LSC COMMUNICATIONS Investor Presentation February, 20 18 SAFE - - PowerPoint PPT Presentation

LSC COMMUNICATIONS

Investor Presentation

February, 20 18

SAFE HARBOR

2 | LSC COMMUNICATIONS

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’ Form 10-K filed on February 22, 2018 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

3 | LSC COMMUNICATIONS

This presentation contains certain non-GAAP measures. The Company believes that these non-GAAP measures, such as non-GAAP adjusted EBITDA 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.

AGENDA

4 | LSC COMMUNICATIONS

+ Business Overview + Investment Highlights + Financial Overview + Appendix

Business Overview

5 | LSC COMMUNICATIONS

LSC AT A GLANCE



Global leader in traditional and digital print, print-related services and office products



Serves the needs of publishers, merchandisers and retailers



Service offering includes supply chain management, mail and distribution services, and e-book formatting



Serves over 3,000 customers



Strategically located operations with 54 production and manufacturing facilities in the U.S., Europe and Mexico



25 acquisitions completed since 2004



$3.60BN of revenues with $328MM of EBITDA(1) in 2017

EXTENSIVE PRODUCTS & SERVICE CAPABILITIES GLOBAL PLATFORM WITH SIGNIFICANT SCALE

$3.6BN

2017 Sales

• 1. Non-GAAP adjusted EBITDA

UNITED STATES MEXICO POLAND

45

Production Facilities in the U.S.

9

International Manufacturing Facilities

~19 million

Square Feet of Owned Facility Space

Print Locations Office Products Locations Office Products Print

Books 28% Magazines, catalogs & retail inserts 48% Europe 7% Directories 3% Office Products 14%

LSC COMMUNICATIONS: A GLOBAL LEADER

6 | LSC COMMUNICATIONS

LSC IS UNIQUELY POSITIONED WITH A CLEAR STRATEGY FOR DELIVERING SIGNIFICANT VALUE TO ITS SHAREHOLDERS IN A DYNAMIC MARKET ENVIRONMENT

Leverage Scale Disciplined M&A Improve Operational Efficiency New Revenue Streams Grow Select Existing Revenue Streams

Value Creation

VALUE CREATION STRATEGY

7 | LSC COMMUNICATIONS

+ Print segment (86% of total revenues) produces magazines, catalogs, retail inserts, books and directories and provides print-related services + Largest producer of books in the U.S. + One of the largest producers of catalogs, magazines and retail inserts in North America + Offers a wide range of products and services to customers:

• Books: Produces hardcover and softcover books serving the

education, trade, religious and testing sectors using a combination of

• ffset and digital printing processes to better manage customer

inventory

• Magazines, Catalogs & Retail Inserts: Produces catalogs,

magazines & retail inserts to customers’ specifications using either

• ffset or gravure printing processes in combination with either on-

press finishing, saddle-stitch binding or patent binding

• Directories: Produces directories which are mainly phone directories

that support local and small business advertising

• Print-related Services:

+ Supply chain management offering includes procurement, warehousing, distribution, and inventory management for book publishers + Mail services offering includes list processing and mail sortation services that optimize postal costs for magazine and catalog customers + Other offerings include e-book formatting and distribution services

 8 of the top 10 book publishers in North America + Europe  7 of the top 10 direct mail catalogers in the United States  7 of the top 10 magazine publishers in the United States

SEGMENT SNAPSHOT NET SALES ($MM)

$1,807 $1,632 $1,730 $925 $1,097 $1,022 $305 $272 $247

$144 $126 $109

$3,181 $3,127 $3,108 2015 2016 2017

Magazines, Catalogs & Retail Inserts Books Europe Directories

SELECT CUSTOMERS

PRINT SEGMENT OVERVIEW

8 | LSC COMMUNICATIONS

THEMES LSC’S ADVANTAGE Highly Competitive Environment + Despite recent consolidation, this highly

price-competitive segment continues to remain fragmented

+ LSC continues to be one of the largest players

in its segments and an active consolidator in the industry with 25 acquisitions since 2004

Excess Industry Capacity + Despite a slight uptick in 2016, the overall industry’s

capacity utilization remains low at 68%(1)

+ Experienced management team with proven

strategy for identifying plant rationalization

• pportunities in time-efficient manner

Customers’ Focus

• n Total Cost

+ Expectation for continued pricing pressure as

customers focus on total cost – including not only price, but materials and distribution costs

+ LSC’s scale and services offerings allow its

customers to benefit from postal and supply chain efficiencies lowering their overall total costs

1. Printing & Support capacity utilization per Federal Reserve as of January 17, 2018.

+ e-book adoption rates are stabilizing and LSC

has benefited from growing industry-wide print book volume in recent years

+ Service offerings represents significant growth

potential for LSC

+ Continued investments in digital print

technology and focus on innovation initiatives help offset declines

Technological Changes / Volume Pressures + Changes in technology including electronic

substitution and migration of paper based documents to digital data formats remain threats to the traditional print industry

PRINT INDUSTRY TRENDS

9 | LSC COMMUNICATIONS

+ Office Products segment (14% of total revenues), produces a wide range of branded and private label products in five core categories: filing products, note-taking products, binder products, forms and envelopes + Customers include office superstores, office supply wholesalers, independent contract stationers, mass merchandisers and retailers and e-commerce resellers + Expanded offering with the acquisition of Quality Park in 2017 and Ampad, Oxford and Pendaflex brands through the acquisition of Esselte’s North American operations in 2014

 Product placement at 8 of the top 10 retailers  Services 4 of the top 10 eCommerce retailers  Top 5 supplies-vendor at both of the office supply superstores

SEGMENT SNAPSHOT NET SALES ($MM) SELECT CUSTOMERS

$562 $527 $495 2015 2016 2017

KEY BRANDS & OFFERINGS

Filing Products Envelopes Note-taking Products Binder Products Forms Private Label Private Label Private Label Private Label Private Label

OFFICE PRODUCTS SEGMENT OVERVIEW

10 | LSC COMMUNICATIONS

THEMES LSC’S ADVANTAGE Increasing Prevalence of Private Label

+ As consumer preferences shift towards private label,

resellers have increased the pressure on suppliers to better differentiate often through product innovation, further improvement of private label products, and providing low cost solutions to end users

+ A majority of LSC's business is currently in private

label products, and management has strategically positioned product mix to take advantage of this trend while also consistently innovating our products to meet customer needs

Technological Advances Impact on Overall Demand

+ Information technology integration and continued

penetration of digital forms and documents has reduced the usage of many paper-based products

+ LSC's management team has a proven track

record of consistently matching costs to demand trends

Fragmented Retailer Market

+ The global market is fragmented with the presence of

many global and local players, and the two major retailers represent only a fraction of total industry revenues

+ LSC has a wide variety of nationally recognized

brands and strategic relationships with major office product wholesalers to effectively serve small and mid-size independent retailers

Shift to Online Channel / E- Commerce

+ Momentum in e-commerce expected to continue with

both consumers and businesses shifting their buying from traditional office products retailers to e-commerce

+ LSC’s market-leading brands are well-positioned to

capture growth in the e-commerce channel through its existing direct to e-commerce retailer and direct- to-consumer strategies

OFFICE PRODUCTS SEGMENT OVERVIEW

11 | LSC COMMUNICATIONS

Investment Highlights

12 | LSC COMMUNICATIONS

1 Leading Player Within a Large, Highly Fragmented Market 2 Extensive Product & Service Profile 3 Long-Standing Relationships with a Premier Customer Base 4 Strong M&A Track Record 5 Sharp Focus on Cost Structure with Additional Opportunities to Rationalize 6 Strong Cash Flow Profile With Attractive Dividend 7 Experienced Leadership Team

INVESTMENT HIGHLIGHTS

13 | LSC COMMUNICATIONS

LEADING PLAYER WITHIN A LARGE, HIGHLY FRAGMENTED MARKET

$4.1 $3.1 QUAD LSC

Largest Players by Revenues in Core LSC Markets(1)

$ in billions

Source: IBISWorld, “Printing in the US”, June 2017. Company filings. 1. Represents latest fiscal year reported revenue. Sales reflect revenues from the entirety of Quad Graphics and LSC Communications’ Print segment.

U.S. Print Industry Revenues MARKET TRENDS LSC ADVANTAGE

Excess Industry Capacity Experienced Team Managing Facility Closures across US, Mexico and Europe Highly Competitive Environment Industry Consolidator with Strong M&A Track Record Customers’ Focus on Total Cost Scale Enables Postal & Supply Chain Efficiencies for Customers Technological Changes / Volume Pressures Exposure to Growing Book Segment, Services Offering and Industry Leading Digital Print Platform to Help Offset Tech-driven Declines LSC’s Core & Related Target Markets are Significant Highly Fragmented Core Market

Top 2 Players Represent Only a Fraction of the Core Market

$77 Billion Total

IN A HIGHLY FRAGMENTED PRINT INDUSTRY, ONLY A SMALL NUMBER OF PLAYERS HAVE THE SCALE TO EFFECTIVELY ADDRESS A CHANGING MARKET ENVIRONMENT

LSC Core Related Unrelated

Next largest company has less than $0.5BN in revenue

1

14 | LSC COMMUNICATIONS

2006 2011 2017 Illustrative Cost Breakdown for Catalogers and Magazine Publishing Customers Postal Savings Based on Sortation Level(2) Postage ~50% Print & Print Materials ~50% LSC’s Growing Co-services Business(3)

+ Continuing investments to grow capability and capacity in co-mail services to support future growth + Continued enhancement of mail-list optimization software + Investments in materials and distribution to enable customer efficiencies

24% 43% - 47% 57% 63%

5 Digit Carrier Route High Density Saturation

Sortation Level Significant opportunity for savings through co-mail

(1)

LSC’S SCALE ENABLES ITS CO-MAIL SERVICES WHICH COMBINES THE DISTRIBUTION OF PRINTED PUBLICATIONS IN AN EFFICIENT MANNER TO PROVIDE POSTAL SAVINGS

Source: United States Postal Service. 1. Includes costs for paper, print & bind, and pre-media. 2. Cumulative savings versus piece rate cost for 3-Digit/SCF level. Based on postal rates for barcoded machinable flats for periodicals outside county. 3. Represents LSC’s co-mail and co-bind units

LSC MAKES CONTINUED INVESTMENTS TO LOWER TOTAL COSTS TO CUSTOMERS

1

LEADING PLAYER WITHIN A LARGE, HIGHLY FRAGMENTED MARKET

15 | LSC COMMUNICATIONS

+ 4.1 million square ft. of warehouses + Full service offering includes:  High volume storage  Returns  Kitting

Vendor Management Materials Manufacturing Book Fulfillment Services Order-to- Cash Logistics

ALLOWS US TO PROVIDE UNIQUE SOLUTIONS THAT MORE NARROW COMPETITORS CANNOT EASILY DUPLICATE

+ Largest U.S. digital print platform for printing books + ~13 billion pages of capacity(1) + Growing platform for quick-turn production + Platform for short-run markets (self- publishing) + 95 offset printing presses + 80 binding lines + 15 sheet-fed presses + Extensive component, finishing, packaging, and logistics capabilities

1. Calculated using expected go-forward annual digital print capacity after 2017 investment in HP Digital Production Technology.

BOOK EXAMPLE: END-TO-END PRINT & SUPPLY CHAIN SERVICES

SERVICE OFFERING SCALE TRADITIONAL BOOK PRODUCTION SCALE WAREHOUSING & FULFILLMENT

 Significant savings on paper and procurement costs  Cash flow improvements  Quicker fulfillment rates to customers  Increase in titles available for sale  Reduce total payroll costs  Fewer “out-of-stock” products  Less inventory obsolescence  Reduction in warehouse space

CLIENT BENEFITS DIGITAL PRINT PLATFORM

2

EXTENSIVE PRODUCT & SERVICE PROFILE

16 | LSC COMMUNICATIONS

BOOKS SECURITY & AUTHENTICATION SERVICES  LSC has developed technologies for book publishers to allow for:

DESPITE CONTRIBUTING TO A MINIMAL PERCENTAGE OF REVENUES TODAY, LSC’S INNOVATION EFFORTS REPRESENT SIGNIFICANT UPSIDE OPPORTUNITY WITH POTENTIAL FOR STRONG GROWTH AND A HIGH MARGIN REVENUE STREAM

LSC’S INNOVATION FOCUS BOOK ANTI-PIRACY EXAMPLE

Reputation as an industry leader for quality and innovation Work to develop advanced technologies and solutions to enhance efficiencies, reduce time-to-market and deliver the best to our customers Focus on recognizing customer needs and responding quickly

  

“Piracy…is a serious issue for publishers. Book piracy, whether in print or digital form, is costing publishers around the world billions of dollars annually…”

• - International Publishers Association

Counterfeit Detection Return Validation Supply Chain Visibility End User Registration Textbook Rental Programs Increased Sales of Additional Products & Services

LSC launches SIMS (Secure

Identity Management System)

New technologies to protect

clients’ IP

“Know Your Customer”

applications could have significant market potential

2

EXTENSIVE PRODUCT & SERVICE PROFILE

17 | LSC COMMUNICATIONS

 More than 3,000 customers across print and office

product segments

 Broad base of blue-chip customers  Leading players in their industries  Top customers’ average relationship tenure of 45+ years

 7 of the top 10 direct mail catalogers  7 of the top 10 magazine publishers  8 of the top 10 book publishers in NA +

EUR

 Product placement at 8 of the top 10

retailers

 Services 4 of the top 10 eCommerce

retailers

 Top 5 supplies-vendor at both of the U.S.

• ffice supply superstores

55+ years 30+ years 50+ years 55+ years 50+ years 20+ years 80+ years 80+ years 35+ years 25+ years 80+ years 25+ years 15+ years

PRINT OFFICE PRODUCTS SELECT CUSTOMERS

35+ years

3

LONG-STANDING RELATIONSHIPS WITH A PREMIER CUSTOMER BASE

18 | LSC COMMUNICATIONS

 Enhance existing product offerings  Expand technological capabilities  Provide synergy opportunities  Attractive financial return on investment  25 acquisitions completed since 2004

 Private / Family-owned  Sub-scale  Niche customer bases  Regional players  Unique capabilities  Innovative solutions

Top 400 Largest Printing Companies by 2017E Revenue(1)

Source: Company Management. 1. Printing Impressions, “Printing Impressions 400,” December 2017. 2. Includes companies with primary specialties in book manufacturing, catalogs, directories, inserts and/or publications and periodicals.

WE HAVE A PROVEN ABILITY TO STRATEGICALLY ACQUIRE, INTEGRATE AND RATIONALIZE QUICKLY AND OUR FUTURE TARGET UNIVERSE REMAINS ROBUST IN A FRAGMENTED MARKET SIGNIFICANT TARGET MARKET THAT FITS CRITERIA M&A CRITERIA TARGET CHARACTERISTICS

Over 105 companies in relevant target sectors with more than $25MM in annual revenues

Companies in Relevant Target Segments(2) 53% >$25MM+ 52%

Breakdown by Revenue Size

4 STRONG M&A TRACK RECORD

19 | LSC COMMUNICATIONS

20 | LSC COMMUNICATIONS

Background Closing Date Financial Information Strategic Rationale + Printing solutions provider with capabilities including offset printing, prepress and distribution services for magazines + September 7, 2017 + Purchase Price: $70 million + Approximate Annual Sales: $170 million(1) + Enhances printing capabilities + Strengthens presence in short-run magazines platform + Significant synergy opportunities + Offset and digital printing company with capabilities such as full-color web and sheetfed printing and integrated digital solutions + August 17, 2017 + Purchase Price: $78 million(2) + Approximate Annual Sales: $110 million(1) + Digital print assets provide manufacturing flexibility with top-line growth potential + New product offerings + Expands LSC’s manufacturing process to the west coast + Significant synergy opportunities + Leading producer of high quality envelopes, mailing supplies, and assorted packaging items + November 9, 2017 + Purchase Price: $41 million + Approximate Annual Sales: $110 million(1) + Enhanced product portfolio growing

• verall share of wallet with key Office

Products customer accounts + Significant synergies opportunities

4 RECENT ACQUISITIONS

(1) Approximate 2017 annual sales represent expected sales for FY 2017. Note : Only sales after the closing date of each acquisition will be reflected in LSC’s results (2) The contingent consideration for Creel in the form of cash payments of up to $10 million is due to the sellers to the extent certain financial targets are achieved

21 | LSC COMMUNICATIONS

Background Closing Date Financial Information Strategic Rationale + Full service, printer-interdependent mailing logistics provider + July 28, 2017 + Purchase Price: $40 million(1) + Approximate Annual Sales: $50 million(2) + Co-mail assets bring additional capacity for growing service offering, adding volume and scale + Strong freight management capabilities to better serve customers, provides base for growth + Leading third-party logistics provider of distribution, consolidation, transportation management, and international freight forwarding services + November 29, 2017 + Purchase Price: $25 million + Approximate Annual Sales: $50 million(2) + Enables LSC to better provide a full service offering for magazine customers with newsstand distribution + Book reverse logistics business brings high-demand service offering to book supply chain

4 RECENT LOGISTICS ACQUISITIONS

(1) $20 million of the purchase price was paid in cash; the remaining purchase price was paid with approximately 1.0 million shares of LKSD common stock (2) Approximate 2017 annual sales represent expected sales for FY 2017. Note : Only sales after the closing date of each acquisition will be reflected in LSC’s results

SUPPORTS CONTINUED DEVELOPMENT OF IN-HOUSE DISTRIBUTION MANAGEMENT CAPABILITIES FOR BOTH PRINT AND NON-PRINT MATERIALS

Rationalization Considerations:

 Evaluation of new business wins and upcoming

RFPs

 Utilize proven facility rationalization model to

understand annual P&L savings

 Real estate value as an offset to restructuring cost  Work to minimize customer disruption and need to

move large presses / binding lines

 Impact on distribution timing and cost  Time of year for potential closing  14 facilities rationalized over last 6 years

EXPERIENCED TEAM PROACTIVELY MANAGING FACILITY COSTS AND RATIONALIZATION PROCESS

LSC’S FACILITY RATIONALIZATION PROCESS COMMITMENT TO EFFICIENCY

5 SHARP FOCUS ON COST STRUCTURE AND EFFICIENCY IMPROVEMENT

Best-in-class Safety Metrics:

 Injury rate 27% below the industry average  12 facilities with 1+ years/1million work hours

without a Days Away Case Continuous Productivity Improvement Initiatives

 Plant overhead reviews resulting in identifiable cost

reductions across the company

 Technological solutions identifying optimal ways to

load assets and reduce labor costs

 Six Sigma methodologies leading to process

improvements focused on reducing inventory and

• verall working capital

22 | LSC COMMUNICATIONS

 Disciplined approach to capital expenditures and

cost management

 Focus on capital efficiency driving strong cash

flow conversion

 Ability to pursue M&A transactions within targeted

leverage range of 1.75x to 2.25x

 Stable cash flows enable deleveraging to

complement M&A strategy

 Current quarterly dividend of $0.26 per share  Board of Directors to review dividend quarterly  Board of Directors approve share repurchase

authorization of up to $20 million of LSC common stock(2)

1. For LSC, dividend yield is calculated as the last quarter annualized dividend ($1.04) per share divided by the closing LKSD stock price as of February 21, 2018. 2. On February 15, 2018 The Board of Directors approved an initial share repurchase authorization of up to $20 million of common stock under which the Company may buy back LSC Communications’ shares at its discretion from February 15, 2018 through August 15, 2019.

DIVIDEND YIELD(1)

1.9%

S&P 500

CASH FLOW HIGHLIGHTS

6 STRONG CASH FLOW PROFILE WITH ATTRACTIVE DIVIDEND

7.5%

23 | LSC COMMUNICATIONS

Name / Position Years with RR Donnelley / LSC Years in Industry

Tom Quinlan President, Chief Executive Officer and Chairman of the Board of Directors

13+ years 26+ years

Drew Coxhead Chief Financial Officer

22+ years 22+ years

Sue Bettman Chief Administrative Officer and General Counsel

13+ years 13+ years

Kent Hansen Chief Accounting Officer and Controller

1+ years 1+ years

Richard Lane Chief Strategy and Supply Chain Officer

20+ years 28+ years

Dave Houck Chief Information Officer

11+ years 26+ years

Janet Halpin Senior Vice President, Treasurer & Investor Relations

9+ years 9+ years

Dave McCree President, Book and Directory

29+ years 29+ years

Dave Cardona Senior Vice President, Magazine Group

30+ years 30+ years

Jim Ellward President, Office Products

16+ years 16+ years

John Coyle President, Group Sales

13+ years 34+ years

LSC HAS AN EXPERIENCED MANAGEMENT TEAM WITH A PROVEN ABILITY TO EXECUTE OPERATIONALLY AND FINANCIALLY IN A DYNAMIC MARKET ENVIRONMENT

7 EXPERIENCED LEADERSHIP TEAM

24 | LSC COMMUNICATIONS

Financial Overview

25 | LSC COMMUNICATIONS

NET SALES ($MM) NON-GAAP ADJ. EBITDA ($MM) CAPITAL EXPENDITURES ($MM) NON-GAAP FREE CASH FLOW ($MM)

$3,743 $3,654 $3,603 $3,800 - $3,900

$0 $1,000 $2,000 $3,000 $4,000 $5,000 2015 2016 2017 2018E

$398 $370 $328 $320 - $360

$0 $100 $200 $300 $400 $500 2015 2016 2017 2018E

% Reported Growth / (Decline) (2.4%) (1.4%) % Margin 10.6% 10.1% 8.2% – 9.5% $42 $48 $60 $65 - $75

$0 $20 $40 $60 $80 $100 2015 2016 2017 2018E

$233 $183 $145 $120 - $160

$0 $50 $100 $150 $200 $250 $300 2015 2016 2017 2018E

% of Sales 1.1% 1.7% % Conv.(2) 58.5% 49.5% 44.2% 1.3%

1. Full year guidance as of Q4 2017 Earnings Call on February 22, 2018 and is not being reaffirmed here. 2. Represents free cash flow as a percent of Non-GAAP Adj. EBITDA.

(2.9)% 9.1% 5.5% – 8.2% 1.7% - 2.0% 33% – 50%

(1) (1) (1) (1)

HISTORICAL FINANCIAL PERFORMANCE SNAPSHOT

Note: Historical cash flows do not reflect interest payments, standalone costs 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. See reconciliation of non-GAAP financials in appendix.

26 | LSC COMMUNICATIONS

DEBT AND LEVERAGE ($MM) as of 12/31/2017 TOTAL LIQUIDITY ($MM) as of 12/31/2017

Capitalization Cash & Cash Equivalents $34 Term Loan Facility due Sept. 2022 $306 8.75% Senior Secured Notes due Oct. 2023 450 Borrowings under Revolving Credit Facility 75 Capital Lease Obligations 3 Unamortized Debt Issuance Costs (12) Total Debt $822 Less: Current Portion (123) Total Long-Term Debt 699 Net Debt $788 Q4 2017 LTM Adj. EBITDA $328 Gross Leverage Ratio (1) 2.51x Total Liquidity Cash $34 Stated Amount of Revolving Credit Facility $400 Less: Availability Reduction from Covenants

• Amount Available Under the Revolving Credit Facility

$400 Usage Borrowings Under the Credit Agreement 75 Impact on Availability Related to Outstanding LoC 53 Net Available Liquidity $306

PENSION PLANS ($MM) as of 12/31/2017

Qualified Non-Qualified Total

Benefit Obligation $2,572 $95 $2,667 Fair Value of Plan Assets 2,478 2 $2,480 Unfunded Status ($94) ($93) ($187)

CAPITALIZATION

Note: See reconciliation of non-GAAP financials in appendix (1) In the twelve months ended December 31, 2017, the Company acquired The Clark Group (acquired November 29, 2017), Quality Park (acquired November 9, 2017), Publishers Press (acquired September 7, 2017), CREEL (acquired August 17, 2017), Fairrington (acquired July 28, 2017), and HudsonYards (acquired March 1, 2017). The leverage ratio calculation includes non-GAAP Adjusted EBITDA since the respective closing date of each acquisition, so does not include a full 12 months of non-GAAP Adjusted EBITDA. 27 | LSC COMMUNICATIONS

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.

LEVERAGE & LIQUIDITY + Continuing to target 1.75x to 2.25x gross leverage(1) + 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 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 & ACQUISITIONS + Selectively pursue strategic acquisitions + Strategy governed by target leverage DIVIDEND POLICY + Current quarterly dividend of $0.26 per share + Board of Directors to review dividend quarterly

FINANCIAL POLICY

28 | LSC COMMUNICATIONS

FULL YEAR 2018 GUIDANCE

(1) Full year 2018 guidance as of Q4 2017 Earnings Call on February 22, 2018 and is not being reaffirmed here. (2) Consistent with historical guidance and presentation, non-GAAP adjusted EBITDA includes net pension income. Beginning in 2018, Accounting Standards Update No. 2017-07 requires companies to disaggregate the service cost component of net benefit cost from other components of net benefit cost and present the service cost component with other employee compensation costs. All other components of net benefit cost will need to be presented outside of income from operations. As a result, the Company expects to reclassify approximately $49 million, $46 million and $45 million of net pension income for years ended 2018, 2017 and 2016, respectively, out of income from operations to a line item outside of income from operations, resulting in no impact to net income or non- GAAP adjusted EBITDA. (3) Free cash flow is defined as net cash provided by operating activities less capital expenditures (4) This guidance assumes no shares are repurchased under the authorization approved by the Company’s Board of Directors on February 15, 2018. (5) Please refer to the Appendix for reconciliation of non-GAAP measures 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, 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

• perations, given that such excluded items are not indicators of business performance.

29 | LSC COMMUNICATIONS

2018 Guidance (1) 2017 Actual (5)

Net Sales $3.8 - $3.9 billion $3.6 billion Non-GAAP Adjusted EBITDA(2) $320 - $360 million $328 million Depreciation and Amortization $135 - $145 million $160 million Interest Expense- Net $72 - $76 million $72 million Non-GAAP Effective Tax Rate 25% - 29% 30.4% Capital Expenditures $65 - $75 million $60 million Free Cash Flow(3) $120 - $160 million $145 million Diluted Share Count(4) Approximately 35 million 34.6 million

Appendix

30 | LSC COMMUNICATIONS

NON-GAAP FINANCIAL MEASURES

($ millions)

Total LSC Communications

Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 FY 2017 FY 2016 FY 2015 Net sales $999 $935 $848 $821 $919 $3,603 $3,654 $3,743 GAAP Net income (loss) (58) (3) 5 (1) 9 (57) 106 74 Restructuring, impairment and other charges, net 42 60 21 6 7 129 18 57 Separation-related transaction expenses

• 1

2 1 4 4 5

• Pension settlement charge
• 1
• Acquisition-related expenses

2 2 1

• 5
• 14

Purchase accounting inventory adj. (2) 1

• (1)
• 11

Loss on debt extinguishment 3

• 3
• Depreciation and amortization

42 39 39 40 41 160 171 181 Interest expense / (income)-net 20 19 16 17 18 72 18 (3) Income tax expense (benefit) 36 (23) (2) 2 1 13 51 64 Non-GAAP Adjusted EBITDA $85 $96 $82 $65 $80 $328 $370 $398 Non-GAAP Adjusted EBITDA margin 8.5% 10.3% 9.7% 7.9% 8.7% 9.1% 10.1% 10.6% Net cash provided by operating activities $147 ($20) $14 $64 $95 $205 $231 $275 Capital expenditures (9) (15) (15) (21) (13) (60) (48) (42) Free cash flow $138 ($35) ($1) $43 $82 $145 $183 $233

31 | LSC COMMUNICATIONS

NON-GAAP FINANCIAL MEASURES (Cont’d)

($ millions)

Print Segment

Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 FY 2017 FY 2016 FY 2015 Magazines, catalogs and retail inserts $521 $448 $378 $383 $441 $1,730 $1,632 $1,807 Book 245 276 262 239 256 1,022 1,097 925 Europe 67 68 56 56 63 247 272 305 Directories 23 27 27 32 29 109 126 144 Net sales $856 $819 $723 $710 $789 $3,108 $3,127 $3,181 Income from operations (7) (10) 22 12 27 17 141 96 Depreciation and amortization 37 35 36 35 37 143 155 164 Restructuring, impairment and other charges, net 39 58 6 5 6 108 15 53 Purchase accounting inventory adjustments, net

• 1
• 1
• 11

Non-GAAP Adjusted EBITDA $69 $84 $64 $52 $70 $269 $311 $324 Non-GAAP Adjusted EBITDA margin 8.1% 10.3% 8.9% 7.3% 8.9% 8.7% 9.9% 10.2%

Office Products Segment

Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 FY 2017 FY 2016 FY 2015 Net sales $143 $116 $125 $111 $130 $495 $527 $562 Income from operations 10 11 12 9 16 42 54 47 Depreciation and amortization 4 4 3 4 3 15 15 16 Restructuring, impairment and other charges, net 3

• 1
• 4
• 4

Purchase accounting inventory adjustments, net 1

• 1
• Non-GAAP Adjusted EBITDA

$18 $15 $15 $14 $19 $62 $69 $67 Non-GAAP Adjusted EBITDA margin 12.6% 12.9% 12.0% 12.6% 14.6% 12.5% 13.1% 11.9%

32 | LSC COMMUNICATIONS

ORGANIC GROWTH RATES

(1) Adjusted for net sales of acquired businesses: For the three months ended December 31, 2017, the adjustments for net sales of acquired businesses reflect the net sales of The Clark Group ("Clark Group") (acquired November 29, 2017) and Quality Park

(acquired November 9, 2017). For the three months ended December 31, 2016, the adjustments for net sales of acquired businesses reflect the net sales of Publishers Press (acquired September 7, 2017), NECI, LLC ("NECI") (acquired August 21, 2017), CREEL Printing ("CREEL") (acquired August 17, 2017), and Fairrington Transportation Corp., F.T.C. Transport, Inc. and F.T.C. Services, Inc. (“Fairrington”) (acquired July 28, 2017), HudsonYards Studios ("HudsonYards") (acquired March 1, 2017) and Continuum M C LLC ("C i ") ( i d D b 2 2016) i ddi i h i i i d b

(3) Adjusted for net sales of acquired businesses, the impact of changes in FX rates and pass-through paper sales. (2) Adjusted for net sales of acquired businesses: For the twelve months ended December 31, 2017, the adjustments for net sales of acquired businesses reflect the net sales of Clark Group (acquired November 29, 2017), Quality Park (acquired November 9,

2017), Publishers Press (acquired September 7, 2017), NECI (acquired August 21, 2017), CREEL (acquired August 17, 2017), Fairrington (acquired July 28, 2017), and HudsonYards (acquired March 1, 2017). For the twelve months ended December 31, 2017, the adjustments for net sales of acquired businesses reflect the net sales of Continuum (acquired December 2, 2016), in addition to the acquisitions noted above. ($ millions) Magazines, Catalogs, and Retail Inserts Books Europe Directories Total Print Total Office Products Total LSC Q4 2016 Net Sales as Reported 441 $ 256 $ 63 $ 29 $ 789 $ 130 $ 919 $ Adjustments (1) 109

• 109

32 141 Q4 2016 Net Sales Pro Forma 550 $ 256 $ 63 $ 29 $ 898 $ 162 $ 1,060 $ Q4 2017 Net Sales as Reported 521 $ 245 $ 67 $ 23 $ 856 $ 143 $ 999 $ Adjustments (1) 8

• 8

9 17 Q4 2017 Net Sales Pro Forma 529 $ 245 $ 67 $ 23 $ 864 $ 152 $ 1,016 $ As Reported % Change 18.1%

• 4.3%

6.3%

• 20.7%

8.5% 10.0% 8.7% Pro Forma % Change

• 3.8%
• 4.3%

6.3%

• 20.7%
• 3.8%
• 6.2%
• 4.2%

Non-GAAP Adjustments: Impact of pass-through paper sales 0.2%

• 0.8%

0.0%

• 10.3%
• 0.4%

0.0%

• 0.4%

Impact of changes in foreign exchange rates 0.4% 0.0% 11.1% 0.0% 1.0% 0.0% 0.8% Q4 2017 Organic % Change (3)

• 4.4%
• 3.5%
• 4.8%
• 10.4%
• 4.4%
• 6.2%
• 4.6%

FY 2016 Net Sales as Reported 1,632 $ 1,097 $ 272 $ 126 $ 3,127 $ 527 $ 3,654 $ Adjustments (2) 444

• 444

137 581 FY 2016 Net Sales Pro Forma 2,076 $ 1,097 $ 272 $ 126 $ 3,571 $ 664 $ 4,235 $ FY 2017 Net Sales as Reported 1,730 $ 1,022 $ 247 $ 109 $ 3,108 $ 495 $ 3,603 $ Adjustments (2) 243

• 243

95 338 FY 2017 Net Sales Pro Forma 1,973 $ 1,022 $ 247 $ 109 $ 3,351 $ 590 $ 3,941 $ As Reported % Change 6.0%

• 6.8%
• 9.2%
• 13.5%
• 0.6%
• 6.1%
• 1.4%

Pro Forma % Change

• 5.0%
• 6.8%
• 9.2%
• 13.5%
• 6.2%
• 11.1%
• 6.9%

Non-GAAP Adjustments: Impact of pass-through paper sales 0.1%

• 1.9%

0.0%

• 7.1%
• 0.8%

0.0%

• 0.7%

Impact of changes in foreign exchange rates 0.0% 0.0% 4.0% 0.0% 0.3% 0.0% 0.2% FY 2017 Organic % Change (3)

• 5.1%
• 4.9%
• 13.2%
• 6.4%
• 5.7%
• 11.1%
• 6.4%

33 | LSC COMMUNICATIONS

investor.relations@lsccom.com | 773-272-9275 | 191 N Wacker (Suite 1400), Chicago, Illinois 60606