UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 1-37728
Donnelley Financial Solutions, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
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36-4829638 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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35 West Wacker Drive, Chicago, Illinois |
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60601 |
(Address of principal executive offices) |
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(Zip code) |
(844) 866-4337
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer |
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Accelerated filer |
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☐ |
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Non-Accelerated filer |
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☒ (Do not check if a smaller reporting company) |
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Smaller reporting company |
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☐ |
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Emerging growth company |
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☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of October 27, 2017, 33.7 million shares of common stock were outstanding.
DONNELLEY FINANCIAL SOLUTIONS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED September 30, 2017
TABLE OF CONTENTS
Part I |
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FINANCIAL INFORMATION |
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Page |
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Item 1: |
Condensed Consolidated and Combined Financial Statements (unaudited) |
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3 |
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3 |
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4 |
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Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016 |
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5 |
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6 |
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Notes to Condensed Consolidated and Combined Financial Statements |
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7 |
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Item 2: |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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32 |
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Item 3: |
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47 |
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Item 4: |
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47 |
OTHER INFORMATION |
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Page |
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Item 1: |
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48 |
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Item 1A: |
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48 |
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Item 2: |
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48 |
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Item 4: |
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48 |
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Item 6: |
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49 |
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53 |
2
Donnelley Financial Solutions, Inc. and Subsidiaries (“Donnelley Financial”)
Condensed Consolidated and Combined Statements of Operations
For the Three and Nine Months Ended September 30, 2017 and 2016
(in millions, except per share data)
(UNAUDITED)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2017 |
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2016 |
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2017 |
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2016 |
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Services net sales |
$ |
140.3 |
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$ |
139.4 |
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$ |
471.4 |
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$ |
454.1 |
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Products net sales |
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82.3 |
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85.0 |
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308.7 |
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308.4 |
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Total net sales |
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222.6 |
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224.4 |
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780.1 |
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762.5 |
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Services cost of sales (exclusive of depreciation and amortization) |
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81.7 |
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64.2 |
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240.2 |
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214.6 |
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Services cost of sales with R.R. Donnelley affiliates (exclusive of depreciation and amortization)* |
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— |
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8.7 |
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19.5 |
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29.4 |
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Products cost of sales (exclusive of depreciation and amortization) |
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58.9 |
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62.0 |
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190.7 |
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179.9 |
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Products cost of sales with R.R. Donnelley affiliates (exclusive of depreciation and amortization)* |
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— |
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11.5 |
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32.3 |
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48.6 |
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Total cost of sales |
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140.6 |
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146.4 |
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482.7 |
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472.5 |
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Selling, general and administrative expenses (exclusive of depreciation and amortization) |
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54.0 |
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48.5 |
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171.2 |
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156.8 |
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Restructuring, impairment and other charges-net |
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(0.6 |
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1.7 |
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6.4 |
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3.6 |
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Depreciation and amortization |
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10.6 |
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9.8 |
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31.7 |
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30.1 |
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Income from operations |
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18.0 |
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18.0 |
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88.1 |
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99.5 |
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Interest expense (income)-net |
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10.6 |
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(0.1 |
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32.7 |
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0.3 |
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Earnings before income taxes |
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7.4 |
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18.1 |
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55.4 |
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99.2 |
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Income tax expense |
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2.1 |
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7.9 |
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22.0 |
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39.3 |
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Net earnings |
$ |
5.3 |
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$ |
10.2 |
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$ |
33.4 |
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$ |
59.9 |
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Net earnings per share (Note 8): |
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Basic net earnings per share |
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0.16 |
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0.31 |
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1.01 |
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1.85 |
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Diluted net earnings per share |
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0.16 |
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0.31 |
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1.01 |
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1.85 |
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Weighted average number of common shares outstanding |
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Basic |
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33.6 |
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32.4 |
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33.0 |
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32.4 |
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Diluted |
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33.8 |
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32.4 |
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33.2 |
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32.4 |
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* |
Beginning in the quarter ended September 30, 2017, R.R. Donnelley & Sons Company ("RRD") no longer qualified as a related party, therefore the amounts disclosed related to RRD are presented through June 30, 2017 only. |
See Notes to Unaudited Condensed Consolidated and Combined Financial Statements
3
Donnelley Financial Solutions, Inc. and Subsidiaries (“Donnelley Financial”)
Condensed Consolidated and Combined Statements of Comprehensive Income
For the Three and Nine Months Ended September 30, 2017 and 2016
(in millions)
(UNAUDITED)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2017 |
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2016 |
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2017 |
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2016 |
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Net earnings |
$ |
5.3 |
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$ |
10.2 |
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$ |
33.4 |
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$ |
59.9 |
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Other comprehensive income (loss), net of tax: |
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Translation adjustments |
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2.2 |
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0.2 |
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4.6 |
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4.2 |
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Adjustment for net periodic pension and other postretirement benefits plan cost |
0.3 |
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(0.2 |
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1.0 |
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(0.4 |
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Other comprehensive income, net of tax |
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2.5 |
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— |
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5.6 |
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3.8 |
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Comprehensive income |
$ |
7.8 |
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$ |
10.2 |
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$ |
39.0 |
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$ |
63.7 |
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See Notes to Unaudited Condensed Consolidated and Combined Financial Statements
4
Donnelley Financial Solutions, Inc. and Subsidiaries (“Donnelley Financial”)
Condensed Consolidated Balance Sheets
As of September 30, 2017 and December 31, 2016
(in millions, except per share data)
(UNAUDITED)
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September 30, |
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December 31, |
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2017 |
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2016 |
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ASSETS |
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Cash and cash equivalents |
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$ |
32.2 |
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$ |
36.2 |
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Receivables, less allowances for doubtful accounts of $8.7 in 2017 (2016 - $6.4) |
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219.3 |
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156.2 |
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Receivables from R.R. Donnelley* |
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— |
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96.0 |
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Inventories |
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23.6 |
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24.1 |
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Prepaid expenses and other current assets |
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15.1 |
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17.1 |
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Total current assets |
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290.2 |
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329.6 |
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Property, plant and equipment-net |
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34.7 |
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35.5 |
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Goodwill |
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447.5 |
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446.4 |
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Other intangible assets-net |
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44.2 |
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54.3 |
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Software-net |
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41.9 |
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41.6 |
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Deferred income taxes |
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36.6 |
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37.0 |
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Other noncurrent assets |
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38.6 |
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34.5 |
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Total assets |
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$ |
933.7 |
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$ |
978.9 |
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LIABILITIES |
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Accounts payable |
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$ |
74.4 |
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$ |
85.3 |
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Accrued liabilities |
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110.1 |
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100.7 |
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Total current liabilities |
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184.5 |
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186.0 |
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Long-term debt (Note 11) |
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488.4 |
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587.0 |
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Deferred compensation liabilities |
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24.6 |
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24.4 |
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Pension and other postretirement benefits plan liabilities |
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51.4 |
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56.4 |
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Other noncurrent liabilities |
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11.2 |
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14.0 |
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Total liabilities |
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760.1 |
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867.8 |
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Commitments and Contingencies (Note 12) |
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EQUITY |
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Preferred stock, $0.01 par value |
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Authorized: 1.0 shares; Issued: None |
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— |
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— |
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Common stock, $0.01 par value |
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Authorized: 65.0 shares; |
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Issued: 33.8 shares in 2017 (2016 - 32.6 shares) |
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0.3 |
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0.3 |
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Treasury stock, at cost: less than 0.1 shares in 2017 |
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(0.9 |
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— |
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Additional paid-in-capital |
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204.3 |
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179.9 |
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Retained earnings (deficit) |
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32.6 |
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(0.8 |
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Accumulated other comprehensive loss |
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(62.7 |
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(68.3 |
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Total equity |
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173.6 |
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111.1 |
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Total liabilities and equity |
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$ |
933.7 |
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$ |
978.9 |
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* |
Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party, therefore the amounts disclosed related to RRD are presented through June 30, 2017 only. |
See Notes to Unaudited Condensed Consolidated and Combined Financial Statements
5
‘Donnelley Financial Solutions, Inc. and Subsidiaries (“Donnelley Financial”)
Condensed Consolidated and Combined Statements of Cash Flows
For the Nine Months Ended September 30, 2017 and 2016
(in millions)
(UNAUDITED)
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Nine Months Ended |
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September 30, |
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2017 |
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2016 |
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OPERATING ACTIVITIES |
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Net earnings |
$ |
33.4 |
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$ |
59.9 |
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Adjustments to reconcile net earnings to net cash provided by operating activities: |
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Impairment charges |
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0.2 |
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— |
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Depreciation and amortization |
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31.7 |
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30.1 |
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Provision for doubtful accounts receivable |
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4.3 |
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1.7 |
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Share-based compensation |
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5.2 |
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1.2 |
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Deferred income taxes |
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(2.7 |
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(1.0 |
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Change in uncertain tax positions |
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(0.2 |
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— |
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Net pension and other postretirement benefits plan income |
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(2.5 |
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(0.4 |
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Other |
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1.7 |
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0.7 |
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Changes in operating assets and liabilities - net of acquisitions: |
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Accounts receivable - net |
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(36.6 |
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(54.6 |
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Inventories |
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0.6 |
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(2.9 |
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Prepaid expenses and other current assets |
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(2.0 |
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(6.3 |
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Accounts payable |
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(11.7 |
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17.9 |
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Income taxes payable and receivable |
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3.7 |
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(0.6 |
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Accrued liabilities and other |
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10.3 |
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12.2 |
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Pension and other postretirement benefits plan contributions |
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(1.7 |
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(1.1 |
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Net cash provided by operating activities |
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33.7 |
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56.8 |
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INVESTING ACTIVITIES |
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Capital expenditures |
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(20.0 |
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(14.0 |
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Purchases of investments |
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(3.4 |
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(3.5 |
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Other investing activities |
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0.3 |
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0.5 |
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Net cash used in investing activities |
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(23.1 |
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(17.0 |
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FINANCING ACTIVITIES |
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Revolving facility borrowings |
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230.0 |
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— |
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Payments on revolving facility borrowings |
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(230.0 |
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— |
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Payments on long-term debt |
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(100.0 |
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— |
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Debt issuance costs |
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(1.5 |
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(9.3 |
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Separation-related payment from R.R. Donnelley |
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68.0 |
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— |
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Proceeds from issuance of common stock |
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18.8 |
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— |
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Proceeds from issuance of long-term debt |
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— |
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348.2 |
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Net change in short-term debt |
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— |
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(8.8 |
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Net transfers to Parent and affiliates |
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— |
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(336.2 |
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Treasury stock repurchases |
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(0.9 |
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— |
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Other financing activities |
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0.4 |
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— |
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Net cash used in financing activities |
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(15.2 |
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(6.1 |
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Effect of exchange rate on cash and cash equivalents |
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0.6 |
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4.2 |
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Net (decrease) increase in cash and cash equivalents |
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(4.0 |
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37.9 |
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Cash and cash equivalents at beginning of year |
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36.2 |
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15.1 |
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Cash and cash equivalents at end of period |
$ |
32.2 |
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$ |
53.0 |
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Supplemental non-cash disclosure: |
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Debt exchange with R.R. Donnelley, including $5.5 million of debt issuance costs |
$ |
— |
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$ |
300.0 |
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Settlement of intercompany note payable |
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— |
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29.6 |
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Accrued debt issuance costs |
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— |
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|
1.6 |
|
See Notes to Unaudited Condensed Consolidated and Combined Financial Statements
6
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Note 1. Overview and Basis of Presentation
Description of Business
Donnelley Financial Solutions, Inc. (the “Company” or “Donnelley Financial” ) is a financial communications services company that supports global capital markets compliance and transaction needs for its corporate clients and their advisors (such as law firms and investment bankers) and global investment markets compliance and analytics needs for mutual fund companies, variable annuity providers and broker/dealers. With proprietary technology such as data storage and workflow collaboration tools, deep subject matter expertise and a global footprint, Donnelley Financial produces, manages, stores, distributes, and translates documents and electronic communications in order to deliver timely financial communications to investors and documents in a manner that complies with regulatory commissions.
Donnelley Financial’s Registration Statement on Form 10, as amended, was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on September 20, 2016. On October 1, 2016, Donnelley Financial became an independent publicly traded company through the distribution by R.R. Donnelley & Sons Company (“RRD”) of approximately 26.2 million shares, or 80.75%, of Donnelley Financial common stock to RRD shareholders (the “Separation”). Holders of RRD common stock received one share of Donnelley Financial common stock for every eight shares of RRD common stock held on September 23, 2016. As part of the Separation, RRD retained approximately 6.2 million shares of Donnelley Financial common stock, or a 19.25% interest in Donnelley Financial. Donnelley Financial’s common stock began regular-way trading under the ticker symbol “DFIN” on the New York Stock Exchange on October 3, 2016. On October 1, 2016, RRD also completed the previously announced separation of LSC Communications, Inc. (“LSC”), its publishing and retail-centric print services and office products business. On March 28, 2017, RRD completed the sale of 6.2 million shares of LSC common stock (RRD’s remaining ownership stake in LSC) in an underwritten public offering. As a result, beginning in the quarter ended June 30, 2017, LSC is no longer an affiliate of the Company.
On September 14, 2016, the Company and LSC entered into a Separation and Distribution Agreement with RRD to effect the distribution of the Company’s and LSC’s common stock to RRD’s common stockholders (the “Separation and Distribution Agreement”). This agreement governs the Company’s relationship with RRD and LSC with respect to pre-Separation matters and provides for the allocation of employee benefit, litigation and other liabilities and obligations attributable to periods prior to the Separation. The Separation and Distribution Agreement also includes an agreement that the Company, RRD and LSC will provide each other with appropriate indemnities with respect to liabilities arising out of the businesses being distributed and retained by RRD in the Separation. The Separation and Distribution Agreement also addresses employee compensation and benefit matters.
In connection with the Separation, the Company entered into transition services agreements separately with RRD and LSC, under which, in exchange for the fees specified in the arrangements, RRD and LSC agree to provide certain services to the Company and the Company agrees to provide certain services to RRD, respectively, for up to 24 months following the Separation. These services include, but are not limited to, information technology, accounts receivable, accounts payable, payroll and other financial and administrative services and functions. These agreements facilitate the separation by allowing the Company to operate independently prior to establishing stand-alone back office systems across its organization.
At the time of the Separation, the Company entered into a number of commercial and other arrangements with RRD and its subsidiaries. These include, among other things, arrangements for the provision of services, including global outsourcing and logistics services, printing and binding, digital printing, composition, premedia and access to technology. The Company also entered into a number of commercial and other arrangements with LSC and its subsidiaries, pursuant to which LSC will print and bind products for the Company. The terms of the arrangements with RRD and LSC do not exceed 24 months. Subsequent to the Separation, RRD and LSC are clients of the Company and expect to utilize financial communication software and services that the Company makes available to all of its clients.
7
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
On March 24, 2017, pursuant to the Stockholder and Registration Rights Agreement, dated as of September 30, 2016, by and between the Company and RRD, the Company filed a Registration Statement on Form S-1 to register the offering and sale of shares of the Company’s common stock retained by RRD. The Registration Statement on Form S-1, as amended, was declared effective by the SEC on June 13, 2017. On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. Upon the consummation of the offering, RRD retained approximately 0.1 million shares of the Company’s common stock which were subsequently sold by RRD on August 1, 2017. In conjunction with the underwritten public offering, the underwriters exercised their option to purchase approximately 0.9 million of the Company’s shares (the “Option Shares”). The Company received approximately $18.8 million in net proceeds from the sale of the Option Shares, after deducting estimated underwriting discounts and commissions. The proceeds were used to reduce outstanding debt under the Revolving Facility (as defined in Note 11, Debt). Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party, therefore amounts disclosed related to RRD are presented through June 30, 2017 only.
Basis of Presentation
The accompanying unaudited condensed consolidated and combined financial statements reflect the consolidated financial position and consolidated results of operations of the Company as an independent, publicly traded company for the periods after the Separation and the combined financial position and combined results of operations for the periods prior to the Separation. Prior to the Separation, the combined financial statements were prepared on a stand-alone basis and were derived from RRD’s consolidated financial statements and accounting records.
The unaudited condensed consolidated and combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The financial data presented herein should be read in conjunction with the audited consolidated and combined financial statements and accompanying notes included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 28, 2017. In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Results of interim periods should not be considered indicative of the results for the full year. These unaudited condensed consolidated and combined interim financial statements include estimates and assumptions of management that affect the amounts reported in the unaudited condensed consolidated and combined financial statements. Actual results could differ from these estimates.
For periods prior to the Separation, the unaudited condensed consolidated and combined financial statements include the allocation of certain assets and liabilities that were historically held at the RRD corporate level but which were specifically identifiable or attributable to the Company. Cash and cash equivalents held by RRD were not allocated to Donnelley Financial unless they were held in a legal entity that was transferred to Donnelley Financial. All intercompany transactions and accounts within Donnelley Financial have been eliminated. All intracompany transactions between RRD and Donnelley Financial are considered to be effectively settled in the unaudited condensed consolidated and combined financial statements at the time the transaction is recorded. The total net effect of the settlement of these intracompany transactions is reflected in the unaudited condensed consolidated and combined statements of cash flows as a financing activity and in the unaudited condensed consolidated and combined balance sheets as net parent company investment. Net parent company investment is primarily impacted by contributions from RRD which are the result of treasury activities and net funding provided by or distributed to RRD.
Prior to the Separation, the unaudited condensed consolidated and combined financial statements include certain expenses of RRD which were allocated to Donnelley Financial for certain functions, including general corporate expenses related to information technology, finance, legal, human resources, internal audit, treasury, tax, investor relations and executive oversight. These expenses were allocated to the Company on the basis of direct usage, when available, with the remainder allocated on the pro rata basis of revenue, employee headcount, or other measures. We consider the expense methodology and results to be reasonable for all periods presented. However these allocations may not be indicative of the actual expenses that would have been incurred as an independent public company or the costs that may be incurred in the future.
For periods prior to the Separation, the income tax amounts in the unaudited condensed consolidated and combined financial statements were calculated based on a separate income tax return methodology and presented as if the Company’s operations were separate taxpayers in the respective jurisdictions.
8
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
RRD maintained various benefit and share-based compensation plans at a corporate level. Donnelley Financial employees participated in those programs and a portion of the cost of those plans is included in Donnelley Financial’s condensed consolidated and combined financial statements for periods prior to the Separation. On October 1, 2016, Donnelley Financial recorded net pension plan liabilities of $68.3 million (consisting of a total benefit plan liability of $317.0 million, net of plan assets having fair market value of $248.7 million), as a result of the transfer of certain pension plan liabilities and assets from RRD to the Company upon the legal split of those plans. The pension plan asset allocation from RRD was finalized on June 30, 2017, which resulted in a $0.7 million decrease to the fair value of plan assets transferred to the Company from RRD. The Company also recorded a net other postretirement benefit liability of $1.5 million, as a result of the transfer of an other postretirement benefit plan from RRD to the Company. Refer to Note 6, Retirement Plans, for further details regarding the Company’s pension and other postretirement benefit plans.
Donnelley Financial generates a portion of net revenue from sales to RRD’s subsidiaries. Included in the unaudited condensed combined financial statements are net revenues from sales to RRD and affiliates of $1.1 million and $3.6 million for the three months and nine months ended September 30, 2016, respectively. Donnelley Financial utilizes RRD for freight and logistics, production of certain printed products and outsourced business services functions. Included in the unaudited condensed combined financial statements are cost of sales to RRD and affiliates of $20.2 million and $78.0 million for the three and nine months ended September 30, 2016, respectively. Intercompany receivables and payables with RRD are reflected within net parent company investment in the accompanying unaudited condensed combined financial statements for periods prior to the Separation. See Note 13, Related Parties, for a further description of related party transactions.
Note 2. Inventories
The components of the Company’s inventories, net of excess and obsolescence reserves for raw materials and finished goods, at September 30, 2017 and December 31, 2016 were as follows:
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
Raw materials and manufacturing supplies |
$ |
6.4 |
|
|
$ |
7.6 |
|
Work in process |
|
11.4 |
|
|
|
10.8 |
|
Finished goods |
|
5.8 |
|
|
|
5.7 |
|
Total |
$ |
23.6 |
|
|
$ |
24.1 |
|
Note 3. Property, Plant and Equipment
The components of the Company’s property, plant and equipment at September 30, 2017 and December 31, 2016 were as follows:
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
Land |
$ |
10.0 |
|
|
$ |
10.0 |
|
Buildings |
|
43.7 |
|
|
|
44.4 |
|
Machinery and equipment |
|
104.4 |
|
|
|
109.2 |
|
|
|
158.1 |
|
|
|
163.6 |
|
Less: Accumulated depreciation |
|
(123.4 |
) |
|
|
(128.1 |
) |
Total |
$ |
34.7 |
|
|
$ |
35.5 |
|
Depreciation expense was $1.9 million and $1.4 million for the three months ended September 30, 2017 and 2016, respectively, and $5.0 million and $6.1 million for the nine months ended September 30, 2017 and 2016, respectively.
Note 4. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill by segment for the nine months ended September 30, 2017 were as follows:
|
U.S. |
|
|
International |
|
|
Total |
|
|||
Net book value as of December 31, 2016 |
$ |
429.2 |
|
|
$ |
17.2 |
|
|
$ |
446.4 |
|
Foreign exchange and other adjustments |
|
— |
|
|
|
1.1 |
|
|
|
1.1 |
|
Net book value as of September 30, 2017 |
$ |
429.2 |
|
|
$ |
18.3 |
|
|
$ |
447.5 |
|
9
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
The components of other intangible assets at September 30, 2017 and December 31, 2016 were as follows:
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||||||||||||||||||
|
Gross |
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
||
|
Carrying |
|
|
Accumulated |
|
|
Net Book |
|
|
Carrying |
|
|
Accumulated |
|
|
Net Book |
|
||||||
|
Amount |
|
|
Amortization |
|
|
Value |
|
|
Amount |
|
|
Amortization |
|
|
Value |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
$ |
140.6 |
|
|
$ |
(97.1 |
) |
|
$ |
43.5 |
|
|
$ |
138.8 |
|
|
$ |
(85.3 |
) |
|
$ |
53.5 |
|
Trade names |
|
6.3 |
|
|
|
(5.6 |
) |
|
|
0.7 |
|
|
|
6.3 |
|
|
|
(5.5 |
) |
|
|
0.8 |
|
Trademarks, licenses and agreements |
|
3.2 |
|
|
|
(3.2 |
) |
|
|
— |
|
|
|
3.2 |
|
|
|
(3.2 |
) |
|
|
— |
|
Total other intangible assets |
$ |
150.1 |
|
|
$ |
(105.9 |
) |
|
$ |
44.2 |
|
|
$ |
148.3 |
|
|
$ |
(94.0 |
) |
|
$ |
54.3 |
|
Amortization expense for other intangible assets was $3.6 million and $3.6 million for the three months ended September 30, 2017 and 2016, respectively, and $10.7 million and $10.8 million for the nine months ended September 30, 2017 and 2016, respectively.
The following table outlines the estimated annual amortization expense related to other intangible assets as of September 30, 2017:
For the year ending December 31, |
Amount |
|
|
2017 |
$ |
14.3 |
|
2018 |
|
13.9 |
|
2019 |
|
13.9 |
|
2020 |
|
12.5 |
|
2021 |
|
0.1 |
|
2022 and thereafter |
|
0.2 |
|
Total |
$ |
54.9 |
|
Note 5. Restructuring, Impairment and Other Charges
Restructuring, Impairment and Other Charges recognized in Results of Operations
For the three months ended September 30, 2017 and 2016, the Company recorded the following net restructuring, impairment and other charges:
Three Months Ended |
|
Employee |
|
|
Other Restructuring |
|
|
Total Restructuring |
|
|
|
|
|
|||
September 30, 2017 |
|
Terminations |
|
|
Charges |
|
|
Charges |
|
|
Total |
|
||||
U.S. |
|
$ |
0.2 |
|
|
$ |
(1.0 |
) |
|
$ |
(0.8 |
) |
|
$ |
(0.8 |
) |
International |
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
0.1 |
|
Corporate |
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
0.1 |
|
Total |
|
$ |
0.4 |
|
|
$ |
(1.0 |
) |
|
$ |
(0.6 |
) |
|
$ |
(0.6 |
) |
Three Months Ended |
|
Employee |
|
|
Other Restructuring |
|
|
Total Restructuring |
|
|
|
|
|
|||
September 30, 2016 |
|
Terminations |
|
|
Charges |
|
|
Charges |
|
|
Total |
|
||||
U.S. |
|
$ |
1.0 |
|
|
$ |
0.4 |
|
|
$ |
1.4 |
|
|
$ |
1.4 |
|
International |
|
|
0.3 |
|
|
|
— |
|
|
|
0.3 |
|
|
|
0.3 |
|
Corporate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
1.3 |
|
|
$ |
0.4 |
|
|
$ |
1.7 |
|
|
$ |
1.7 |
|
10
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
For the nine months ended September 30, 2017 and 2016, the Company recorded the following net restructuring, impairment and other charges:
Nine Months Ended |
|
Employee |
|
|
Other Restructuring |
|
|
Total Restructuring |
|
|
|
|
|
|
Other |
|
|
|
|
|
||||
September 30, 2017 |
|
Terminations |
|
|
Charges |
|
|
Charges |
|
|
Impairment |
|
|
Charges |
|
|
Total |
|
||||||
U.S. |
|
$ |
3.2 |
|
|
$ |
0.9 |
|
|
$ |
4.1 |
|
|
$ |
0.2 |
|
|
$ |
0.1 |
|
|
$ |
4.4 |
|
International |
|
|
1.3 |
|
|
|
— |
|
|
|
1.3 |
|
|
|
— |
|
|
|
— |
|
|
|
1.3 |
|
Corporate |
|
|
0.7 |
|
|
|
— |
|
|
|
0.7 |
|
|
|
— |
|
|
|
— |
|
|
|
0.7 |
|
Total |
|
$ |
5.2 |
|
|
$ |
0.9 |
|
|
$ |
6.1 |
|
|
$ |
0.2 |
|
|
$ |
0.1 |
|
|
$ |
6.4 |
|
Nine Months Ended |
|
Employee |
|
|
Other Restructuring |
|
|
Total Restructuring |
|
|
|
|
|
|
Other |
|
|
|
|
|
||||
September 30, 2016 |
|
Terminations |
|
|
Charges |
|
|
Charges |
|
|
Impairment |
|
|
Charges |
|
|
Total |
|
||||||
U.S. |
|
$ |
1.8 |
|
|
$ |
1.2 |
|
|
$ |
3.0 |
|
|
$ |
— |
|
|
$ |
0.1 |
|
|
$ |
3.1 |
|
International |
|
|
0.5 |
|
|
|
— |
|
|
|
0.5 |
|
|
|
— |
|
|
|
— |
|
|
|
0.5 |
|
Corporate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
2.3 |
|
|
$ |
1.2 |
|
|
$ |
3.5 |
|
|
$ |
— |
|
|
$ |
0.1 |
|
|
$ |
3.6 |
|
Restructuring and Impairment Charges
For the three and nine months ended September 30, 2017, the Company recorded net restructuring charges of $0.4 million and $5.2 million, respectively, for employee termination costs for 169 employees, substantially all of whom were terminated as of September 30, 2017. These charges primarily related to the reorganization of certain operations and certain administrative functions. Additionally, the Company recognized a net reversal of $1.0 million of other restructuring charges during the three months ended September 30, 2017 primarily due to the reversal of previously recognized lease termination costs associated with a facility that the Company began using during the third quarter of 2017. The Company incurred net lease termination and other restructuring charges of $0.9 million for the nine months ended September 30, 2017. For the nine months ended September 30, 2017, the Company also recorded $0.2 million of net impairment charges primarily related to leasehold improvements associated with facility closures. The nine months ended September 30, 2017 includes $0.1 million for other charges associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate.
For the three and nine months ended September 30, 2016, the Company recorded net restructuring charges of $1.3 million and $2.3 million, respectively, for employee termination costs for 22 employees. These charges primarily related to the reorganization of certain administrative functions. Additionally, the Company incurred lease termination and other restructuring charges of $0.4 million and $1.2 million, respectively, for the three and nine months ended September 30, 2016. The nine months ended September 30, 2016, includes $0.1 million for other charges associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate.
Restructuring Reserve
The restructuring reserve as of December 31, 2016 and September 30, 2017, and changes during the nine months ended September 30, 2017, were as follows:
|
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
Restructuring |
|
|
Exchange and |
|
|
Cash |
|
|
September 30, |
|
|||||
|
2016 |
|
|
Charges |
|
|
Other |
|
|
Paid |
|
|
2017 |
|
|||||
Employee terminations |
$ |
1.6 |
|
|
$ |
5.2 |
|
|
$ |
0.1 |
|
|
$ |
(5.3 |
) |
|
$ |
1.6 |
|
Lease terminations and other |
|
3.8 |
|
|
|
0.9 |
|
|
|
0.2 |
|
|
|
(1.5 |
) |
|
|
3.4 |
|
Total |
$ |
5.4 |
|
|
$ |
6.1 |
|
|
$ |
0.3 |
|
|
$ |
(6.8 |
) |
|
$ |
5.0 |
|
The current portion of restructuring reserves of $3.2 million at September 30, 2017 was included in accrued liabilities, while the long-term portion of $1.8 million, primarily related to lease termination costs, was included in other noncurrent liabilities at September 30, 2017.
11
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
The Company anticipates that payments associated with the employee terminations reflected in the above table will be substantially completed by March 31, 2018.
The restructuring liabilities classified as “lease terminations and other” consisted of lease terminations, other facility closing costs and contract termination costs. Payments on certain of the lease obligations are scheduled to continue until 2026. Market conditions and the Company’s ability to sublease these properties could affect the ultimate charges related to the lease obligations. Any potential recoveries or additional charges could affect amounts reported in the Company’s financial statements.
Note 6. Retirement Plans
Donnelley Financial’s Participation in RRD’s Pension and Postretirement Benefit Plans
RRD provided pension and other postretirement healthcare benefits to certain current and former employees of Donnelley Financial. Prior to the Separation, RRD was responsible for the net benefit plan obligations associated with these plans, and as such, these liabilities are not reflected in Donnelley Financial’s unaudited condensed consolidated and combined balance sheets.
Donnelley Financial’s unaudited condensed consolidated and combined statements of operations include expense allocations for these benefits. These allocations were funded through intercompany transactions with RRD which are reflected within net parent company investment in Donnelley Financial. Total RRD pension and postretirement benefit plan net income allocated to Donnelley Financial, related to pension cost and postretirement benefits, was $1.3 million and $4.2 million in the three and nine months ended September 30, 2016, respectively. Included in these amounts is an allocation for other postretirement benefit plans for $0.3 million and $1.0 million in the three and nine months ended September 30, 2016, respectively. These allocations are reflected in the Company’s cost of sales and selling, general and administrative expenses.
Donnelley Financial’s Pension and Postretirement Benefit Plans
On October 1, 2016, Donnelley Financial recorded net pension plan liabilities of $68.3 million (consisting of a total benefit plan liability of $317.0 million, net of plan assets having fair market value of $248.7 million), as a result of the transfer of certain pension plan liabilities and assets from RRD to the Company upon the legal split of those plans. The pension plan asset allocation from RRD was finalized on June 30, 2017, which resulted in a $0.7 million decrease to the fair value of plan assets transferred to the Company from RRD. The Company also recorded a net other postretirement benefit liability of $1.5 million, as a result of the transfer of an other postretirement benefit plan from RRD to the Company.
The components of the estimated net pension plan income for Donnelley Financial’s pension plans for the three and nine months ended September 30, 2017 and 2016 were as follows:
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 30, |
|
|
September 30, |
|
||||||||||
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
Pension expense (income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
$ |
2.6 |
|
|
$ |
— |
|
|
$ |
7.9 |
|
|
$ |
— |
|
Expected return on assets |
|
(4.0 |
) |
|
|
— |
|
|
|
(12.0 |
) |
|
|
— |
|
Amortization, net |
|
0.6 |
|
|
|
(0.2 |
) |
|
|
1.6 |
|
|
|
(0.4 |
) |
Net pension income |
$ |
(0.8 |
) |
|
$ |
(0.2 |
) |
|
$ |
(2.5 |
) |
|
$ |
(0.4 |
) |
12
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
The Company’s equity as of December 31, 2016 and September 30, 2017, and changes during the nine months ended September 30, 2017, were as follows:
|
Total |
|
|
|
Equity |
|
|
Balance at December 31, 2016 |
$ |
111.1 |
|
Net earnings |
|
33.4 |
|
Other comprehensive income |
|
5.6 |
|
Separation-related adjustments |
|
0.2 |
|
Share-based compensation |
|
5.2 |
|
Issuance of common stock |
|
18.8 |
|
Issuance of share-based awards, net of withholdings and other |
|
(0.7 |
) |
Balance at September 30, 2017 |
$ |
173.6 |
|
Separation-related adjustments primarily relate to adjustments arising from the finalization of tax returns for periods prior to the Separation as well as settlement of balances due to or from RRD for activity prior to the Separation.
On June 21, 2017, the Company issued stock in conjunction with the underwritten public offering of the sale of the Company’s shares retained by RRD. The underwriters exercised their option to purchase approximately 0.9 million Option Shares. The Company received approximately $18.8 million in net proceeds from the sale of the Option Shares, after deducting estimated underwriting discounts and commissions. Refer to Note 1, Overview and Basis of Presentation, for further details.
The Company’s equity as of December 31, 2015 and September 30, 2016, and changes during the nine months ended September 30, 2016, were as follows:
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
Net Parent |
|
|
Other |
|
|
|
|
|
||
|
Company |
|
|
Comprehensive |
|
|
Total |
|
|||
|
Investment |
|
|
Loss |
|
|
Equity |
|
|||
Balance at December 31, 2015 |
$ |
639.5 |
|
|
$ |
(16.0 |
) |
|
$ |
623.5 |
|
Net earnings |
|
59.9 |
|
|
|
— |
|
|
|
59.9 |
|
Transfers from parent company, net |
|
(598.6 |
) |
|
|
— |
|
|
|
(598.6 |
) |
Other comprehensive income |
|
— |
|
|
|
3.8 |
|
|
|
3.8 |
|
Balance at September 30, 2016 |
$ |
100.8 |
|
|
$ |
(12.2 |
) |
|
$ |
88.6 |
|
Note 8. Earnings per Share
Basic earnings per share is calculated by dividing net earnings by the weighted average number of common shares outstanding for the period. In computing diluted earnings per share, basic earnings per share is adjusted for the assumed issuance of all potentially dilutive share-based awards, including restricted stock units and restricted stock.
On October 1, 2016, RRD distributed approximately 26.2 million shares of Donnelley Financial common stock to RRD shareholders in connection with the spin-off of Donnelley Financial, with RRD retaining approximately 6.2 million shares of Donnelley Financial common stock. Holders of RRD common stock received one share of Donnelley Financial for every eight shares of RRD common stock held on September 23, 2016. Basic and diluted earnings per common share and the average number of common shares outstanding were retrospectively restated for the number of Donnelley Financial shares outstanding immediately following this transaction. For periods prior to the Separation, basic and diluted earnings per share were calculated using the number of shares distributed and retained by RRD, totaling 32.4 million. The same number of shares was used to calculate basic and diluted earnings per share since there were no Donnelley Financial equity awards outstanding prior to the spin-off.
13
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. Upon consummation of the offering, RRD retained approximately 0.1 million shares of the Company’s common stock which were subsequently sold by RRD on August 1, 2017. Refer to Note 1, Overview and Basis of Presentation, for further details.
As a result of the Company adopting Accounting Standards Update 2016-09 “Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” beginning in the first quarter of 2017, excess tax benefits and tax deficiencies are excluded from the calculation of assumed proceeds when using the treasury stock method in calculating diluted earnings per share.
The reconciliation of the numerator and denominator of the basic and diluted earnings per share calculation and the anti-dilutive share-based awards for the three and nine months ended September 30, 2017 and 2016 were as follows:
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 30, |
|
|
September 30, |
|
||||||||||
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
Net earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.16 |
|
|
$ |
0.31 |
|
|
$ |
1.01 |
|
|
$ |
1.85 |
|
Diluted |
$ |
0.16 |
|
|
$ |
0.31 |
|
|
$ |
1.01 |
|
|
$ |
1.85 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
$ |
5.3 |
|
|
$ |
10.2 |
|
|
$ |
33.4 |
|
|
$ |
59.9 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
33.6 |
|
|
|
32.4 |
|
|
|
33.0 |
|
|
|
32.4 |
|
Dilutive awards |
|
0.2 |
|
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
Diluted weighted average number of common shares outstanding |
|
33.8 |
|
|
|
32.4 |
|
|
|
33.2 |
|
|
|
32.4 |
|
Weighted average number of anti-dilutive share-based awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units |
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
Stock options |
|
0.4 |
|
|
|
— |
|
|
|
0.3 |
|
|
|
— |
|
Total |
|
0.4 |
|
|
|
— |
|
|
|
0.5 |
|
|
|
— |
|
Note 9. Comprehensive Income
The components of other comprehensive income and income tax expense allocated to each component for the three and nine months ended September 30, 2017 and 2016 were as follows:
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
September 30, 2017 |
|
|
September 30, 2017 |
|
||||||||||||||||||
|
Before Tax |
|
|
Income Tax |
|
|
Net of Tax |
|
|
Before Tax |
|
|
Income Tax |
|
|
Net of Tax |
|
||||||
|
Amount |
|
|
Expense |
|
|
Amount |
|
|
Amount |
|
|
Expense |
|
|
Amount |
|
||||||
Translation adjustments |
$ |
2.2 |
|
|
$ |
— |
|
|
$ |
2.2 |
|
|
$ |
4.6 |
|
|
$ |
— |
|
|
$ |
4.6 |
|
Adjustment for net periodic pension plan and other postretirement benefits plan cost |
|
0.6 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
1.6 |
|
|
|
0.6 |
|
|
|
1.0 |
|
Other comprehensive income |
$ |
2.8 |
|
|
$ |
0.3 |
|
|
$ |
2.5 |
|
|
$ |
6.2 |
|
|
$ |
0.6 |
|
|
$ |
5.6 |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
September 30, 2016 |
|
|
September 30, 2016 |
|
||||||||||||||||||
|
Before Tax |
|
|
Income Tax |
|
|
Net of Tax |
|
|
Before Tax |
|
|
Income Tax |
|
|
Net of Tax |
|
||||||
|
Amount |
|
|
Expense |
|
|
Amount |
|
|
Amount |
|
|
Expense |
|
|
Amount |
|
||||||
Translation adjustments |
$ |
0.2 |
|
|
$ |
— |
|
|
$ |
0.2 |
|
|
$ |
4.2 |
|
|
$ |
— |
|
|
$ |
4.2 |
|
Adjustment for net periodic pension plan and other postretirement benefits plan cost |
|
(0.2 |
) |
|
|
— |
|
|
|
(0.2 |
) |
|
|
(0.4 |
) |
|
|
— |
|
|
|
(0.4 |
) |
Other comprehensive income |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3.8 |
|
|
$ |
— |
|
|
$ |
3.8 |
|
14
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Accumulated other comprehensive loss by component as of December 31, 2016 and September 30, 2017 were as follows:
|
Pension and Other Postretirement Benefits Plan Cost |
|
|
Translation Adjustments |
|
|
Total |
|
|||
Balance at December 31, 2016 |
$ |
(52.2 |
) |
|
$ |
(16.1 |
) |
|
$ |
(68.3 |
) |
Other comprehensive income before reclassifications |
|
— |
|
|
|
4.6 |
|
|
|
4.6 |
|
Amounts reclassified from accumulated other comprehensive loss |
|
1.0 |
|
|
|
— |
|
|
|
1.0 |
|
Net change in accumulated other comprehensive loss |
|
1.0 |
|
|
|
4.6 |
|
|
|
5.6 |
|
Balance at September 30, 2017 |
$ |
(51.2 |
) |
|
$ |
(11.5 |
) |
|
$ |
(62.7 |
) |
Accumulated other comprehensive loss by component as of December 31, 2015 and September 30, 2016 as follows:
|
Pension and Other Postretirement Benefits Plan Cost |
|
|
Translation Adjustments |
|
|
Total |
|
|||
Balance at December 31, 2015 |
$ |
— |
|
|
$ |
(16.0 |
) |
|
$ |
(16.0 |
) |
Other comprehensive income before reclassifications |
|
— |
|
|
|
4.2 |
|
|
|
4.2 |
|
Amounts reclassified from accumulated other comprehensive loss |
|
(0.4 |
) |
|
|
— |
|
|
|
(0.4 |
) |
Net change in accumulated other comprehensive loss |
|
(0.4 |
) |
|
|
4.2 |
|
|
|
3.8 |
|
Balance at September 30, 2016 |
$ |
(0.4 |
) |
|
$ |
(11.8 |
) |
|
$ |
(12.2 |
) |
Reclassifications from accumulated other comprehensive loss for the three and nine months ended September 30, 2017 and 2016 were as follows:
|
Three Months Ended |
|
|
Nine Months Ended |
|
Classification in the Condensed |
|||||||||||
|
September 30, |
|
|
September 30, |
|
Consolidated and Combined |
|||||||||||
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Statements of Operations |
|||||
Amortization of pension and other postretirement benefits plan cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial income (loss) |
$ |
0.6 |
|
|
$ |
(0.2 |
) |
|
$ |
1.6 |
|
|
$ |
(0.4 |
) |
(a) |
|
Reclassifications before tax |
|
0.6 |
|
|
|
(0.2 |
) |
|
|
1.6 |
|
|
|
(0.4 |
) |
|
|
Income tax expense |
|
0.3 |
|
|
|
— |
|
|
|
0.6 |
|
|
|
— |
|
|
|
Reclassifications, net of tax |
$ |
0.3 |
|
|
$ |
(0.2 |
) |
|
$ |
1.0 |
|
|
$ |
(0.4 |
) |
|
|
(a) |
These accumulated other comprehensive loss components are included in the calculation of net periodic pension and other postretirement benefits plan (income) expense, a component of which was allocated to Donnelley Financial in periods prior to the Separation, and recognized in cost of sales and selling, general and administrative expenses in the unaudited condensed consolidated and combined statements of operations (see Note 6, Retirement Plans). |
Note 10. Segment Information
The Company’s segments are summarized below:
United States
The U.S. segment serves capital market and investment market clients in the U.S. by delivering products and services to help create, manage, and deliver, accurate and timely financial communications to investors and regulators. The Company also provides virtual data rooms to facilitate the deal management requirements of capital markets and mergers and acquisitions transactions, and provides data and analytics services that help professionals uncover intelligence from disclosures contained within public filings made with the SEC. The U.S. segment also includes language solutions capabilities, through which the Company can translate documents and create content in up to 190 different languages for its clients, and commercial print.
15
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
The International segment includes the Company’s operations in Asia, Europe, Canada and Latin America. The international business is primarily focused on working with international capital markets clients on capital markets offerings and regulatory compliance related activities into or within the United States. In addition, the international segment provides language translation services and shareholder communication services to investment market clients.
Corporate
Corporate consists of unallocated selling, general and administrative activities and associated expenses including, in part, executive, legal, finance, communications and certain facility costs. In addition, certain costs and earnings of employee benefit plans, such as pension and other postretirement benefit plan expense (income) and allocated costs for share-based compensation, are included in Corporate and not allocated to the operating segments.
Information by Segment
The Company has disclosed income (loss) from operations as the primary measure of segment earnings (loss). This is the measure of profitability used by the Company’s chief operating decision-maker and is most consistent with the presentation of profitability reported within the consolidated and combined financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) |
|
|
Depreciation |
|
|
|
|
|
||
|
Total |
|
|
Intersegment |
|
|
Net |
|
|
from |
|
|
and |
|
|
Capital |
|
||||||
|
Sales |
|
|
Sales |
|
|
Sales |
|
|
Operations |
|
|
Amortization |
|
|
Expenditures |
|
||||||
Three Months Ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
$ |
188.9 |
|
|
$ |
(2.8 |
) |
|
$ |
186.1 |
|
|
$ |
22.4 |
|
|
$ |
9.2 |
|
|
$ |
7.7 |
|
International |
|
37.1 |
|
|
|
(0.6 |
) |
|
|
36.5 |
|
|
|
1.5 |
|
|
|
1.4 |
|
|
|
0.1 |
|
Total operating segments |
|
226.0 |
|
|
|
(3.4 |
) |
|
|
222.6 |
|
|
|
23.9 |
|
|
|
10.6 |
|
|
|
7.8 |
|
Corporate |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5.9 |
) |
|
|
— |
|
|
|
0.2 |
|
Total operations |
$ |
226.0 |
|
|
$ |
(3.4 |
) |
|
$ |
222.6 |
|
|
$ |
18.0 |
|
|
$ |
10.6 |
|
|
$ |
8.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) |
|
|
Depreciation |
|
|
|
|
|
||
|
Total |
|
|
Intersegment |
|
|
Net |
|
|
from |
|
|
and |
|
|
Capital |
|
||||||
|
Sales |
|
|
Sales |
|
|
Sales |
|
|
Operations |
|
|
Amortization |
|
|
Expenditures |
|
||||||
Three Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
$ |
193.6 |
|
|
$ |
(1.3 |
) |
|
$ |
192.3 |
|
|
$ |
18.7 |
|
|
$ |
8.5 |
|
|
$ |
1.3 |
|
International |
|
33.2 |
|
|
|
(1.1 |
) |
|
|
32.1 |
|
|
|
1.1 |
|
|
|
1.1 |
|
|
|
— |
|
Total operating segments |
|
226.8 |
|
|
|
(2.4 |
) |
|
|
224.4 |
|
|
|
19.8 |
|
|
|
9.6 |
|
|
|
1.3 |
|
Corporate |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.8 |
) |
|
|
0.2 |
|
|
|
0.4 |
|
Total operations |
$ |
226.8 |
|
|
$ |
(2.4 |
) |
|
$ |
224.4 |
|
|
$ |
18.0 |
|
|
$ |
9.8 |
|
|
$ |
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) |
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
||
|
Total |
|
|
Intersegment |
|
|
Net |
|
|
from |
|
|
Assets of |
|
|
and |
|
|
Capital |
|
|||||||
|
Sales |
|
|
Sales |
|
|
Sales |
|
|
Operations |
|
|
Operations |
|
|
Amortization |
|
|
Expenditures |
|
|||||||
Nine Months Ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
$ |
665.8 |
|
|
$ |
(7.6 |
) |
|
$ |
658.2 |
|
|
$ |
107.5 |
|
|
$ |
715.3 |
|
|
$ |
27.5 |
|
|
$ |
18.1 |
|
International |
|
124.8 |
|
|
|
(2.9 |
) |
|
|
121.9 |
|
|
|
7.6 |
|
|
|
96.0 |
|
|
|
4.2 |
|
|
|
0.8 |
|
Total operating segments |
|
790.6 |
|
|
|
(10.5 |
) |
|
|
780.1 |
|
|
|
115.1 |
|
|
|
811.3 |
|
|
|
31.7 |
|
|
|
18.9 |
|
Corporate |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(27.0 |
) |
|
|
122.4 |
|
|
|
— |
|
|
|
1.1 |
|
Total operations |
$ |
790.6 |
|
|
$ |
(10.5 |
) |
|
$ |
780.1 |
|
|
$ |
88.1 |
|
|
$ |
933.7 |
|
|
$ |
31.7 |
|
|
$ |
20.0 |
|
16
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) |
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
||
|
Total |
|
|
Intersegment |
|
|
Net |
|
|
from |
|
|
Assets of |
|
|
and |
|
|
Capital |
|
|||||||
|
Sales |
|
|
Sales |
|
|
Sales |
|
|
Operations |
|
|
Operations |
|
|
Amortization |
|
|
Expenditures |
|
|||||||
Nine Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
$ |
666.4 |
|
|
$ |
(4.0 |
) |
|
$ |
662.4 |
|
|
$ |
100.0 |
|
|
$ |
714.2 |
|
|
$ |
26.2 |
|
|
$ |
10.2 |
|
International |
|
103.9 |
|
|
|
(3.8 |
) |
|
|
100.1 |
|
|
|
7.2 |
|
|
|
99.9 |
|
|
|
3.2 |
|
|
|
1.2 |
|
Total operating segments |
|
770.3 |
|
|
|
(7.8 |
) |
|
|
762.5 |
|
|
|
107.2 |
|
|
|
814.1 |
|
|
|
29.4 |
|
|
|
11.4 |
|
Corporate |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7.7 |
) |
|
|
99.9 |
|
|
|
0.7 |
|
|
|
2.6 |
|
Total operations |
$ |
770.3 |
|
|
$ |
(7.8 |
) |
|
$ |
762.5 |
|
|
$ |
99.5 |
|
|
$ |
914.0 |
|
|
$ |
30.1 |
|
|
$ |
14.0 |
|
Note 11. Debt
On September 30, 2016, in connection with the Separation, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement provides for (i) a new senior secured term loan B facility in an aggregate principal amount of $350.0 million (the “Term Loan Credit Facility”) and (ii) a new first lien senior secured revolving credit facility in an aggregate principal amount of $300.0 million (the “Revolving Facility”, and, together with the Term Loan Credit Facility, the “Credit Facilities”). The Credit Agreement contains a number of covenants, including 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. The Credit Agreement generally allows annual dividend payments of up to $15.0 million in the aggregate. As of September 30, 2017, there were no outstanding borrowings under the Revolving Facility.
Borrowings under the Term Loan Credit Facility were used to provide $340.2 million of cash to RRD, pursuant to the Separation Agreement, as of September 30, 2016. The remainder of the net proceeds was used for general corporate purposes.
Pursuant to the Separation and Distribution Agreement, the Company received a cash payment of $68.0 million from RRD on April 3, 2017. The proceeds were used to reduce outstanding debt under the Term Loan Credit Facility.
On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. Upon the consummation of the offering, RRD retained approximately 0.1 million shares of the Company’s common stock of the offering which were subsequently sold by RRD on August 1, 2017. In conjunction with the underwritten public offering, the underwriters exercised their option to purchase approximately 0.9 million Option Shares. The Company received approximately $18.8 million in net proceeds from the sale of the Option Shares, after deducting estimated underwriting discounts and commissions. The proceeds were used to reduce outstanding debt under the Revolving Facility.
On October 2, 2017, the Company repriced the Term Loan Credit Facility. As a result, the interest rate was reduced by 100 basis points to LIBOR plus 3.0% and the LIBOR floor was reduced by 25 basis points to .75%. Additionally, under the amended Credit Agreement, principal payments are due on a quarterly basis. Other terms, including the outstanding principal, maturity date, and debt covenants such as the minimum Interest Coverage Ratio and the maximum Leverage Ratio are consistent with the original Credit Agreement.
17
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
On September 30, 2016, also in connection with the Separation, the Company issued $300.0 million of 8.25% senior unsecured notes due October 15, 2024 (the “Notes”). Interest on the Notes is payable semi-annually on April 15 and October 15, commencing on April 15, 2017. The issuance of the Notes was part of a debt exchange that resulted in the settlement of certain of RRD's bonds. The Notes were issued pursuant to an indenture where certain wholly-owned domestic subsidiaries of the Company guarantee the Notes (the “Guarantors”). The Notes are jointly and severally guaranteed, on an unsecured basis, by the Guarantors, which are comprised of each of the Company’s existing and future direct and indirect wholly-owned U.S. subsidiaries that guarantee the Company’s obligations under the Credit Facilities. The Notes are not guaranteed by the Company’s foreign subsidiaries or unrestricted subsidiaries. The Notes and the related guarantees will be the Company and the Guarantors’, respective, senior unsecured obligations and will rank equally in right of payment to all present and future senior debt, including the obligations under the Company’s Credit Facilities, senior in right of payment to all present and future subordinated debt, and effectively subordinated in right of payment to any of the Company and the Guarantors’ secured debt, to the extent of the value of the assets securing such debt. The indenture governing the Notes contains certain covenants applicable to the Company and its restricted subsidiaries, including limitations on: (1) liens; (2) indebtedness; (3) mergers, consolidations and acquisitions; (4) sales, transfers and other dispositions of assets; (5) loans and other investments; (6) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (7) restrictions affecting subsidiaries; (8) transactions with affiliates; and (9) designations of unrestricted subsidiaries. Each of these covenants is subject to important exceptions and qualifications.
In connection with the offering of the Notes, the Company entered into a registration rights agreement, dated as of September 30, 2016 (the “Registration Rights Agreement”), pursuant to which the Company agreed to file a registration statement with the SEC with respect to an offer to exchange the Notes for registered notes. In certain circumstances, the Company may be required to file a shelf registration statement with the SEC registering the resale of the Notes by the holders thereof, in lieu of an exchange offer to such holders. On March 10, 2017, the Company filed a Registration Statement on Form S-4 (as amended, the “Exchange Offer Registration Statement”) to offer to exchange the Notes for registered notes which have terms identical in all material respects to the Notes except that the registered notes are not subject to transfer restrictions or registration rights. The Exchange Offer Registration Statement was declared effective by the SEC on March 22, 2017. An exchange offer for the Notes was launched on March 22, 2017 and settled on April 25, 2017, resulting in the exchange of $299.9 million aggregate principal amount of outstanding Notes for registered notes.
The Company’s debt as of September 30, 2017 and December 31, 2016 consisted of the following:
|
September 30, |
|
|
December 31, |
|
||
|
2017 |
|
|
2016 |
|
||
8.25% senior notes due October 15, 2024 |
$ |
300.0 |
|
|
$ |
300.0 |
|
Term Loan Credit Facility |
|
198.5 |
|
|
|
298.3 |
|
Borrowings under the Revolving Facility |
|
— |
|
|
|
— |
|
Unamortized debt issuance costs |
|
(10.1 |
) |
|
|
(11.3 |
) |
Total debt |
|
488.4 |
|
|
|
587.0 |
|
Less: current portion |
|
— |
|
|
|
— |
|
Long-term debt |
$ |
488.4 |
|
|
$ |
587.0 |
|
The fair value of the senior notes, which was determined using the market approach based upon interest rates available to the Company for borrowings with similar terms and maturities, were determined to be Level 2 under the fair value hierarchy. The fair value of the Company’s senior notes was $322.2 million and $307.1 million at September 30, 2017 and December 31, 2016, respectively.
The weighted average interest rate on borrowings under the Revolving Facility was 4.4% at September 30, 2017.
Note 12. Commitments and Contingencies
Litigation
From time to time, the Company’s customers and others file voluntary petitions for reorganization under United States bankruptcy laws. In such cases, certain pre-petition payments received by the Company from these parties could be considered preference items and subject to return. In addition, the Company may be party to certain litigation arising in the ordinary course of business. Management believes that the final resolution of these preference items and litigation will not have a material effect on the Company’s consolidated and combined results of operations, financial position or cash flows.
18
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Note 13. Related Parties
On March 28, 2017, RRD completed the sale of 6.2 million shares of LSC common stock (RRD’s remaining ownership stake in LSC) in an underwritten public offering. As a result, beginning in the quarter ended June 30, 2017, LSC is no longer an affiliate of the Company.
On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock. RRD retained approximately 0.1 million shares of the Company’s common stock which RRD sold on August 1, 2017. Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party and the amounts disclosed related to RRD are presented through June 30, 2017 only.
Transition Services Agreements
In connection with the Separation, the Company entered into transition services agreements separately with RRD and LSC, under which, in exchange for the fees specified in the arrangements, RRD and LSC agree to provide certain services to the Company and the Company agrees to provide certain services to RRD, respectively, for up to 24 months following the Separation. These services include, but are not limited to, information technology, accounts receivable, accounts payable, payroll and other financial and administrative services and functions. These agreements facilitate the separation by allowing the Company to operate independently prior to establishing stand-alone back office systems across its organization.
Commercial Arrangements
The Company entered into a number of commercial and other arrangements with RRD and its subsidiaries. These include, among other things, arrangements for the provision of services, including global outsourcing and logistics services, printing and binding, digital printing, composition and access to technology. The Company also entered into a number of commercial and other arrangements with LSC and its subsidiaries, pursuant to which LSC will print and bind products for the Company. The terms of the arrangements with RRD and LSC do not exceed 24 months. Subsequent to the Separation, RRD and LSC are clients of the Company and expect to utilize financial communication software and services that the Company provides to all of its clients.
Stockholder and Registration Rights Agreement
The Company and RRD entered into a Stockholder and Registration Rights Agreement with respect to the Company’s common stock retained by RRD pursuant to which the Company agrees that, upon the request of RRD, the Company will use its reasonable best efforts to effect the registration under applicable federal and state securities laws of the shares of the Company’s common stock retained by RRD after the Separation. In addition, RRD granted the Company a proxy to vote the shares of the Company’s common stock that RRD retained immediately after the Separation in proportion to the votes cast by the Company’s other stockholders. This proxy, however, will be automatically revoked as to a particular share upon any sale or transfer of such share from RRD to a person other than RRD, and neither the voting agreement nor the proxy will limit or prohibit any such sale or transfer.
On March 24, 2017, pursuant to the Stockholder and Registration Rights Agreement, the Company filed a Registration Statement on Form S-1 to register the offering and sale of the Company’s common stock retained by RRD. The Registration Statement on Form S-1, as amended, was declared effective by the SEC on June 13, 2017. On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. Upon consummation of the offering, RRD retained approximately 0.1 million shares of the Company’s common stock which were subsequently sold by RRD on August 1, 2017.
Sublease Agreement
In connection with the Separation, the Company assumed an operating lease through 2024 for the Company’s headquarters. There is a related non-cancelable sublease rental to RRD for the same period. The Company remains secondarily liable under this lease in the event that the sub-lessee defaults under the sublease terms. The Company does not believe that material payments will be required as a result of the secondary liability provisions of the primary lease agreement.
19
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Related Party Receivables/Payables
Pursuant to the Separation and Distribution Agreement, the Company received a cash payment of $68.0 million from RRD on April 3, 2017. The proceeds were used to reduce outstanding debt under the Term Loan Credit Facility. The Company has other amounts due to or from RRD in the normal course of business. The Company had $96.0 million of receivables from RRD and $27.1 million of payables to RRD included in the condensed consolidated balance sheet at December 31, 2016.
Allocations from RRD
Prior to the Separation RRD provided Donnelley Financial with certain services, which include, but are not limited to information technology, finance, legal, human resources, internal audit, treasury, tax, investor relations and executive oversight. The financial information in these consolidated and combined financial statements does not necessarily include all the expenses that would have been incurred had Donnelley Financial been a separate, standalone entity for all periods presented. Prior to the Separation RRD charged Donnelley Financial for these services based on direct usage when possible. When specific identification was not practicable, the pro rata basis of revenue or employee headcount, or some other measure was used. These allocations were reflected as follows in the unaudited condensed consolidated and combined financial statements:
|
Three Months Ended |
|
|
Nine Months Ended |
|
||
|
September 30, 2016 |
|
|
September 30, 2016 |
|
||
Costs of goods sold allocation |
$ |
8.3 |
|
|
$ |
28.0 |
|
Selling, general and administrative allocation |
|
38.3 |
|
|
|
129.4 |
|
Depreciation and amortization |
|
5.3 |
|
|
|
15.2 |
|
Total allocations from RRD |
$ |
51.9 |
|
|
$ |
172.6 |
|
The Company considers the expense methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that the Company would have incurred as an independent public company or the costs it may incur in the future.
Related Party Revenues
Donnelley Financial generates a portion of net revenue from sales to RRD’s subsidiaries. Net revenues from sales to RRD and affiliates of $1.1 million and $3.6 million for the three and nine months ended September 30, 2016, respectively, were included in the unaudited condensed combined statement of operations.
Related Party Purchases
Donnelley Financial utilizes RRD for freight and logistics and services as well as certain production of printed products. Cost of sales of $11.5 million and $48.6 million for the three and nine months ended September 30, 2016, respectively, were included in the unaudited condensed combined statement of operations for these purchases.
Donnelley Financial also utilizes RRD’s business process outsourcing business for certain composition, XBRL and other functions. Cost of sales of $8.7 million and $29.4 million for the three and nine months ended September 30, 2016, respectively, were included in the unaudited condensed combined statement of operations for these purchases.
For periods prior to the Separation, intercompany payables with RRD and affiliates for these purchases are reflected within net parent company investment in the unaudited condensed consolidated and combined financial statements.
Share-Based Compensation Prior to Separation
Prior to the Separation, certain Donnelley Financial employees participated in RRD’s share-based compensation plans, the costs of which have been allocated to Donnelley Financial and recorded in selling, general and administrative expenses in the unaudited condensed combined statement of operations. Share-based compensation costs allocated to the Company were $0.2 million and $1.2 million for the three and nine months ended September 30, 2016, respectively.
20
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Retirement Plans Prior to Separation
Prior to the Separation, Donnelley Financial employees participated in pension and other postretirement plans sponsored by RRD. These costs are reflected in the Company’s cost of sales and selling, general and administrative expenses in the unaudited condensed consolidated and combined statements of operations. These costs were funded through intercompany transactions with RRD which are reflected within the net parent company investment.
On October 1, 2016, Donnelley Financial recorded net pension plan liabilities of $68.3 million (consisting of a total benefit plan liability of $317.0 million, net of plan assets having fair market value of $248.7 million), as a result of the transfer of certain pension plan liabilities and assets from RRD to the Company upon the legal split of those plans. The pension plan asset allocation from RRD was finalized on June 30, 2017, which resulted in a $0.7 million decrease to the fair value of plan assets transferred to the Company from RRD. Refer to Note 6, Retirement Plans, for further details regarding the Company’s pension and other postretirement benefit plans.
Centralized Cash Management Prior to Separation
RRD used a centralized approach to cash management and financing of operations. Prior to the Separation, the majority of the Company’s foreign subsidiaries were party to RRD’s international cash pooling arrangements to maximize the availability of cash for general operating and investing purposes. As part of RRD’s centralized cash management process, cash balances were swept regularly from the Company’s accounts. Cash transfers to and from RRD’s cash concentration accounts and the resulting balances at the end of each reporting period prior to the Separation are reflected in net parent company investment in the consolidated balance sheet.
Debt
RRD’s third party debt and related interest expense have not been allocated to the Company for any of the periods presented as the Company was not the legal obligor of the debt and the borrowings were not directly related to the Company’s business.
Note 14. New Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2017-07 “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”), which requires an employer to report the service cost component of net periodic benefit cost in the same line item(s) as other employee compensation costs arising from services rendered during the period. The other components of net periodic benefit cost will be presented in the income statement separately from the line item(s) that includes the service cost and outside of any subtotal of operating income. ASU 2017-07 must be applied retrospectively and is effective in the first quarter of 2018. Early adoption is permitted; however the Company plans to adopt the standard in the first quarter of 2018. Refer to Note 6, Retirement Plans, for disclosure of pension income for the nine months ended September 30, 2017 and 2016 which would be reclassified to other income upon adoption of the standard.
In January 2017, the FASB issued Accounting Standards Update No. 2017-04 “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”), which simplifies the accounting for goodwill impairment. ASU 2017-04 requires entities to record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (Step 1 under the current impairment test). The standard eliminates Step 2 from the current goodwill impairment test, which included determining the implied fair value of goodwill and comparing it with the carrying amount of that goodwill. ASU 2017-04 must be applied prospectively and is effective in the first quarter of 2020. Early adoption is permitted. The Company early adopted the standard in the first quarter of 2017.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02 “Leases (Topic 842)” (“ASU 2016-02”), which requires lessees to put most leases on the balance sheet but recognize expense on the income statement in a manner similar to current accounting. For lessors, ASU 2016-02 also modifies the classification criteria and the accounting for sales-type and direct financing leases. The standard requires a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements and is effective in the first quarter of 2019. Early adoption of ASU 2016-02 is permitted; however the Company plans to adopt the standard in the first quarter of 2019. The Company is evaluating the impact of ASU 2016-02.
21
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue using a five-step process that supersedes virtually all existing revenue guidance. ASU 2014-09 also requires additional quantitative and qualitative disclosures. In August 2015, the FASB issued Accounting Standards Update No. 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”), which defers the effective date of ASU 2014-09 to January 1, 2018. Early adoption of ASU 2014-09 is permitted in the first quarter of 2017. However, the Company plans to adopt the standard in the first quarter of 2018. The standard allows the option of either a full retrospective adoption, meaning the standard is applied to all periods presented, or a modified retrospective adoption, meaning the standard is applied only to the most current period. The Company is evaluating the impact of the provisions of ASU 2014-09 and currently anticipates applying the modified retrospective approach when adopting the standard.
22
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Note 15. Guarantor Financial Information
As described in Note 11, Debt, on September 30, 2016, the Company issued the Notes. The Guarantors of the Notes, Donnelley Financial, LLC and DFS International Holding, Inc., entered into an agreement pursuant to which each agreed to guarantee the Company’s obligations under the Notes. All guarantees are full and unconditional and joint and several. The Guarantors are 100% directly owned subsidiaries of the Company.
The guarantee of the Notes by a subsidiary guarantor will be automatically released under certain situations, including upon the sale or disposition of such subsidiary guarantor to a person that is not Donnelley Financial or a subsidiary guarantor of the notes, the liquidation or dissolution of such subsidiary guarantor, and if such subsidiary guarantor is released from its guarantee obligations under the Company’s Credit Facilities.
The following tables set forth condensed consolidating statements of income for the three and nine months ended September 30, 2017 and 2016, condensed consolidating statements of financial position as of September 30, 2017 and December 31, 2016, and condensed consolidating and combined statements of cash flows for the nine months ended September 30, 2017 and 2016. The principal consolidating adjustments are to eliminate the investment in subsidiaries and intercompany balances and transactions. For purposes of the tables below, the Company is referred to as “Parent” and the Guarantors are referred to as “Guarantor Subsidiaries.”
23
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Condensed Consolidating Statements of Operations
For the Three Months Ended September 30, 2017
|
Parent |
|
|
Guarantor Subsidiaries |
|
|
Non-guarantor Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services net sales |
$ |
— |
|
|
$ |
112.3 |
|
|
$ |
30.1 |
|
|
$ |
(2.1 |
) |
|
$ |
140.3 |
|
Products net sales |
|
— |
|
|
|
76.6 |
|
|
|
7.0 |
|
|
|
(1.3 |
) |
|
|
82.3 |
|
Total net sales |
|
— |
|
|
|
188.9 |
|
|
|
37.1 |
|
|
|
(3.4 |
) |
|
|
222.6 |
|
Services cost of sales (exclusive of depreciation and amortization) |
|
— |
|
|
|
63.6 |
|
|
|
20.1 |
|
|
|
(2.0 |
) |
|
|
81.7 |
|
Products cost of sales (exclusive of depreciation and amortization) |
|
— |
|
|
|
56.0 |
|
|
|
4.3 |
|
|
|
(1.4 |
) |
|
|
58.9 |
|
Total cost of sales |
|
— |
|
|
|
119.6 |
|
|
|
24.4 |
|
|
|
(3.4 |
) |
|
|
140.6 |
|
Selling, general and administrative expenses (exclusive of depreciation and amortization) |
|
— |
|
|
|
44.2 |
|
|
|
9.8 |
|
|
|
— |
|
|
|
54.0 |
|
Restructuring, impairment and other charges-net |
|
— |
|
|
|
(0.7 |
) |
|
|
0.1 |
|
|
|
— |
|
|
|
(0.6 |
) |
Depreciation and amortization |
|
— |
|
|
|
9.2 |
|
|
|
1.4 |
|
|
|
— |
|
|
|
10.6 |
|
Income from operations |
|
— |
|
|
|
16.6 |
|
|
|
1.4 |
|
|
|
— |
|
|
|
18.0 |
|
Interest expense-net |
|
10.2 |
|
|
|
0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
10.6 |
|
Earnings (loss) before income taxes and equity in net income of subsidiaries |
|
(10.2 |
) |
|
|
16.2 |
|
|
|
1.4 |
|
|
|
— |
|
|
|
7.4 |
|
Income tax (benefit) expense |
|
(5.1 |
) |
|
|
8.4 |
|
|
|
(1.2 |
) |
|
|
— |
|
|
|
2.1 |
|
Earnings (loss) before equity in net income of subsidiaries |
|
(5.1 |
) |
|
|
7.8 |
|
|
|
2.6 |
|
|
|
— |
|
|
|
5.3 |
|
Equity in net income of subsidiaries |
|
10.4 |
|
|
|
2.6 |
|
|
|
— |
|
|
|
(13.0 |
) |
|
|
— |
|
Net earnings (loss) |
$ |
5.3 |
|
|
$ |
10.4 |
|
|
$ |
2.6 |
|
|
$ |
(13.0 |
) |
|
$ |
5.3 |
|
Comprehensive income (loss) |
$ |
7.8 |
|
|
$ |
12.9 |
|
|
$ |
4.8 |
|
|
$ |
(17.7 |
) |
|
$ |
7.8 |
|
24
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Condensed Consolidating Statements of Operations
For the Nine Months Ended September 30, 2017
|
Parent |
|
|
Guarantor Subsidiaries |
|
|
Non-guarantor Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services net sales |
$ |
— |
|
|
$ |
386.7 |
|
|
$ |
91.2 |
|
|
$ |
(6.5 |
) |
|
$ |
471.4 |
|
Products net sales |
|
— |
|
|
|
279.1 |
|
|
|
33.6 |
|
|
|
(4.0 |
) |
|
|
308.7 |
|
Total net sales |
|
— |
|
|
|
665.8 |
|
|
|
124.8 |
|
|
|
(10.5 |
) |
|
|
780.1 |
|
Services cost of sales (exclusive of depreciation and amortization) |
|
— |
|
|
|
186.9 |
|
|
|
59.2 |
|
|
|
(5.9 |
) |
|
|
240.2 |
|
Services cost of sales with R.R. Donnelley affiliates (exclusive of depreciation and amortization)* |
|
— |
|
|
|
18.4 |
|
|
|
1.1 |
|
|
|
— |
|
|
|
19.5 |
|
Products cost of sales (exclusive of depreciation and amortization) |
|
— |
|
|
|
174.6 |
|
|
|
20.7 |
|
|
|
(4.6 |
) |
|
|
190.7 |
|
Products cost of sales with R.R. Donnelley affiliates (exclusive of depreciation and amortization)* |
|
— |
|
|
|
30.1 |
|
|
|
2.2 |
|
|
|
— |
|
|
|
32.3 |
|
Total cost of sales |
|
— |
|
|
|
410.0 |
|
|
|
83.2 |
|
|
|
(10.5 |
) |
|
|
482.7 |
|
Selling, general and administrative expenses (exclusive of depreciation and amortization) |
|
— |
|
|
|
142.6 |
|
|
|
28.6 |
|
|
|
— |
|
|
|
171.2 |
|
Restructuring, impairment and other charges-net |
|
— |
|
|
|
5.1 |
|
|
|
1.3 |
|
|
|
— |
|
|
|
6.4 |
|
Depreciation and amortization |
|
— |
|
|
|
27.5 |
|
|
|
4.2 |
|
|
|
— |
|
|
|
31.7 |
|
Income from operations |
|
— |
|
|
|
80.6 |
|
|
|
7.5 |
|
|
|
— |
|
|
|
88.1 |
|
Interest expense-net |
|
32.7 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
32.7 |
|
Earnings (loss) before income taxes and equity in net income of subsidiaries |
|
(32.7 |
) |
|
|
80.6 |
|
|
|
7.5 |
|
|
|
— |
|
|
|
55.4 |
|
Income tax (benefit) expense |
|
(14.4 |
) |
|
|
35.0 |
|
|
|
1.4 |
|
|
|
— |
|
|
|
22.0 |
|
Earnings (loss) before equity in net income of subsidiaries |
|
(18.3 |
) |
|
|
45.6 |
|
|
|
6.1 |
|
|
|
— |
|
|
|
33.4 |
|
Equity in net income of subsidiaries |
|
51.7 |
|
|
|
6.1 |
|
|
|
— |
|
|
|
(57.8 |
) |
|
|
— |
|
Net earnings |
$ |
33.4 |
|
|
$ |
51.7 |
|
|
$ |
6.1 |
|
|
$ |
(57.8 |
) |
|
$ |
33.4 |
|
Comprehensive income |
$ |
39.0 |
|
|
$ |
57.3 |
|
|
$ |
10.7 |
|
|
$ |
(68.0 |
) |
|
$ |
39.0 |
|
* |
Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party, therefore the amounts disclosed related to RRD are presented through June 30, 2017 only. |
25
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Condensed Consolidating Statements of Operations
For the Three Months Ended September 30, 2016
|
Parent |
|
|
Guarantor Subsidiaries |
|
|
Non-guarantor Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services net sales |
$ |
— |
|
|
$ |
115.5 |
|
|
$ |
25.5 |
|
|
$ |
(1.6 |
) |
|
$ |
139.4 |
|
Products net sales |
|
— |
|
|
|
78.1 |
|
|
|
7.7 |
|
|
|
(0.8 |
) |
|
|
85.0 |
|
Total net sales |
|
— |
|
|
|
193.6 |
|
|
|
33.2 |
|
|
|
(2.4 |
) |
|
|
224.4 |
|
Services cost of sales (exclusive of depreciation and amortization) |
|
— |
|
|
|
49.3 |
|
|
|
16.4 |
|
|
|
(1.5 |
) |
|
|
64.2 |
|
Services cost of sales with R.R. Donnelley affiliates (exclusive of depreciation and amortization) |
|
— |
|
|
|
8.2 |
|
|
|
0.5 |
|
|
|
— |
|
|
|
8.7 |
|
Products cost of sales (exclusive of depreciation and amortization) |
|
— |
|
|
|
57.7 |
|
|
|
5.2 |
|
|
|
(0.9 |
) |
|
|
62.0 |
|
Products cost of sales with R.R. Donnelley affiliates (exclusive of depreciation and amortization) |
|
— |
|
|
|
11.5 |
|
|
|
— |
|
|
|
— |
|
|
|
11.5 |
|
Total cost of sales |
|
— |
|
|
|
126.7 |
|
|
|
22.1 |
|
|
|
(2.4 |
) |
|
|
146.4 |
|
Selling, general and administrative expenses (exclusive of depreciation and amortization) |
|
— |
|
|
|
39.9 |
|
|
|
8.6 |
|
|
|
— |
|
|
|
48.5 |
|
Restructuring, impairment and other charges-net |
|
— |
|
|
|
1.4 |
|
|
|
0.3 |
|
|
|
— |
|
|
|
1.7 |
|
Depreciation and amortization |
|
— |
|
|
|
8.7 |
|
|
|
1.1 |
|
|
|
— |
|
|
|
9.8 |
|
Income from operations |
|
— |
|
|
|
16.9 |
|
|
|
1.1 |
|
|
|
— |
|
|
|
18.0 |
|
Interest expense (income) –net |
|
— |
|
|
|
(0.2 |
) |
|
|
0.1 |
|
|
|
— |
|
|
|
(0.1 |
) |
Earnings before income taxes and equity in net income of subsidiaries |
|
— |
|
|
|
17.1 |
|
|
|
1.0 |
|
|
|
— |
|
|
|
18.1 |
|
Income tax (benefit) expense |
|
— |
|
|
|
9.5 |
|
|
|
(1.6 |
) |
|
|
— |
|
|
|
7.9 |
|
Earnings before equity in net income of subsidiaries |
|
— |
|
|
|
7.6 |
|
|
|
2.6 |
|
|
|
— |
|
|
|
10.2 |
|
Equity in net income of subsidiaries |
|
10.2 |
|
|
|
2.6 |
|
|
|
— |
|
|
|
(12.8 |
) |
|
|
— |
|
Net earnings |
$ |
10.2 |
|
|
$ |
10.2 |
|
|
$ |
2.6 |
|
|
$ |
(12.8 |
) |
|
$ |
10.2 |
|
Comprehensive income |
$ |
10.2 |
|
|
$ |
10.2 |
|
|
$ |
2.8 |
|
|
$ |
(13.0 |
) |
|
$ |
10.2 |
|
26
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Condensed Consolidating Statements of Operations
For the Nine Months Ended September 30, 2016
|
Parent |
|
|
Guarantor Subsidiaries |
|
|
Non-guarantor Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services net sales |
$ |
— |
|
|
$ |
381.9 |
|
|
$ |
77.3 |
|
|
$ |
(5.1 |
) |
|
$ |
454.1 |
|
Products net sales |
|
— |
|
|
|
284.5 |
|
|
|
26.6 |
|
|
|
(2.7 |
) |
|
|
308.4 |
|
Total net sales |
|
— |
|
|
|
666.4 |
|
|
|
103.9 |
|
|
|
(7.8 |
) |
|
|
762.5 |
|
Services cost of sales (exclusive of depreciation and amortization) |
|
— |
|
|
|
170.0 |
|
|
|
49.4 |
|
|
|
(4.8 |
) |
|
|
214.6 |
|
Services cost of sales with R.R. Donnelley affiliates (exclusive of depreciation and amortization) |
|
— |
|
|
|
27.8 |
|
|
|
1.6 |
|
|
|
— |
|
|
|
29.4 |
|
Products cost of sales (exclusive of depreciation and amortization) |
|
— |
|
|
|
164.6 |
|
|
|
18.3 |
|
|
|
(3.0 |
) |
|
|
179.9 |
|
Products cost of sales with R.R. Donnelley affiliates (exclusive of depreciation and amortization) |
|
— |
|
|
|
48.6 |
|
|
|
— |
|
|
|
— |
|
|
|
48.6 |
|
Total cost of sales |
|
— |
|
|
|
411.0 |
|
|
|
69.3 |
|
|
|
(7.8 |
) |
|
|
472.5 |
|
Selling, general and administrative expenses (exclusive of depreciation and amortization) |
|
— |
|
|
|
133.1 |
|
|
|
23.7 |
|
|
|
— |
|
|
|
156.8 |
|
Restructuring, impairment and other charges-net |
|
— |
|
|
|
3.1 |
|
|
|
0.5 |
|
|
|
— |
|
|
|
3.6 |
|
Depreciation and amortization |
|
— |
|
|
|
26.9 |
|
|
|
3.2 |
|
|
|
— |
|
|
|
30.1 |
|
Income from operations |
|
— |
|
|
|
92.3 |
|
|
|
7.2 |
|
|
|
— |
|
|
|
99.5 |
|
Interest expense-net |
|
— |
|
|
|
0.2 |
|
|
|
0.1 |
|
|
|
— |
|
|
|
0.3 |
|
Earnings before income taxes and equity in net income of subsidiaries |
|
— |
|
|
|
92.1 |
|
|
|
7.1 |
|
|
|
— |
|
|
|
99.2 |
|
Income tax expense |
|
— |
|
|
|
38.6 |
|
|
|
0.7 |
|
|
|
— |
|
|
|
39.3 |
|
Earnings before equity in net income of subsidiaries |
|
— |
|
|
|
53.5 |
|
|
|
6.4 |
|
|
|
— |
|
|
|
59.9 |
|
Equity in net income of subsidiaries |
|
59.9 |
|
|
|
6.4 |
|
|
|
— |
|
|
|
(66.3 |
) |
|
|
— |
|
Net earnings |
$ |
59.9 |
|
|
$ |
59.9 |
|
|
$ |
6.4 |
|
|
$ |
(66.3 |
) |
|
$ |
59.9 |
|
Comprehensive income |
$ |
63.7 |
|
|
$ |
63.7 |
|
|
$ |
10.6 |
|
|
$ |
(74.3 |
) |
|
$ |
63.7 |
|
27
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Condensed Consolidating Balance Sheet
As of September 30, 2017
|
Parent |
|
|
Guarantor Subsidiaries |
|
|
Non-guarantor Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
0.2 |
|
|
$ |
21.3 |
|
|
$ |
10.7 |
|
|
$ |
— |
|
|
$ |
32.2 |
|
Receivables, less allowances |
|
— |
|
|
|
177.7 |
|
|
|
41.6 |
|
|
|
— |
|
|
|
219.3 |
|
Intercompany receivables |
|
— |
|
|
|
80.5 |
|
|
|
— |
|
|
|
(80.5 |
) |
|
|
— |
|
Intercompany short-term note receivable |
|
— |
|
|
|
— |
|
|
|
35.0 |
|
|
|
(35.0 |
) |
|
|
— |
|
Inventories |
|
— |
|
|
|
21.2 |
|
|
|
2.4 |
|
|
|
— |
|
|
|
23.6 |
|
Prepaid expenses and other current assets |
|
7.3 |
|
|
|
7.1 |
|
|
|
3.6 |
|
|
|
(2.9 |
) |
|
|
15.1 |
|
Total current assets |
|
7.5 |
|
|
|
307.8 |
|
|
|
93.3 |
|
|
|
(118.4 |
) |
|
|
290.2 |
|
Property, plant and equipment-net |
|
— |
|
|
|
31.4 |
|
|
|
3.3 |
|
|
|
— |
|
|
|
34.7 |
|
Goodwill |
|
— |
|
|
|
429.2 |
|
|
|
18.3 |
|
|
|
— |
|
|
|
447.5 |
|
Other intangible assets-net |
|
— |
|
|
|
35.2 |
|
|
|
9.0 |
|
|
|
— |
|
|
|
44.2 |
|
Software-net |
|
— |
|
|
|
41.5 |
|
|
|
0.4 |
|
|
|
— |
|
|
|
41.9 |
|
Deferred income taxes |
|
— |
|
|
|
32.6 |
|
|
|
4.0 |
|
|
|
— |
|
|
|
36.6 |
|
Other noncurrent assets |
|
3.7 |
|
|
|
30.2 |
|
|
|
4.7 |
|
|
|
— |
|
|
|
38.6 |
|
Investments in consolidated subsidiaries |
|
750.3 |
|
|
|
85.2 |
|
|
|
— |
|
|
|
(835.5 |
) |
|
|
— |
|
Total assets |
$ |
761.5 |
|
|
$ |
993.1 |
|
|
$ |
133.0 |
|
|
$ |
(953.9 |
) |
|
$ |
933.7 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
$ |
— |
|
|
$ |
61.5 |
|
|
$ |
12.9 |
|
|
$ |
— |
|
|
$ |
74.4 |
|
Intercompany payable |
|
64.5 |
|
|
|
— |
|
|
|
16.0 |
|
|
|
(80.5 |
) |
|
|
— |
|
Intercompany short-term note payable |
|
35.0 |
|
|
|
— |
|
|
|
— |
|
|
|
(35.0 |
) |
|
|
— |
|
Accrued liabilities |
|
— |
|
|
|
97.9 |
|
|
|
15.1 |
|
|
|
(2.9 |
) |
|
|
110.1 |
|
Total current liabilities |
|
99.5 |
|
|
|
159.4 |
|
|
|
44.0 |
|
|
|
(118.4 |
) |
|
|
184.5 |
|
Long-term debt |
|
488.4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
488.4 |
|
Deferred compensation liabilities |
|
— |
|
|
|
24.6 |
|
|
|
— |
|
|
|
— |
|
|
|
24.6 |
|
Pension and other postretirement benefits plan liabilities |
|
— |
|
|
|
50.2 |
|
|
|
1.2 |
|
|
|
— |
|
|
|
51.4 |
|
Other noncurrent liabilities |
|
— |
|
|
|
8.6 |
|
|
|
2.6 |
|
|
|
— |
|
|
|
11.2 |
|
Total liabilities |
|
587.9 |
|
|
|
242.8 |
|
|
|
47.8 |
|
|
|
(118.4 |
) |
|
|
760.1 |
|
Total equity |
|
173.6 |
|
|
|
750.3 |
|
|
|
85.2 |
|
|
|
(835.5 |
) |
|
|
173.6 |
|
Total liabilities and equity |
$ |
761.5 |
|
|
$ |
993.1 |
|
|
$ |
133.0 |
|
|
$ |
(953.9 |
) |
|
$ |
933.7 |
|
28
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Condensed Consolidating Balance Sheet
As of December 31, 2016
|
Parent |
|
|
Guarantor Subsidiaries |
|
|
Non-guarantor Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
— |
|
|
$ |
21.8 |
|
|
$ |
16.8 |
|
|
$ |
(2.4 |
) |
|
$ |
36.2 |
|
Receivables, less allowances |
|
— |
|
|
|
119.9 |
|
|
|
36.3 |
|
|
|
— |
|
|
|
156.2 |
|
Receivables from R.R. Donnelley |
|
68.0 |
|
|
|
28.0 |
|
|
|
— |
|
|
|
— |
|
|
|
96.0 |
|
Intercompany receivables |
|
— |
|
|
|
63.0 |
|
|
|
— |
|
|
|
(63.0 |
) |
|
|
— |
|
Intercompany short-term note receivable |
|
— |
|
|
|
— |
|
|
|
15.3 |
|
|
|
(15.3 |
) |
|
|
— |
|
Inventories |
|
— |
|
|
|
22.7 |
|
|
|
1.4 |
|
|
|
— |
|
|
|
24.1 |
|
Prepaid expenses and other current assets |
|
4.3 |
|
|
|
8.1 |
|
|
|
4.7 |
|
|
|
— |
|
|
|
17.1 |
|
Total current assets |
|
72.3 |
|
|
|
263.5 |
|
|
|
74.5 |
|
|
|
(80.7 |
) |
|
|
329.6 |
|
Property, plant and equipment-net |
|
— |
|
|
|
32.4 |
|
|
|
3.1 |
|
|
|
— |
|
|
|
35.5 |
|
Goodwill |
|
— |
|
|
|
429.2 |
|
|
|
17.2 |
|
|
|
— |
|
|
|
446.4 |
|
Other intangible assets-net |
|
— |
|
|
|
44.0 |
|
|
|
10.3 |
|
|
|
— |
|
|
|
54.3 |
|
Software-net |
|
— |
|
|
|
41.0 |
|
|
|
0.6 |
|
|
|
— |
|
|
|
41.6 |
|
Deferred income taxes |
|
— |
|
|
|
34.2 |
|
|
|
2.8 |
|
|
|
— |
|
|
|
37.0 |
|
Other noncurrent assets |
|
4.4 |
|
|
|
27.7 |
|
|
|
2.4 |
|
|
|
— |
|
|
|
34.5 |
|
Investments in consolidated subsidiaries |
|
692.2 |
|
|
|
65.1 |
|
|
|
— |
|
|
|
(757.3 |
) |
|
|
— |
|
Total assets |
$ |
768.9 |
|
|
$ |
937.1 |
|
|
$ |
110.9 |
|
|
$ |
(838.0 |
) |
|
$ |
978.9 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
$ |
3.4 |
|
|
$ |
72.8 |
|
|
$ |
11.5 |
|
|
$ |
(2.4 |
) |
|
$ |
85.3 |
|
Intercompany payable |
|
43.9 |
|
|
|
— |
|
|
|
18.6 |
|
|
|
(62.5 |
) |
|
|
— |
|
Intercompany short-term note payable |
|
15.3 |
|
|
|
— |
|
|
|
— |
|
|
|
(15.3 |
) |
|
|
— |
|
Accrued liabilities |
|
8.2 |
|
|
|
81.4 |
|
|
|
11.6 |
|
|
|
(0.5 |
) |
|
|
100.7 |
|
Total current liabilities |
|
70.8 |
|
|
|
154.2 |
|
|
|
41.7 |
|
|
|
(80.7 |
) |
|
|
186.0 |
|
Long-term debt |
|
587.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
587.0 |
|
Deferred compensation liabilities |
|
— |
|
|
|
24.4 |
|
|
|
— |
|
|
|
— |
|
|
|
24.4 |
|
Pension and other postretirement benefits plan liabilities |
|
— |
|
|
|
55.3 |
|
|
|
1.1 |
|
|
|
— |
|
|
|
56.4 |
|
Other noncurrent liabilities |
|
— |
|
|
|
11.0 |
|
|
|
3.0 |
|
|
|
— |
|
|
|
14.0 |
|
Total liabilities |
|
657.8 |
|
|
|
244.9 |
|
|
|
45.8 |
|
|
|
(80.7 |
) |
|
|
867.8 |
|
Total equity |
|
111.1 |
|
|
|
692.2 |
|
|
|
65.1 |
|
|
|
(757.3 |
) |
|
|
111.1 |
|
Total liabilities and equity |
$ |
768.9 |
|
|
$ |
937.1 |
|
|
$ |
110.9 |
|
|
$ |
(838.0 |
) |
|
$ |
978.9 |
|
29
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Condensed Consolidating Statements of Cash Flows
For the Nine Months Ended September 30, 2017
|
Parent |
|
|
Guarantor Subsidiaries |
|
|
Non-guarantor Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
$ |
(4.3 |
) |
|
$ |
21.8 |
|
|
$ |
13.8 |
|
|
$ |
2.4 |
|
|
$ |
33.7 |
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
— |
|
|
|
(19.2 |
) |
|
|
(0.8 |
) |
|
|
— |
|
|
|
(20.0 |
) |
Purchase of investment |
|
— |
|
|
|
(3.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3.4 |
) |
Intercompany note receivable |
|
— |
|
|
|
— |
|
|
|
(19.7 |
) |
|
|
19.7 |
|
|
|
— |
|
Other investing activities |
|
— |
|
|
|
0.3 |
|
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
Net cash provided by (used in) investing activities |
|
— |
|
|
|
(22.3 |
) |
|
|
(20.5 |
) |
|
|
19.7 |
|
|
|
(23.1 |
) |
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving facility borrowings |
|
230.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
230.0 |
|
Payments on revolving facility borrowings |
|
(230.0 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(230.0 |
) |
Payments on long-term debt |
|
(100.0 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(100.0 |
) |
Debt issuance costs |
|
(1.5 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.5 |
) |
Separation-related payment from R.R. Donnelley |
|
68.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
68.0 |
|
Proceeds from the issuance of common stock |
|
18.8 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18.8 |
|
Treasury stock repurchases |
|
(0.9 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.9 |
) |
Intercompany note payable |
|
19.7 |
|
|
|
— |
|
|
|
— |
|
|
|
(19.7 |
) |
|
|
— |
|
Other financing activities |
|
0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
Net cash provided by (used in) financing activities |
|
4.5 |
|
|
|
— |
|
|
|
— |
|
|
|
(19.7 |
) |
|
|
(15.2 |
) |
Effect of exchange rate on cash and cash equivalents |
|
— |
|
|
|
— |
|
|
|
0.6 |
|
|
|
— |
|
|
|
0.6 |
|
Net (decrease) increase in cash and cash equivalents |
|
0.2 |
|
|
|
(0.5 |
) |
|
|
(6.1 |
) |
|
|
2.4 |
|
|
|
(4.0 |
) |
Cash and cash equivalents at beginning of year |
|
— |
|
|
|
21.8 |
|
|
|
16.8 |
|
|
|
(2.4 |
) |
|
|
36.2 |
|
Cash and cash equivalents at end of period |
$ |
0.2 |
|
|
$ |
21.3 |
|
|
$ |
10.7 |
|
|
$ |
— |
|
|
$ |
32.2 |
|
30
Donnelley Financial Solutions, Inc.
Notes to the Unaudited Condensed Consolidated and Combined Financial Statements
(in millions, except per share data, unless otherwise indicated)
Condensed Consolidating Statements of Cash Flows
For the Nine Months Ended September 30, 2016
|
Parent |
|
|
Guarantor Subsidiaries |
|
|
Non-guarantor Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
$ |
— |
|
|
$ |
52.6 |
|
|
$ |
4.2 |
|
|
$ |
— |
|
|
$ |
56.8 |
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
— |
|
|
|
(12.8 |
) |
|
|
(1.2 |
) |
|
|
— |
|
|
|
(14.0 |
) |
Purchase of investment |
|
— |
|
|
|
(3.5 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3.5 |
) |
Other investing activities |
|
— |
|
|
|
— |
|
|
|
0.5 |
|
|
|
— |
|
|
|
0.5 |
|
Net cash used in investing activities |
|
— |
|
|
|
(16.3 |
) |
|
|
(0.7 |
) |
|
|
— |
|
|
|
(17.0 |
) |
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt issuance costs |
|
(9.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9.3 |
) |
Proceeds from issuance of long-term debt |
|
348.2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
348.2 |
|
Net change in short-term debt |
|
— |
|
|
|
— |
|
|
|
(8.8 |
) |
|
|
— |
|
|
|
(8.8 |
) |
Net transfers to Parent and affiliates |
|
(338.9 |
) |
|
|
(9.1 |
) |
|
|
11.8 |
|
|
|
— |
|
|
|
(336.2 |
) |
Net cash (used in) provided by financing activities |
|
— |
|
|
|
(9.1 |
) |
|
|
3.0 |
|
|
|
— |
|
|
|
(6.1 |
) |
Effect of exchange rate on cash and cash equivalents |
|
— |
|
|
|
— |
|
|
|
4.2 |
|
|
|
— |
|
|
|
4.2 |
|
Net increase in cash and cash equivalents |
|
— |
|
|
|
27.2 |
|
|
|
10.7 |
|
|
|
— |
|
|
|
37.9 |
|
Cash and cash equivalents at beginning of year |
|
— |
|
|
|
0.1 |
|
|
|
15.0 |
|
|
|
— |
|
|
|
15.1 |
|
Cash and cash equivalents at end of period |
$ |
— |
|
|
$ |
27.3 |
|
|
$ |
25.7 |
|
|
$ |
— |
|
|
$ |
53.0 |
|
31
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Company Overview
Donnelley Financial Solutions, Inc. (“Donnelley Financial,” or the “Company”) is a financial communications services company that supports global capital markets compliance and transaction needs for its corporate clients and their advisors (such as law firms and investment bankers) and global investment management compliance and analytics needs for mutual fund companies, variable annuity providers and broker/dealers. The Company provides content management, multi-channel content distribution, data management and analytics services, collaborative workflow and business reporting tools, and translations and other language services in support of its clients’ communications requirements. The Company operates in two business segments:
|
• |
United States. The U.S. segment is comprised of three reporting units: capital markets, investment markets, and language solutions and other. The Company services capital market and investment market clients in the U.S by delivering products and services to help create, manage and deliver financial communications to investors and regulators. The Company provides capital market and investment market clients with communication tools and services to allow them to comply with their ongoing regulatory filings. In addition, the U.S. segment provides clients with communications services to create, manage and deliver registration statements, prospectuses, proxies and other communications to regulators and investors. The U.S. segment also includes language solutions and commercial printing capabilities. |
|
• |
International. The International segment includes operations in Asia, Europe, Canada and Latin America. The international business is primarily focused on working with international capital markets clients on capital markets offerings and regulatory compliance related activities within the United States. In addition, the International segment provides services to international investment market clients to allow them to comply with applicable U.S. Securities and Exchange Commission (“SEC”) regulations, as well as language solutions to international clients. |
The Company reports certain unallocated selling, general and administrative activities and associated expenses within “Corporate”, including, in part, executive, legal, finance, marketing and certain facility costs. In addition, certain costs and earnings of employee benefit plans, such as pension income and share-based compensation, are included in Corporate and are not allocated to the reportable segments. Prior to the Separation (as defined below), many of these costs were based on allocations from R.R. Donnelley & Sons Company (“RRD”); however, the Company now incurs such costs directly.
For the Company’s financial results and the presentation of certain other financial information by segment, see Note 10, Segment Information, to the Unaudited Condensed Consolidated and Combined Financial Statements.
Products and Services
The Company separately reports its net sales and related cost of sales for its products and services offerings. The Company’s services offerings consist of all non-print offerings, including document composition, compliance related EDGAR filing services, transaction solutions, data and analytics, content storage services and language solutions. The Company’s product offerings primarily consist of conventional and digital printed products and related distribution costs.
Spin-off Transaction
On October 1, 2016, Donnelley Financial became an independent publicly traded company through the distribution by RRD of approximately 26.2 million shares, or 80.75%, of Donnelley Financial common stock to RRD shareholders (the “Separation”). Holders of RRD common stock received one share of Donnelley Financial common stock for every eight shares of RRD common stock held on September 23, 2016. RRD retained approximately 6.2 million shares of Donnelley Financial common stock, or a 19.25% interest (as of the Separation date) in Donnelley Financial, as part of the Separation.
Donnelley Financial’s common stock began regular-way trading under the ticker symbol “DFIN” on the New York Stock Exchange on October 3, 2016. On October 1, 2016, RRD also completed the previously announced separation of LSC Communications, Inc. (“LSC”), its publishing and retail-centric print services and office products business. On March 28, 2017, RRD completed the sale of 6.2 million shares of LSC common stock (RRD’s remaining ownership stake in LSC) in an underwritten public offering. As a result, beginning in the quarter ended June 30, 2017, LSC is no longer an affiliate of the Company.
32
On March 24, 2017, pursuant to the Stockholder and Registration Rights Agreement, the Company filed a Registration Statement on Form S-1 to register the offering and sale of the Company’s common stock retained by RRD. The Registration Statement on Form S-1, as amended, was declared effective by the SEC on June 13, 2017. On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. RRD retained approximately 0.1 million shares of the Company’s common stock upon consummation of the offering which were subsequently sold by RRD on August 1, 2017. In conjunction with the underwritten public offering, the underwriters exercised their option to purchase approximately 0.9 million of the Company’s shares (the “Option Shares”). The Company received approximately $18.8 million in net proceeds from the sale of the Option Shares, after deducting estimated underwriting discounts and commissions. The proceeds were used to reduce outstanding debt under the Revolving Facility (as defined in Liquidity and Capital Resources).
Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party, therefore amounts disclosed related to RRD are presented through June 30, 2017 only.
Executive Overview
Third Quarter Overview
Net sales decreased by $1.8 million, or 0.8%, for the third quarter of 2017 compared to the same period in the prior year. There was a $0.3 million, or 0.1%, increase due to changes in foreign exchange rates. Net sales decreased primarily due to lower volumes in capital markets transactions, partially offset by higher volumes in mutual fund print and print-related services and capital markets compliance.
Non-GAAP Measures
The Company believes that certain Non-GAAP measures, such as Non-GAAP adjusted EBITDA, provide useful information about the Company’s operating results and enhance the overall ability to assess the Company’s financial performance. The Company uses these measures, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business. Non-GAAP adjusted EBITDA allows investors to make a more meaningful comparison between the Company’s core business operating results over different periods of time. The Company believes that Non-GAAP adjusted EBITDA, when viewed with the Company’s results under GAAP and the accompanying reconciliations, provides useful information about the Company’s business without regard to potential distortions. By eliminating potential differences in results of operations between periods caused by factors such as depreciation and amortization methods, 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 can provide a useful additional basis for comparing the current performance of the underlying operations being evaluated.
Non-GAAP adjusted EBITDA is not presented in accordance with GAAP and has important limitations as an analytical tool. These measures should not be considered as a substitute for analysis of the Company’s results as reported under GAAP. In addition, these measures are defined differently by different companies in our industry and, accordingly, such measures may not be comparable to similarly-titled measures of other companies.
In addition to the factors listed above, the following items are excluded from Non-GAAP adjusted EBITDA:
|
• |
Share-based compensation expense. Although share-based compensation is a key incentive offered to certain of the Company’s employees, business performance is evaluated excluding share-based compensation expenses. Depending upon the size, timing and the terms of grants, non-cash compensation expense may vary but will recur in future periods. Prior periods have been revised to reflect this adjustment. |
|
• |
Spin-off related transaction expenses. The Company has incurred expenses related to the Separation to operate as a standalone publicly traded company. These expenses include third-party consulting fees, employee retention payments, legal fees and other costs related to the Separation. Management does not believe that these expenses are reflective of ongoing operating results. This adjustment does not include expenses incurred prior to the Separation. |
33
A reconciliation of GAAP net earnings to Non-GAAP adjusted EBITDA for the three and nine months ended September 30, 2017 and 2016 for these adjustments is presented in the following table:
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
(in millions) |
|
|||||||||||||
Net earnings |
$ |
5.3 |
|
|
$ |
10.2 |
|
|
$ |
33.4 |
|
|
$ |
59.9 |
|
Restructuring, impairment and other charges—net |
|
(0.6 |
) |
|
|
1.7 |
|
|
|
6.4 |
|
|
|
3.6 |
|
Share-based compensation expense |
|
1.7 |
|
|
|
0.2 |
|
|
|
5.2 |
|
|
|
1.2 |
|
Spin-off related transaction expenses |
|
2.6 |
|
|
|
— |
|
|
|
9.8 |
|
|
|
— |
|
Depreciation and amortization |
|
10.6 |
|
|
|
9.8 |
|
|
|
31.7 |
|
|
|
30.1 |
|
Interest expense (income)—net |
|
10.6 |
|
|
|
(0.1 |
) |
|
|
32.7 |
|
|
|
0.3 |
|
Income tax expense |
|
2.1 |
|
|
|
7.9 |
|
|
|
22.0 |
|
|
|
39.3 |
|
Non-GAAP adjusted EBITDA |
$ |
32.3 |
|
|
$ |
29.7 |
|
|
$ |
141.2 |
|
|
$ |
134.4 |
|
2017 Restructuring, impairment and other charges—net. The three months ended September 30, 2017 included $0.4 million for employee termination costs and a $1.0 million net reversal of other restructuring charges, primarily related to the reversal of previously recognized lease termination costs associated with a facility that the Company began using during the third quarter of 2017. The nine months ended September 30, 2017 included $5.2 million for employee termination costs, $0.9 million of net lease termination and other restructuring costs, $0.2 million of net impairment charges of long-lived assets and $0.1 million for other charges associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate.
2016 Restructuring, impairment and other charges—net. The three months ended September 30, 2016 included $1.3 million for employee termination costs and $0.4 million of lease termination and other restructuring costs. The nine months ended September 30, 2016 included $2.3 million for employee termination costs, $1.2 million of lease termination and other restructuring costs and $0.1 million for other charges associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate.
Share-based compensation expense. Included pre-tax charges of $1.7 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively, and $5.2 million and $1.2 million for the nine months ended September 30, 2017 and 2016, respectively.
Spin-off related transaction expenses. Included pre-tax charges of $2.6 million and $9.8 million related to third-party consulting fees, legal fees and other costs related to the Separation for the three months and nine months ended September 30, 2017, respectively.
OUTLOOK
Competition
Technological and regulatory changes, including the electronic distribution of documents and data hosting of media content, continue to impact the market for our products and services. One of the Company’s competitive strengths is that it offers a wide array of communications products, compliance services and technologies, a global platform, exceptional sales and service and regulatory domain expertise, which provide differentiated solutions for its clients.
The financial communications services industry, in general, is highly competitive and barriers to entry have decreased as a result of technology innovation. Despite some consolidation in recent years, the industry remains highly fragmented in the United States and even more so internationally with many in-country alternative providers. The Company expects competition to increase from existing competitors, as well as new and emerging market entrants. In addition, as the Company expands its product and service offerings, it may face competition from new and existing competitors. The Company competes primarily on product quality and functionality, service levels, subject matter regulatory expertise, security and compliance characteristics, price and reputation.
34
The impact of digital technologies has been felt in many print products, most acutely in the Company’s mutual fund, variable annuity and public company compliance business offerings. Historically, the Company has been a high-touch, service oriented business. Technology changes have provided alternatives to the Company’s clients that allow them to manage more of the financial disclosure process themselves through collaborative document management solutions. For years, the Company has invested in its own applications, ActiveDisclosure, FundSuiteArc and Venue to serve clients and increase retention and has invested to expand capabilities and address new market sectors. The future impact of technology on the business is difficult to predict and could result in additional expenditures to restructure impacted operations or develop new technologies. In addition, the Company has made targeted acquisitions and investments in its existing business to offer clients innovative services and solutions, including acquisitions of EDGAR Online and MultiCorpora and investments in Soxhub, Mediant, Peloton and eBrevia that further solidify the Company’s position as a technology service leader in the industry.
The Company’s competitors for SEC filing services for capital markets clients include full service financial communications providers, technology point solution providers focused on financial communications and general technology providers. The Company’s competitors for SEC filing services for investment markets clients include full service traditional providers, small niche technology providers and local and regional print providers that bid against the Company for printing, mailing and fulfillment services. Language solutions competes with global and local language service providers and language/globalization software vendors.
Market Volatility/Cyclicality
The Company is subject to market volatility in the United States and world economy, as the success of the transactional offering is largely dependent on the global market for IPOs, secondary offerings, mergers and acquisitions, public and private debt offerings, leveraged buyouts, spinouts and other transactions. The International segment is particularly susceptible to capital market volatility as most of the International business is capital markets transaction focused. The Company mitigates some of that risk by offering services in higher demand during a down market, like document management tools for the bankruptcy/restructuring process, and also moving upstream from the filing process with products like Venue, the Company’s data room solution. The Company also attempts to balance this volatility through supporting the quarterly/annual public company reporting process through its EDGAR filing services and ActiveDisclosure product, its investment markets regulatory and shareholder communications offering and continues to expand into adjacent growth businesses like language solutions and data and analytics, which have recurring revenues and are not as susceptible to market volatility and cycles. This quarterly/annual public company reporting process work also subjects the Company to filing seasonality shortly after the end of each fiscal quarter, with peak periods during the course of the year that have operational implications. Such operational implications include the need to increase staff during peak periods through a combined strategy of hiring additional full-time and temporary personnel, increasing the premium time of existing staff, and outsourcing production for a number of services. Additionally, clients and their financial advisors have begun to increasingly rely on web-based services which allow clients to autonomously file and distribute compliance documents with regulatory agencies, such as the SEC. While the Company believes that its ActiveDisclosure and FundSuiteArc solutions are competitive in this space, competitors are continuing to develop technologies that aim to improve clients’ ability to autonomously produce and file documents to meet their regulatory obligations. The Company continues to remain focused on driving recurring revenue in order to mitigate market volatility.
Raw Materials
The primary raw materials used in the Company’s printed products are paper and ink. The paper and ink supply is sourced from a small set of select suppliers in order to ensure consistent quality that meets the Company’s performance expectations and provides for continuity of supply. The Company believes that the risk of incurring material losses as a result of a shortage in raw materials is unlikely and that the losses, if any, would not have a materially negative impact on the Company’s business.
Distribution
The Company’s products are distributed to end-users through the U.S or foreign postal services, through retail channels, electronically or by direct shipment to customer facilities. Postal costs are a significant component of many customers’ cost structures and postal rate changes can influence the number of pieces that the Company’s customers are willing to print and mail.
Financial Review
In the financial review that follows, the Company discusses its unaudited condensed consolidated and combined results of operations, cash flows and certain other information. In periods prior to the Separation, the combined financial statements were prepared on a stand-alone basis and were derived from RRD’s consolidated financial statements and accounting records. There are limitations inherent in the preparation of all carve out financial statements due to the fact that the Company’s business was previously part of a larger organization. This discussion should be read in conjunction with the Company’s unaudited condensed consolidated and combined financial statements and the related notes.
35
Results of Operations for the Three Months Ended September 30, 2017 as Compared to the Three Months Ended September 30, 2016
The following table shows the results of operations for the three months ended September 30, 2017 and 2016 :
|
2017 |
|
|
2016 |
|
|
$ Change |
|
|
% Change |
|
||||
|
(in millions, except percentages) |
|
|||||||||||||
Services net sales |
$ |
140.3 |
|
|
$ |
139.4 |
|
|
$ |
0.9 |
|
|
|
0.6 |
% |
Products net sales |
|
82.3 |
|
|
|
85.0 |
|
|
|
(2.7 |
) |
|
|
(3.2 |
%) |
Net sales |
|
222.6 |
|
|
|
224.4 |
|
|
|
(1.8 |
) |
|
|
(0.8 |
%) |
Services cost of sales (exclusive of depreciation and amortization) |
|
81.7 |
|
|
|
64.2 |
|
|
|
17.5 |
|
|
|
27.3 |
% |
Services cost of sales with RRD affiliates (exclusive of depreciation and amortization)* |
|
— |
|
|
|
8.7 |
|
|
|
(8.7 |
) |
|
|
(100.0 |
%) |
Products cost of sales (exclusive of depreciation and amortization) |
|
58.9 |
|
|
|
62.0 |
|
|
|
(3.1 |
) |
|
|
(5.0 |
%) |
Products cost of sales with RRD affiliates (exclusive of depreciation and amortization)* |
|
— |
|
|
|
11.5 |
|
|
|
(11.5 |
) |
|
|
(100.0 |
%) |
Cost of sales |
|
140.6 |
|
|
|
146.4 |
|
|
|
(5.8 |
) |
|
|
(4.0 |
%) |
Selling, general and administrative expenses (exclusive of depreciation and amortization) |
|
54.0 |
|
|
|
48.5 |
|
|
|
5.5 |
|
|
|
11.3 |
% |
Restructuring, impairment and other charges-net |
|
(0.6 |
) |
|
|
1.7 |
|
|
|
(2.3 |
) |
|
|
(135.3 |
%) |
Depreciation and amortization |
|
10.6 |
|
|
|
9.8 |
|
|
|
0.8 |
|
|
|
8.2 |
% |
Income from operations |
$ |
18.0 |
|
|
$ |
18.0 |
|
|
$ |
- |
|
|
|
0.0 |
% |
* |
Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party, therefore the amounts disclosed related to RRD are presented through June 30, 2017 only. |
Consolidated and Combined
Net sales of services for the three months ended September 30, 2017 increased $0.9 million, or 0.6%, to $140.3 million, versus the three months ended September 30, 2016, including a $0.2 million, or 0.1%, increase due to changes in foreign exchange rates. Net sales of services increased due to higher mutual fund print-related services and virtual data room services, partially offset by lower volumes in both capital markets transactions and compliance and mutual fund content management volumes.
Net sales of products for the three months ended September 30, 2017 decreased $2.7 million, or 3.2%, to $82.3 million versus the three months ended September 30, 2016, including a $0.1 million, or 0.1%, increase due to changes in foreign exchange rates. Net sales of products decreased due to lower capital markets transactions volumes and healthcare print volumes, partially offset by higher capital markets compliance volumes.
Services cost of sales increased $8.8 million, or 12.1%, for the three months ended September 30, 2017, versus the three months ended September 30, 2016. Services cost of sales increased due to higher volumes in mutual fund print-related services, an increase in the allocation of information technology expenses from selling, general and administrative expenses to cost of sales, partially offset by cost control initiatives. As a percentage of net sales, services cost of sales increased 5.9% primarily due to unfavorable mix from lower capital markets transaction volumes and increased information technology expenses.
Products cost of sales decreased $14.6 million, or 19.9%, for the three months ended September 30, 2017, versus the three months ended September 30, 2016. As a percentage of net sales, products cost of sales decreased 14.9%. Products cost of sales decreased due to a favorable mix of products sales and cost control initiatives.
Selling, general and administrative expenses increased $5.5 million, or 11.3%, to $54.0 million, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily due to an increase in expenses incurred to operate as an independent public company, including employee compensation costs and spin-off related transaction expenses, partially offset by an increase in the allocation of information technology expenses from selling, general and administrative expenses to cost of sales. As a percentage of net sales, selling, general, and administrative expenses increased from 21.6% for the three months ended September 30, 2016 to 24.3% for the three months ended September 30, 2017 due to increased costs of operating as an independent public company.
36
For the three months ended September 30, 2017, the Company recorded a net restructuring reversal of $0.6 million, as compared to $1.7 million in expense for the three months ended September 30, 2016. In 2017, the net restructuring reversal included a $1.0 million net restructuring reversal of other restructuring charges, primarily related to the reversal of previously recognized lease termination charges associated with a facility that the Company began using during the third quarter of September 30, 2017 partially offset by $0.4 million of employee termination costs for 21 employees. In 2016, these charges included $1.3 million of employee termination costs for 22 employees and $0.4 million of lease termination and other restructuring costs.
Depreciation and amortization increased $0.8 million, or 8.2%, to $10.6 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. Depreciation and amortization included $3.6 million and $3.6 million of amortization of other intangible assets related to customer relationships, trade names and non-compete agreements for the three months ended September 30, 2017 and 2016, respectively.
Income from operations for the three months ended September 30, 2017 was consistent at $18.0 million as compared to the three months ended September 30, 2016, due to cost control initiatives and higher volumes in capital markets compliance, mutual fund print-related services and virtual data room services, partially offset by lower volumes in capital markets transactions and healthcare print, an increase in expenses incurred to operate as an independent public company, including employee compensation costs and spin-off related transaction expenses.
|
2017 |
|
|
2016 |
|
|
$ Change |
|
|
% Change |
|||
|
(in millions, except percentages) |
||||||||||||
Interest expense (income)-net |
$ |
10.6 |
|
|
$ |
(0.1 |
) |
|
$ |
10.7 |
|
|
nm |
Net interest expense increased $10.7 million for the three months ended September 30, 2017 versus the same period in 2016, due to the issuance of debt in connection with the Separation.
|
2017 |
|
|
2016 |
|
|
$ Change |
|
|
% Change |
|
||||
|
(in millions, except percentages) |
|
|||||||||||||
Earnings before income taxes |
$ |
7.4 |
|
|
$ |
18.1 |
|
|
$ |
(10.7 |
) |
|
|
(59.1 |
%) |
Income tax expense |
|
2.1 |
|
|
|
7.9 |
|
|
|
(5.8 |
) |
|
|
(73.4 |
%) |
Effective income tax rate |
|
28.4 |
% |
|
|
43.6 |
% |
|
|
|
|
|
|
|
|
The effective income tax rate was 28.4% for the three months ended September 30, 2017 compared to 43.6% for the three months ended September 30, 2016. For the quarter ended September 30, 2017, the effective income tax rate is lower due to a decrease in the estimated full-year income tax rate, which was driven by a favorable change in jurisdictional mix of income, as well as the positive settlement of previous years’ tax disputes.
Information by Segment
The following tables summarize net sales, income (loss) from operations and certain items impacting comparability within each of the operating segments and Corporate.
U.S.
|
Three Months Ended September 30, |
|
|||||
|
2017 |
|
|
2016 |
|
||
|
(in millions, except percentages) |
|
|||||
Net sales |
$ |
186.1 |
|
|
$ |
192.3 |
|
Income from operations |
|
22.4 |
|
|
|
18.7 |
|
Operating margin |
|
12.0 |
% |
|
|
9.7 |
% |
Restructuring, impairment and other charges-net |
|
(0.8 |
) |
|
|
1.4 |
|
Spin-off related transaction expenses |
|
2.2 |
|
|
|
— |
|
37
|
Net Sales for the Three Months |
|
|
|
|
|
|
|
|
|
|||||
|
Ended September 30, |
|
|
|
|
|
|
|
|
|
|||||
Reporting unit |
2017 |
|
|
2016 |
|
|
$ Change |
|
|
% Change |
|
||||
|
(in millions, except percentages) |
|
|||||||||||||
Capital Markets |
$ |
93.8 |
|
|
$ |
98.4 |
|
|
$ |
(4.6 |
) |
|
|
(4.7 |
%) |
Investment Markets |
|
81.7 |
|
|
|
84.1 |
|
|
|
(2.4 |
) |
|
|
(2.9 |
%) |
Language Solutions and other |
|
10.6 |
|
|
|
9.8 |
|
|
|
0.8 |
|
|
|
8.2 |
% |
Total U.S. |
$ |
186.1 |
|
|
$ |
192.3 |
|
|
$ |
(6.2 |
) |
|
|
(3.2 |
%) |
Net sales for the U.S. segment for the three months ended September 30, 2017 were $186.1 million, a decrease of $6.2 million, or 3.2%, compared to the three months ended September 30, 2016. Net sales decreased due to lower volumes in capital markets transactions and healthcare print, partially offset by higher capital markets compliance volumes, mutual fund print-related services, and virtual data room services. An analysis of net sales by reporting unit follows:
|
• |
Capital Markets: Sales decreased due to lower transactions volumes, partially offset by higher compliance volumes, and virtual data room services. |
|
• |
Investment Markets: Sales decreased due to lower healthcare and content management volumes partially offset by higher mutual fund print-related services. |
|
• |
Language Solutions and other: Sales increased primarily due to higher volumes in commercial print. |
U.S. segment income from operations increased $3.7 million, or 19.8%, for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016, primarily due to an increase in capital markets compliance volumes, mutual fund print-related services, cost control initiatives, and lower restructuring, impairment and other charges, partially offset by lower volumes in capital markets transactions, spin-off related transaction expenses and lower healthcare volumes.
Operating margins increased from 9.7% for the three months ended September 30, 2016 to 12.0% for the three months ended September 30, 2017 due to cost control initiatives, partially offset by an increase in selling expenses and incentive compensation expense.
International
|
Three Months Ended September 30, |
|
|||||
|
2017 |
|
|
2016 |
|
||
|
(in millions, except percentages) |
|
|||||
Net sales |
$ |
36.5 |
|
|
$ |
32.1 |
|
Income from operations |
|
1.5 |
|
|
|
1.1 |
|
Operating margin |
|
4.1 |
% |
|
|
3.4 |
% |
Restructuring, impairment and other charges-net |
|
0.1 |
|
|
|
0.3 |
|
Net sales for the International segment for the three months ended September 30, 2017 were $36.5 million, an increase of $4.4 million, or 13.7%, compared to the three months ended September 30, 2016 including a $0.3 million, or 0.9%, increase due to changes in foreign exchange rates. Net sales increased due to higher mutual fund print-related services and translation services.
International segment income from operations increased $0.4 million, or 36.4%, for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016, due to an increase in mutual fund print-related services and translation services and lower restructuring, impairment and other charges, partially offset by an increase in allocated expenses, including information technology expenses.
Operating margins increased from 3.4% for the three months ended September 30, 2016 to 4.1% for the three months ended September 30, 2017 due to an increase in overall sales volume for the segment, partially offset by an increase in allocated expenses, including information technology expenses.
38
The following table summarizes unallocated operating expenses and certain items impacting comparability within the activities presented as Corporate:
|
Three Months Ended September 30, |
|
|||||
|
2017 |
|
|
2016 |
|
||
|
(in millions) |
|
|||||
Operating expenses |
$ |
5.9 |
|
|
$ |
1.8 |
|
Spin-off related transaction expenses |
|
0.4 |
|
|
|
— |
|
Share-based compensation expense |
|
1.7 |
|
|
|
0.2 |
|
Restructuring, impairment and other charges-net |
|
0.1 |
|
|
|
— |
|
Corporate operating expenses for the three months ended September 30, 2017 increased $4.1 million versus the same period in 2016 due to higher employee compensation costs incurred to operate as an independent public company, an increase in share-based compensation expense and spin-off related transaction expenses.
Results of Operations for the Nine Months Ended September 30, 2017 as Compared to the Nine Months Ended September 30, 2016
The following table shows the results of operations for the nine months ended September 30, 2017 and 2016 :
|
2017 |
|
|
2016 |
|
|
$ Change |
|
|
% Change |
|
||||
|
(in millions, except percentages) |
|
|||||||||||||
Services net sales |
$ |
471.4 |
|
|
$ |
454.1 |
|
|
$ |
17.3 |
|
|
|
3.8 |
% |
Products net sales |
|
308.7 |
|
|
|
308.4 |
|
|
|
0.3 |
|
|
|
0.1 |
% |
Net sales |
|
780.1 |
|
|
|
762.5 |
|
|
|
17.6 |
|
|
|
2.3 |
% |
Services cost of sales (exclusive of depreciation and amortization) |
|
240.2 |
|
|
|
214.6 |
|
|
|
25.6 |
|
|
|
11.9 |
% |
Services cost of sales with RRD affiliates (exclusive of depreciation and amortization)* |
|
19.5 |
|
|
|
29.4 |
|
|
|
(9.9 |
) |
|
|
(33.7 |
%) |
Products cost of sales (exclusive of depreciation and amortization) |
|
190.7 |
|
|
|
179.9 |
|
|
|
10.8 |
|
|
|
6.0 |
% |
Products cost of sales with RRD affiliates (exclusive of depreciation and amortization)* |
|
32.3 |
|
|
|
48.6 |
|
|
|
(16.3 |
) |
|
|
(33.5 |
%) |
Cost of sales |
|
482.7 |
|
|
|
472.5 |
|
|
|
10.2 |
|
|
|
2.2 |
% |
Selling, general and administrative expenses (exclusive of depreciation and amortization) |
|
171.2 |
|
|
|
156.8 |
|
|
|
14.4 |
|
|
|
9.2 |
% |
Restructuring, impairment and other charges-net |
|
6.4 |
|
|
|
3.6 |
|
|
|
2.8 |
|
|
|
77.8 |
% |
Depreciation and amortization |
|
31.7 |
|
|
|
30.1 |
|
|
|
1.6 |
|
|
|
5.3 |
% |
Income from operations |
$ |
88.1 |
|
|
$ |
99.5 |
|
|
$ |
(11.4 |
) |
|
|
(11.5 |
%) |
* |
Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party, therefore the amounts disclosed related to RRD are presented through June 30, 2017 only. |
Consolidated and Combined
Net sales of services for the nine months ended September 30, 2017 increased $17.3 million, or 3.8%, to $471.4 million, versus the nine months ended September 30, 2016, including a $2.4 million, or 0.5%, decrease due to changes in foreign exchange rates. Net sales of services increased due to higher volumes in mutual fund print-related services, virtual data room services and content management, partially offset by lower capital markets transactions and compliance volumes.
Net sales of products for the nine months ended September 30, 2017 increased $0.3 million, or 0.1%, to $308.7 million versus the nine months ended September 30, 2016, including a $1.0 million, or 0.3%, decrease due to changes in foreign exchange rates. Net sales of products increased due to higher capital markets compliance and mutual fund print-volumes, partially offset by lower capital markets transactions volumes and healthcare volumes.
39
Services cost of sales increased $15.7 million, or 6.4%, for the nine months ended September 30, 2017, versus the nine months ended September 30, 2016. Services cost of sales increased due to higher mutual fund print-related services, and content management volumes, an increase in the allocation of information technology expenses from selling, general and administrative expenses to cost of sales and an increase in incentive compensation expense, partially offset by cost control initiatives. As a percentage of net sales, services cost of sales increased 1.4% due to unfavorable mix and the increased information technology expense.
Products cost of sales decreased $5.5 million, or 2.4%, for the nine months ended September 30, 2017, versus the nine months ended September 30, 2016. As a percentage of net sales, products cost of sales decreased 1.9%. Products cost of sales decreased due to a favorable mix of product sales and cost control initiatives.
Selling, general and administrative expenses increased $14.4 million, or 9.2%, to $171.2 million, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to an increase in expenses incurred to operate as an independent public company, including selling expenses, employee compensation costs and spin-off related transaction expenses, partially offset by an increase in the allocation of information technology expenses from selling, general and administrative expenses to cost of sales. As a percentage of net sales, selling, general, and administrative expenses increased from 20.6% for the nine months ended September 30, 2016 to 21.9% for the nine months ended September 30, 2017 primarily due to increased costs of operating as an independent public company, including spin-off related transaction expenses.
For the nine months ended September 30, 2017, the Company recorded net restructuring, impairment and other charges of $6.4 million, as compared to $3.6 million for the nine months ended September 30, 2016. In 2017, these charges included $5.2 million of employee termination costs for 169 employees, $0.9 million of lease termination and other restructuring costs, $0.2 million of impairment charges for long-lived assets, and $0.1 million for other charges associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate. In 2016, these charges included $2.3 million of employee termination costs for 74 employees, $1.2 million of lease termination and other restructuring costs and $0.1 million for other charges associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate.
Depreciation and amortization increased $1.6 million, or 5.3%, to $31.7 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Depreciation and amortization included $10.7 million and $10.8 million of amortization of other intangible assets related to customer relationships, trade names and non-compete agreements for the nine months ended September 30, 2017 and 2016, respectively.
Income from operations for the nine months ended September 30, 2017 decreased $11.4 million, or 11.5%, to $88.1 million versus the nine months ended September 30, 2016, due to lower volumes in capital markets transactions and healthcare print and an increase in expenses incurred to operate as an independent public company, including selling expenses, employee compensation costs and spin-off related transaction expenses, partially offset by cost control initiatives and higher volumes in mutual funds print-related, capital markets compliance, mutual fund print, virtual data room services, and content management.
|
2017 |
|
|
2016 |
|
|
$ Change |
|
|
% Change |
|||
|
(in millions, except percentages) |
||||||||||||
Interest expense-net |
$ |
32.7 |
|
|
$ |
0.3 |
|
|
$ |
32.4 |
|
|
nm |
Net interest expense increased $32.4 million for the nine months ended September 30, 2017 versus the same period in 2016, due to the issuance of debt in connection with the Separation.
|
2017 |
|
|
2016 |
|
|
$ Change |
|
|
% Change |
|
||||
|
(in millions, except percentages) |
|
|||||||||||||
Earnings before income taxes |
$ |
55.4 |
|
|
$ |
99.2 |
|
|
$ |
(43.8 |
) |
|
|
(44.2 |
%) |
Income tax expense |
|
22.0 |
|
|
|
39.3 |
|
|
|
(17.3 |
) |
|
|
(44.0 |
%) |
Effective income tax rate |
|
39.7 |
% |
|
|
39.6 |
% |
|
|
|
|
|
|
|
|
The effective income tax rate was 39.7% for the nine months ended September 30, 2017 compared to 39.6% for the nine months ended September 30, 2016.
40
The following tables summarize net sales, income (loss) from operations and certain items impacting comparability within each of the operating segments and Corporate.
U.S.
|
Nine Months Ended September 30, |
|
|||||
|
2017 |
|
|
2016 |
|
||
|
(in millions, except percentages) |
|
|||||
Net sales |
$ |
658.2 |
|
|
$ |
662.4 |
|
Income from operations |
|
107.5 |
|
|
|
100.0 |
|
Operating margin |
|
16.3 |
% |
|
|
15.1 |
% |
Restructuring, impairment and other charges-net |
|
4.4 |
|
|
|
3.1 |
|
Spin-off related transaction expenses |
|
4.0 |
|
|
|
— |
|
|
Net Sales for the Nine Months |
|
|
|
|
|
|
|
|
|||||
|
Ended September 30, |
|
|
|
|
|
|
|
|
|||||
Reporting unit |
2017 |
|
|
2016 |
|
|
$ Change |
|
% Change |
|
||||
|
(in millions, except percentages) |
|
||||||||||||
Capital Markets |
$ |
349.8 |
|
|
$ |
369.5 |
|
|
$ |
(19.7 |
) |
|
(5.3 |
%) |
Investment Markets |
|
276.0 |
|
|
|
263.7 |
|
|
|
12.3 |
|
|
4.7 |
% |
Language Solutions and other |
|
32.4 |
|
|
|
29.2 |
|
|
|
3.2 |
|
|
11.0 |
% |
Total U.S. |
$ |
658.2 |
|
|
$ |
662.4 |
|
|
$ |
(4.2 |
) |
|
(0.6 |
%) |
Net sales for the U.S. segment for the nine months ended September 30, 2017 were $658.2 million, a decrease of $4.2 million, or 0.6%, compared to the nine months ended September 30, 2016. Net sales decreased due to lower capital markets transactions and healthcare volumes partially offset by higher volumes in capital markets compliance, mutual fund print-related services, mutual fund print volumes, virtual data room services and content management. An analysis of net sales by reporting unit follows:
|
• |
Capital Markets: Sales decreased due to lower transactions volumes, partially offset by increased compliance volumes and virtual data room services. |
|
• |
Investment Markets: Sales increased due to higher mutual fund print and print-related services, mutual fund print, and content management volumes, partially offset by lower healthcare volumes. |
|
• |
Language Solutions and other: Sales increased primarily due to higher volumes in commercial print. |
U.S. segment income from operations increased $7.5 million, or 7.5%, for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, due to cost control initiatives and higher volumes in capital markets compliance, mutual fund print-related services, mutual fund print volumes, virtual data room services and content management, partially offset by lower capital markets transactions and healthcare volumes and an increase in selling expenses, spin-off related transaction expenses, incentive compensation expense, and restructuring, impairment and other charges.
Operating margins increased from 15.1% for the nine months ended September 30, 2016 to 16.3% for the nine months ended September 30, 2017 due to cost control initiatives. The increase in operating margins was partially offset by spin-off related transaction expenses and higher restructuring, impairment and other charges which impacted margins by 0.6 and 0.2 percentage points, respectively, and an increase in selling expenses and incentive compensation expense.
International
|
Nine Months Ended September 30, |
|
|||||
|
2017 |
|
|
2016 |
|
||
|
(in millions, except percentages) |
|
|||||
Net sales |
$ |
121.9 |
|
|
$ |
100.1 |
|
Income from operations |
|
7.6 |
|
|
|
7.2 |
|
Operating margin |
|
6.2 |
% |
|
|
7.2 |
% |
Restructuring, impairment and other charges-net |
|
1.3 |
|
|
|
0.5 |
|
41
Net sales for the International segment for the nine months ended September 30, 2017 were $121.9 million, an increase of $21.8 million, or 21.8%, compared to the nine months ended September 30, 2016 including a $3.4 million, or 3.4%, decrease due to changes in foreign exchange rates. Net sales increased due to higher volumes in capital markets transactions, mutual funds, virtual data room, and translation services.
International segment income from operations was $7.6 million and $7.2 million for the nine months ended September 30, 2017 and 2016, respectively, due to the increase from the higher volumes in capital markets transactions, mutual funds, virtual data room and translation services and cost control initiatives, mostly offset by an increase in allocated expenses, including information technology expenses and an increase in incentive compensation expense and restructuring, impairment and other charges.
Operating margins decreased from 7.2% for the nine months ended September 30, 2016 to 6.2% for the nine months ended September 30, 2017 of which 0.6 percentage points were due to higher restructuring, impairment and other charges. Operating margins were also impacted by an increase in allocated expenses, including information technology expenses partially offset by cost control initiatives.
Corporate
The following table summarizes unallocated operating expenses and certain items impacting comparability within the activities presented as Corporate:
|
Nine Months Ended September 30, |
|
|||||
|
2017 |
|
|
2016 |
|
||
|
(in millions) |
|
|||||
Operating expenses |
$ |
27.0 |
|
|
$ |
7.7 |
|
Spin-off related transaction expenses |
|
5.8 |
|
|
|
— |
|
Share-based compensation expense |
|
5.2 |
|
|
|
1.2 |
|
Restructuring, impairment and other charges-net |
|
0.7 |
|
|
|
— |
|
Corporate operating expenses for the nine months ended September 30, 2017 increased $19.3 million versus the same period in 2016 due to higher employee compensation costs incurred to operate as an independent public company, spin-off related transaction expenses and an increase in share-based compensation and bad debt expense.
Liquidity and Capital Resources
Prior to the Separation, RRD provided financing, cash management and other treasury services to Donnelley Financial. The Company’s cash balances were swept by RRD and the Company received funding from RRD for operating and investing needs. Cash transferred to and from RRD was recorded as intercompany payables and receivables which are reflected in the net parent company investment in the consolidated and combined financial statements. Subsequent to the Separation, the Company no longer participates in cash management and funding arrangements with RRD.
The Company believes it has sufficient liquidity to support its ongoing operations and to invest in future growth to create value for its shareholders. Cash on hand, operating cash flows and the Company’s $300.0 million senior secured revolving credit facility (the “Revolving Facility”) are the primary sources of liquidity and are expected to be used for, among other things, payment of interest and principal on the Company’s debt obligations, capital expenditures necessary to support productivity improvement and growth, acquisitions and completion of restructuring programs.
The following describes the Company’s cash flows for the nine months ended September 30, 2017 and 2016.
Cash Flows Used For Operating Activities
Operating cash inflows are largely attributable to sales of the Company’s services and products. Operating cash outflows are largely attributable to recurring expenditures for labor, rent, raw materials and other operating activities. For periods prior to the Separation, allocations of operating expenses from RRD are also reflected as operating cash inflows or outflows, including those for pension costs and current income taxes payable.
Net cash provided by operating activities was $33.7 million for the nine months ended September 30, 2017 compared to $56.8 million for the nine months ended September 30, 2016. The decrease in net cash provided by operating activities reflected higher payments related to interest and the timing of payments for suppliers and employee-related liabilities, offset by the timing of customer payments.
42
Cash Flows Used For Investing Activities
Net cash used in investing activities was $23.1 million for the nine months ended September 30, 2017 compared to $17.0 million for the nine months ended September 30, 2016. Capital expenditures were $20.0 million during the nine months ended September 30, 2017, an increase of $6.0 million as compared to the nine months ended September 30, 2016. The Company expects that capital expenditures for 2017 will be approximately $30.0 million to $35.0 million, compared to $26.2 million in 2016.
Cash Flows Provided By Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2017 was $15.2 million compared to $6.1 million for the nine months ended September 30, 2016. The increase in net cash used in financing activities reflected $100.0 million in payments on long-term debt partially offset by a $68.0 million Separation-related payment from RRD and $18.8 million of proceeds from the issuance of common stock as compared to $348.2 million of proceeds from issuance of long-term debt during the nine months ended September 30, 2016, mostly offset by $336.2 million in net transfers from RRD and its affiliates in connection with the Separation.
Contractual Cash Obligations and Other Commitments and Contingencies
In connection with the Separation, the Company entered into transition services agreements with RRD, covering certain support and back office services that the Company has historically received from RRD. Under the terms of the agreements, RRD will provide various services, including information technology, accounts receivable, accounts payable, payroll and other financial and administrative services and functions. The Company also entered into a transition services agreement with LSC, pursuant to which LSC will provide certain services to the Company. The services under the transition services agreements generally extend for up to 24 months following the Separation.
The Company entered into a number of commercial and other arrangements with RRD and its subsidiaries. These include, among other things, arrangements for the provision of services, including global outsourcing and logistics services, printing and binding, digital printing, composition and access to technology. The Company also entered into a number of commercial and other arrangements with LSC and its subsidiaries, pursuant to which LSC will print and bind products for the Company. The terms of the arrangements with RRD and LSC do not exceed 24 months.
See discussion in Liquidity related to the Company's debt obligations.
Liquidity
Cash and cash equivalents of $32.2 million at September 30, 2017 included $21.5 million in the U.S. and $10.7 million at international locations. The Company has not recognized deferred tax liabilities related to taxes on foreign earnings as foreign earnings are considered to be indefinitely reinvested. Certain cash balances of foreign subsidiaries may be subject to U.S. or local country taxes if repatriated to the U.S. In addition, repatriation of some foreign cash balances is further restricted by local laws. Management regularly evaluates whether foreign earnings are expected to be indefinitely reinvested. This evaluation requires judgment about the future operating and liquidity needs of the Company and its foreign subsidiaries. Changes in economic and business conditions, foreign or U.S. tax laws, or the Company’s financial situation could result in changes to these judgments and the need to record additional tax liabilities.
On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. RRD retained approximately 0.1 million shares of the Company’s common stock upon consummation of the offering which were subsequently sold by RRD on August 1, 2017. In conjunction with the underwritten public offering, the underwriters exercised their option to purchase approximately 0.9 million Option Shares. The Company received approximately $18.8 million in net proceeds from the sale of the Option Shares, after deducting estimated underwriting discounts and commissions. The proceeds were used to reduce outstanding debt under the Revolving Facility.
Pursuant to the Separation and Distribution Agreement, the Company received a cash payment of $68.0 million from RRD on April 3, 2017. The proceeds were used to reduce outstanding debt under the Term Loan Credit Facility.
43
The Company’s debt maturity schedule as of September 30, 2017 is shown in the table below:
|
Debt Maturity Schedule |
|
|||||||||||||||||||
|
Total |
|
2017 |
|
2018 |
|
2019 |
|
2020 |
|
2021 |
|
Thereafter |
|
|||||||
Notes (a) |
$ |
300.0 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
300.0 |
|
Borrowings under the Term Loan Credit Facility (b) |
|
200.0 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
200.0 |
|
Borrowings under the Revolving Facility |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Total |
$ |
500.0 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
500.0 |
|
(a) |
Excludes unamortized debt issuance costs of $5.8 million which do not represent contractual commitments with a fixed amount or maturity date. |
(b) |
Excludes unamortized debt issuance costs of $4.3 million and a discount of $1.5 million which do not represent contractual commitments with a fixed amount or maturity date. |
On October 2, 2017, the Company repriced the Term Loan Credit Facility. As a result, the interest rate was reduced by 100 basis points to LIBOR plus 3.0% and the LIBOR floor was reduced by 25 basis points to .75%. Additionally, under the amended Credit Agreement, principal payments are due on a quarterly basis. Other terms, including the outstanding principal, maturity date, and debt covenants such as the minimum interest coverage ratio and the maximum leverage ratio are consistent with the original Credit Agreement. If the debt maturity schedule above as of September 30, 2017 reflected the impact of the amended Credit Agreement, the Company would reflect the following amounts for Borrowings under the Term Loan Credit Facility:
|
Total |
|
2017 |
|
2018 |
|
2019 |
|
2020 |
|
2021 |
|
Thereafter |
|
|||||||
Borrowings under the Term Loan Credit Facility |
$ |
200.0 |
|
$ |
2.5 |
|
$ |
9.7 |
|
$ |
9.2 |
|
$ |
8.8 |
|
$ |
8.3 |
|
$ |
161.5 |
|
The Credit Agreement contains a number of covenants, including, but not limited to, a minimum Interest Coverage Ratio and the Consolidated Leverage Ratio, as defined in and calculated pursuant to the Credit Agreement, that, in part, restrict the Company’s ability to incur additional indebtedness, create liens, engage in mergers and consolidations, make restricted payments and dispose of certain assets. The Credit Agreement generally allows annual dividend payments of up to $15.0 million in aggregate, though additional dividends may be allowed subject to certain conditions. Each of these covenants is subject to important exceptions and qualifications.
The indenture governing the Notes contains certain covenants applicable to the Company and its restricted subsidiaries, including limitations on: (1) liens; (2) indebtedness; (3) mergers, consolidations and acquisitions; (4) sales, transfers and other dispositions of assets; (5) loans and other investments; (6) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (7) restrictions affecting subsidiaries; (8) transactions with affiliates; and (9) designations of unrestricted subsidiaries. Each of these covenants is subject to important exceptions and qualifications.
As of September 30, 2017, there were no outstanding borrowings under the Revolving Facility. Based on the Company’s results of operations for the twelve months ended September 30, 2017 and existing debt, the Company would have had the ability to utilize $261.0 million of the $300.0 million Revolving Facility and not have been in violation of the terms of the agreement. The current availability under the Revolving Facility and net available liquidity as of September 30, 2017 is shown in the table below:
|
|
September 30, 2017 |
|
|
Availability |
|
(in millions) |
|
|
Revolving Facility |
|
$ |
300.0 |
|
Availability reduction from covenants |
|
|
(39.0 |
) |
|
|
$ |
261.0 |
|
Usage |
|
|
|
|
Borrowings under the Revolving Facility |
|
|
— |
|
Impact on availability related to outstanding letters of credit |
|
|
— |
|
|
|
$ |
— |
|
|
|
|
|
|
Current availability at September 30, 2017 |
|
$ |
261.0 |
|
Cash |
|
|
32.2 |
|
Net Available Liquidity |
|
$ |
293.2 |
|
44
The Company was in compliance with its debt covenants as of September 30, 2017, and expects to remain in compliance based on management’s estimates of operating and financial results for 2017 and the foreseeable future. However, declines in market and economic conditions or demand for certain of the Company’s products and services could impact the Company’s ability to remain in compliance with its debt covenants in future periods. As of September 30, 2017, the Company met all the conditions required to borrow under the Credit Agreement and management expects the Company to continue to meet the applicable borrowing conditions.
The failure of a financial institution supporting the Revolving Facility would reduce the size of the Company’s committed facility unless a replacement institution was added. As of September 30, 2017, the Revolving Facility is supported by seventeen U.S. and international financial institutions.
As of September 30, 2017, the Company had $4.2 million in outstanding letters of credit and bank guarantees, of which there was no reduction to the availability under the Revolving Facility.
The Company’s liquidity may be affected by its credit ratings. The Company’s S&P and Moody’s credit ratings as of September 30, 2017 are shown in the table below:
|
S&P |
|
Moody's |
Ratings |
|
|
|
Long-term corporate credit rating |
BB- |
|
B1 |
Senior unsecured debt |
B |
|
B3 |
Credit Agreement |
BB+ |
|
Ba2 |
Outlook |
Stable |
|
Stable |
Debt Issuances
On September 30, 2016, the Company entered into the Credit Agreement, which provided for the Term Loan Credit Facility and the Revolving Facility. The Term Loan Facility will mature on September 30, 2023 and the Revolving Credit Facility will mature on September 30, 2021.
On September 30, 2016, the Company issued $300.0 million of 8.250% Senior Notes (the “Notes”) due October 15, 2024. Interest on the Notes is due semi-annually on April 15 and October 15, commencing on April 15, 2017.
The Notes were issued pursuant to an indenture where certain wholly-owned domestic subsidiaries of the Company guarantee the Notes (the “Guarantors”). In connection with the offering of the Notes, the Company entered into a registration rights agreement, dated as of September 30, 2016 (the “Registration Rights Agreement”), pursuant to which the Company agreed to file a registration statement with the SEC with respect to an offer to exchange the Notes for registered notes. On March 10, 2017, the Company filed a Registration Statement on Form S-4 (as amended, the “Exchange Offer Registration Statement”) to offer to exchange the Notes for registered notes which have terms identical in all material respects to the Notes except that the registered notes are not subject to transfer restrictions or registration rights. The Exchange Offer Registration Statement was declared effective by the SEC on March 22, 2017. An exchange offer for the Notes was launched on March 22, 2017 and settled on April 25, 2017, resulting in the exchange of $299.9 million aggregate principal amount of outstanding Notes for registered notes.
Risk Management
The Company is exposed to interest rate risk on its variable debt. At September 30, 2017, the Company’s exposure to rate fluctuations on variable-interest borrowings was $198.5 million.
The Company assesses market risk based on changes in interest rates utilizing a sensitivity analysis that measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change in interest rates. Using this sensitivity analysis, such changes would not have a material effect on interest income or expense and cash flows. A hypothetical 10% change in yield would change the fair values of fixed-rate debt at September 30, 2017 by approximately $11.7 million, or 3.9%.
The Company is exposed to the impact of foreign currency fluctuations in certain countries in which it operates. The exposure to foreign currency movements is limited in many countries because the operating revenues and expenses of its various subsidiaries and business units are substantially in the local currency of the country in which they operate. To the extent that borrowings, sales, purchases, revenues, expenses or other transactions are not in the local currency of the subsidiary, the Company is exposed to currency risk and may enter into foreign exchange spot and forward contracts to hedge the currency risk. The Company does not use derivative financial instruments for trading or speculative purposes.
45
Litigation and Contingent Liabilities
For a discussion of certain litigation involving the Company, see Note 12, Commitments and Contingencies, to the Unaudited Condensed Consolidated and Combined Financial Statements.
New Accounting Pronouncements and Pending Accounting Standards
Recently issued accounting standards and their estimated effect on the Company’s combined financial statements are described in Note 14, New Accounting Pronouncements, to the Unaudited Condensed Consolidated and Combined Financial Statements.
CAUTIONARY STATEMENT
The Company has made forward-looking statements in this Quarterly Report on Form 10-Q within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the Company. Generally, forward-looking statements include information concerning possible or assumed future actions, events, or results of operations of the Company.
These statements may include words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “continues,” “believes,” “may,” “will,” “goals” and variations of such words and similar expressions are intended to identify our forward-looking statements.
Forward-looking statements are not guarantees of performance. The following important factors, in addition to those discussed elsewhere in this Quarterly Report on Form 10-Q, that could cause our actual results to differ materially from those indicated in any such forward-looking statements. These factors include, but are not limited to:
|
• |
the volatility of the global economy and financial markets, and its impact on transactional volume; |
|
• |
failure to offer high quality customer support and services; |
|
• |
the retention of existing, and continued attraction of additional clients and key employees; |
|
• |
the growth of new technologies with which we may be able to adequately compete; |
|
• |
our inability to maintain client referrals; |
|
• |
vulnerability to adverse events as a result of becoming a stand-alone company following the Separation from RRD, including the inability to obtain as favorable of terms from third-party vendors; |
|
• |
the competitive market for our products and industry fragmentation affecting our prices; |
|
• |
the ability to gain client acceptance of our new products and technologies; |
|
• |
delay in market acceptance of our products and services due to undetected errors or failures found in our products and services; |
|
• |
failure to maintain the confidentiality, integrity and availability of our systems, software and solutions; |
|
• |
failure to properly use and protect client and employee information and data; |
|
• |
the effect of a material breach of security or other performance issues of any of our or our vendors’ systems; |
|
• |
factors that affect client demand, including changes in economic conditions, national or international regulations and clients’ budgetary constraints; |
|
• |
our ability to access debt and the capital markets due to adverse credit market conditions; |
|
• |
the effect of increasing costs of providing healthcare and other benefits to our employees |
|
• |
changes in the availability or costs of key materials (such as ink and paper) or in prices received for the sale of by-products; |
|
• |
failure to protect our proprietary technology; |
|
• |
failure to successfully integrate acquired businesses into our business; |
|
• |
availability to maintain our brands and reputation; |
46
|
• |
the effects of operating in international markets, including fluctuations in currency exchange rates; |
|
• |
the effect of economic and political conditions on a regional, national or international basis; |
|
• |
lack of market for our common stock; |
|
• |
lack of history as an operating company and costs associated with being an independent company; |
|
• |
failure to achieve certain intended benefits of the Separation; and |
|
• |
failure of RRD or LSC to satisfy their respective obligations under transition services agreements or other agreements entered into in connection with the Separation. |
Because forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Undue reliance should not be placed on such statements, which speak only as of the date of this document or the date of any document that may be incorporated by reference into this document.
Consequently, readers of the Quarterly Report on Form 10-Q should consider these forward looking statements only as the Company’s current plans, estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. The Company undertakes no obligation to update or revise any forward-looking statements in this Quarterly Report on Form 10-Q to reflect any new events or any change in conditions or circumstances.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Refer to Item 2 of Part I under “Risk Management.” There have been no significant changes to the Company’s market risk since December 31, 2016. For a discussion of exposure to market risk, refer to Part II, Item 7A – Quantitative and Qualitative Disclosures about Market Risk, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on February 28, 2017.
Item 4. Controls and Procedures
(a) |
Disclosure controls and procedures. |
Management, together with the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934) as of September 30, 2017. Based on that evaluation the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2017.
(b) |
Changes in internal control over financial reporting. |
Under the rules and regulations of the Securities and Exchange Commission, Donnelley Financial is not required to comply with the requirements of Section 404 of the Sarbanes Oxley Act of 2002 until its Annual Report on Form 10-K for the year ending December 31, 2017. In its Annual Report on Form 10-K for the year ending December 31, 2017, management and the Company’s independent registered public accounting firm will be required to provide an assessment as to the effectiveness of the Company’s internal control over financial reporting.
There have not been any changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the quarter ended September 30, 2017 that had materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.
47
For a discussion of certain litigation involving the Company, see Note 12, Commitments and Contingencies, to the Condensed Consolidated and Combined Financial Statements.
There have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on February 28, 2017.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
48
2.1 |
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||
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2.2 |
|
||
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2.3 |
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2.4 |
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2.5 |
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||
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2.6 |
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||
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2.7 |
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2.8 |
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3.1 |
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3.2 |
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4.1 |
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4.2 |
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4.3 |
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10.1 |
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10.2 |
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10.3 |
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||
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49
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10.5 |
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10.6 |
|
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10.7 |
|
||
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10.8 |
|
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10.9 |
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10.10 |
|
||
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10.11 |
|
||
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10.12 |
|
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10.13 |
|
||
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10.14 |
|
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10.15 |
|
||
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10.16 |
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10.17 |
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||
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10.18 |
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10.19 |
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||
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10.20 |
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||
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10.21 |
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10.22 |
|
50
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10.23 |
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||
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10.24 |
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||
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10.25 |
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10.26 |
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10.27 |
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||
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10.28 |
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||
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10.29 |
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10.30 |
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||
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10.31 |
|
||
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10.32 |
|
||
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10.33 |
|
||
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10.34 |
|
||
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10.35 |
|
||
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10.36 |
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||
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10.37 |
|
||
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10.38 |
|
||
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14.1 |
|
||
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51
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|||
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31.1 |
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||
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31.2 |
|
||
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32.1 |
|
||
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32.2 |
|
||
|
|
|
|
101.INS |
|
XBRL Instance Document |
|
|
|
|
|
101.SCH |
|
XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document |
* |
Management contract or compensatory plan or arrangement. |
52
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DONNELLEY FINANCIAL SOLUTIONS, INC. |
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By: |
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/s/ DAVID A. GARDELLA |
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David A. Gardella |
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Executive Vice President and Chief Financial Officer |
Date: November 2, 2017
53
EXECUTION VERSION
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT NO. 1 TO CREDIT AGREEMENT (this “Amendment No. 1”), dated as of October 2, 2017, by and among Donnelley Financial Solutions, Inc. (the “Borrower”), the other Loan Parties, the 2017 Refinancing Term Lenders (as defined below) party hereto and JPMORGAN CHASE BANK, N.A. (“JPM”), as administrative agent (in such capacity, including any permitted successor thereto, the “Administrative Agent”). All capitalized terms used herein (including in this preamble) and not otherwise defined herein shall have the respective meanings provided such terms in the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
WHEREAS, the Borrower has entered into that certain Credit Agreement, dated as of September 30, 2016, among the Borrower, the other parties thereto, the lenders party thereto from time to time (collectively, the “Lenders” and each individually, a “Lender”), JPM, as Administrative Agent, collateral agent, Swing Line Lender and as an Issuing Bank (as amended, restated, amended and restated, supplemented or otherwise modified from time to time prior to, but not including, the date hereof, the “Credit Agreement”) and, in connection with this Amendment No. 1, the Lead Arrangers (as defined therein) are acting as joint lead arrangers and joint bookrunners (in such capacities, the “Arrangers”) in connection with the provision of the 2017 Refinancing Term Loans (as defined below);
WHEREAS, the Borrower has requested that the Credit Agreement be amended as set forth herein (the Credit Agreement, as amended by this Amendment No. 1, the “Amended Credit Agreement”) so as to, among other things, provide for a new Class of Term Loans (the “2017 Refinancing Term Loans”), which 2017 Refinancing Term Loans would refinance all of the Term Loans made on the Closing Date that are outstanding under the Credit Agreement immediately prior to the effectiveness of this Amendment No. 1 (the “Existing Term Loans” and each Lender with an Existing Term Loan, an “Existing Term Lender”) and shall have the terms set forth in the Amended Credit Agreement;
WHEREAS, pursuant to the Engagement Letter, dated September 13, 2017, by and among the Arrangers and the Borrower (the “Engagement Letter”), the Arrangers have agreed to act as joint lead arrangers and joint bookrunners in connection with the provision of the 2017 Refinancing Term Loans;
WHEREAS, each Existing Term Lender that executes and delivers a consent and executed signature page to this Amendment No. 1 in the form of the Exchanging Term Lender Consent attached to the Election Notice Memorandum posted on LendAmend on September 14, 2017 (a “Lender Consent”) (such consenting Lender, an “Exchanging Term Lender”) will be deemed (i) to have agreed to the terms of this Amendment No. 1 and the Amended Credit Agreement, (ii) to have agreed to continue (as further described in the Lender Consent) its Existing Term Loans as 2017 Refinancing Term Loans in an equal principal amount, and (iii) upon the Amendment No. 1 Effective Date to have continued (as further described in the Lender Consent) its Existing Term Loans as 2017 Refinancing Term Loans in an equal principal amount;
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WHEREAS, each Person that executes and delivers a signature page to this Amendment No. 1 in the capacity of an “Additional Refinancing Term Lender” (each, an “Additional Refinancing Term Lender” and together with the Exchanging Term Lenders, the “2017 Refinancing Term Lenders”) will be deemed (i) to have agreed to the terms of this Amendment No. 1 and the Amended Credit Agreement and (ii) to have committed to make 2017 Refinancing Term Loans to the Borrower on the Amendment No. 1 Effective Date, in the amount specified on Schedule 1 hereto (such loans, the “Additional Refinancing Term Loans”);
WHEREAS, the aggregate proceeds of the Additional Refinancing Term Loans will be used by the Borrower to repay in full the outstanding principal amount of the Existing Term Loans (other than the Exchanged Term Loans);
WHEREAS, each Additional Refinancing Term Lender party hereto is prepared to provide 2017 Refinancing Term Loans in an amount equal to its commitment to provide such Loans as set forth on Schedule 1 hereto (the “2017 Refinancing Term Commitments”), subject to the terms and conditions set forth herein; and
WHEREAS, each Loan Party party hereto (collectively, the “Reaffirming Parties”, and each, a “Reaffirming Party”) expects to realize substantial direct and indirect benefits as a result of this Amendment No. 1 becoming effective and the consummation of the transactions contemplated hereby and agrees to reaffirm its obligations under the Credit Agreement, the Collateral Documents, and the other Loan Documents to which it is a party.
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is acknowledged by each party hereto, it is agreed:
SECTION 1.CERTAIN DEFINITIONS. Capitalized terms used (including in the preamble and recitals hereto) but not defined herein shall have the meanings assigned to such terms in the Amended Credit Agreement. As used in this Amendment No. 1:
“2017 Refinancing Term Commitments” is defined in the seventh recital hereto.
“2017 Refinancing Term Lenders” is defined in the fifth recital hereto.
“2017 Refinancing Term Loans” is defined in the second recital hereto.
“Additional Refinancing Term Lenders” is defined in the fifth recital hereto.
“Additional Refinancing Term Loans” is defined in the fifth recital hereto.
“Administrative Agent” is defined in the preamble hereto.
“Amended Credit Agreement” is defined in the second recital hereto.
“Amendment No. 1” is defined in the preamble hereto.
“Amendment No. 1 Effective Date” is defined in Section 6 hereof.
“Arrangers” is defined in the first recital hereto.
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“Borrower” is defined in the preamble hereto.
“Credit Agreement” is defined in the first recital hereto.
“Exchanged Term Loan” is defined in Section 2(a)(i) hereof.
“Exchanging Term Lenders” is defined in the fourth recital hereto.
“Existing Term Lender” is defined in the second recital hereto.
“Existing Term Loans” is defined in the second recital hereto.
“Lender Consent” is defined in the fourth recital hereto.
“Lenders” is defined in the first recital hereto.
“Non-Exchanging Term Lender” is defined in Section 2(a)(ii) hereof.
“Reaffirming Parties” is defined in the eighth recital hereto.
“Refinancing Arranger” shall mean JPMorgan Chase Bank, N.A.
SECTION 2.CONTINUATION OF EXISTING TERM LOANS; AGREEMENT TO MAKE 2017 REFINANCING TERM LOANS.
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Continuation and Repayment of Existing Term Loans. |
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As of the Amendment No. 1 Effective Date, subject to the terms hereof, each Exchanging Term Lender agrees that the aggregate principal amount of its Existing Term Loans (the “Exchanged Term Loans”) will be continued as 2017 Refinancing Term Loans in an equal principal amount through a cashless rollover. |
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As of the Amendment No. 1 Effective Date, subject to the terms hereof, (1) the Borrower agrees that pursuant to Section 2.20 of the Credit Agreement all unpaid and accrued interest up to but not including the Amendment No. 1 Effective Date on the Existing Term Loans that are continued pursuant to Section 2(a)(i) will be repaid in full on the Amendment No. 1 Effective Date and (2) the Borrower agrees that pursuant to Section 2.20 of the Credit Agreement the aggregate principal amount of the Existing Term Loans, together with all unpaid and accrued interest thereon up to but not including the Amendment No. 1 Effective Date, of each Lender holding Existing Term Loans that are not continued pursuant to Section 2(a)(i) (each, a “Non-Exchanging Term Lender”), will be repaid in full on the Amendment No. 1 Effective Date. |
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Commitment to Make Additional Refinancing Term Loans. As of the Amendment No. 1 Effective Date, subject to the terms hereof, each Additional Refinancing Term Lender agrees to make Additional Refinancing Term Loans equal to the amount set forth on Schedule I hereto. |
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On the Amendment No. 1 Effective Date, the Borrower shall apply the aggregate proceeds of the Additional Refinancing Term Loans to prepay in full the principal amount of all Existing Term Loans (other than the Exchanged Term Loans). The commitments of the Exchanging Term Lenders and the Additional Refinancing Term Lenders are several and not joint and no 2017 Refinancing Term Lender will be responsible for any other 2017 Refinancing Term Lender’s failure to make or acquire the 2017 Refinancing Term Loans. |
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Each 2017 Refinancing Term Lender shall be a “Term Lender” and “Lender” under the Credit Agreement as of the Amendment No. 1 Effective Date. Amounts paid or prepaid in respect of 2017 Refinancing Term Loans may not be reborrowed. |
SECTION 3.AMENDMENTS TO LOAN DOCUMENTS.
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Section 1.01 of the Credit Agreement is hereby amended to add the following definitions in their proper alphabetical order: |
“Amendment No. 1” shall mean the Amendment No. 1 to Credit Agreement, dated as of October 2, 2017, among the Borrower, the Administrative Agent and the Lenders party thereto.
“Amendment No. 1 Effective Date” shall have the meaning assigned to such term in Amendment No. 1.
“2017 Refinancing Term Loans” shall have the meaning assigned to such term in Amendment No. 1;
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Section 1.01 of the Credit Agreement is hereby amended by amending and restating clause (b) of the definition of “Applicable Rate” contained therein to read as follows: |
“(b) for each Term B Loan, 3.00% for Eurodollar Loans and 2.00% for ABR Loans and”;
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Section 1.01 of the Credit Agreement is hereby amended by replacing all references in the definition of “Eurodollar Rate” to “1.00%” with “0.75%”; |
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Section 2.07 of the Credit Agreement is hereby amended by amending and restating clause (c) thereof to read as follows: |
“The Borrower shall repay principal of outstanding 2017 Refinancing Term Loans on the last Business Day of each March, June, September and December of each year (commencing on the applicable day of the first full fiscal quarter of the Borrower after the Amendment No. 1 Effective Date) and on the Term B Maturity Date, in an aggregate principal amount of such Term B Loans equal to (A) in the case of quarterly payments due prior to the Term B Maturity Date, an amount equal to 1.25% of the aggregate principal amount of such 2017 Refinancing Term Loans incurred on the Amendment No. 1 Effective Date and (B) in the case of such payment due on the Term B Maturity Date, an amount equal to the then unpaid principal amount of such Term B Loans outstanding.”.
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Section 2.08(a)(i) of the Credit Agreement is hereby amended by amending and restating the last two sentences thereof to read as follows: |
“If any Repricing Event occurs prior to the date occurring 6 months after the Amendment No.1 Effective Date, the Borrower agrees to pay to the Administrative Agent, for the ratable account of each Lender with Term B Loans that are subject to such Repricing Event (including any Lender which is replaced pursuant to Section 2.16(c) as a result of its refusal to consent to an amendment giving rise to such Repricing Event), a fee in an amount equal to 1.00% of the aggregate principal amount of the Term B Loans subject to such Repricing Event. Such fees shall be earned, due and payable upon the date of the occurrence of such Repricing Event.”.
SECTION 4.REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT. On and after the Amendment No. 1 Effective Date, (i) each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof” or text of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by this Amendment No. 1, (ii) the 2017 Refinancing Term Commitments shall constitute “Term Commitments”, “Term B Commitments” and “Commitments”, in each case, under and as defined in the Credit Agreement, (iii) the 2017 Refinancing Term Loans shall constitute “Term Loans”, “Term B Loans” and “Loans”, in each case, under and as defined in the Credit Agreement and (iv) the 2017 Refinancing Term Lenders shall each constitute a “Term Lender”, “Term B Lender” and a “Lender”, in each case, under and as defined in the Credit Agreement. This Amendment No. 1 shall for all purposes constitute a “Loan Document” under and as defined in the Credit Agreement and the other Loan Documents.
SECTION 5.REPRESENTATIONS & WARRANTIES. In order to induce the 2017 Refinancing Term Lenders and the Administrative Agent to enter into this Amendment No. 1 and to induce the 2017 Refinancing Term Lenders to make the 2017 Refinancing Term Loans hereunder, each Loan Party hereby represents and warrants to the 2017 Refinancing Term Lenders and the Administrative Agent on and as of the Amendment No. 1 Effective Date that each of the representations and warranties made by any Loan Party set forth in Article III of the Credit Agreement or in any other Loan Document shall be true and correct in all material respects (provided that, any representation and warranty that is qualified by “materiality,” “material adverse effect” or similar language shall be true and correct in all respects (after giving effect to any such qualification therein)) on and as of the Amendment No. 1 Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects (or if any such representation and warranty is qualified by “materiality,” “material adverse effect” or similar language, shall be true and correct in all respects (after giving effect to any such qualification therein)) on and as of such earlier date); provided that all references in the representations set forth in Sections 3.02, and 3.03 of the Credit Agreement to “Loan Documents” shall be deemed to be references to this Amendment No. 1 and the other Loan Documents (including the Credit Agreement) as amended by this Amendment No. 1.
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SECTION 6.CONDITIONS PRECEDENT. This Amendment No. 1 shall become effective as of the first date (the “Amendment No. 1 Effective Date”) when each of the conditions set forth in this Section 6 shall have been satisfied or waived:
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The Administrative Agent shall have received a duly authorized, executed and delivered counterpart of the signature page to this Amendment No. 1 from each Loan Party named on the signature pages hereto, the Administrative Agent and the 2017 Refinancing Term Lenders. |
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All costs, fees and expenses (including, without limitation, legal fees and expenses) contemplated and to the extent required by the Credit Agreement, the Engagement Letter and any other letter agreement between the Borrower and any Arranger relating to the transactions contemplated hereby, and which are payable to the Refinancing Arranger or any other Arranger (or any other 2017 Refinancing Term Lender) or the Administrative Agent shall have been paid to the extent due. All accrued interest on, and any amounts owing under the Credit Agreement with respect to, the Existing Term Loans, whether or not due and payable, shall have been, or shall substantially concurrently with the effectiveness of this Amendment No. 1 be, paid in full. |
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No Default or Event of Default shall have occurred or be continuing or would occur immediately after giving effect to the incurrence of the 2017 Refinancing Term Loans. |
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Each of the representations and warranties made by any Loan Party set forth in Section 5 hereof shall be true and correct in all material respects (provided that, any representation and warranty that is qualified by “materiality,” “material adverse effect” or similar language shall be true and correct in all respects (after giving effect to any such qualification therein)) on and as of the Amendment No. 1 Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects (or if any such representation and warranty is qualified by “materiality,” “material adverse effect” or similar language, shall be true and correct in all respects (after giving effect to any such qualification therein)) on and as of such earlier date). |
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The Administrative Agent shall have received a Borrowing Notice meeting the requirements of Section 2.03 of the Credit Agreement for the 2017 Refinancing Term Loans. |
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The Administrative Agent shall have received a certificate of the Borrower, dated the Amendment No. 1 Effective Date, executed by a Responsible Officer of the Borrower certifying compliance with the requirements set forth in clauses (c) and (d) of this Section 6. |
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On the Amendment No. 1 Effective Date, the Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the 2017 Refinancing Term Lenders and dated the Amendment No. 1 Effective Date) of (i) Sullivan & Cromwell LLP, counsel to the Loan Parties and (ii) local counsel in each jurisdiction in which a Loan Party is organized and the laws of which are not covered by the opinion referred to in (i) above, in each case in form and substance reasonably satisfactory to the Administrative Agent. |
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such Loan Party, (b) customary resolutions of such Loan Party referred to in such certificate, (c) incumbency or specimen signatures which identify by name and title of such Responsible Officer or authorized signatory of such Loan Party authorized to sign this Amendment No. 1, and (d) a good standing certificate from the applicable Governmental Authority of such Loan Party’s jurisdiction of incorporation, organization or formation, each dated a recent date prior to the Amendment No. 1 Effective Date and certifying as to the good standing of such Loan Party; provided that in the case of preceding clause (a), such documents shall not be required to be delivered with respect to any Person that was a Loan Party immediately prior to the Amendment No. 1 Effective Date if such certificate includes a certification by such Responsible Officer that the applicable organizational documents delivered to the Administrative Agent in connection with the initial funding of Term Loans on the Closing Date remain in full force and effect and have not been amended, modified, revoked or rescinded since the Closing Date. |
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The Refinancing Arranger and the Administrative Agent shall have received at least three (3) Business Days prior to the Amendment No. 1 Effective Date all documentation and other information requested by the 2017 Refinancing Term Lenders that is required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including without limitation, the Act, in each case as requested at least five (5) Business Days prior to the Amendment No. 1 Effective Date. |
SECTION 7.ARRANGERS. The Borrower and the 2017 Refinancing Term Lenders agree that the Arrangers shall be entitled to the privileges, indemnification, immunities and other benefits afforded to the Lead Arrangers pursuant to Sections 8.08 and 9.04 of the Amended Credit Agreement and except as otherwise agreed to in writing by the Borrower and the Arrangers, shall have no duties, responsibilities or liabilities with respect to this Amendment No. 1, the Amended Credit Agreement or any other Loan Document.
SECTION 8.REAFFIRMATION.
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To induce the 2017 Refinancing Term Lenders and the Administrative Agent to enter into this Amendment No. 1, each of the Loan Parties hereby acknowledges and reaffirms its obligations under each Loan Document to which it is a party, including, without limitation, any grant, pledge or collateral assignment of a lien or security interest, as applicable, contained therein, in each case as amended, restated, amended and restated, supplemented or otherwise modified prior to or as of the date hereof (including as amended pursuant to this Amendment No. 1 and the incurrence of the 2017 Refinancing Term Loans hereunder) (collectively, the “Reaffirmed Documents”). Each Loan Party acknowledges and agrees that each of the Loan Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall not be impaired or limited by the execution or effectiveness of this Amendment No. 1. |
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principal of, the interest and premium (if any) on, and fees related to, the 2017 Refinancing Term Loans constitute “Obligations” under the Loan Documents. Each Reaffirming Loan Guarantor hereby (i) acknowledges and agrees that its guarantee of the Obligations and each of the Loan Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall not be impaired or limited by the execution or effectiveness of this Amendment No. 1, (ii) acknowledges and agrees that it will continue to guarantee to the fullest extent possible in accordance with the Loan Documents the payment and performance of all Obligations under each of the Loan Documents to which it is a party (including all such Obligations as amended, reaffirmed and/or increased pursuant to this Amendment No. 1 and the incurrence of the 2017 Refinancing Term Loans) and (iii) acknowledges, agrees and warrants for the benefit of the Administrative Agent, the Collateral Agent and each other Secured Party that there are no rights of set-off or counterclaim, nor any defenses of any kind, whether legal, equitable or otherwise, that would enable such Reaffirming Loan Guarantor to avoid or delay timely performance of its obligations under the Loan Documents. |
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In furtherance of the foregoing Section 8(a), each of the Loan Parties that is party to any Collateral Document, in its capacity as a “grantor”, “pledgor” or other similar capacity under such Collateral Document (in such capacity, each a “Reaffirming Grantor”), hereby acknowledges that it has reviewed and consents to the terms and conditions of this Amendment No. 1 and the transactions contemplated hereby, including the extension of credit in the form of the 2017 Refinancing Term Loans. In addition, each Reaffirming Grantor reaffirms the security interests granted by such Reaffirming Grantor under the terms and conditions of the Collateral Documents (in each case, to the extent a party thereto) to secure the Obligations (including all such Obligations as amended, reaffirmed and/or increased pursuant to this Amendment No. 1 and the incurrence of the 2017 Refinancing Term Loans) and agrees that such security interests remain in full force and effect and are hereby ratified, reaffirmed and confirmed. Each Loan Party hereby confirms that the security interests granted by such Reaffirming Grantor under the terms and conditions of the Loan Documents secure the 2017 Refinancing Term Loans as part of the Obligations. Each Reaffirming Grantor hereby (i) confirms that each Collateral Document to which it is a party or is otherwise bound and all Collateral encumbered thereby will continue to secure, to the fullest extent possible in accordance with the Collateral Documents, the payment and performance of the Obligations (including all such Obligations as amended, reaffirmed and/or increased pursuant to this Amendment No. 1 and the incurrence of the 2017 Refinancing Term Loans), as the case may be, including without limitation the payment and performance of all such applicable Obligations that are joint and several obligations of each Guarantor and each Reaffirming Grantor now or hereafter existing, (ii) confirms its respective grant to the Collateral Agent for the benefit of the Secured Parties of the security interest in and continuing Lien on all of such Reaffirming Grantor’s right, title and interest in, to and under all Collateral, in each case whether now owned or existing or hereafter acquired or arising and wherever located, as collateral security for the prompt and complete payment and performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all applicable Obligations (including all such Obligations as amended, reaffirmed and/or increased pursuant to this Amendment No. 1 and the incurrence of the 2017 Refinancing Term Loans), subject to the terms contained in the applicable Loan Documents, and (iii) confirms its respective pledges, grants of security interests and other obligations, as applicable, under and subject to the terms of each of the Collateral Documents to which it is a party. |
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SECTION 9.MISCELLANEOUS PROVISIONS.
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Ratification. This Amendment No. 1 is limited to the matters specified herein and shall not constitute acceptance or waiver, or, to the extent not expressly set forth herein, an amendment or modification, of any other provision of the Credit Agreement or any other Loan Document. Nothing herein contained shall be construed as a substitution or novation of the obligations outstanding under the Credit Agreement or any other Loan Document or instruments securing the same, which shall remain in full force and effect as modified hereby or by instruments executed concurrently herewith, and each of the parties hereto acknowledges and agrees that the terms of this Amendment No. 1 constitute an amendment of the terms of pre-existing Indebtedness and the related agreement, as evidenced by the Amended Credit Agreement. |
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Governing Law; Submission to Jurisdiction, Consent to Service of Process, Waiver of Jury Trial, Etc. Sections 9.10 and 9.11 of the Credit Agreement are incorporated by reference herein as if such Sections appeared herein, mutatis mutandis. |
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Severability. Section 9.08 of the Credit Agreement is incorporated by reference herein as if such Section appeared herein, mutatis mutandis. |
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Counterparts; Headings. This Amendment No. 1 may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment No. 1 by telecopy or other electronic transmission (including in .pdf format) shall be effective as delivery of a manually executed counterpart of this Amendment No. 1. Article and Section headings used herein are for convenience of reference only, and are not part of this Amendment No. 1 and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment No. 1. |
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Notice. For purposes of the Credit Agreement, the initial notice address of each Additional Refinancing Term Lender shall be as set forth on Schedule 1 hereto. |
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Recordation of 2017 Refinancing Term Loans. Upon execution and delivery hereof, and the funding of the 2017 Refinancing Term Loans, the Administrative Agent will record in the Register the 2017 Refinancing Term Loans made by the 2017 Refinancing Term Lenders as “Term Loans”. |
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Amendment, Modification and Waiver. This Amendment No. 1 may not be amended nor may any provision hereof be waived except pursuant to a writing signed by each of the parties hereto. |
[Remainder of page intentionally blank; signatures begin next page]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed by their respective authorized officers as of the date first above written.
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DONNELLEY FINANCIAL SERVICES, INC., |
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By: |
/s/ David A. Gardella |
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Name: David A. Gardella |
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Title: Chief Financial Officer |
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with respect to Section 8: |
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By: |
/s/ David A. Gardella |
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Name: David A. Gardella |
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Title: Chief Financial Officer |
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with respect to Section 8: DFS |
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By: |
/s/ David A. Gardella |
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Name: David A. Gardella |
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Title: Chief Financial Officer |
[DFS – Signature Page to Amendment No. 1 to Credit Agreement
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JPMORGAN CHASE BANK, N.A., as an |
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By |
/s/ Gene Riego de Dios |
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Name: Gene Riego de Dios |
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Title: Executive Director |
[DFS – Signature Page to Amendment No. 1 to Credit Agreement]
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JPMORGAN CHASE BANK, N.A., as |
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By |
/s/ Gene Riego de Dios |
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Name: Gene Riego de Dios |
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Title: Executive Director |
[DFS – Signature Page to Amendment No. 1 to Credit Agreement]
KE 49201287.2
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SCHEDULE 1
Additional Refinancing Term Lender |
2017 Refinancing Term Commitment |
Notice address |
JPMorgan Chase Bank, N.A. |
$25,443,948.71 |
383 Madison Avenue New York, NY 10179 |
TOTAL |
$25,443,948.71 |
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Exhibit 31.1
Certification Pursuant to Rule 13a-14(a) and Rule 15d-14(a)
of the Securities Exchange Act of 1934
I, Daniel N. Leib, certify that:
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I have reviewed this Quarterly Report on Form 10-Q of Donnelley Financial Solutions, Inc.; |
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
not applicable; |
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(c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 2, 2017
/s/ DANIEL N. LEIB |
Daniel N. Leib President and Chief Executive Officer |
Exhibit 31.2
Certification Pursuant to Rule 13a-14(a) and Rule 15d-14(a)
of the Securities Exchange Act of 1934
I, David A. Gardella, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Donnelley Financial Solutions, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
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(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
not applicable; |
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(c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 2, 2017
/s/ DAVID A. GARDELLA |
David A. Gardella Executive Vice President and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
CERTIFICATION PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b)
AND SECTION 1350 OF CHAPTER 63 OF TITLE 18
OF THE UNITED STATES CODE (18 U.S.C. 1350),
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Donnelley Financial Solutions, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel N. Leib, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
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(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
November 2, 2017
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/s/ DANIEL N. LEIB |
Daniel N. Leib |
President and Chief Executive Officer |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
CERTIFICATION PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b)
AND SECTION 1350 OF CHAPTER 63 OF TITLE 18
OF THE UNITED STATES CODE (18 U.S.C. 1350),
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Donnelley Financial Solutions, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A. Gardella, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
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(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
November 2, 2017
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/s/ DAVID A. GARDELLA |
David A. Gardella |
Executive Vice President and Chief Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 27, 2017 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | DFIN | |
Entity Registrant Name | Donnelley Financial Solutions, Inc. | |
Entity Central Index Key | 0001669811 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 33,700,000 |
Condensed Consolidated and Combined Statements of Operations (UNAUDITED) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|||||||
Services net sales | $ 140.3 | $ 139.4 | $ 471.4 | $ 454.1 | ||||||
Products net sales | 82.3 | 85.0 | 308.7 | 308.4 | ||||||
Total net sales | 222.6 | 224.4 | 780.1 | 762.5 | ||||||
Services cost of sales (exclusive of depreciation and amortization) | 81.7 | 64.2 | 240.2 | 214.6 | ||||||
Products cost of sales (exclusive of depreciation and amortization) | 58.9 | 62.0 | 190.7 | 179.9 | ||||||
Total cost of sales | 140.6 | 146.4 | 482.7 | 472.5 | ||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization) | 54.0 | 48.5 | 171.2 | 156.8 | ||||||
Restructuring, impairment and other charges-net | (0.6) | 1.7 | 6.4 | 3.6 | ||||||
Depreciation and amortization | 10.6 | 9.8 | 31.7 | 30.1 | ||||||
Income from operations | 18.0 | 18.0 | 88.1 | 99.5 | ||||||
Interest expense (income)-net | 10.6 | (0.1) | 32.7 | 0.3 | ||||||
Earnings before income taxes | 7.4 | 18.1 | 55.4 | 99.2 | ||||||
Income tax expense | 2.1 | 7.9 | 22.0 | 39.3 | ||||||
Net earnings | $ 5.3 | $ 10.2 | $ 33.4 | $ 59.9 | ||||||
Net earnings per share (Note 8): | ||||||||||
Basic net earnings per share | $ 0.16 | $ 0.31 | $ 1.01 | $ 1.85 | ||||||
Diluted net earnings per share | $ 0.16 | $ 0.31 | $ 1.01 | $ 1.85 | ||||||
Weighted average number of common shares outstanding | ||||||||||
Basic | 33.6 | 32.4 | 33.0 | 32.4 | ||||||
Diluted | 33.8 | 32.4 | 33.2 | 32.4 | ||||||
R.R. Donnelley Affiliates | ||||||||||
Total net sales | $ 1.1 | $ 3.6 | ||||||||
Services cost of sales (exclusive of depreciation and amortization) | [1] | $ 0.0 | 8.7 | $ 19.5 | [2] | 29.4 | ||||
Products cost of sales (exclusive of depreciation and amortization) | [1] | $ 0.0 | $ 11.5 | $ 32.3 | [2] | $ 48.6 | ||||
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Condensed Consolidated and Combined Statements of Comprehensive Income (UNAUDITED) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
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Statement Of Income And Comprehensive Income [Abstract] | ||||
Net earnings | $ 5.3 | $ 10.2 | $ 33.4 | $ 59.9 |
Other comprehensive income (loss), net of tax: | ||||
Translation adjustments | 2.2 | 0.2 | 4.6 | 4.2 |
Adjustment for net periodic pension and other postretirement benefits plan cost | 0.3 | (0.2) | 1.0 | (0.4) |
Other comprehensive income, net of tax | 2.5 | 0.0 | 5.6 | 3.8 |
Comprehensive income | $ 7.8 | $ 10.2 | $ 39.0 | $ 63.7 |
Condensed Consolidated Balance Sheets (UNAUDITED) (Parenthetical) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
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Receivables, allowance for doubtful accounts | $ 8.7 | $ 6.4 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, authorized | 1,000,000 | 1,000,000 |
Preferred stock, Issued | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, Authorized | 65,000,000 | 65,000,000 |
Common stock, Issued | 33,800,000 | 32,600,000 |
Maximum | ||
Treasury stock, Shares | 100,000 |
Condensed Consolidated and Combined Statements of Cash Flows (UNAUDITED) - USD ($) $ in Millions |
9 Months Ended | |
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Sep. 30, 2017 |
Sep. 30, 2016 |
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OPERATING ACTIVITIES | ||
Net earnings | $ 33.4 | $ 59.9 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||
Impairment charges | 0.2 | 0.0 |
Depreciation and amortization | 31.7 | 30.1 |
Provision for doubtful accounts receivable | 4.3 | 1.7 |
Share-based compensation | 5.2 | 1.2 |
Deferred income taxes | (2.7) | (1.0) |
Change in uncertain tax positions | (0.2) | 0.0 |
Net pension and other postretirement benefits plan income | (2.5) | (0.4) |
Other | 1.7 | 0.7 |
Changes in operating assets and liabilities - net of acquisitions: | ||
Accounts receivable - net | (36.6) | (54.6) |
Inventories | 0.6 | (2.9) |
Prepaid expenses and other current assets | (2.0) | (6.3) |
Accounts payable | (11.7) | 17.9 |
Income taxes payable and receivable | 3.7 | (0.6) |
Accrued liabilities and other | 10.3 | 12.2 |
Pension and other postretirement benefits plan contributions | (1.7) | (1.1) |
Net cash provided by operating activities | 33.7 | 56.8 |
INVESTING ACTIVITIES | ||
Capital expenditures | (20.0) | (14.0) |
Purchases of investments | (3.4) | (3.5) |
Other investing activities | 0.3 | 0.5 |
Net cash used in investing activities | (23.1) | (17.0) |
FINANCING ACTIVITIES | ||
Revolving facility borrowings | 230.0 | 0.0 |
Payments on revolving facility borrowings | (230.0) | 0.0 |
Payments on long-term debt | (100.0) | 0.0 |
Debt issuance costs | (1.5) | (9.3) |
Separation-related payment from R.R. Donnelley | 68.0 | 0.0 |
Proceeds from issuance of common stock | 18.8 | 0.0 |
Proceeds from issuance of long-term debt | 0.0 | 348.2 |
Net change in short-term debt | 0.0 | (8.8) |
Net transfers to Parent and affiliates | 0.0 | (336.2) |
Treasury stock repurchases | (0.9) | 0.0 |
Other financing activities | 0.4 | 0.0 |
Net cash used in financing activities | (15.2) | (6.1) |
Effect of exchange rate on cash and cash equivalents | 0.6 | 4.2 |
Net (decrease) increase in cash and cash equivalents | (4.0) | 37.9 |
Cash and cash equivalents at beginning of year | 36.2 | 15.1 |
Cash and cash equivalents at end of period | 32.2 | 53.0 |
Supplemental non-cash disclosure: | ||
Debt exchange with R.R. Donnelley, including $5.5 million of debt issuance costs | 0.0 | 300.0 |
Settlement of intercompany note payable | 0.0 | 29.6 |
Accrued debt issuance costs | $ 0.0 | $ 1.6 |
Condensed Consolidated and Combined Statements of Cash Flows (UNAUDITED) (Parenthetical) $ in Millions |
9 Months Ended |
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Sep. 30, 2016
USD ($)
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Statement Of Cash Flows [Abstract] | |
Debt issuance costs | $ 5.5 |
Overview and Basis of Presentation |
9 Months Ended |
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Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Overview and Basis of Presentation | Note 1. Overview and Basis of Presentation Description of Business Donnelley Financial Solutions, Inc. (the “Company” or “Donnelley Financial” ) is a financial communications services company that supports global capital markets compliance and transaction needs for its corporate clients and their advisors (such as law firms and investment bankers) and global investment markets compliance and analytics needs for mutual fund companies, variable annuity providers and broker/dealers. With proprietary technology such as data storage and workflow collaboration tools, deep subject matter expertise and a global footprint, Donnelley Financial produces, manages, stores, distributes, and translates documents and electronic communications in order to deliver timely financial communications to investors and documents in a manner that complies with regulatory commissions. Donnelley Financial’s Registration Statement on Form 10, as amended, was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on September 20, 2016. On October 1, 2016, Donnelley Financial became an independent publicly traded company through the distribution by R.R. Donnelley & Sons Company (“RRD”) of approximately 26.2 million shares, or 80.75%, of Donnelley Financial common stock to RRD shareholders (the “Separation”). Holders of RRD common stock received one share of Donnelley Financial common stock for every eight shares of RRD common stock held on September 23, 2016. As part of the Separation, RRD retained approximately 6.2 million shares of Donnelley Financial common stock, or a 19.25% interest in Donnelley Financial. Donnelley Financial’s common stock began regular-way trading under the ticker symbol “DFIN” on the New York Stock Exchange on October 3, 2016. On October 1, 2016, RRD also completed the previously announced separation of LSC Communications, Inc. (“LSC”), its publishing and retail-centric print services and office products business. On March 28, 2017, RRD completed the sale of 6.2 million shares of LSC common stock (RRD’s remaining ownership stake in LSC) in an underwritten public offering. As a result, beginning in the quarter ended June 30, 2017, LSC is no longer an affiliate of the Company. On September 14, 2016, the Company and LSC entered into a Separation and Distribution Agreement with RRD to effect the distribution of the Company’s and LSC’s common stock to RRD’s common stockholders (the “Separation and Distribution Agreement”). This agreement governs the Company’s relationship with RRD and LSC with respect to pre-Separation matters and provides for the allocation of employee benefit, litigation and other liabilities and obligations attributable to periods prior to the Separation. The Separation and Distribution Agreement also includes an agreement that the Company, RRD and LSC will provide each other with appropriate indemnities with respect to liabilities arising out of the businesses being distributed and retained by RRD in the Separation. The Separation and Distribution Agreement also addresses employee compensation and benefit matters. In connection with the Separation, the Company entered into transition services agreements separately with RRD and LSC, under which, in exchange for the fees specified in the arrangements, RRD and LSC agree to provide certain services to the Company and the Company agrees to provide certain services to RRD, respectively, for up to 24 months following the Separation. These services include, but are not limited to, information technology, accounts receivable, accounts payable, payroll and other financial and administrative services and functions. These agreements facilitate the separation by allowing the Company to operate independently prior to establishing stand-alone back office systems across its organization. At the time of the Separation, the Company entered into a number of commercial and other arrangements with RRD and its subsidiaries. These include, among other things, arrangements for the provision of services, including global outsourcing and logistics services, printing and binding, digital printing, composition, premedia and access to technology. The Company also entered into a number of commercial and other arrangements with LSC and its subsidiaries, pursuant to which LSC will print and bind products for the Company. The terms of the arrangements with RRD and LSC do not exceed 24 months. Subsequent to the Separation, RRD and LSC are clients of the Company and expect to utilize financial communication software and services that the Company makes available to all of its clients. On March 24, 2017, pursuant to the Stockholder and Registration Rights Agreement, dated as of September 30, 2016, by and between the Company and RRD, the Company filed a Registration Statement on Form S-1 to register the offering and sale of shares of the Company’s common stock retained by RRD. The Registration Statement on Form S-1, as amended, was declared effective by the SEC on June 13, 2017. On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. Upon the consummation of the offering, RRD retained approximately 0.1 million shares of the Company’s common stock which were subsequently sold by RRD on August 1, 2017. In conjunction with the underwritten public offering, the underwriters exercised their option to purchase approximately 0.9 million of the Company’s shares (the “Option Shares”). The Company received approximately $18.8 million in net proceeds from the sale of the Option Shares, after deducting estimated underwriting discounts and commissions. The proceeds were used to reduce outstanding debt under the Revolving Facility (as defined in Note 11, Debt). Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party, therefore amounts disclosed related to RRD are presented through June 30, 2017 only. Basis of Presentation The accompanying unaudited condensed consolidated and combined financial statements reflect the consolidated financial position and consolidated results of operations of the Company as an independent, publicly traded company for the periods after the Separation and the combined financial position and combined results of operations for the periods prior to the Separation. Prior to the Separation, the combined financial statements were prepared on a stand-alone basis and were derived from RRD’s consolidated financial statements and accounting records. The unaudited condensed consolidated and combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The financial data presented herein should be read in conjunction with the audited consolidated and combined financial statements and accompanying notes included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 28, 2017. In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Results of interim periods should not be considered indicative of the results for the full year. These unaudited condensed consolidated and combined interim financial statements include estimates and assumptions of management that affect the amounts reported in the unaudited condensed consolidated and combined financial statements. Actual results could differ from these estimates. For periods prior to the Separation, the unaudited condensed consolidated and combined financial statements include the allocation of certain assets and liabilities that were historically held at the RRD corporate level but which were specifically identifiable or attributable to the Company. Cash and cash equivalents held by RRD were not allocated to Donnelley Financial unless they were held in a legal entity that was transferred to Donnelley Financial. All intercompany transactions and accounts within Donnelley Financial have been eliminated. All intracompany transactions between RRD and Donnelley Financial are considered to be effectively settled in the unaudited condensed consolidated and combined financial statements at the time the transaction is recorded. The total net effect of the settlement of these intracompany transactions is reflected in the unaudited condensed consolidated and combined statements of cash flows as a financing activity and in the unaudited condensed consolidated and combined balance sheets as net parent company investment. Net parent company investment is primarily impacted by contributions from RRD which are the result of treasury activities and net funding provided by or distributed to RRD. Prior to the Separation, the unaudited condensed consolidated and combined financial statements include certain expenses of RRD which were allocated to Donnelley Financial for certain functions, including general corporate expenses related to information technology, finance, legal, human resources, internal audit, treasury, tax, investor relations and executive oversight. These expenses were allocated to the Company on the basis of direct usage, when available, with the remainder allocated on the pro rata basis of revenue, employee headcount, or other measures. We consider the expense methodology and results to be reasonable for all periods presented. However these allocations may not be indicative of the actual expenses that would have been incurred as an independent public company or the costs that may be incurred in the future. For periods prior to the Separation, the income tax amounts in the unaudited condensed consolidated and combined financial statements were calculated based on a separate income tax return methodology and presented as if the Company’s operations were separate taxpayers in the respective jurisdictions. RRD maintained various benefit and share-based compensation plans at a corporate level. Donnelley Financial employees participated in those programs and a portion of the cost of those plans is included in Donnelley Financial’s condensed consolidated and combined financial statements for periods prior to the Separation. On October 1, 2016, Donnelley Financial recorded net pension plan liabilities of $68.3 million (consisting of a total benefit plan liability of $317.0 million, net of plan assets having fair market value of $248.7 million), as a result of the transfer of certain pension plan liabilities and assets from RRD to the Company upon the legal split of those plans. The pension plan asset allocation from RRD was finalized on June 30, 2017, which resulted in a $0.7 million decrease to the fair value of plan assets transferred to the Company from RRD. The Company also recorded a net other postretirement benefit liability of $1.5 million, as a result of the transfer of an other postretirement benefit plan from RRD to the Company. Refer to Note 6, Retirement Plans, for further details regarding the Company’s pension and other postretirement benefit plans. Donnelley Financial generates a portion of net revenue from sales to RRD’s subsidiaries. Included in the unaudited condensed combined financial statements are net revenues from sales to RRD and affiliates of $1.1 million and $3.6 million for the three months and nine months ended September 30, 2016, respectively. Donnelley Financial utilizes RRD for freight and logistics, production of certain printed products and outsourced business services functions. Included in the unaudited condensed combined financial statements are cost of sales to RRD and affiliates of $20.2 million and $78.0 million for the three and nine months ended September 30, 2016, respectively. Intercompany receivables and payables with RRD are reflected within net parent company investment in the accompanying unaudited condensed combined financial statements for periods prior to the Separation. See Note 13, Related Parties, for a further description of related party transactions. |
Inventories |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Inventories | Note 2. Inventories The components of the Company’s inventories, net of excess and obsolescence reserves for raw materials and finished goods, at September 30, 2017 and December 31, 2016 were as follows:
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Property, Plant and Equipment |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property Plant And Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment | Note 3. Property, Plant and Equipment The components of the Company’s property, plant and equipment at September 30, 2017 and December 31, 2016 were as follows:
Depreciation expense was $1.9 million and $1.4 million for the three months ended September 30, 2017 and 2016, respectively, and $5.0 million and $6.1 million for the nine months ended September 30, 2017 and 2016, respectively. |
Goodwill and Other Intangible Assets |
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Goodwill And Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | Note 4. Goodwill and Other Intangible Assets The changes in the carrying amount of goodwill by segment for the nine months ended September 30, 2017 were as follows:
The components of other intangible assets at September 30, 2017 and December 31, 2016 were as follows:
Amortization expense for other intangible assets was $3.6 million and $3.6 million for the three months ended September 30, 2017 and 2016, respectively, and $10.7 million and $10.8 million for the nine months ended September 30, 2017 and 2016, respectively. The following table outlines the estimated annual amortization expense related to other intangible assets as of September 30, 2017:
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Restructuring, Impairment and Other Charges |
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Restructuring And Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring, Impairment and Other Charges | Note 5. Restructuring, Impairment and Other Charges Restructuring, Impairment and Other Charges recognized in Results of Operations For the three months ended September 30, 2017 and 2016, the Company recorded the following net restructuring, impairment and other charges:
For the nine months ended September 30, 2017 and 2016, the Company recorded the following net restructuring, impairment and other charges:
Restructuring and Impairment Charges For the three and nine months ended September 30, 2017, the Company recorded net restructuring charges of $0.4 million and $5.2 million, respectively, for employee termination costs for 169 employees, substantially all of whom were terminated as of September 30, 2017. These charges primarily related to the reorganization of certain operations and certain administrative functions. Additionally, the Company recognized a net reversal of $1.0 million of other restructuring charges during the three months ended September 30, 2017 primarily due to the reversal of previously recognized lease termination costs associated with a facility that the Company began using during the third quarter of 2017. The Company incurred net lease termination and other restructuring charges of $0.9 million for the nine months ended September 30, 2017. For the nine months ended September 30, 2017, the Company also recorded $0.2 million of net impairment charges primarily related to leasehold improvements associated with facility closures. The nine months ended September 30, 2017 includes $0.1 million for other charges associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate. For the three and nine months ended September 30, 2016, the Company recorded net restructuring charges of $1.3 million and $2.3 million, respectively, for employee termination costs for 22 employees. These charges primarily related to the reorganization of certain administrative functions. Additionally, the Company incurred lease termination and other restructuring charges of $0.4 million and $1.2 million, respectively, for the three and nine months ended September 30, 2016. The nine months ended September 30, 2016, includes $0.1 million for other charges associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate.
Restructuring Reserve The restructuring reserve as of December 31, 2016 and September 30, 2017, and changes during the nine months ended September 30, 2017, were as follows:
The current portion of restructuring reserves of $3.2 million at September 30, 2017 was included in accrued liabilities, while the long-term portion of $1.8 million, primarily related to lease termination costs, was included in other noncurrent liabilities at September 30, 2017.
The Company anticipates that payments associated with the employee terminations reflected in the above table will be substantially completed by March 31, 2018. The restructuring liabilities classified as “lease terminations and other” consisted of lease terminations, other facility closing costs and contract termination costs. Payments on certain of the lease obligations are scheduled to continue until 2026. Market conditions and the Company’s ability to sublease these properties could affect the ultimate charges related to the lease obligations. Any potential recoveries or additional charges could affect amounts reported in the Company’s financial statements. |
Retirement Plans |
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Compensation And Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Plans | Note 6. Retirement Plans Donnelley Financial’s Participation in RRD’s Pension and Postretirement Benefit Plans RRD provided pension and other postretirement healthcare benefits to certain current and former employees of Donnelley Financial. Prior to the Separation, RRD was responsible for the net benefit plan obligations associated with these plans, and as such, these liabilities are not reflected in Donnelley Financial’s unaudited condensed consolidated and combined balance sheets. Donnelley Financial’s unaudited condensed consolidated and combined statements of operations include expense allocations for these benefits. These allocations were funded through intercompany transactions with RRD which are reflected within net parent company investment in Donnelley Financial. Total RRD pension and postretirement benefit plan net income allocated to Donnelley Financial, related to pension cost and postretirement benefits, was $1.3 million and $4.2 million in the three and nine months ended September 30, 2016, respectively. Included in these amounts is an allocation for other postretirement benefit plans for $0.3 million and $1.0 million in the three and nine months ended September 30, 2016, respectively. These allocations are reflected in the Company’s cost of sales and selling, general and administrative expenses. Donnelley Financial’s Pension and Postretirement Benefit Plans On October 1, 2016, Donnelley Financial recorded net pension plan liabilities of $68.3 million (consisting of a total benefit plan liability of $317.0 million, net of plan assets having fair market value of $248.7 million), as a result of the transfer of certain pension plan liabilities and assets from RRD to the Company upon the legal split of those plans. The pension plan asset allocation from RRD was finalized on June 30, 2017, which resulted in a $0.7 million decrease to the fair value of plan assets transferred to the Company from RRD. The Company also recorded a net other postretirement benefit liability of $1.5 million, as a result of the transfer of an other postretirement benefit plan from RRD to the Company. The components of the estimated net pension plan income for Donnelley Financial’s pension plans for the three and nine months ended September 30, 2017 and 2016 were as follows:
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Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | Note 7. Equity The Company’s equity as of December 31, 2016 and September 30, 2017, and changes during the nine months ended September 30, 2017, were as follows:
Separation-related adjustments primarily relate to adjustments arising from the finalization of tax returns for periods prior to the Separation as well as settlement of balances due to or from RRD for activity prior to the Separation. On June 21, 2017, the Company issued stock in conjunction with the underwritten public offering of the sale of the Company’s shares retained by RRD. The underwriters exercised their option to purchase approximately 0.9 million Option Shares. The Company received approximately $18.8 million in net proceeds from the sale of the Option Shares, after deducting estimated underwriting discounts and commissions. Refer to Note 1, Overview and Basis of Presentation, for further details. The Company’s equity as of December 31, 2015 and September 30, 2016, and changes during the nine months ended September 30, 2016, were as follows:
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Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Note 8. Earnings per Share Basic earnings per share is calculated by dividing net earnings by the weighted average number of common shares outstanding for the period. In computing diluted earnings per share, basic earnings per share is adjusted for the assumed issuance of all potentially dilutive share-based awards, including restricted stock units and restricted stock. On October 1, 2016, RRD distributed approximately 26.2 million shares of Donnelley Financial common stock to RRD shareholders in connection with the spin-off of Donnelley Financial, with RRD retaining approximately 6.2 million shares of Donnelley Financial common stock. Holders of RRD common stock received one share of Donnelley Financial for every eight shares of RRD common stock held on September 23, 2016. Basic and diluted earnings per common share and the average number of common shares outstanding were retrospectively restated for the number of Donnelley Financial shares outstanding immediately following this transaction. For periods prior to the Separation, basic and diluted earnings per share were calculated using the number of shares distributed and retained by RRD, totaling 32.4 million. The same number of shares was used to calculate basic and diluted earnings per share since there were no Donnelley Financial equity awards outstanding prior to the spin-off. On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. Upon consummation of the offering, RRD retained approximately 0.1 million shares of the Company’s common stock which were subsequently sold by RRD on August 1, 2017. Refer to Note 1, Overview and Basis of Presentation, for further details. As a result of the Company adopting Accounting Standards Update 2016-09 “Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” beginning in the first quarter of 2017, excess tax benefits and tax deficiencies are excluded from the calculation of assumed proceeds when using the treasury stock method in calculating diluted earnings per share. The reconciliation of the numerator and denominator of the basic and diluted earnings per share calculation and the anti-dilutive share-based awards for the three and nine months ended September 30, 2017 and 2016 were as follows:
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Comprehensive Income | Note 9. Comprehensive Income The components of other comprehensive income and income tax expense allocated to each component for the three and nine months ended September 30, 2017 and 2016 were as follows:
Accumulated other comprehensive loss by component as of December 31, 2016 and September 30, 2017 were as follows:
Accumulated other comprehensive loss by component as of December 31, 2015 and September 30, 2016 as follows:
Reclassifications from accumulated other comprehensive loss for the three and nine months ended September 30, 2017 and 2016 were as follows:
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Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Note 10. Segment Information The Company’s segments are summarized below: United States The U.S. segment serves capital market and investment market clients in the U.S. by delivering products and services to help create, manage, and deliver, accurate and timely financial communications to investors and regulators. The Company also provides virtual data rooms to facilitate the deal management requirements of capital markets and mergers and acquisitions transactions, and provides data and analytics services that help professionals uncover intelligence from disclosures contained within public filings made with the SEC. The U.S. segment also includes language solutions capabilities, through which the Company can translate documents and create content in up to 190 different languages for its clients, and commercial print. International The International segment includes the Company’s operations in Asia, Europe, Canada and Latin America. The international business is primarily focused on working with international capital markets clients on capital markets offerings and regulatory compliance related activities into or within the United States. In addition, the international segment provides language translation services and shareholder communication services to investment market clients. Corporate Corporate consists of unallocated selling, general and administrative activities and associated expenses including, in part, executive, legal, finance, communications and certain facility costs. In addition, certain costs and earnings of employee benefit plans, such as pension and other postretirement benefit plan expense (income) and allocated costs for share-based compensation, are included in Corporate and not allocated to the operating segments. Information by Segment The Company has disclosed income (loss) from operations as the primary measure of segment earnings (loss). This is the measure of profitability used by the Company’s chief operating decision-maker and is most consistent with the presentation of profitability reported within the consolidated and combined financial statements.
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Debt |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Note 11. Debt On September 30, 2016, in connection with the Separation, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement provides for (i) a new senior secured term loan B facility in an aggregate principal amount of $350.0 million (the “Term Loan Credit Facility”) and (ii) a new first lien senior secured revolving credit facility in an aggregate principal amount of $300.0 million (the “Revolving Facility”, and, together with the Term Loan Credit Facility, the “Credit Facilities”). The Credit Agreement contains a number of covenants, including 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. The Credit Agreement generally allows annual dividend payments of up to $15.0 million in the aggregate. As of September 30, 2017, there were no outstanding borrowings under the Revolving Facility. Borrowings under the Term Loan Credit Facility were used to provide $340.2 million of cash to RRD, pursuant to the Separation Agreement, as of September 30, 2016. The remainder of the net proceeds was used for general corporate purposes. Pursuant to the Separation and Distribution Agreement, the Company received a cash payment of $68.0 million from RRD on April 3, 2017. The proceeds were used to reduce outstanding debt under the Term Loan Credit Facility. On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. Upon the consummation of the offering, RRD retained approximately 0.1 million shares of the Company’s common stock of the offering which were subsequently sold by RRD on August 1, 2017. In conjunction with the underwritten public offering, the underwriters exercised their option to purchase approximately 0.9 million Option Shares. The Company received approximately $18.8 million in net proceeds from the sale of the Option Shares, after deducting estimated underwriting discounts and commissions. The proceeds were used to reduce outstanding debt under the Revolving Facility. On October 2, 2017, the Company repriced the Term Loan Credit Facility. As a result, the interest rate was reduced by 100 basis points to LIBOR plus 3.0% and the LIBOR floor was reduced by 25 basis points to .75%. Additionally, under the amended Credit Agreement, principal payments are due on a quarterly basis. Other terms, including the outstanding principal, maturity date, and debt covenants such as the minimum Interest Coverage Ratio and the maximum Leverage Ratio are consistent with the original Credit Agreement. On September 30, 2016, also in connection with the Separation, the Company issued $300.0 million of 8.25% senior unsecured notes due October 15, 2024 (the “Notes”). Interest on the Notes is payable semi-annually on April 15 and October 15, commencing on April 15, 2017. The issuance of the Notes was part of a debt exchange that resulted in the settlement of certain of RRD's bonds. The Notes were issued pursuant to an indenture where certain wholly-owned domestic subsidiaries of the Company guarantee the Notes (the “Guarantors”). The Notes are jointly and severally guaranteed, on an unsecured basis, by the Guarantors, which are comprised of each of the Company’s existing and future direct and indirect wholly-owned U.S. subsidiaries that guarantee the Company’s obligations under the Credit Facilities. The Notes are not guaranteed by the Company’s foreign subsidiaries or unrestricted subsidiaries. The Notes and the related guarantees will be the Company and the Guarantors’, respective, senior unsecured obligations and will rank equally in right of payment to all present and future senior debt, including the obligations under the Company’s Credit Facilities, senior in right of payment to all present and future subordinated debt, and effectively subordinated in right of payment to any of the Company and the Guarantors’ secured debt, to the extent of the value of the assets securing such debt. The indenture governing the Notes contains certain covenants applicable to the Company and its restricted subsidiaries, including limitations on: (1) liens; (2) indebtedness; (3) mergers, consolidations and acquisitions; (4) sales, transfers and other dispositions of assets; (5) loans and other investments; (6) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (7) restrictions affecting subsidiaries; (8) transactions with affiliates; and (9) designations of unrestricted subsidiaries. Each of these covenants is subject to important exceptions and qualifications. In connection with the offering of the Notes, the Company entered into a registration rights agreement, dated as of September 30, 2016 (the “Registration Rights Agreement”), pursuant to which the Company agreed to file a registration statement with the SEC with respect to an offer to exchange the Notes for registered notes. In certain circumstances, the Company may be required to file a shelf registration statement with the SEC registering the resale of the Notes by the holders thereof, in lieu of an exchange offer to such holders. On March 10, 2017, the Company filed a Registration Statement on Form S-4 (as amended, the “Exchange Offer Registration Statement”) to offer to exchange the Notes for registered notes which have terms identical in all material respects to the Notes except that the registered notes are not subject to transfer restrictions or registration rights. The Exchange Offer Registration Statement was declared effective by the SEC on March 22, 2017. An exchange offer for the Notes was launched on March 22, 2017 and settled on April 25, 2017, resulting in the exchange of $299.9 million aggregate principal amount of outstanding Notes for registered notes. The Company’s debt as of September 30, 2017 and December 31, 2016 consisted of the following:
The fair value of the senior notes, which was determined using the market approach based upon interest rates available to the Company for borrowings with similar terms and maturities, were determined to be Level 2 under the fair value hierarchy. The fair value of the Company’s senior notes was $322.2 million and $307.1 million at September 30, 2017 and December 31, 2016, respectively. The weighted average interest rate on borrowings under the Revolving Facility was 4.4% at September 30, 2017.
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Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2017 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 12. Commitments and Contingencies Litigation From time to time, the Company’s customers and others file voluntary petitions for reorganization under United States bankruptcy laws. In such cases, certain pre-petition payments received by the Company from these parties could be considered preference items and subject to return. In addition, the Company may be party to certain litigation arising in the ordinary course of business. Management believes that the final resolution of these preference items and litigation will not have a material effect on the Company’s consolidated and combined results of operations, financial position or cash flows. |
Related Parties |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Related Parties | Note 13. Related Parties On March 28, 2017, RRD completed the sale of 6.2 million shares of LSC common stock (RRD’s remaining ownership stake in LSC) in an underwritten public offering. As a result, beginning in the quarter ended June 30, 2017, LSC is no longer an affiliate of the Company. On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock. RRD retained approximately 0.1 million shares of the Company’s common stock which RRD sold on August 1, 2017. Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party and the amounts disclosed related to RRD are presented through June 30, 2017 only. Transition Services Agreements In connection with the Separation, the Company entered into transition services agreements separately with RRD and LSC, under which, in exchange for the fees specified in the arrangements, RRD and LSC agree to provide certain services to the Company and the Company agrees to provide certain services to RRD, respectively, for up to 24 months following the Separation. These services include, but are not limited to, information technology, accounts receivable, accounts payable, payroll and other financial and administrative services and functions. These agreements facilitate the separation by allowing the Company to operate independently prior to establishing stand-alone back office systems across its organization. Commercial Arrangements The Company entered into a number of commercial and other arrangements with RRD and its subsidiaries. These include, among other things, arrangements for the provision of services, including global outsourcing and logistics services, printing and binding, digital printing, composition and access to technology. The Company also entered into a number of commercial and other arrangements with LSC and its subsidiaries, pursuant to which LSC will print and bind products for the Company. The terms of the arrangements with RRD and LSC do not exceed 24 months. Subsequent to the Separation, RRD and LSC are clients of the Company and expect to utilize financial communication software and services that the Company provides to all of its clients. Stockholder and Registration Rights Agreement The Company and RRD entered into a Stockholder and Registration Rights Agreement with respect to the Company’s common stock retained by RRD pursuant to which the Company agrees that, upon the request of RRD, the Company will use its reasonable best efforts to effect the registration under applicable federal and state securities laws of the shares of the Company’s common stock retained by RRD after the Separation. In addition, RRD granted the Company a proxy to vote the shares of the Company’s common stock that RRD retained immediately after the Separation in proportion to the votes cast by the Company’s other stockholders. This proxy, however, will be automatically revoked as to a particular share upon any sale or transfer of such share from RRD to a person other than RRD, and neither the voting agreement nor the proxy will limit or prohibit any such sale or transfer. On March 24, 2017, pursuant to the Stockholder and Registration Rights Agreement, the Company filed a Registration Statement on Form S-1 to register the offering and sale of the Company’s common stock retained by RRD. The Registration Statement on Form S-1, as amended, was declared effective by the SEC on June 13, 2017. On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. Upon consummation of the offering, RRD retained approximately 0.1 million shares of the Company’s common stock which were subsequently sold by RRD on August 1, 2017. Sublease Agreement In connection with the Separation, the Company assumed an operating lease through 2024 for the Company’s headquarters. There is a related non-cancelable sublease rental to RRD for the same period. The Company remains secondarily liable under this lease in the event that the sub-lessee defaults under the sublease terms. The Company does not believe that material payments will be required as a result of the secondary liability provisions of the primary lease agreement. Related Party Receivables/Payables Pursuant to the Separation and Distribution Agreement, the Company received a cash payment of $68.0 million from RRD on April 3, 2017. The proceeds were used to reduce outstanding debt under the Term Loan Credit Facility. The Company has other amounts due to or from RRD in the normal course of business. The Company had $96.0 million of receivables from RRD and $27.1 million of payables to RRD included in the condensed consolidated balance sheet at December 31, 2016. Allocations from RRD Prior to the Separation RRD provided Donnelley Financial with certain services, which include, but are not limited to information technology, finance, legal, human resources, internal audit, treasury, tax, investor relations and executive oversight. The financial information in these consolidated and combined financial statements does not necessarily include all the expenses that would have been incurred had Donnelley Financial been a separate, standalone entity for all periods presented. Prior to the Separation RRD charged Donnelley Financial for these services based on direct usage when possible. When specific identification was not practicable, the pro rata basis of revenue or employee headcount, or some other measure was used. These allocations were reflected as follows in the unaudited condensed consolidated and combined financial statements:
The Company considers the expense methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that the Company would have incurred as an independent public company or the costs it may incur in the future. Related Party Revenues Donnelley Financial generates a portion of net revenue from sales to RRD’s subsidiaries. Net revenues from sales to RRD and affiliates of $1.1 million and $3.6 million for the three and nine months ended September 30, 2016, respectively, were included in the unaudited condensed combined statement of operations. Related Party Purchases Donnelley Financial utilizes RRD for freight and logistics and services as well as certain production of printed products. Cost of sales of $11.5 million and $48.6 million for the three and nine months ended September 30, 2016, respectively, were included in the unaudited condensed combined statement of operations for these purchases. Donnelley Financial also utilizes RRD’s business process outsourcing business for certain composition, XBRL and other functions. Cost of sales of $8.7 million and $29.4 million for the three and nine months ended September 30, 2016, respectively, were included in the unaudited condensed combined statement of operations for these purchases. For periods prior to the Separation, intercompany payables with RRD and affiliates for these purchases are reflected within net parent company investment in the unaudited condensed consolidated and combined financial statements. Share-Based Compensation Prior to Separation Prior to the Separation, certain Donnelley Financial employees participated in RRD’s share-based compensation plans, the costs of which have been allocated to Donnelley Financial and recorded in selling, general and administrative expenses in the unaudited condensed combined statement of operations. Share-based compensation costs allocated to the Company were $0.2 million and $1.2 million for the three and nine months ended September 30, 2016, respectively. Retirement Plans Prior to Separation Prior to the Separation, Donnelley Financial employees participated in pension and other postretirement plans sponsored by RRD. These costs are reflected in the Company’s cost of sales and selling, general and administrative expenses in the unaudited condensed consolidated and combined statements of operations. These costs were funded through intercompany transactions with RRD which are reflected within the net parent company investment. On October 1, 2016, Donnelley Financial recorded net pension plan liabilities of $68.3 million (consisting of a total benefit plan liability of $317.0 million, net of plan assets having fair market value of $248.7 million), as a result of the transfer of certain pension plan liabilities and assets from RRD to the Company upon the legal split of those plans. The pension plan asset allocation from RRD was finalized on June 30, 2017, which resulted in a $0.7 million decrease to the fair value of plan assets transferred to the Company from RRD. Refer to Note 6, Retirement Plans, for further details regarding the Company’s pension and other postretirement benefit plans. Centralized Cash Management Prior to Separation RRD used a centralized approach to cash management and financing of operations. Prior to the Separation, the majority of the Company’s foreign subsidiaries were party to RRD’s international cash pooling arrangements to maximize the availability of cash for general operating and investing purposes. As part of RRD’s centralized cash management process, cash balances were swept regularly from the Company’s accounts. Cash transfers to and from RRD’s cash concentration accounts and the resulting balances at the end of each reporting period prior to the Separation are reflected in net parent company investment in the consolidated balance sheet. Debt RRD’s third party debt and related interest expense have not been allocated to the Company for any of the periods presented as the Company was not the legal obligor of the debt and the borrowings were not directly related to the Company’s business. |
New Accounting Pronouncements |
9 Months Ended |
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Sep. 30, 2017 | |
Accounting Changes And Error Corrections [Abstract] | |
New Accounting Pronouncements | Note 14. New Accounting Pronouncements In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2017-07 “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”), which requires an employer to report the service cost component of net periodic benefit cost in the same line item(s) as other employee compensation costs arising from services rendered during the period. The other components of net periodic benefit cost will be presented in the income statement separately from the line item(s) that includes the service cost and outside of any subtotal of operating income. ASU 2017-07 must be applied retrospectively and is effective in the first quarter of 2018. Early adoption is permitted; however the Company plans to adopt the standard in the first quarter of 2018. Refer to Note 6, Retirement Plans, for disclosure of pension income for the nine months ended September 30, 2017 and 2016 which would be reclassified to other income upon adoption of the standard. In January 2017, the FASB issued Accounting Standards Update No. 2017-04 “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”), which simplifies the accounting for goodwill impairment. ASU 2017-04 requires entities to record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (Step 1 under the current impairment test). The standard eliminates Step 2 from the current goodwill impairment test, which included determining the implied fair value of goodwill and comparing it with the carrying amount of that goodwill. ASU 2017-04 must be applied prospectively and is effective in the first quarter of 2020. Early adoption is permitted. The Company early adopted the standard in the first quarter of 2017. In February 2016, the FASB issued Accounting Standards Update No. 2016-02 “Leases (Topic 842)” (“ASU 2016-02”), which requires lessees to put most leases on the balance sheet but recognize expense on the income statement in a manner similar to current accounting. For lessors, ASU 2016-02 also modifies the classification criteria and the accounting for sales-type and direct financing leases. The standard requires a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements and is effective in the first quarter of 2019. Early adoption of ASU 2016-02 is permitted; however the Company plans to adopt the standard in the first quarter of 2019. The Company is evaluating the impact of ASU 2016-02. In May 2014, the FASB issued Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue using a five-step process that supersedes virtually all existing revenue guidance. ASU 2014-09 also requires additional quantitative and qualitative disclosures. In August 2015, the FASB issued Accounting Standards Update No. 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”), which defers the effective date of ASU 2014-09 to January 1, 2018. Early adoption of ASU 2014-09 is permitted in the first quarter of 2017. However, the Company plans to adopt the standard in the first quarter of 2018. The standard allows the option of either a full retrospective adoption, meaning the standard is applied to all periods presented, or a modified retrospective adoption, meaning the standard is applied only to the most current period. The Company is evaluating the impact of the provisions of ASU 2014-09 and currently anticipates applying the modified retrospective approach when adopting the standard. |
Guarantor Financial Information |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Information Of Parent Company Only Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Financial Information | Note 15. Guarantor Financial Information As described in Note 11, Debt, on September 30, 2016, the Company issued the Notes. The Guarantors of the Notes, Donnelley Financial, LLC and DFS International Holding, Inc., entered into an agreement pursuant to which each agreed to guarantee the Company’s obligations under the Notes. All guarantees are full and unconditional and joint and several. The Guarantors are 100% directly owned subsidiaries of the Company. The guarantee of the Notes by a subsidiary guarantor will be automatically released under certain situations, including upon the sale or disposition of such subsidiary guarantor to a person that is not Donnelley Financial or a subsidiary guarantor of the notes, the liquidation or dissolution of such subsidiary guarantor, and if such subsidiary guarantor is released from its guarantee obligations under the Company’s Credit Facilities. The following tables set forth condensed consolidating statements of income for the three and nine months ended September 30, 2017 and 2016, condensed consolidating statements of financial position as of September 30, 2017 and December 31, 2016, and condensed consolidating and combined statements of cash flows for the nine months ended September 30, 2017 and 2016. The principal consolidating adjustments are to eliminate the investment in subsidiaries and intercompany balances and transactions. For purposes of the tables below, the Company is referred to as “Parent” and the Guarantors are referred to as “Guarantor Subsidiaries.”
Condensed Consolidating Statements of Operations For the Three Months Ended September 30, 2017
Condensed Consolidating Statements of Operations For the Nine Months Ended September 30, 2017
Condensed Consolidating Statements of Operations For the Three Months Ended September 30, 2016
Condensed Consolidating Statements of Operations For the Nine Months Ended September 30, 2016
Condensed Consolidating Balance Sheet As of September 30, 2017
Condensed Consolidating Balance Sheet As of December 31, 2016
Condensed Consolidating Statements of Cash Flows For the Nine Months Ended September 30, 2017
Condensed Consolidating Statements of Cash Flows For the Nine Months Ended September 30, 2016
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Inventories (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Components of Inventories | The components of the Company’s inventories, net of excess and obsolescence reserves for raw materials and finished goods, at September 30, 2017 and December 31, 2016 were as follows:
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Property, Plant and Equipment (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property Plant And Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Company's Property, Plant and Equipment | The components of the Company’s property, plant and equipment at September 30, 2017 and December 31, 2016 were as follows:
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Goodwill and Other Intangible Assets (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill And Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in the Carrying Amount of Goodwill by Segment | The changes in the carrying amount of goodwill by segment for the nine months ended September 30, 2017 were as follows:
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Components of Other Intangible Assets | The components of other intangible assets at September 30, 2017 and December 31, 2016 were as follows:
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Schedule of Estimated Annual Amortization Expense Related to Other Intangible Assets | The following table outlines the estimated annual amortization expense related to other intangible assets as of September 30, 2017:
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Restructuring, Impairment and Other Charges (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring And Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring, Impairment and Other Charges Recognized in Results of Operations | For the three months ended September 30, 2017 and 2016, the Company recorded the following net restructuring, impairment and other charges:
For the nine months ended September 30, 2017 and 2016, the Company recorded the following net restructuring, impairment and other charges:
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Schedule of Changes in the Restructuring Reserve | The restructuring reserve as of December 31, 2016 and September 30, 2017, and changes during the nine months ended September 30, 2017, were as follows:
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Retirement Plans (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation And Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Estimated Net Pension Plan Income | The components of the estimated net pension plan income for Donnelley Financial’s pension plans for the three and nine months ended September 30, 2017 and 2016 were as follows:
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Equity (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the Company's Equity Activity | The Company’s equity as of December 31, 2016 and September 30, 2017, and changes during the nine months ended September 30, 2017, were as follows:
The Company’s equity as of December 31, 2015 and September 30, 2016, and changes during the nine months ended September 30, 2016, were as follows:
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Earnings per Share (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Numerator and Denominator of Basic and Diluted Earnings per Share Calculation and Anti-dilutive Share-based Awards | The reconciliation of the numerator and denominator of the basic and diluted earnings per share calculation and the anti-dilutive share-based awards for the three and nine months ended September 30, 2017 and 2016 were as follows:
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Comprehensive Income (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Other Comprehensive Income and Income Tax Expense Allocated to Each Component | The components of other comprehensive income and income tax expense allocated to each component for the three and nine months ended September 30, 2017 and 2016 were as follows:
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Schedule of Changes in Accumulated Other Comprehensive Loss | Accumulated other comprehensive loss by component as of December 31, 2016 and September 30, 2017 were as follows:
Accumulated other comprehensive loss by component as of December 31, 2015 and September 30, 2016 as follows:
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Reclassifications from Accumulated Other Comprehensive Loss, Amortization of Pension Plan Cost | Reclassifications from accumulated other comprehensive loss for the three and nine months ended September 30, 2017 and 2016 were as follows:
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Segment Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information | The Company has disclosed income (loss) from operations as the primary measure of segment earnings (loss). This is the measure of profitability used by the Company’s chief operating decision-maker and is most consistent with the presentation of profitability reported within the consolidated and combined financial statements.
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Debt (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the Company's Debt | The Company’s debt as of September 30, 2017 and December 31, 2016 consisted of the following:
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Related Parties (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Allocation of Expenses Reflected in Unaudited Condensed Consolidated and Combined Financial Statements | These allocations were reflected as follows in the unaudited condensed consolidated and combined financial statements:
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Guarantor Financial Information - (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Information Of Parent Company Only Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Financial Information Condensed Consolidating Statements of Operations | Condensed Consolidating Statements of Operations For the Three Months Ended September 30, 2017
Condensed Consolidating Statements of Operations For the Nine Months Ended September 30, 2017
Condensed Consolidating Statements of Operations For the Three Months Ended September 30, 2016
Condensed Consolidating Statements of Operations For the Nine Months Ended September 30, 2016
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Guarantor Financial Information Condensed Consolidating Balance Sheet | Condensed Consolidating Balance Sheet As of September 30, 2017
Condensed Consolidating Balance Sheet As of December 31, 2016
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Guarantor Financial Information Condensed Consolidating Statements of Cash Flows | Condensed Consolidating Statements of Cash Flows For the Nine Months Ended September 30, 2017
Condensed Consolidating Statements of Cash Flows For the Nine Months Ended September 30, 2016
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Overview and Basis of Presentation - Additional Information (Details) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|
Aug. 01, 2017 |
Jun. 21, 2017 |
Mar. 28, 2017 |
Oct. 01, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Jun. 30, 2017 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||
Distribution of common shares during spinoff | 26.2 | ||||||||
Percentage of distribution of common shares during spinoff | 80.75% | ||||||||
Description of distribution of common shares during spinoff | Holders of RRD common stock received one share of Donnelley Financial common stock for every eight shares of RRD common stock held on September 23, 2016. | ||||||||
Number of common stock sold | 6.1 | ||||||||
Proceeds from the issuance of common stock | $ 18.8 | $ 0.0 | |||||||
Net Sales | $ 222.6 | $ 224.4 | $ 780.1 | 762.5 | |||||
Transition Services Agreements | |||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||
Intercompany agreements, description | In connection with the Separation, the Company entered into transition services agreements separately with RRD and LSC, under which, in exchange for the fees specified in the arrangements, RRD and LSC agree to provide certain services to the Company and the Company agrees to provide certain services to RRD, respectively, for up to 24 months following the Separation. These services include, but are not limited to, information technology, accounts receivable, accounts payable, payroll and other financial and administrative services and functions. These agreements facilitate the separation by allowing the Company to operate independently prior to establishing stand-alone back office systems across its organization. | ||||||||
Term of agreement | 24 months | ||||||||
Commercial and Other Arrangements | |||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||
Intercompany agreements, description | At the time of the Separation, the Company entered into a number of commercial and other arrangements with RRD and its subsidiaries. These include, among other things, arrangements for the provision of services, including global outsourcing and logistics services, printing and binding, digital printing, composition, premedia and access to technology. The Company also entered into a number of commercial and other arrangements with LSC and its subsidiaries, pursuant to which LSC will print and bind products for the Company. The terms of the arrangements with RRD and LSC do not exceed 24 months. Subsequent to the Separation, RRD and LSC are clients of the Company and expect to utilize financial communication software and services that the Company makes available to all of its clients. | ||||||||
Term of agreement | 24 months | ||||||||
R.R. Donnelley & Sons Company | |||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||
Distribution of common shares during spinoff | 26.2 | ||||||||
Number of common stock retained | 0.1 | 6.2 | 0.1 | 0.1 | |||||
Ownership percentage | 19.25% | ||||||||
Net pension plan liabilities | $ 68.3 | ||||||||
Total benefit plan liability | 317.0 | ||||||||
Decrease to the fair value of plan assets | $ (0.7) | ||||||||
Plan assets, fair market value | 248.7 | ||||||||
Net other postretirement benefit liability | $ 1.5 | ||||||||
RRD and Affiliates | |||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||
Net Sales | 1.1 | 3.6 | |||||||
Cost of sales | $ 20.2 | $ 78.0 | |||||||
Underwritten Public Offering | R.R. Donnelley & Sons Company | |||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||
Number of common stock sold | 0.1 | 6.1 | 6.2 | ||||||
Proceeds from the issuance of common stock | $ 18.8 | ||||||||
Underwritten Public Offering | R.R. Donnelley & Sons Company | Common Stock | |||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||
Stock issued upon exercise of underwriters options | 0.9 |
Inventories - Components of Inventories (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Inventory Net [Abstract] | ||
Raw materials and manufacturing supplies | $ 6.4 | $ 7.6 |
Work in process | 11.4 | 10.8 |
Finished goods | 5.8 | 5.7 |
Total | $ 23.6 | $ 24.1 |
Property, Plant and Equipment - Components of Company's Property, Plant and Equipment (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 158.1 | $ 163.6 |
Less: Accumulated depreciation | (123.4) | (128.1) |
Total | 34.7 | 35.5 |
Land | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | 10.0 | 10.0 |
Buildings | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | 43.7 | 44.4 |
Machinery and Equipment | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 104.4 | $ 109.2 |
Property, Plant and Equipment - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Property Plant And Equipment [Abstract] | ||||
Depreciation expense | $ 1.9 | $ 1.4 | $ 5.0 | $ 6.1 |
Goodwill and Other Intangible Assets - Schedule of Changes in the Carrying Amount of Goodwill by Segment (Details) $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Goodwill [Line Items] | |
Goodwill net book value, beginning balance | $ 446.4 |
Foreign exchange and other adjustments | 1.1 |
Goodwill net book value, ending balance | 447.5 |
U.S. | |
Goodwill [Line Items] | |
Goodwill net book value, beginning balance | 429.2 |
Foreign exchange and other adjustments | 0.0 |
Goodwill net book value, ending balance | 429.2 |
International | |
Goodwill [Line Items] | |
Goodwill net book value, beginning balance | 17.2 |
Foreign exchange and other adjustments | 1.1 |
Goodwill net book value, ending balance | $ 18.3 |
Goodwill and Other Intangible Assets - Components of Other Intangible Assets (Detail) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Finite Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 150.1 | $ 148.3 |
Accumulated Amortization | (105.9) | (94.0) |
Net Book Value | 44.2 | 54.3 |
Customer Relationships | ||
Finite Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 140.6 | 138.8 |
Accumulated Amortization | (97.1) | (85.3) |
Net Book Value | 43.5 | 53.5 |
Trade Names | ||
Finite Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 6.3 | 6.3 |
Accumulated Amortization | (5.6) | (5.5) |
Net Book Value | 0.7 | 0.8 |
Trademarks, Licenses and Agreements | ||
Finite Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 3.2 | 3.2 |
Accumulated Amortization | (3.2) | (3.2) |
Net Book Value | $ 0.0 | $ 0.0 |
Goodwill and Other Intangible Assets - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Goodwill And Intangible Assets Disclosure [Abstract] | ||||
Amortization expense for other intangible assets | $ 3.6 | $ 3.6 | $ 10.7 | $ 10.8 |
Goodwill and Other Intangible Assets - Schedule of Estimated Annual Amortization Expense Related to Other Intangible Assets (Detail) $ in Millions |
Sep. 30, 2017
USD ($)
|
---|---|
Goodwill And Intangible Assets Disclosure [Abstract] | |
2017 | $ 14.3 |
2018 | 13.9 |
2019 | 13.9 |
2020 | 12.5 |
2021 | 0.1 |
2022 and thereafter | 0.2 |
Total | $ 54.9 |
Restructuring, Impairment and Other Charges - Schedule of Restructuring, Impairment and Other Charges Recognized in Results of Operations (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Restructuring Cost And Reserve [Line Items] | ||||
Employee Terminations | $ 0.4 | $ 1.3 | $ 5.2 | $ 2.3 |
Other Restructuring Charges | (1.0) | 0.4 | 0.9 | 1.2 |
Total Restructuring Charges | (0.6) | 1.7 | 6.1 | 3.5 |
Impairment | 0.2 | 0.0 | ||
Other Charges | 0.1 | 0.1 | ||
Total | (0.6) | 1.7 | 6.4 | 3.6 |
U.S. | ||||
Restructuring Cost And Reserve [Line Items] | ||||
Employee Terminations | 0.2 | 1.0 | 3.2 | 1.8 |
Other Restructuring Charges | (1.0) | 0.4 | 0.9 | 1.2 |
Total Restructuring Charges | (0.8) | 1.4 | 4.1 | 3.0 |
Impairment | 0.2 | 0.0 | ||
Other Charges | 0.1 | 0.1 | ||
Total | (0.8) | 1.4 | 4.4 | 3.1 |
International | ||||
Restructuring Cost And Reserve [Line Items] | ||||
Employee Terminations | 0.1 | 0.3 | 1.3 | 0.5 |
Other Restructuring Charges | 0.0 | 0.0 | 0.0 | 0.0 |
Total Restructuring Charges | 0.1 | 0.3 | 1.3 | 0.5 |
Impairment | 0.0 | 0.0 | ||
Other Charges | 0.0 | 0.0 | ||
Total | 0.1 | 0.3 | 1.3 | 0.5 |
Corporate | ||||
Restructuring Cost And Reserve [Line Items] | ||||
Employee Terminations | 0.1 | 0.0 | 0.7 | 0.0 |
Other Restructuring Charges | 0.0 | 0.0 | 0.0 | 0.0 |
Total Restructuring Charges | 0.1 | 0.0 | 0.7 | 0.0 |
Impairment | 0.0 | 0.0 | ||
Other Charges | 0.0 | 0.0 | ||
Total | $ 0.1 | $ 0.0 | $ 0.7 | $ 0.0 |
Restructuring, Impairment and Other Charges - Additional Information (Details) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017
USD ($)
Employee
|
Sep. 30, 2016
USD ($)
Employee
|
Sep. 30, 2017
USD ($)
Employee
|
Sep. 30, 2016
USD ($)
Employee
|
|
Restructuring And Related Activities [Abstract] | ||||
Employee termination costs | $ 0.4 | $ 1.3 | $ 5.2 | $ 2.3 |
Number of employees used to determine employee termination costs | Employee | 169 | 22 | 169 | 22 |
Net reversal of other restructuring charges | $ 1.0 | |||
Other restructuring charges | $ (1.0) | $ 0.4 | $ 0.9 | $ 1.2 |
Impairment charges | 0.2 | 0.0 | ||
Other charges | $ 0.1 | $ 0.1 |
Restructuring, Impairment and Other Charges - Schedule of Changes in the Restructuring Reserve (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Restructuring Cost And Reserve [Line Items] | ||||
Balance at the beginning | $ 5.4 | |||
Restructuring Charges | $ (0.6) | $ 1.7 | 6.1 | $ 3.5 |
Foreign Exchange and Other | 0.3 | |||
Cash Paid | (6.8) | |||
Balance at the end | 5.0 | 5.0 | ||
Employee terminations | ||||
Restructuring Cost And Reserve [Line Items] | ||||
Balance at the beginning | 1.6 | |||
Restructuring Charges | 5.2 | |||
Foreign Exchange and Other | 0.1 | |||
Cash Paid | (5.3) | |||
Balance at the end | 1.6 | 1.6 | ||
Lease terminations and other | ||||
Restructuring Cost And Reserve [Line Items] | ||||
Balance at the beginning | 3.8 | |||
Restructuring Charges | 0.9 | |||
Foreign Exchange and Other | 0.2 | |||
Cash Paid | (1.5) | |||
Balance at the end | $ 3.4 | $ 3.4 |
Restructuring, Impairment and Other Charges - Restructuring Reserve - Additional Information (Details) $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Restructuring And Related Activities [Abstract] | |
Current restructuring reserve (included in accrued liabilities) | $ 3.2 |
Noncurrent restructuring reserve (included in noncurrent liabilities) | $ 1.8 |
Employee termination payments expected completion date | Mar. 31, 2018 |
Retirement Plans - Additional Information (Details) - R.R. Donnelley & Sons Company - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | 9 Months Ended | |
---|---|---|---|---|
Sep. 30, 2016 |
Jun. 30, 2017 |
Sep. 30, 2016 |
Oct. 01, 2016 |
|
Defined Benefit Plan Disclosure [Line Items] | ||||
Pension cost and other postretirement benefits | $ 1.3 | $ 4.2 | ||
Net pension plan liabilities | $ 68.3 | |||
Total benefit plan liability | 317.0 | |||
Plan assets, fair market value | 248.7 | |||
Net other postretirement benefit liability | $ 1.5 | |||
Decrease in fair value of plan assets | $ (0.7) | |||
Other Postretirement Benefit Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Pension cost and other postretirement benefits | $ 0.3 | $ 1.0 |
Retirement Plans - Components of Estimated Net Pension Plan Income (Detail) - Pension Plan - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Pension expense (income) | ||||
Interest cost | $ 2.6 | $ 0.0 | $ 7.9 | $ 0.0 |
Expected return on assets | (4.0) | 0.0 | (12.0) | 0.0 |
Amortization, net | 0.6 | (0.2) | 1.6 | (0.4) |
Net pension income | $ (0.8) | $ (0.2) | $ (2.5) | $ (0.4) |
Equity - Schedule of the Company's Equity Activity (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Equity [Line Items] | ||||
Beginning Balance | $ 111.1 | $ 623.5 | ||
Net earnings | $ 5.3 | $ 10.2 | 33.4 | 59.9 |
Transfers from parent company, net | (598.6) | |||
Other comprehensive income | 2.5 | 0.0 | 5.6 | 3.8 |
Separation-related adjustments | 0.2 | |||
Share-based compensation | 5.2 | |||
Issuance of share-based awards, net of withholdings and other | (0.7) | |||
Ending Balance | 173.6 | 88.6 | 173.6 | 88.6 |
Common Stock | ||||
Equity [Line Items] | ||||
Issuance of common stock | 18.8 | |||
Net Parent Company Investment | ||||
Equity [Line Items] | ||||
Beginning Balance | 639.5 | |||
Net earnings | 59.9 | |||
Transfers from parent company, net | (598.6) | |||
Other comprehensive income | 0.0 | |||
Ending Balance | 100.8 | 100.8 | ||
Accumulated Other Comprehensive Loss | ||||
Equity [Line Items] | ||||
Beginning Balance | (68.3) | (16.0) | ||
Net earnings | 0.0 | |||
Transfers from parent company, net | 0.0 | |||
Other comprehensive income | 3.8 | |||
Ending Balance | $ (62.7) | $ (12.2) | $ (62.7) | $ (12.2) |
Equity - Additional Information (Detail) - USD ($) shares in Millions, $ in Millions |
9 Months Ended | ||
---|---|---|---|
Jun. 21, 2017 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Equity [Line Items] | |||
Proceeds from the issuance of common stock | $ 18.8 | $ 0.0 | |
Underwritten Public Offering | R.R. Donnelley & Sons Company | |||
Equity [Line Items] | |||
Proceeds from the issuance of common stock | $ 18.8 | ||
Underwritten Public Offering | Common Stock | R.R. Donnelley & Sons Company | |||
Equity [Line Items] | |||
Stock issued upon exercise of underwriters options | 0.9 |
Earnings per Share - Additional Information (Detail) shares in Millions |
9 Months Ended | |||||
---|---|---|---|---|---|---|
Aug. 01, 2017
shares
|
Jun. 21, 2017
shares
|
Mar. 28, 2017
shares
|
Oct. 01, 2016
shares
|
Sep. 30, 2017
shares
|
Sep. 30, 2016
shares
|
|
Earnings Per Share [Line Items] | ||||||
Distribution of common shares during spinoff | 26.2 | |||||
Number of common stock sold | 6.1 | |||||
R.R. Donnelley & Sons Company | ||||||
Earnings Per Share [Line Items] | ||||||
Distribution of common shares during spinoff | 26.2 | |||||
Number of common stock retained | 0.1 | 6.2 | 0.1 | |||
Basic and diluted common shares outstanding | 32.4 | |||||
R.R. Donnelley & Sons Company | Underwritten Public Offering | ||||||
Earnings Per Share [Line Items] | ||||||
Number of common stock sold | 0.1 | 6.1 | 6.2 | |||
R.R. Donnelley & Sons Company | Spinoff | ||||||
Earnings Per Share [Line Items] | ||||||
Number of common stock retained | 6.2 | |||||
Common stock received during spinoff, description | Holders of RRD common stock received one share of Donnelley Financial for every eight shares of RRD common stock held on September 23, 2016. | |||||
Conversion ratio of common stock received during spinoff | 0.125 |
Earnings per Share - Reconciliation of Numerator and Denominator of Basic and Diluted Earnings per Share Calculation and Anti-dilutive Share-based Awards (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Earnings Per Share Basic And Diluted [Line Items] | ||||
Basic | $ 0.16 | $ 0.31 | $ 1.01 | $ 1.85 |
Diluted | $ 0.16 | $ 0.31 | $ 1.01 | $ 1.85 |
Net earnings | $ 5.3 | $ 10.2 | $ 33.4 | $ 59.9 |
Weighted average number of common shares outstanding | 33.6 | 32.4 | 33.0 | 32.4 |
Dilutive awards | 0.2 | 0.0 | 0.2 | 0.0 |
Diluted weighted average number of common shares outstanding | 33.8 | 32.4 | 33.2 | 32.4 |
Total weighted average number of anti-dilutive share-based awards | 0.4 | 0.0 | 0.5 | 0.0 |
Restricted stock units | ||||
Earnings Per Share Basic And Diluted [Line Items] | ||||
Total weighted average number of anti-dilutive share-based awards | 0.0 | 0.0 | 0.2 | 0.0 |
Stock options | ||||
Earnings Per Share Basic And Diluted [Line Items] | ||||
Total weighted average number of anti-dilutive share-based awards | 0.4 | 0.0 | 0.3 | 0.0 |
Comprehensive Income - Schedule of Components of Other Comprehensive Income and Income Tax Expense Allocated to Each Component (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Other comprehensive (loss) income, Before Tax Amount | $ 2.8 | $ 0.0 | $ 6.2 | $ 3.8 |
Other comprehensive (loss) income, Income Tax Expense | 0.3 | 0.0 | 0.6 | 0.0 |
Other comprehensive income, net of tax | 2.5 | 0.0 | 5.6 | 3.8 |
Translation adjustments | ||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Other comprehensive (loss) income, Before Tax Amount | 2.2 | 0.2 | 4.6 | 4.2 |
Other comprehensive (loss) income, Income Tax Expense | 0.0 | 0.0 | 0.0 | 0.0 |
Other comprehensive income, net of tax | 2.2 | 0.2 | 4.6 | 4.2 |
Adjustment for Net Periodic Pension Plan and Other Postretirement Benefits Plan Cost | ||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Other comprehensive (loss) income, Before Tax Amount | 0.6 | (0.2) | 1.6 | (0.4) |
Other comprehensive (loss) income, Income Tax Expense | 0.3 | 0.0 | 0.6 | 0.0 |
Other comprehensive income, net of tax | $ 0.3 | $ (0.2) | $ 1.0 | $ (0.4) |
Comprehensive Income - Schedule of Changes in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Beginning Balance | $ 111.1 | $ 623.5 | ||
Other comprehensive income before reclassifications | 4.6 | 4.2 | ||
Amounts reclassified from accumulated other comprehensive loss | 1.0 | (0.4) | ||
Other comprehensive income, net of tax | $ 2.5 | $ 0.0 | 5.6 | 3.8 |
Ending Balance | 173.6 | 88.6 | 173.6 | 88.6 |
Pension and Other Postretirement Benefits Plan Cost | ||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Beginning Balance | (52.2) | 0.0 | ||
Other comprehensive income before reclassifications | 0.0 | 0.0 | ||
Amounts reclassified from accumulated other comprehensive loss | 1.0 | (0.4) | ||
Other comprehensive income, net of tax | 0.3 | (0.2) | 1.0 | (0.4) |
Ending Balance | (51.2) | (0.4) | (51.2) | (0.4) |
Translation adjustments | ||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Beginning Balance | (16.1) | (16.0) | ||
Other comprehensive income before reclassifications | 4.6 | 4.2 | ||
Amounts reclassified from accumulated other comprehensive loss | 0.0 | 0.0 | ||
Other comprehensive income, net of tax | 2.2 | 0.2 | 4.6 | 4.2 |
Ending Balance | (11.5) | (11.8) | (11.5) | (11.8) |
Accumulated Other Comprehensive Loss | ||||
Accumulated Other Comprehensive Income Loss [Line Items] | ||||
Beginning Balance | (68.3) | (16.0) | ||
Other comprehensive income, net of tax | 3.8 | |||
Ending Balance | $ (62.7) | $ (12.2) | $ (62.7) | $ (12.2) |
Comprehensive Income - Reclassifications from Accumulated Other Comprehensive Loss Amortization of Pension Plan Cost (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|||
Accumulated Defined Benefit Plans Adjustment, Net Actuarial Income | ||||||
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items] | ||||||
Amortization of pension and other postretirement benefits plan cost: Reclassifications before tax | [1] | $ 0.6 | $ (0.2) | $ 1.6 | $ (0.4) | |
Pension and Other Postretirement Benefits Plan Cost | ||||||
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items] | ||||||
Amortization of pension and other postretirement benefits plan cost: Reclassifications before tax | 0.6 | (0.2) | 1.6 | (0.4) | ||
Income tax expense | 0.3 | 0.0 | 0.6 | 0.0 | ||
Reclassifications, net of tax | $ 0.3 | $ (0.2) | $ 1.0 | $ (0.4) | ||
|
Segment Information - Schedule of Segment Reporting Information (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Segment Reporting Information [Line Items] | |||||
Net Sales | $ 222.6 | $ 224.4 | $ 780.1 | $ 762.5 | |
Income (Loss) from Operations | 18.0 | 18.0 | 88.1 | 99.5 | |
Assets of Operations | 933.7 | 914.0 | 933.7 | 914.0 | $ 978.9 |
Depreciation and amortization | 10.6 | 9.8 | 31.7 | 30.1 | |
Capital Expenditures | 8.0 | 1.7 | 20.0 | 14.0 | |
Total Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Net Sales | 226.0 | 226.8 | 790.6 | 770.3 | |
Income (Loss) from Operations | 23.9 | 19.8 | 115.1 | 107.2 | |
Assets of Operations | 811.3 | 814.1 | 811.3 | 814.1 | |
Depreciation and amortization | 10.6 | 9.6 | 31.7 | 29.4 | |
Capital Expenditures | 7.8 | 1.3 | 18.9 | 11.4 | |
Intersegment Sales | |||||
Segment Reporting Information [Line Items] | |||||
Net Sales | (3.4) | (2.4) | (10.5) | (7.8) | |
Corporate | |||||
Segment Reporting Information [Line Items] | |||||
Income (Loss) from Operations | (5.9) | (1.8) | (27.0) | (7.7) | |
Assets of Operations | 122.4 | 99.9 | 122.4 | 99.9 | |
Depreciation and amortization | 0.0 | 0.2 | 0.0 | 0.7 | |
Capital Expenditures | 0.2 | 0.4 | 1.1 | 2.6 | |
U.S. | |||||
Segment Reporting Information [Line Items] | |||||
Net Sales | 186.1 | 192.3 | 658.2 | 662.4 | |
U.S. | Total Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Net Sales | 188.9 | 193.6 | 665.8 | 666.4 | |
Income (Loss) from Operations | 22.4 | 18.7 | 107.5 | 100.0 | |
Assets of Operations | 715.3 | 714.2 | 715.3 | 714.2 | |
Depreciation and amortization | 9.2 | 8.5 | 27.5 | 26.2 | |
Capital Expenditures | 7.7 | 1.3 | 18.1 | 10.2 | |
U.S. | Intersegment Sales | |||||
Segment Reporting Information [Line Items] | |||||
Net Sales | (2.8) | (1.3) | (7.6) | (4.0) | |
International | |||||
Segment Reporting Information [Line Items] | |||||
Net Sales | 36.5 | 32.1 | 121.9 | 100.1 | |
International | Total Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Net Sales | 37.1 | 33.2 | 124.8 | 103.9 | |
Income (Loss) from Operations | 1.5 | 1.1 | 7.6 | 7.2 | |
Assets of Operations | 96.0 | 99.9 | 96.0 | 99.9 | |
Depreciation and amortization | 1.4 | 1.1 | 4.2 | 3.2 | |
Capital Expenditures | 0.1 | 0.0 | 0.8 | 1.2 | |
International | Intersegment Sales | |||||
Segment Reporting Information [Line Items] | |||||
Net Sales | $ (0.6) | $ (1.1) | $ (2.9) | $ (3.8) |
Debt - Additional Information (Details) - USD ($) shares in Millions |
9 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 02, 2017 |
Aug. 01, 2017 |
Jun. 21, 2017 |
Apr. 03, 2017 |
Mar. 28, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
Apr. 25, 2017 |
Oct. 01, 2016 |
|
Debt Instrument [Line Items] | |||||||||||
Number of common stock sold | 6.1 | ||||||||||
Senior Notes | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Interest payment period | semi-annually | ||||||||||
Commencement of interest payment | Apr. 15, 2017 | ||||||||||
8.25% Senior Notes Due October 15, 2024 | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Senior notes | $ 300,000,000 | $ 300,000,000 | $ 300,000,000 | $ 300,000,000 | $ 299,900,000 | ||||||
Interest rate, stated percentage | 8.25% | 8.25% | 8.25% | 8.25% | |||||||
Maturity date | Oct. 15, 2024 | Oct. 15, 2024 | Oct. 15, 2024 | ||||||||
Fair value of senior notes | $ 322,200,000 | $ 307,100,000 | |||||||||
R.R. Donnelley & Sons Company | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Repayments of debt | $ 340,200,000 | ||||||||||
Number of common stock retained | 0.1 | 0.1 | 6.2 | ||||||||
R.R. Donnelley & Sons Company | Underwritten Public Offering | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Number of common stock sold | 0.1 | 6.1 | 6.2 | ||||||||
Stock issued upon exercise of underwriters options | 0.9 | ||||||||||
Proceeds from sale of options exercised | $ 18,800,000 | ||||||||||
R.R. Donnelley & Sons Company | Separation and Distribution Agreement | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Cash payment received from RR Donnelley | $ 68,000,000 | ||||||||||
Senior Secured Term Loan B Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facility | $ 350,000,000 | 350,000,000 | |||||||||
Outstanding borrowings | $ 198,500,000 | 298,300,000 | |||||||||
Senior Secured Term Loan B Facility | LIBOR | Subsequent Event | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument interest rate basis spread on variable rate decrease | 1.00% | ||||||||||
Debt instrument, basis spread on variable rate | 3.00% | ||||||||||
Debt instrument, interest rate basis spread on floor rate decrease | 0.25% | ||||||||||
Debt instrument floor rate | 0.75% | ||||||||||
Revolving Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facility | 300,000,000 | 300,000,000 | |||||||||
Outstanding borrowings | $ 0 | $ 0 | |||||||||
Weighted average interest rate on borrowings | 4.40% | ||||||||||
Credit Agreement | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Allowable annual dividend payment under credit agreement | $ 15,000,000 | $ 15,000,000 |
Debt - Schedule of the Company's Debt (Details) - USD ($) |
Sep. 30, 2017 |
Apr. 25, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
---|---|---|---|---|
Debt Instrument [Line Items] | ||||
Unamortized debt issuance costs | $ (10,100,000) | $ (11,300,000) | ||
Total debt | 488,400,000 | 587,000,000 | ||
Less: current portion | 0 | 0 | ||
Long-term debt (Note 11) | 488,400,000 | 587,000,000 | ||
8.25% Senior Notes Due October 15, 2024 | ||||
Debt Instrument [Line Items] | ||||
Senior notes | 300,000,000 | $ 299,900,000 | 300,000,000 | $ 300,000,000 |
Senior Secured Term Loan B Facility | ||||
Debt Instrument [Line Items] | ||||
Credit facility | 198,500,000 | 298,300,000 | ||
Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Credit facility | $ 0 | $ 0 |
Debt - Schedule of the Company's Debt (Parenthetical) (Details) - 8.25% Senior Notes Due October 15, 2024 |
9 Months Ended | 12 Months Ended | |
---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Debt Instrument [Line Items] | |||
Interest rate, stated percentage | 8.25% | 8.25% | 8.25% |
Maturity date | Oct. 15, 2024 | Oct. 15, 2024 | Oct. 15, 2024 |
Related Parties - Additional Information (Details) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 01, 2017 |
Jun. 21, 2017 |
Apr. 03, 2017 |
Mar. 28, 2017 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Jun. 30, 2017 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
Oct. 01, 2016 |
|||||||
Related Party Transaction [Line Items] | |||||||||||||||||
Number of common stock sold | 6.1 | ||||||||||||||||
Sale of common stock transaction date | Jun. 21, 2017 | ||||||||||||||||
Common stock shares issued retained | 0.1 | ||||||||||||||||
Net Sales | $ 222.6 | $ 224.4 | $ 780.1 | $ 762.5 | |||||||||||||
Products cost of sales (exclusive of depreciation and amortization) | 58.9 | 62.0 | 190.7 | 179.9 | |||||||||||||
Services cost of sales (exclusive of depreciation and amortization) | 81.7 | 64.2 | $ 240.2 | 214.6 | |||||||||||||
Share-based compensation costs | 0.2 | 1.2 | |||||||||||||||
Outsourcing Business | |||||||||||||||||
Related Party Transaction [Line Items] | |||||||||||||||||
Services cost of sales (exclusive of depreciation and amortization) | 8.7 | 29.4 | |||||||||||||||
Transition Services Agreements | |||||||||||||||||
Related Party Transaction [Line Items] | |||||||||||||||||
Intercompany agreements, description | In connection with the Separation, the Company entered into transition services agreements separately with RRD and LSC, under which, in exchange for the fees specified in the arrangements, RRD and LSC agree to provide certain services to the Company and the Company agrees to provide certain services to RRD, respectively, for up to 24 months following the Separation. These services include, but are not limited to, information technology, accounts receivable, accounts payable, payroll and other financial and administrative services and functions. These agreements facilitate the separation by allowing the Company to operate independently prior to establishing stand-alone back office systems across its organization. | ||||||||||||||||
Term of agreement | 24 months | ||||||||||||||||
Commercial and Other Arrangements | |||||||||||||||||
Related Party Transaction [Line Items] | |||||||||||||||||
Intercompany agreements, description | At the time of the Separation, the Company entered into a number of commercial and other arrangements with RRD and its subsidiaries. These include, among other things, arrangements for the provision of services, including global outsourcing and logistics services, printing and binding, digital printing, composition, premedia and access to technology. The Company also entered into a number of commercial and other arrangements with LSC and its subsidiaries, pursuant to which LSC will print and bind products for the Company. The terms of the arrangements with RRD and LSC do not exceed 24 months. Subsequent to the Separation, RRD and LSC are clients of the Company and expect to utilize financial communication software and services that the Company makes available to all of its clients. | ||||||||||||||||
Term of agreement | 24 months | ||||||||||||||||
R.R. Donnelley & Sons Company | |||||||||||||||||
Related Party Transaction [Line Items] | |||||||||||||||||
Receivable from related parties | [1] | 0.0 | $ 0.0 | $ 96.0 | |||||||||||||
Payables to related parties | $ 27.1 | ||||||||||||||||
Net pension plan liabilities | $ 68.3 | ||||||||||||||||
Total benefit plan liability | 317.0 | ||||||||||||||||
Plan assets, fair market value | $ 248.7 | ||||||||||||||||
Decrease to the fair value of plan assets | $ (0.7) | ||||||||||||||||
R.R. Donnelley & Sons Company | Separation and Distribution Agreement | |||||||||||||||||
Related Party Transaction [Line Items] | |||||||||||||||||
Cash payment received from RR Donnelley | $ 68.0 | ||||||||||||||||
R.R. Donnelley & Sons Company | Freight and Logistics and Services | Printed Products | |||||||||||||||||
Related Party Transaction [Line Items] | |||||||||||||||||
Products cost of sales (exclusive of depreciation and amortization) | 11.5 | 48.6 | |||||||||||||||
R.R. Donnelley & Sons Company | Underwritten Public Offering | |||||||||||||||||
Related Party Transaction [Line Items] | |||||||||||||||||
Number of common stock sold | 0.1 | 6.1 | 6.2 | ||||||||||||||
Sale of common stock transaction date | Aug. 01, 2017 | ||||||||||||||||
R.R. Donnelley Affiliates | |||||||||||||||||
Related Party Transaction [Line Items] | |||||||||||||||||
Net Sales | 1.1 | 3.6 | |||||||||||||||
Products cost of sales (exclusive of depreciation and amortization) | [2] | 0.0 | 11.5 | 32.3 | [1] | 48.6 | |||||||||||
Services cost of sales (exclusive of depreciation and amortization) | [2] | $ 0.0 | $ 8.7 | $ 19.5 | [1] | $ 29.4 | |||||||||||
|
Related Parties - Schedule of Allocation of Expenses Reflected in Unaudited Condensed Consolidated and Combined Financial Statements (Details) - R.R. Donnelley & Sons Company - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2016 |
|
Related Party Transaction [Line Items] | ||
Total allocations from RRD | $ 51.9 | $ 172.6 |
Costs of goods sold | ||
Related Party Transaction [Line Items] | ||
Total allocations from RRD | 8.3 | 28.0 |
Selling, general and administrative | ||
Related Party Transaction [Line Items] | ||
Total allocations from RRD | 38.3 | 129.4 |
Depreciation and amortization | ||
Related Party Transaction [Line Items] | ||
Total allocations from RRD | $ 5.3 | $ 15.2 |
Guarantor Financial Information - Additional Information (Details) |
Sep. 30, 2017 |
---|---|
Guarantor Subsidiaries | |
Condensed Income Statements Captions [Line Items] | |
Percentage of ownership in directly owned subsidiaries | 100.00% |
Guarantor Financial Information - Condensed Consolidating Statements of Operations (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|||||||
Condensed Income Statements Captions [Line Items] | ||||||||||
Services net sales | $ 140.3 | $ 139.4 | $ 471.4 | $ 454.1 | ||||||
Products net sales | 82.3 | 85.0 | 308.7 | 308.4 | ||||||
Total net sales | 222.6 | 224.4 | 780.1 | 762.5 | ||||||
Services cost of sales (exclusive of depreciation and amortization) | 81.7 | 64.2 | 240.2 | 214.6 | ||||||
Products cost of sales (exclusive of depreciation and amortization) | 58.9 | 62.0 | 190.7 | 179.9 | ||||||
Total cost of sales | 140.6 | 146.4 | 482.7 | 472.5 | ||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization) | 54.0 | 48.5 | 171.2 | 156.8 | ||||||
Restructuring, impairment and other charges-net | (0.6) | 1.7 | 6.4 | 3.6 | ||||||
Depreciation and amortization | 10.6 | 9.8 | 31.7 | 30.1 | ||||||
Income from operations | 18.0 | 18.0 | 88.1 | 99.5 | ||||||
Interest expense (income)-net | 10.6 | (0.1) | 32.7 | 0.3 | ||||||
Earnings (loss) before income taxes and equity in net income of subsidiaries | 7.4 | 18.1 | 55.4 | 99.2 | ||||||
Income tax (benefit) expense | 2.1 | 7.9 | 22.0 | 39.3 | ||||||
Earnings (loss) before equity in net income of subsidiaries | 5.3 | 10.2 | 33.4 | 59.9 | ||||||
Net earnings | 5.3 | 10.2 | 33.4 | 59.9 | ||||||
Comprehensive income (loss) | 7.8 | 10.2 | 39.0 | 63.7 | ||||||
R.R. Donnelley Affiliates | ||||||||||
Condensed Income Statements Captions [Line Items] | ||||||||||
Total net sales | 1.1 | 3.6 | ||||||||
Services cost of sales (exclusive of depreciation and amortization) | [1] | 0.0 | 8.7 | 19.5 | [2] | 29.4 | ||||
Products cost of sales (exclusive of depreciation and amortization) | [1] | 0.0 | 11.5 | 32.3 | [2] | 48.6 | ||||
Eliminations | ||||||||||
Condensed Income Statements Captions [Line Items] | ||||||||||
Services net sales | (2.1) | (1.6) | (6.5) | (5.1) | ||||||
Products net sales | (1.3) | (0.8) | (4.0) | (2.7) | ||||||
Total net sales | (3.4) | (2.4) | (10.5) | (7.8) | ||||||
Services cost of sales (exclusive of depreciation and amortization) | (2.0) | (1.5) | (5.9) | (4.8) | ||||||
Products cost of sales (exclusive of depreciation and amortization) | (1.4) | (0.9) | (4.6) | (3.0) | ||||||
Total cost of sales | (3.4) | (2.4) | (10.5) | (7.8) | ||||||
Equity in net income of subsidiaries | (13.0) | (12.8) | (57.8) | (66.3) | ||||||
Net earnings | (13.0) | (12.8) | (57.8) | (66.3) | ||||||
Comprehensive income (loss) | (17.7) | (13.0) | (68.0) | (74.3) | ||||||
Parent | ||||||||||
Condensed Income Statements Captions [Line Items] | ||||||||||
Interest expense (income)-net | 10.2 | 32.7 | ||||||||
Earnings (loss) before income taxes and equity in net income of subsidiaries | (10.2) | (32.7) | ||||||||
Income tax (benefit) expense | (5.1) | (14.4) | ||||||||
Earnings (loss) before equity in net income of subsidiaries | (5.1) | (18.3) | ||||||||
Equity in net income of subsidiaries | 10.4 | 10.2 | 51.7 | 59.9 | ||||||
Net earnings | 5.3 | 10.2 | 33.4 | 59.9 | ||||||
Comprehensive income (loss) | 7.8 | 10.2 | 39.0 | 63.7 | ||||||
Guarantor Subsidiaries | ||||||||||
Condensed Income Statements Captions [Line Items] | ||||||||||
Services net sales | 112.3 | 115.5 | 386.7 | 381.9 | ||||||
Products net sales | 76.6 | 78.1 | 279.1 | 284.5 | ||||||
Total net sales | 188.9 | 193.6 | 665.8 | 666.4 | ||||||
Services cost of sales (exclusive of depreciation and amortization) | 63.6 | 49.3 | 186.9 | 170.0 | ||||||
Products cost of sales (exclusive of depreciation and amortization) | 56.0 | 57.7 | 174.6 | 164.6 | ||||||
Total cost of sales | 119.6 | 126.7 | 410.0 | 411.0 | ||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization) | 44.2 | 39.9 | 142.6 | 133.1 | ||||||
Restructuring, impairment and other charges-net | (0.7) | 1.4 | 5.1 | 3.1 | ||||||
Depreciation and amortization | 9.2 | 8.7 | 27.5 | 26.9 | ||||||
Income from operations | 16.6 | 16.9 | 80.6 | 92.3 | ||||||
Interest expense (income)-net | 0.4 | (0.2) | 0.2 | |||||||
Earnings (loss) before income taxes and equity in net income of subsidiaries | 16.2 | 17.1 | 80.6 | 92.1 | ||||||
Income tax (benefit) expense | 8.4 | 9.5 | 35.0 | 38.6 | ||||||
Earnings (loss) before equity in net income of subsidiaries | 7.8 | 7.6 | 45.6 | 53.5 | ||||||
Equity in net income of subsidiaries | 2.6 | 2.6 | 6.1 | 6.4 | ||||||
Net earnings | 10.4 | 10.2 | 51.7 | 59.9 | ||||||
Comprehensive income (loss) | 12.9 | 10.2 | 57.3 | 63.7 | ||||||
Guarantor Subsidiaries | R.R. Donnelley Affiliates | ||||||||||
Condensed Income Statements Captions [Line Items] | ||||||||||
Services cost of sales (exclusive of depreciation and amortization) | 8.2 | 18.4 | [2] | 27.8 | ||||||
Products cost of sales (exclusive of depreciation and amortization) | 11.5 | 30.1 | [2] | 48.6 | ||||||
Non-guarantor Subsidiaries | ||||||||||
Condensed Income Statements Captions [Line Items] | ||||||||||
Services net sales | 30.1 | 25.5 | 91.2 | 77.3 | ||||||
Products net sales | 7.0 | 7.7 | 33.6 | 26.6 | ||||||
Total net sales | 37.1 | 33.2 | 124.8 | 103.9 | ||||||
Services cost of sales (exclusive of depreciation and amortization) | 20.1 | 16.4 | 59.2 | 49.4 | ||||||
Products cost of sales (exclusive of depreciation and amortization) | 4.3 | 5.2 | 20.7 | 18.3 | ||||||
Total cost of sales | 24.4 | 22.1 | 83.2 | 69.3 | ||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization) | 9.8 | 8.6 | 28.6 | 23.7 | ||||||
Restructuring, impairment and other charges-net | 0.1 | 0.3 | 1.3 | 0.5 | ||||||
Depreciation and amortization | 1.4 | 1.1 | 4.2 | 3.2 | ||||||
Income from operations | 1.4 | 1.1 | 7.5 | 7.2 | ||||||
Interest expense (income)-net | 0.1 | 0.1 | ||||||||
Earnings (loss) before income taxes and equity in net income of subsidiaries | 1.4 | 1.0 | 7.5 | 7.1 | ||||||
Income tax (benefit) expense | (1.2) | (1.6) | 1.4 | 0.7 | ||||||
Earnings (loss) before equity in net income of subsidiaries | 2.6 | 2.6 | 6.1 | 6.4 | ||||||
Net earnings | 2.6 | 2.6 | 6.1 | 6.4 | ||||||
Comprehensive income (loss) | $ 4.8 | 2.8 | 10.7 | 10.6 | ||||||
Non-guarantor Subsidiaries | R.R. Donnelley Affiliates | ||||||||||
Condensed Income Statements Captions [Line Items] | ||||||||||
Services cost of sales (exclusive of depreciation and amortization) | $ 0.5 | 1.1 | [2] | $ 1.6 | ||||||
Products cost of sales (exclusive of depreciation and amortization) | [2] | $ 2.2 | ||||||||
|
Guarantor Financial Information - Condensed Consolidating Balance Sheets (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Dec. 31, 2015 |
||
---|---|---|---|---|---|---|
ASSETS | ||||||
Cash and cash equivalents | $ 32.2 | $ 36.2 | $ 53.0 | $ 15.1 | ||
Receivables, less allowances | 219.3 | 156.2 | ||||
Inventories | 23.6 | 24.1 | ||||
Prepaid expenses and other current assets | 15.1 | 17.1 | ||||
Total current assets | 290.2 | 329.6 | ||||
Property, plant and equipment-net | 34.7 | 35.5 | ||||
Goodwill | 447.5 | 446.4 | ||||
Other intangible assets-net | 44.2 | 54.3 | ||||
Software-net | 41.9 | 41.6 | ||||
Deferred income taxes | 36.6 | 37.0 | ||||
Other noncurrent assets | 38.6 | 34.5 | ||||
Total assets | 933.7 | 978.9 | 914.0 | |||
LIABILITIES AND EQUITY | ||||||
Accounts payable | 74.4 | 85.3 | ||||
Accrued liabilities | 110.1 | 100.7 | ||||
Total current liabilities | 184.5 | 186.0 | ||||
Long-term debt | 488.4 | 587.0 | ||||
Deferred compensation liabilities | 24.6 | 24.4 | ||||
Pension and other postretirement benefits plan liabilities | 51.4 | 56.4 | ||||
Other noncurrent liabilities | 11.2 | 14.0 | ||||
Total liabilities | 760.1 | 867.8 | ||||
Total equity | 173.6 | 111.1 | 88.6 | 623.5 | ||
Total liabilities and equity | 933.7 | 978.9 | ||||
R.R. Donnelley & Sons Company | ||||||
ASSETS | ||||||
Receivables from R.R. Donnelley | [1] | 0.0 | 96.0 | |||
Eliminations | ||||||
ASSETS | ||||||
Cash and cash equivalents | (2.4) | |||||
Intercompany receivables | (80.5) | (63.0) | ||||
Intercompany short-term note receivable | (35.0) | (15.3) | ||||
Prepaid expenses and other current assets | (2.9) | |||||
Total current assets | (118.4) | (80.7) | ||||
Investments in consolidated subsidiaries | (835.5) | (757.3) | ||||
Total assets | (953.9) | (838.0) | ||||
LIABILITIES AND EQUITY | ||||||
Accounts payable | (2.4) | |||||
Intercompany payable | (80.5) | (62.5) | ||||
Intercompany short-term note payable | (35.0) | (15.3) | ||||
Accrued liabilities | (2.9) | (0.5) | ||||
Total current liabilities | (118.4) | (80.7) | ||||
Total liabilities | (118.4) | (80.7) | ||||
Total equity | (835.5) | (757.3) | ||||
Total liabilities and equity | (953.9) | (838.0) | ||||
Parent | ||||||
ASSETS | ||||||
Cash and cash equivalents | 0.2 | |||||
Prepaid expenses and other current assets | 7.3 | 4.3 | ||||
Total current assets | 7.5 | 72.3 | ||||
Other noncurrent assets | 3.7 | 4.4 | ||||
Investments in consolidated subsidiaries | 750.3 | 692.2 | ||||
Total assets | 761.5 | 768.9 | ||||
LIABILITIES AND EQUITY | ||||||
Accounts payable | 3.4 | |||||
Intercompany payable | 64.5 | 43.9 | ||||
Intercompany short-term note payable | 35.0 | 15.3 | ||||
Accrued liabilities | 8.2 | |||||
Total current liabilities | 99.5 | 70.8 | ||||
Long-term debt | 488.4 | 587.0 | ||||
Total liabilities | 587.9 | 657.8 | ||||
Total equity | 173.6 | 111.1 | ||||
Total liabilities and equity | 761.5 | 768.9 | ||||
Parent | R.R. Donnelley & Sons Company | ||||||
ASSETS | ||||||
Receivables from R.R. Donnelley | 68.0 | |||||
Guarantor Subsidiaries | ||||||
ASSETS | ||||||
Cash and cash equivalents | 21.3 | 21.8 | 27.3 | 0.1 | ||
Receivables, less allowances | 177.7 | 119.9 | ||||
Intercompany receivables | 80.5 | 63.0 | ||||
Inventories | 21.2 | 22.7 | ||||
Prepaid expenses and other current assets | 7.1 | 8.1 | ||||
Total current assets | 307.8 | 263.5 | ||||
Property, plant and equipment-net | 31.4 | 32.4 | ||||
Goodwill | 429.2 | 429.2 | ||||
Other intangible assets-net | 35.2 | 44.0 | ||||
Software-net | 41.5 | 41.0 | ||||
Deferred income taxes | 32.6 | 34.2 | ||||
Other noncurrent assets | 30.2 | 27.7 | ||||
Investments in consolidated subsidiaries | 85.2 | 65.1 | ||||
Total assets | 993.1 | 937.1 | ||||
LIABILITIES AND EQUITY | ||||||
Accounts payable | 61.5 | 72.8 | ||||
Accrued liabilities | 97.9 | 81.4 | ||||
Total current liabilities | 159.4 | 154.2 | ||||
Deferred compensation liabilities | 24.6 | 24.4 | ||||
Pension and other postretirement benefits plan liabilities | 50.2 | 55.3 | ||||
Other noncurrent liabilities | 8.6 | 11.0 | ||||
Total liabilities | 242.8 | 244.9 | ||||
Total equity | 750.3 | 692.2 | ||||
Total liabilities and equity | 993.1 | 937.1 | ||||
Guarantor Subsidiaries | R.R. Donnelley & Sons Company | ||||||
ASSETS | ||||||
Receivables from R.R. Donnelley | 28.0 | |||||
Non-guarantor Subsidiaries | ||||||
ASSETS | ||||||
Cash and cash equivalents | 10.7 | 16.8 | $ 25.7 | $ 15.0 | ||
Receivables, less allowances | 41.6 | 36.3 | ||||
Intercompany short-term note receivable | 35.0 | 15.3 | ||||
Inventories | 2.4 | 1.4 | ||||
Prepaid expenses and other current assets | 3.6 | 4.7 | ||||
Total current assets | 93.3 | 74.5 | ||||
Property, plant and equipment-net | 3.3 | 3.1 | ||||
Goodwill | 18.3 | 17.2 | ||||
Other intangible assets-net | 9.0 | 10.3 | ||||
Software-net | 0.4 | 0.6 | ||||
Deferred income taxes | 4.0 | 2.8 | ||||
Other noncurrent assets | 4.7 | 2.4 | ||||
Total assets | 133.0 | 110.9 | ||||
LIABILITIES AND EQUITY | ||||||
Accounts payable | 12.9 | 11.5 | ||||
Intercompany payable | 16.0 | 18.6 | ||||
Accrued liabilities | 15.1 | 11.6 | ||||
Total current liabilities | 44.0 | 41.7 | ||||
Pension and other postretirement benefits plan liabilities | 1.2 | 1.1 | ||||
Other noncurrent liabilities | 2.6 | 3.0 | ||||
Total liabilities | 47.8 | 45.8 | ||||
Total equity | 85.2 | 65.1 | ||||
Total liabilities and equity | $ 133.0 | $ 110.9 | ||||
|
Guarantor Financial Information - Condensed Consolidating Statements of Cash Flows (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
OPERATING ACTIVITIES | ||||
Net cash (used in) provided by operating activities | $ 33.7 | $ 56.8 | ||
INVESTING ACTIVITIES | ||||
Capital expenditures | $ (8.0) | $ (1.7) | (20.0) | (14.0) |
Purchase of investment | (3.4) | (3.5) | ||
Other investing activities | 0.3 | 0.5 | ||
Net cash used in investing activities | (23.1) | (17.0) | ||
FINANCING ACTIVITIES | ||||
Revolving facility borrowings | 230.0 | 0.0 | ||
Payments on revolving facility borrowings | (230.0) | 0.0 | ||
Payments on long-term debt | (100.0) | 0.0 | ||
Debt issuance costs | (1.5) | (9.3) | ||
Separation-related payment from R.R. Donnelley | 68.0 | 0.0 | ||
Proceeds from the issuance of common stock | 18.8 | 0.0 | ||
Proceeds from issuance of long-term debt | 0.0 | 348.2 | ||
Treasury stock repurchases | (0.9) | 0.0 | ||
Other financing activities | 0.4 | 0.0 | ||
Net change in short-term debt | 0.0 | (8.8) | ||
Net transfers to Parent and affiliates | 0.0 | (336.2) | ||
Net cash used in financing activities | (15.2) | (6.1) | ||
Effect of exchange rate on cash and cash equivalents | 0.6 | 4.2 | ||
Net (decrease) increase in cash and cash equivalents | (4.0) | 37.9 | ||
Cash and cash equivalents at beginning of year | 36.2 | 15.1 | ||
Cash and cash equivalents at end of period | 32.2 | 53.0 | 32.2 | 53.0 |
Eliminations | ||||
OPERATING ACTIVITIES | ||||
Net cash (used in) provided by operating activities | 2.4 | |||
INVESTING ACTIVITIES | ||||
Intercompany note receivable | 19.7 | |||
Net cash used in investing activities | 19.7 | |||
FINANCING ACTIVITIES | ||||
Intercompany note payable | (19.7) | |||
Net cash used in financing activities | (19.7) | |||
Net (decrease) increase in cash and cash equivalents | 2.4 | |||
Cash and cash equivalents at beginning of year | (2.4) | |||
Parent | ||||
OPERATING ACTIVITIES | ||||
Net cash (used in) provided by operating activities | (4.3) | |||
FINANCING ACTIVITIES | ||||
Revolving facility borrowings | 230.0 | |||
Payments on revolving facility borrowings | (230.0) | |||
Payments on long-term debt | (100.0) | |||
Debt issuance costs | (1.5) | (9.3) | ||
Separation-related payment from R.R. Donnelley | 68.0 | |||
Proceeds from the issuance of common stock | 18.8 | |||
Proceeds from issuance of long-term debt | 348.2 | |||
Treasury stock repurchases | (0.9) | |||
Intercompany note payable | 19.7 | |||
Other financing activities | 0.4 | |||
Net transfers to Parent and affiliates | (338.9) | |||
Net cash used in financing activities | 4.5 | |||
Net (decrease) increase in cash and cash equivalents | 0.2 | |||
Cash and cash equivalents at end of period | 0.2 | 0.2 | ||
Guarantor Subsidiaries | ||||
OPERATING ACTIVITIES | ||||
Net cash (used in) provided by operating activities | 21.8 | 52.6 | ||
INVESTING ACTIVITIES | ||||
Capital expenditures | (19.2) | (12.8) | ||
Purchase of investment | (3.4) | (3.5) | ||
Other investing activities | 0.3 | |||
Net cash used in investing activities | (22.3) | (16.3) | ||
FINANCING ACTIVITIES | ||||
Net transfers to Parent and affiliates | (9.1) | |||
Net cash used in financing activities | (9.1) | |||
Net (decrease) increase in cash and cash equivalents | (0.5) | 27.2 | ||
Cash and cash equivalents at beginning of year | 21.8 | 0.1 | ||
Cash and cash equivalents at end of period | 21.3 | 27.3 | 21.3 | 27.3 |
Non-guarantor Subsidiaries | ||||
OPERATING ACTIVITIES | ||||
Net cash (used in) provided by operating activities | 13.8 | 4.2 | ||
INVESTING ACTIVITIES | ||||
Capital expenditures | (0.8) | (1.2) | ||
Intercompany note receivable | (19.7) | |||
Other investing activities | 0.5 | |||
Net cash used in investing activities | (20.5) | (0.7) | ||
FINANCING ACTIVITIES | ||||
Net change in short-term debt | (8.8) | |||
Net transfers to Parent and affiliates | 11.8 | |||
Net cash used in financing activities | 3.0 | |||
Effect of exchange rate on cash and cash equivalents | 0.6 | 4.2 | ||
Net (decrease) increase in cash and cash equivalents | (6.1) | 10.7 | ||
Cash and cash equivalents at beginning of year | 16.8 | 15.0 | ||
Cash and cash equivalents at end of period | $ 10.7 | $ 25.7 | $ 10.7 | $ 25.7 |
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