.2$ 2,856.8$

3Q 2016 YTD Net Sales as Reported 1,191.5 840.6 208.7 96.6 2,337.4 397.2 2,734.6

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 450.3$ 292.6$ 77.9$ 33.5$ 854.3$ 144.7$ 999.0$

3Q 2016 Net Sales as Reported 407.1 309.8 72.1 32.4 821.4 127.1 948.5

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

www.lsccom.com | 1-844-572-5720 | 35 W Wacker, Chicago, Illinois 60601

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