rrd-10k_20181231.htm

Indicated by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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:

If an emerging growth company, indicate by check mark if the registrant has elected 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 Act). Yes ☐ No ☑

The aggregate market value of the shares of registrant’s common stock held by non-affiliates based on the sale price of the common stock on June 30, 2018 was $395,032,904.

Portions of the registrant’s proxy statement related to its annual meeting of stockholders scheduled to be held on May 16, 2019 are incorporated by reference into Part III of this Form 10-K.

R.R. Donnelley & Sons Company (“RRD,” the “Company,” “we,” “us,” and “our”), a Delaware corporation, helps organizations communicate more effectively by working to create, manage, produce, distribute and process content on behalf of our clients. We assist clients in developing and executing multichannel communication strategies that engage audiences, reduce costs, drive revenues and enhance compliance. Our innovative content management offering, production platform, logistics services, supply chain management, outsourcing capabilities and customized consultative expertise assists our clients in the delivery of integrated messages across multiple media to highly targeted audiences at optimal times to their customers in virtually every private and public sector. We have strategically located operations that provide local service and responsiveness while leveraging the economic, geographic and technological advantages of a global organization.

Our key strategic focus areas, which leverage our long-standing client relationships and comprehensive portfolio of capabilities, are as follows:

Our reportable segments and their product and service offerings are summarized below.

Our Business Services segment provides customized solutions at scale to help clients inform, service and transact with their customers. The segment’s primary product and service offerings include commercial print, logistics, statement printing, labels, packaging, supply chain management, forms and business process outsourcing. This segment also includes all of our operations in Asia, Europe, Canada and Latin America. In 2018, our Business Services segment accounted for 82.6% of our consolidated net sales.

We provide various commercial printing products and offer a full range of branded materials including manuals, publications, brochures, business cards, flyers, post cards, posters and promotional items. Commercial print accounted for 34.4% of our Business Services segment’s net sales for the fiscal year ended December 31, 2018.

We provide specialized transportation and distribution services using our third party logistics solutions. These services are comprised of freight services, including truckload, less-than-truckload, intermodal and international freight forwarding; international mail and parcel distribution; and courier services including same day and next day delivery. As discussed in Note 3, Dispositions and Acquisition, to the Consolidated Financial Statements, we sold our Print Logistics business on July 2, 2018. Print Logistics services included the distribution of retail and newsstand printed materials. Logistics accounted for 19.7% of our Business Services segment’s net sales for the fiscal year ended December 31, 2018, which included $203.3 million or 3.6% of Business Services’ net sales, related to our former Print Logistics business.

We provide packaging solutions, ranging from rigid boxes to in-box print materials, for clients in consumer electronics, life sciences, cosmetics and consumer packaged goods industries. Packaging accounted for 12.0% of our Business Services segment’s net sales for the year ended December 31, 2018.

We create critical business communications, including customer billings, financial statements, healthcare communications and insurance documents. Our capabilities include design and composition, variable imaging, email, archival and digital mail interaction, as well as our innovative RRDigital solution set. Statements accounted for 10.4% of our Business Services segment’s net sales for the fiscal year ended December 31, 2018.

We produce custom labels for clients across multiple industries including warehouse and distribution, retail, pharmaceutical, manufacturing and consumer packaging. We offer distribution and shipping labels, healthcare and durable goods labels, promotional labels and consumer product goods packaging labels. Labels accounted for 8.6% of our Business Services segment’s net sales for the fiscal year ended December 31, 2018.

We provide workflow design to assembly, configuration, kitting and fulfillment for clients in consumer electronics, telecommunications, life sciences, cosmetics, education and industrial industries. Supply chain management accounted for 5.7% of our Business Services segment’s net sales for the fiscal year ended December 31, 2018.

We produce a variety of forms including invoices, order forms and business forms that support both the private and public sectors for clients in financial, government, retail, healthcare and business services industries. Forms accounted for 4.8% of our Business Services segment’s net sales for the fiscal year ended December 31, 2018.

We provide outsourcing services including creative services, research and analytics, financial management and other services for legal providers, insurance, telecommunications, utilities, retail and financial services companies. Business process outsourcing accounted for 4.4% of our Business Services segment’s net sales for the fiscal year ended December 31, 2018.

Our Marketing Solutions segment leverages an integrated portfolio of data analytics, creative services and multichannel execution to deliver comprehensive, end-to-end solutions. The segment’s primary product and service offerings include direct marketing, in-store marketing, digital print, kitting, fulfillment, digital and creative solutions and list services. In 2018, our Marketing Solutions segment accounted for 17.4% of our consolidated net sales.

We provide audience segmentation, creative development, program testing, print production, postal optimization and performance analytics for large-scale personalized direct mail programs. Direct marketing accounted for 49.2% of our Marketing Solutions segment’s net sales for the fiscal year ended December 31, 2018.

Using digital and offset production capabilities, we provide in-store marketing materials, including signage and point-of-purchase materials, as well as custom marketing kits that require multiple types of marketing collateral. Under the trade name Motif^TM, we also create custom photobooks. Digital print and fulfillment accounted for 40.2% of our Marketing Solutions segment’s net sales for the fiscal year ended December 31, 2018.

We help clients manage their customer data in order to better understand their customers and guide more effective marketing communications efforts. In addition, we create, edit and manage content for delivery across multiple marketing communications channels including print and digital advertising, direct marketing and mail, packaging, sales collateral, in-store marketing and social media. Digital and creative solutions accounted for 10.6% of our Marketing Solutions segment’s net sales for the year ended December 31, 2018.

Our Corporate segment consists of unallocated selling, general and administrative activities and associated expenses including, in part, executive, legal, finance, communications, certain facility costs and last-in-first-out inventory provisions. In addition, certain costs and earnings of employee benefit plans, such as pension and other postretirement benefits (“OPEB”) plan expense (income) and share-based compensation, are included in Corporate and not allocated to the operating segments. Corporate also manages our cash pooling structures, which enables participating international locations to draw on our international cash resources to meet local liquidity needs.

On October 1, 2016, we completed the separation of our financial communications and data services business (“Donnelley Financial Solutions, Inc.” or “Donnelley Financial”) and our publishing and retail-centric print services and office products business (“LSC Communications, Inc.” or “LSC”) into two separate publicly-traded companies (the “Separation”). We completed the tax free distribution of approximately 26.2 million shares, or 80.75%, of the outstanding common stock of each of Donnelley Financial and LSC, to RRD stockholders (the “Distribution”). The Distribution was made to RRD stockholders of record as of the close of business on September 23, 2016, who received one share of Donnelley Financial common stock and one share of LSC common stock for every eight shares of RRD common stock held as of the record date. As a result of the Distribution, Donnelley Financial and LSC are independent public companies trading under the symbols “DFIN” and “LKSD”, respectively, on the New York Stock Exchange. Immediately following the Distribution and as of December 31, 2016, we held approximately 6.2 million shares of Donnelley Financial common stock and approximately 6.2 million shares of LSC common stock.

In March 2017, we sold the approximately 6.2 million shares of LSC common stock retained by us and used the proceeds to repay a portion of the outstanding borrowings under our then-existing credit facility. In June 2017 and August 2017, we exchanged our approximately 6.2 million shares of Donnelley Financial common stock for certain outstanding senior indebtedness of ours, which obligations were subsequently cancelled and discharged upon delivery to us. We no longer hold any shares of the common stock of either Donnelley Financial or LSC.

The financial results of Donnelley Financial and LSC for periods prior to the Distribution are presented as discontinued operations on the Consolidated Statements of Operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Additionally, sales from RRD to Donnelley Financial and LSC previously eliminated in consolidation have been recast and are now shown as external sales of RRD within the financial results of continuing operations. See Note 2, Discontinued Operations, to the Consolidated Financial Statements for additional information.

On July 2, 2018, we sold our Print Logistics business within the Business Services segment.

On August 4, 2016, we acquired Precision Dialogue, a provider of email marketing, direct mail marketing and other services with operations in the United States within the Marketing Solutions segment.

During the year ended December 31, 2016, we sold five insignificant entities within the Business Services segment.

For further information on the above dispositions and acquisition, see Note 3, Dispositions and Acquisition, to the Consolidated Financial Statements.

The print and related services industry, in general, continues to have excess capacity and remains highly competitive and fragmented. Our clients operate in an evolving and ever-changing market. While the market is large and fragmented, there are tremendous changes occurring in how organizations need to create, manage, deliver and measure their communications. Some of the key factors facing our clients include regulatory changes, sensitivity to economic conditions, raw material pricing volatility and United States Postal Service (“USPS”) actions. In addition, technological changes, including the electronic distribution of documents and data, online distribution and hosting of media content, and advances in digital printing, print-on-demand and internet technologies, continue to impact the market for many of our products and services.

We believe that, across our range of products and services, competition is based primarily on quality and the ability to service the special needs of clients at a competitive price. Therefore, we believe we need to continue to differentiate our product and service offerings and aggressively manage our cost structure to remain competitive. Our business is differentiated by the wide array of quality communications products and services, including print and content management, we provide for our clients. We work with our clients to create, manage, deliver and optimize their multichannel communications strategies by providing innovative solutions to meet increasing customer demands in light of the large and evolving marketplace. We also continue to develop and expand our creative and design, content management, digital and print production, supply chain management and distribution services to address our clients’ evolving needs while supporting the strategic objective of becoming a leading global provider of integrated communication products and services.

Advertising and consumer spending trends affect demand in several of the end-markets we serve. As such, we have some seasonality in our business, mostly in the second half of the year, despite the breadth of our product and service offerings.

The primary raw materials we use in our print businesses are paper and ink. We negotiate with leading suppliers to maximize our purchasing efficiencies. Some of the paper we use is supplied directly by clients. Variations in the cost and supply of certain paper grades and ink formulations used in the manufacturing process may affect our consolidated financial results. Paper prices have fluctuated over the past two years and we expect continued volatility in the foreseeable future. Generally, clients directly absorb the impact of changing prices on client-supplied paper. With respect to paper we purchase, we have historically passed most changes in price through to our clients although in many cases there is a delay based on terms within individual client contracts. We believe contractual arrangements and industry practice will support our continued ability to pass on any future paper price increases, but there is no assurance that market conditions will continue to enable us to successfully do so. We believe that the paper supply is consolidating, and there may be shortfalls in the future in supplies necessary to meet the demands of the entire marketplace. Higher paper prices and tight paper supplies may have an impact on clients’ demand for printed products. We have undertaken various strategic initiatives to mitigate any foreseeable supply disruptions with respect to our paper and ink requirements.

We continue to monitor the impact of changes in the price of crude oil and other energy costs, which impact our ink suppliers, logistics operations and manufacturing costs. Crude oil, energy prices and market cost of transportation continue to be volatile. We believe our logistics operations will continue to be able to pass a substantial portion of any increases in fuel prices directly to our clients in order to offset the impact of related cost increases. Decreases in fuel prices are also passed on to clients which negatively impact sales. However, our logistics operation is restricted in its ability to pass on increased cost of transportation costs to some clients in the short term. Therefore, increases in the market cost of transportation will negatively impact income from operations. We generally cannot pass on to clients the impact of higher energy prices on our manufacturing costs. We cannot predict sudden changes in energy prices and the impact that possible future changes in energy prices might have upon either future operating costs or client demand or the related impact either will have on our consolidated annual results of operations, financial position or cash flows.

Our products are distributed to end-users through U.S. and foreign postal services, through retail channels, electronically or by direct shipment to client facilities. In cooperation with trusted logistics vendors, we manage the distribution of most client products we print in the U.S. and Canada to maximize efficiency and reduce costs for clients.

As a leading mail service provider of both First-Class and Marketing mail, we are ranked by the USPS as one of the largest mailers in the U.S. We work closely with our clients and the USPS to offer innovative products and mail preparation services to minimize postage costs. While we do not directly absorb the impact of higher postal rates on our clients’ mailings, demand for products distributed through the U.S. or foreign postal services has been negatively impacted by increases in postal rates, as postal costs are a significant component of many clients’ cost structures.

In accordance with the 2006 Postal Accountability and Enhancement Act (“PAEA”), the Postal Regulatory Commission (“PRC”) adjusted and approved USPS filings for a CPI based average price increases of 1.9% to 2.0% depending on the class of mail effective January 21, 2018 and a CPI based average price increase of 2.5% on average for the Market Dominant mail classes effective January 27, 2019.

Additionally, as required on the 10-year anniversary of PAEA, the PRC initiated a comprehensive review of PAEA on December 20, 2016, to determine if the current system for regulating rates and classes for market-dominant products is still achieving the original objectives of the law. The PRC issued its findings on December 1, 2017 and concluded that the current system was not meeting all of PAEA’s original objectives. To remedy this situation, the PRC proposed recommendations, which among other things, allows the Postal Service flexibility of “CPI + 2%” on market-dominant mail products for a 5-year period of time. The PRC asked for industry stakeholder input, comments and alternative suggestions to these recommendations which were due by March 1, 2018. The PRC is expected to issue additional communications regarding this 10-year review in early 2019.

In other developments, the Trump administration on April 12, 2018 issued an Executive Order establishing a Task Force (“TF”) to evaluate the USPS. On December 4, 2018, the TF issued a formal report calling for a total reevaluation of the Postal Service business model to make the organization more viable and sustainable going into the future.

We have more than 50,000 clients worldwide, including 95% of the Fortune 100, 88% of the Fortune 500 and 76% of the Fortune 1000. Our products and services enable some of the world’s largest companies to create, manage and deliver comprehensive and cost-effective multi-channel communications around the world. For each of the years ended December 31, 2018, 2017 and 2016, no single client accounted for 10% or more of consolidated net sales.

We invest in technology and research and development as a key strategy for our business. We believe that investing in new technologies allows us to remain on the forefront of content management and data analytics, while also allowing us to support our clients’ growing utilization of digital and print technologies. In addition, these technologies help expand our capabilities to provide additional services to clients as customers’ needs evolve. We have a research facility in Grand Island, New York, that supports the development and implementation of new technologies to meet client needs and improve operating efficiencies. We believe that proprietary technology is required where it will provide a competitive advantage or where the desired technology is not readily available in the marketplace, and as such, our proprietary technology portfolio contains an array of applications and technological capabilities which are developed to perform different functions, including digital ink jet printing. Our cost for research and development activities is not material to our consolidated annual results of operations, financial position or cash flows. In addition, while we consider our patent portfolio to be valuable, we do not believe that our business is dependent upon any single patent or group of patents. We actively monitor the registrations of our trademark and patent portfolio to ensure that our intellectual property is appropriately protected and maintained.

Our cybersecurity program is designed to meet the needs and expectations of our clients who entrust us with highly sensitive information. Furthermore, our healthcare and insurance printing businesses are subject to industry-specific data regulations, including the Health Care Insurance Portability and Accountability Act of 1996, which could subject us and our clients to liability should sensitive customer or patient information be publicly disclosed. Our infrastructure and technology, expansive and highly trained global workforce and comprehensive security and compliance program make us qualified to safely process, store and protect customer information to ensure compliance with relevant regulations.

Our infrastructure and technology security capabilities are bolstered by our relationship with a leading data center services provider. Furthermore, our networks are monitored by intrusion detection services around the clock, and our systems and applications are routinely tested for vulnerabilities and are operated under a strict patch management program.

We employ a highly skilled IT workforce to implement our cybersecurity programs and to handle specific security responsibilities. As a result of annual mandatory security awareness training, our IT workforce is qualified to address security and compliance-related issues as they arise. Additionally, all of our IT employees are carefully screened, undergo a thorough background check and are bound by a nondisclosure agreement that details such employee’s security and legal responsibilities with regard to information handling.

It is our policy to conduct our global operations in accordance with all applicable laws, regulations and other requirements. It is not possible to quantify with certainty the impact of potential failures regarding environmental matters, particularly remediation and other compliance efforts that we may undertake in the future. However, in our opinion, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect on our consolidated annual results of operations, financial position or cash flows.

As of December 31, 2018, 416 of our U.S. employees were covered by collective bargaining agreements at ten of our U.S. facilities, representing 2.6% of our U.S. workforce. We also have collective bargaining agreements with unionized employees in China, Canada, Mexico, Brazil, Chile and Europe. We have not experienced a work stoppage during the past five years. We believe that our relationships with our employees and collective bargaining groups are good.

We maintain an Internet website at www.rrd.com where our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports are available without charge, as soon as reasonably practicable following the time they are filed with, or furnished to, the Securities and Exchange Commission (“SEC”). Reports, proxy and information statements and other information that is filed electronically with the SEC are available on the SEC’s website at www.sec.gov.

The Principles of Corporate Governance of our Board of Directors, the Charters of the Audit, Human Resources and Corporate Responsibility & Governance Committees of the Board of Directors and our Principles of Ethical Business Conduct are also available on the Investor Relations portion of www.rrd.com, and will be provided, free of charge, to any stockholder who requests a copy. References to our website address do not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of this document.

This Annual Report on Form 10-K and any documents incorporated by reference contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on our beliefs and assumptions. Generally, forward-looking statements include information concerning possible or assumed future actions, events, or results of operations of ours. These statements may include, or be preceded or followed by, the words “may,” “will,” “should,” “might,” “could,” “would,” “potential,” “possible,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “hope” or similar expressions. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements.

Forward-looking statements are not guarantees of performance. The factors identified below are believed to be significant factors, but not necessarily all of the significant factors, that could cause actual results to differ materially from those expressed in any forward-looking statement. Unpredictable or unknown factors could also have material effects on us.

The following important factors, in addition to those discussed elsewhere in this Annual Report on Form 10-K, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

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

Consequently, readers of this Annual Report on Form 10-K should consider these forward-looking statements only as our current plans, estimates and beliefs. We do not undertake and specifically disclaim 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. We undertake no obligation to update or revise any forward-looking statements in this Annual Report on Form 10-K to reflect any new events or any change in conditions or circumstances.

Our consolidated results of operations, financial position and cash flows can be adversely affected by various risks. These risks include the principal factors listed below and the other matters set forth in this Annual Report on Form 10-K. You should carefully consider all of these risks.

Global market and economic conditions, as well as the effects of these conditions on our clients’ businesses, may adversely affect us.

In general, demand for our products and services is highly correlated with general economic conditions. Because a significant part of our business relies on our clients’ advertising spending, which is driven in part by economic conditions and customer spending, a prolonged downturn in the global economy and an uncertain economic outlook may further reduce the demand for printing and related services that we provide to these clients. Delays or reductions in clients’ spending could have an adverse effect on demand for our products and services which may adversely affect our results of operations, financial position and cash flows. Economic weakness and constrained advertising spending may result in decreased revenue, operating margin, earnings and growth rates and difficulty in managing inventory levels and collecting accounts receivable. In addition, client difficulties may result in increases in bad debt write-offs and allowances for doubtful accounts receivable. Economic downturns may also result in restructuring actions and associated expenses and impairment of long-lived assets, including goodwill and other intangibles. Uncertainty about future economic conditions makes it difficult for us to forecast operating results and to make decisions about future investments.

Changes in customer preferences have reduced, and may continue to reduce, demand for our products and services in certain markets. In addition, failure to manage changes in our relationships with our significant clients may have an adverse effect on our results of operations.

Many of the end markets in which our clients compete are experiencing changes due to technological progress and changes in customer preferences. In order to grow and remain competitive, we will need to continue to adapt to future changes in technology, enhance our existing offerings and introduce new offerings to address the changing demands of clients. If we are unable to continue to utilize new and existing technologies to adapt to new distribution methods and address changing customer preferences, our business may be adversely affected.

Technological developments and changing demands of clients may require additional investment in new equipment and technologies. We must monitor changes in our clients’ markets and develop new solutions to meet clients’ needs. The development of such solutions may be costly and there is no assurance that these solutions will be accepted by clients. If we are unable to adapt to technological changes on a timely basis or at an acceptable cost, clients’ demand for our products and services may be adversely affected.

In addition, electronic delivery of documents and data, including the online distribution and hosting of media content, offer alternatives to traditional delivery of printed documents. Customers continue to accept electronic substitution in statement printing and forms while online and digital advertising is impacting clients’ printed advertising spend. The extent to which customers will continue to accept electronic delivery is uncertain and it is difficult to predict future acceptance of these alternatives. Electronic delivery has adversely affected our products, such as forms and statement printing. To the extent that customers, clients and regulators continue to accept these alternatives, demand for our products and services may be further adversely affected.

During 2018, our five largest clients accounted for 9.7% of our net sales in the aggregate. In addition, we continue to provide products and services, including logistics, pre-media, production and sales services, to LSC and Donnelley Financial and their respective customers. There can be no assurance that our clients, including LSC and Donnelley Financial, will continue to purchase our products in the same mix or quantities or on the same terms as in the past. The loss of or disruptions related to significant clients may result in a reduction in sales or change in the mix of products we sell to significant clients. This may adversely affect our results of operations, financial condition and cash flows.

Additionally, disputes with significant suppliers, including those related to pricing or performance, may adversely affect our ability to supply products to our clients and also our results of operations, financial condition and cash flows.

Our business is dependent upon brand reputation and the quality of our client support and services offerings. If we fail to offer effective client support and services, our brand reputation could be harmed and clients may not use our products and services, which may have an adverse effect on our results of operations.

A high level of client support and service is critical for the successful marketing and sale of our solutions and the maintenance and enhancement of our brand reputation. If we are unable to provide a level of client support and service to meet or exceed the expectations of our clients, we may experience a loss of clients and market share and a decline in our brand reputation which may result in reduced client demand for our products and services. Furthermore, our brand reputation may be impacted by a wide range of factors, some of which are out of our control, including actions of our competitors and third party providers and positive or negative publicity, any or all of which could adversely affect our operations.

Our operations are subject to political and regulatory risks in the countries in which we operate.

Our operations may be substantially affected by both domestic and international political or regulatory risk including general political conditions in the countries in which we operate; unexpected legal, regulatory or tax changes; governmental actions which have the effect of restriction on our business or opportunities or make it more expensive for us to operate in those jurisdictions; and changes in tax laws that would reduce net income due to withholding requirements or the imposition of tariffs or other restrictions.

In addition, potential political uncertainty in our developed markets, or the perception of such uncertainty, has had and may continue to have an adverse effect on global economic conditions and the stability of global financial markets. This may reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors may adversely affect our results of operations, financial position and cash flows. Our success will depend, in part, on our ability to effectively anticipate and manage these and other risks associated with our domestic and international operations.

We are a U.S.-based global company subject to tax in multiple U.S. and foreign tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets and liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be overturned by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes.

Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law on December 22, 2017 and represents the most significant change to U.S. tax law since 1986. As a result of the Tax Act, we recorded a provisional estimate for the one-time transition tax on foreign earnings, as well as other items, in our 2017 results of operations. During 2018, we continued to analyze and interpret new guidance and clarifications of the Tax Act, and as a result recorded adjustments to the provisional estimates. During the fourth quarter of 2018, we finalized our accounting analysis for the income tax effects of the Tax Act. However, in the future, we may be subject to additional taxes as required under the Tax Act, based upon new regulations and guidance which may adversely affect our results of operations, financial position and cash flows.

Many countries are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business. If U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, which may adversely affect our business, results of operations, financial position and cash flows.

Adverse credit market conditions, our operating performance and our creditworthiness may limit our ability to obtain future financing and the cost of any such capital may be higher than in past periods.

We have a substantial amount of outstanding debt at December 31, 2018 which could adversely affect our business, results of operations, financial condition and cash flows. Uncertainty and volatility in global financial markets may cause financial institutions to fail, lenders to reduce lending or investors to reinvest in assets that are considered less risky. The failure of a financial institution that is a lender under our existing senior secured asset-based revolving credit agreement (the “ABL Credit Agreement”) would reduce the size of our committed revolving credit facility unless a replacement financial institution was willing to provide such commitments. Future capital markets transactions are dependent on our financial performance as well as market conditions, which may result in receiving financing on terms less favorable to us than our existing financings. In addition, our access to future financing and our ability to refinance existing debt will depend on a variety of factors such as our financial performance, the general availability of credit, our credit ratings and credit capacity at the time we pursue such financing.

Our current corporate credit ratings are below investment grade and, as a result, our borrowing costs may further increase and our ability to borrow may be limited. If adequate capital is not available to us on reasonable terms and our internal sources of liquidity prove to be insufficient, or if future financings require more restrictive covenants, such combination of events could adversely affect our ability to (i) acquire new businesses or enter new markets, (ii) service or refinance our existing debt, (iii) pay dividends on common stock, (iv) make necessary capital investments, and (v) make other expenditures necessary for the ongoing conduct of our business.

Our ABL Credit Agreement limits our borrowing capacity to the value of certain of our assets. In addition, our ABL Credit Agreement and Term Loan B credit facility pursuant to a credit agreement are secured by substantially all assets of our Company and our material domestic subsidiaries that are guarantors under such credit agreements and lenders may exercise remedies against the collateral in the event of our default.

Our borrowing capacity under our ABL Credit Agreement is equal to the lesser of (i) $800.0 million and (ii) a borrowing base formula based on the amount of accounts receivable, inventory, machinery, equipment and, if we were to so elect in the future subject to the satisfaction of certain conditions, fee-owned real estate of the Company and our material domestic subsidiaries that are guarantors under the ABL Credit Agreement, subject to certain eligibility criteria and advance rates (collectively, the “Borrowing Base”). In the event of any material decrease in the amount of or appraised value of the assets in the Borrowing Base, our borrowing capacity would similarly decrease, which could adversely affect our business and liquidity.

Certain restrictions on operations become applicable if our borrowing availability under the ABL Credit Agreement falls below certain thresholds. These restrictions could impose significant operating and financial limitations and restrictions on us, including restrictions on our ability to enter into particular transactions and to engage in other actions that we may believe are advisable or necessary for our business.

In the event of a default under our ABL Credit Agreement or our $550.0 million senior secured Term Loan B credit facility pursuant to a credit agreement (the “Term Loan Credit Agreement,” and together with the ABL Credit Agreement, the “Credit Agreements”), the lenders’ commitment to extend further credit under our ABL Credit Agreement could be terminated, our outstanding obligations under either or both of the Credit Agreements could become immediately due and payable, outstanding letters of credit issued under our ABL Credit Agreement may be required to be cash collateralized, and remedies may be exercised against the collateral securing either or both of the Credit Agreements. If we are unable to borrow under our ABL Credit Agreement, we may not have the necessary cash resources for our operations and, if any event of default occurs under either Credit Agreement, there is no assurance that we would have the cash resources available to repay such accelerated obligations, refinance such indebtedness on commercially reasonable terms, or at all, or cash collateralize our letters of credit issued under the ABL Credit Agreement, which would have a material adverse effect on our business, financial condition, results of operations and liquidity.

An increase in interest rates could have a material adverse effect on our business.

Borrowings under our Credit Agreements bear interest at rates that are calculated according to a base rate or a Eurocurrency rate plus an applicable margin which, in the case of the ABL Credit Agreement, is dependent on the average quarterly borrowing availability under our ABL Credit Agreement. As a result, we are exposed to risks associated with fluctuations in interest rates, including if the U.S. Federal Reserve raises its benchmark interest rate. Increases in interest rates may adversely affect our business, financial position and results of operations by causing an increase in interest expense. Significantly higher interest rates may also, among other things, reduce the availability and increase the cost of obtaining new debt and refinancing existing indebtedness, as well as negatively impact the market price of our common stock.

We may not be able to reduce or extinguish our material indebtedness, and as a result we may have increased financial leverage, which may adversely affect our business.

We have substantial indebtedness and our interest and principal payments are significant. In addition, our Term Loan Credit Agreement requires us to make amortization payments every quarter equal to 0.25% of the original principal amount of the Term Loan Credit Agreement and to make prepayments with excess cash flow and asset sale proceeds in certain circumstances. If we are unable to reduce this indebtedness, we will continue to have increased financial leverage which may limit or restrict our ability to operate our business. In addition, our ability to make payments on, repay or refinance, such debt, will depend largely upon our future operating performance.

We may be adversely affected by a decline in the availability of raw materials or by fluctuations in the costs of paper, ink, energy and other raw materials.

We are dependent on the availability of paper, ink and other raw materials to support our operations. As such, purchases of paper, ink, energy and other raw materials represent a large portion of our costs. Increases in the costs of these inputs may increase our costs and we may not be able to pass these costs on to clients through higher prices. Increases in the cost of materials may adversely affect clients’ demand for our printing and related services. Other unforeseen developments in these markets may result in a decrease in the supply of paper, ink or other raw materials which may adversely affect our results of operations and financial condition.

We may be unable to improve our operating efficiency rapidly enough to meet market conditions.

Because the markets in which we operate are highly competitive, we must continue to improve our operating efficiency in order to maintain or improve our profitability. There is no assurance that we will be able to do so in the future. In addition, the need to reduce ongoing operating costs may result in significant up-front costs to reduce workforce, close or consolidate facilities, or upgrade equipment and technology.

A decline in our Company’s or our individual reporting units’ expected profitability may result in the impairment of assets, including goodwill, other long-lived assets and deferred tax assets.

In prior years we have recorded significant goodwill and other long-lived asset impairments and continue to hold goodwill, other long-lived assets and deferred tax assets on our balance sheet. A decline in expected profitability may call into question the recoverability of our related goodwill, other long-lived tangible and intangible assets or deferred tax assets and require the write down or write off of these assets or, in the case of deferred tax assets, recognition of a valuation allowance through a charge to income. Such events have had and may continue to have an adverse effect on our results of operations, financial position and cash flows.

Our services depend on the reliability of computer systems we and our vendors maintain. If our systems fail or are unreliable, our operations may be adversely affected.

We depend on our information technology and data processing systems to operate our business, and a significant malfunction or disruption in the operation of our systems may disrupt our business and adversely affect our ability to operate and compete in the markets we serve. These systems include systems that we own and operate, as well as those systems of our vendors. Such systems are susceptible to malfunctions and interruptions due to equipment damage and power outages and a range of other hardware, software and network problems. We also periodically upgrade and install new systems, which if installed or programmed incorrectly, may cause significant disruptions. If a disruption occurs, we may incur losses and costs for interruption of our operations, which may adversely affect our results of operations, financial condition and cash flows.

We may suffer a material data breach of sensitive information. If our efforts to protect the security of such information are unsuccessful, any such material failures may result in significant costs to investigate and remediate the data-breach, private litigation expense and costly government enforcement actions and penalties, and may have an adverse effect on our operations and reputation.

Maintaining the confidentiality, integrity and availability of our systems, software and solutions is an issue of critical importance for us and our clients and users who rely on us to protect the confidentiality of certain information they provide us. Many of our clients’ industries are highly regulated and have established standards and requirements for safeguarding the confidentiality, integrity and availability of information relating to their businesses and customers. Confidential and sensitive information stored in our systems are susceptible to cybercrime, or threats of intentional disruption, which are increasing in terms of sophistication and frequency. Disclosure of the information maintained on our systems due to human error, breach of our systems through hacking or cybercrime, a leak of confidential information due to employee misconduct or other such events may damage our reputation, subject us to regulatory enforcement action and cause significant reputational harm for our clients, all of which may materially affect our results of operations, financial condition and cash flows. In addition, as security threats continue to evolve and increase in terms of sophistication, we may invest additional resources in the security of our systems. The level of investment could also adversely affect our results of operations, financial condition and cash flows.

The highly competitive market for our products and industry consolidation may continue to create adverse price pressures.

The markets for the majority of our product categories are highly fragmented and we have a large number of competitors. We believe excess capacity in our markets has caused downward price pressure and this trend is likely to continue. In addition, consolidation in the markets in which we compete may increase competitive price pressures due to competitors lowering prices.

We believe that selectively pursuing acquisitions is an important strategy for us. If our competitors are able to successfully combine with one another or otherwise consolidate, the competitive landscape would be significantly altered. Such consolidation would create stronger competitors with greater financial resources and broader manufacturing and distribution capabilities than our own, and, if we are not successful with our own efforts to consolidate or adapt effectively to increased competition, the resulting increase in competitive pressures may adversely affect our results of operations, financial position and cash flows.

We have in the past acquired, and intend in the future to acquire, other businesses, and we may be unable to successfully integrate the operations of these businesses and may not achieve the cost savings and increased net sales anticipated as a result of these acquisitions.

Achieving the anticipated benefits of acquisitions will depend in part upon our ability to integrate these businesses in an efficient and effective manner. The integration of companies that have previously operated independently may result in significant challenges, and we may be unable to accomplish the integration smoothly or successfully. In particular, the coordination of geographically dispersed organizations with differences in corporate cultures and management philosophies may increase the difficulties of integration. The integration of acquired businesses may also require the dedication of significant management resources, which may temporarily distract management’s attention from our day-to-day operations. In addition, the process of integrating operations may cause an interruption of, or loss of momentum in, the activities of one or more of our businesses and the loss of our key personnel or the acquired businesses. Further, employee uncertainty and lack of focus during the integration process may disrupt our operations or the operations of the acquired businesses. Our strategy is, in part, predicated on our ability to realize cost savings and to increase net sales through the acquisition of businesses that add to the breadth and depth of our products and services. Achieving these cost savings and net sales increases is dependent upon a number of factors, many of which are beyond our control. In particular, we may not be able to realize the benefits of more comprehensive product and service offerings, anticipated integration of sales forces, asset rationalization and systems integration.

The trend of increasing costs to provide health care and other benefits to our employees and retirees may continue.

We provide health care and other benefits to employees and retirees. Costs for health care have increased more rapidly than general inflation in the U.S. economy. If this trend in health care costs continues, our cost to provide such benefits may increase, adversely affecting our profitability. Changes to health care regulations in the U.S. may also increase our cost of providing such benefits.

Changes in market conditions or lower returns on assets may increase required pension and OPEB plan contributions in future periods.

The funded status of our pension and OPEB plans is dependent upon many factors, including returns on invested assets and the level of certain market interest rates. Market conditions may lead to changes in the discount rates used to value the year-end benefit obligations of the plans, which may partially mitigate or worsen the effects of lower asset returns. If adverse market conditions were to continue for an extended period of time, our costs and required cash contributions associated with pension and OPEB plans may substantially increase in future periods.

We may be more vulnerable to adverse events and trends associated with operations outside the U.S.

We have significant operations outside the U.S. Conducting business outside the U.S. subjects us to a number of additional risks and challenges, including:

These factors, individually or in combination, may impair our ability to effectively deliver our products and services, result in unexpected expenses, or cause an unexpected decline in the demand for our products in certain countries or regions. Specifically with respect to our operations in China, our financial performance may be subject to the following risks, among others, regulation of foreign investment and business activities by the Chinese government, including scrutiny of foreign companies, may limit our ability to expand our business in China; uncertainties with respect to the legal system in China may limit the legal protections available to us in China; government restrictions on the remittance of currency out of China and the ability of any subsidiary we may establish in China to pay dividends and make other distributions to us; unfavorable result of ongoing trade negotiations between the U.S. and China; and potential unfavorable tax and tariff consequences as a result of our operations in China. Our failure to manage the risks and challenges associated with our international business and operations may adversely affect our results of operations, financial position and cash flows.

We are exposed to significant risks related to potential adverse changes in currency exchange rates.

We are exposed to market risks resulting from changes in the currency exchange rates of the currencies in the countries in which we do business. Although operating in local currencies may limit the impact of currency rate fluctuations on the operating results of our non-U.S. subsidiaries, fluctuations in such rates may affect the translation of these results into our Consolidated Financial Statements. To the extent borrowings, sales, purchases, revenues and expenses or other transactions are not in the applicable local currency, we may enter into foreign currency spot and forward contracts to hedge the currency risk. We cannot provide assurance, however, that our efforts at hedging will be successful, and such efforts may, in certain circumstances, adversely affect our results of operations, financial position and cash flows.

Catastrophic events may damage or destroy our factories, distribution centers or other facilities, which may disrupt our business.

Natural disasters, conflicts, wars, terrorist attacks, fires or other catastrophic events may cause damage or disruption to our factories, distribution centers or other facilities, which may adversely affect our ability to manage logistics, cause delays in the delivery of products and services to our clients, and create inefficiencies in our supply chain. An event of this nature may also prevent us from maintaining ongoing operations and performing critical business functions. While we maintain backup systems and operate out of multiple facilities to reduce the potentially adverse effect of these types of events, a catastrophic event that results in the destruction of any of our major factories, distribution centers or other facilities would affect our ability to conduct normal business operations, which may adversely affect our results of operations, financial position and cash flows.

Changes in rules and regulations to which we are subject may increase our costs, which may adversely affect us.

We are subject to numerous rules and regulations, including, but not limited to, product safety, environmental and health and welfare benefit regulations. These rules and regulations may be changed by local, state or federal governments in countries in which we operate. Changes in these regulations may result in a significant increase in our costs to comply. Compliance with changes in rules and regulations may require increases to our workforce, increased cost for compensation and benefits, or investments in new or upgraded equipment. In addition, growing concerns about climate change, including the impact of global warming, may result in new regulations with respect to greenhouse gas emissions (including carbon dioxide) and/or “cap and trade” legislation. Compliance with new rules and regulations or changes in existing rules and regulations may result in additional costs, which may adversely affect our results of operations, financial condition and cash flows.

Many of our clients are subject to rules and regulations requiring certain printed or electronic communications, governing the form of such communications and protecting the privacy of customers. For instance, our healthcare and insurance printing businesses are subject to such regulations. Changes in these regulations may impact clients’ business practices and may reduce demand for our products and services. Changes in such regulations may eliminate the need for certain types of communications altogether or may impact the quantity or format of such communications.

Changes in postal rates, regulations and delivery structure may adversely affect demand for our products and services.

Postal costs are a significant component of many of our clients’ cost structure and postal rate changes can influence the number of pieces and types of mailings that our clients mail. In accordance with the 2006 PAEA, the PRC adjusted and approved USPS filings for a CPI based average price increases of 1.9% to 2.0% depending on the class of mail effective January 21, 2018 and a CPI based average price increase of 2.5% on average for the Market Dominant mail classes effective January 27, 2019.

In other developments, the Trump administration on April 12, 2018 issued an Executive Order establishing a TF to evaluate the USPS. On December 4, 2018, the TF issued a formal report calling for a total reevaluation of the Postal Service business model to make the organization more viable and sustainable going into the future.

The impact of any restructuring of the USPS, which may require legislative action, cannot currently be estimated. If implemented, certain changes may impact our clients’ ability or willingness to communicate by mail. Declines in print volumes mailed would have an adverse effect on our results of operations, financial condition and cash flows.

Increased transportation costs and changes in the relationships with independent shipping companies may have an adverse effect on our business.

We rely upon third party carriers for timely delivery of our product shipments. As a result, we are subject to carrier disruptions and increased costs due to factors that are beyond our control, including employee strikes, inclement weather and increased fuel costs. Any failure to deliver products to our clients in a timely and accurate manner may damage our reputation and brand and may cause us to lose clients. If our relationship with any of these third party carriers is terminated or impaired, or if any of these third parties are unable to ship products for us, we would be required to use alternative, and possibly more expensive, carriers for the shipment of products. We may be unable to engage alternative carriers on a timely basis or on terms favorable to us, if at all, which may have an adverse effect on our results of operations, financial condition and cash flows.

Furthermore, shipping costs represent a significant operational expense for us. Changes in shipping terms, or the inability of these third party shippers to perform effectively (whether as a result of mechanical failure, casualty loss, labor stoppage, or any other reason), may have an adverse effect on our results of operations, financial condition and cash flows. Additionally, deterioration of the financial condition of these third-party carriers may have an adverse effect on our shipping costs. Any future increases in shipping rates may have an adverse effect on our results of operations, financial condition and cash flows, particularly if we are unable to pass on these higher costs to our clients.

Undetected errors or failures found in our products and services may result in loss of or delay in market acceptance of our products and services that may seriously harm our business.

Our products and services may contain undetected errors or scalability limitations at any point, but particularly when first introduced or as new versions are released. We frequently release new versions of our products and different aspects of our platform are in various stages of development. Despite testing by us and by current and potential clients, errors may not be found in new products and services until after commencement of commercial availability or use, resulting in a loss of or a delay in market acceptance, damage to our reputation, client dissatisfaction and reductions in net sales and margins, any of which may have an adverse effect on our results of operations, financial condition and cash flows.

Our success depends, in part, on our general ability to attract, develop, motivate and retain highly skilled employees. The loss of a significant number of our employees or the inability to attract, hire, develop, train and retain skilled personnel, particularly during strong economic periods, may have an adverse effect on us. Various locations may encounter competition with other manufacturers for skilled labor. Many of these competitors may be able to offer significantly greater compensation and benefits or more attractive lifestyle choices than we offer. In addition, many members of our management team have significant industry experience that is valuable to our competitors. We enter into non-solicitation and, as appropriate, non-competition agreements with certain of our executive officers, prohibiting them contractually from soliciting our clients and employees and from leaving and joining a competitor within a specified period. Our inability to hire and retain talented employees or the loss of senior members of our senior management team may result in challenges or temporary difficulty in managing our business, which may adversely affect our results of operations, financial condition or cash flows.

We obtained an opinion from our outside legal counsel substantially to the effect that, among other things, the distributions in connection with the spinoff transactions qualify as tax-free distributions under the U.S. Internal Revenue Code of 1986, as amended (the “Code”). The opinion will not be binding on the IRS or the courts. Additionally, we have received a private letter ruling from the IRS concluding that certain limited aspects of the distributions will not prevent the distributions from satisfying certain requirements for tax-free treatment under the Code. The opinion and the private letter ruling rely on customary factual representations and assumptions, which if incorrect or inaccurate may jeopardize the ability to rely on such opinion and letter ruling.

If either or both of the distributions do not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, we would be subject to tax as if we had sold the common stock of such spun-off entity in a taxable sale for its fair value. In that case, we expect that RRD stockholders would be subject to tax as if they had received a distribution equal to the fair value of the spun-off entity’s common stock that was distributed to them, which generally would be treated first as a taxable dividend to the extent of our earnings and profits, then as a non-taxable return of capital to the extent of each holder’s tax basis in its Company common stock, and thereafter as capital gain with respect to any remaining value. We expect that the amount of any such taxes to RRD stockholders and us would be substantial if this were to occur.

We have no unresolved written comments from the SEC staff regarding our periodic or current reports under the Securities Exchange Act of 1934.

Our corporate office is located in leased office space in Chicago, Illinois. As of December 31, 2018, we leased or owned 214 U.S. facilities, some of which had multiple buildings and warehouses, and these U.S. facilities encompassed approximately 15.2 million square feet. We leased or owned 88 international facilities, some of which had multiple buildings and warehouses, encompassing approximately 6.4 million square feet primarily in Asia, Europe, Canada and Latin America. Of our U.S. and international facilities, approximately 9.2 million square feet of space was owned, while the remaining 12.4 million square feet of space was leased.

From time to time, our clients and others file voluntary petitions for reorganization under United States bankruptcy laws. In such cases, certain pre-petition payments we received from these parties could be considered preference items and subject to return. In addition, we are party to certain litigation arising in the ordinary course of business. We believe that the final resolution of these preference items and litigation will not have a material effect on our consolidated results of operations, financial position or cash flows.

For a discussion of certain litigation involving us, see Note 9, Commitments and Contingencies, to the Consolidated Financial Statements.

Name and Positions with the Company	Age		Business Experience
Daniel L. Knotts President and Chief Executive Officer		54	Since October 2016, Mr. Knotts has served as the Chief Executive Officer of RRD and a member of our board of directors. Prior to this, Mr. Knotts was our Chief Operating Officer from 2013 to 2016.

Terry D. Peterson Executive Vice President and Chief Financial Officer		54	Since October 2016, Mr. Peterson has served as RRD’s Executive Vice President and Chief Financial Officer. Prior to joining RRD, Mr. Peterson served as Senior Vice President and Chief Financial Officer of Deluxe Corporation from 2009 to 2016.

Kenneth O’Brien Executive Vice President and Chief Information Officer		58	Since February 2004, Mr. O’Brien has served as RRD’s Executive Vice President and Chief Information Officer.

John Pecaric President, RRD Business Services		56	Since April 2018, Mr. Pecaric has served as President of RRD Business Services. Prior to this, Mr. Pecaric was our Executive Vice President, Chief Commercial Officer and President of International from 2016 to 2018. From 2014 to 2016, Mr. Pecaric was Group President – International where he led RRD’s businesses outside the United States. From 2012 to 2014, Mr. Pecaric was Senior Vice President of Canada, Latin America, Book and Office Products.

J. Glynn Perry Executive Vice President, Domestic Operations and Chief Supply Chain Officer		59	Since October 2016, Mr. Perry has served as RRD’s Executive Vice President of Domestic Operations and Chief Supply Chain Officer. Prior to this, Mr. Perry served in various capacities at RRD including President of Commercial & Variable Print from 2014 to 2016 and Senior Vice President of Operations from 2000 to 2013.

Sheila M. Rutt Executive Vice President and Chief Human Resources Officer		50	Since July 2017, Ms. Rutt has served as RRD’s Executive Vice President and Chief Human Resources Officer. Prior to joining RRD, Ms. Rutt served as Chief Human Resources Officer of Diebold Nixdorf from 2005 to 2017.

Doug Ryan President, RRD Marketing Solutions		56	Since April 2018, Mr. Ryan has served as President of RRD Marketing Solutions. Prior to this, Mr. Ryan was our Executive Vice President of Marketing Services from 2017 to 2018. Prior to joining RRD, Mr. Ryan served as President of North America for Digitas from 2016 to 2017 and President of San Francisco and Chicago for Digitas from 2010 to 2016.

Michael J. Sharp Senior Vice President, Controller and Chief Accounting Officer		57	Since November 2017, Mr. Sharp has served as RRD’s Senior Vice President, Controller and Chief Accounting Officer. Prior to joining RRD, Mr. Sharp served in various capacities at AAR Corporation including, Vice President and Chief Financial Officer from 2015 to 2016; Vice President, Controller and Chief Accounting Officer from 1999 to 2015; and interim Vice President and Chief Financial Officer from 2012 to 2013.

Deborah L. Steiner Executive Vice President, General Counsel, Secretary and Chief Compliance Officer		48	Since October 2016, Ms. Steiner has served as RRD’s Executive Vice President, General Counsel, Secretary and Chief Compliance Officer. Prior to this, Ms. Steiner was our Vice President, Associate General Counsel from 2012 to 2016.

Effective August 22, 2016, our common stock is listed and traded on the New York Stock Exchange (NYSE) under the symbol “RRD”. Prior to that date, our stock was listed and traded on the Nasdaq Stock Market (“NASDAQ”) under the symbol “RRD”. As of February 22, 2019, there were 3,876 stockholders of record of our common stock.

There were no repurchases of equity securities during the three months ended December 31, 2018.

For information regarding equity compensation plans, see Item 12 of Part III of this Annual Report on Form 10-K.

The graph below compares five-year returns of our common stock with those of the S&P SmallCap 600 and the S&P 1500 Industrials Index. The comparison assumes an initial investment of $100 on December 31, 2013 and that all dividends have been reinvested. Our performance through September 30, 2016 has been adjusted for the spinoffs of LSC and Donnelley Financial which occurred on October 1, 2016 and are reflected in the table below as a dividend. Additionally, our performance has been adjusted for the 1-for-3 reverse stock split for our stock which also occurred on October 1, 2016.

	Base Period	Fiscal Years Ended December 31,
Company Name/Index	2013	2014		2015		2016		2017		2018
RR Donnelley	100		88.01		81.81		64.95		38.90		17.44
S&P SmallCap 600	100		105.76		103.67		131.20		148.56		135.96
S&P 1500 Industrials Index	100		108.48		105.53		127.07		153.83		133.25

	2018			2017			2016			2015			2014
Continuing Operations
Net sales	$	6,800.2		$	6,939.6		$	6,833.0		$	6,880.7		$	7,118.0
Net loss from continuing operations⁽¹⁾		(9.6	)		(33.2	)		(484.9	)		(31.7	)		(40.3	)
Net loss attributable to RRD common stockholders per diluted share⁽¹⁾⁽²⁾		(0.16	)		(0.49	)		(6.95	)		(0.28	)		(0.66	)

Financial Position and Other Data
Total assets⁽³⁾		3,640.8			3,904.5			4,268.8			7,264.6			7,598.0
Long-term debt⁽³⁾		1,875.3			2,098.9			2,379.2			3,188.3			3,398.6
Cash dividends per common share⁽²⁾		0.34			0.56			2.48			3.12			3.12

	2018			2017			2016			2015			2014
Restructuring, impairment and other charges-net	$	38.8		$	53.0		$	584.3		$	62.7		$	72.3
Acquisition-related expenses		0.1			—			2.7			0.5			7.0
Spinoff-related transaction expenses		—			3.3			8.0			—			—
Gain from the sale of certain of our affordable housing investments		(0.4	)		(1.3	)		(0.1	)		(3.9	)		—
Pension settlement and plan amendments charges		1.9			1.6			21.1			—			—
OPEB curtailment gain		—			—			(19.5	)		—			—
Net gain on disposal of businesses		(3.7	)		—			(11.9	)		—			(10.4	)
Loss on Venezuela currency remeasurement		—			—			—			30.3			18.4
Loss primarily related to the disposal of the Venezuelan operating entity		—			—			—			15.7			—
Loss from the impairment of our investment in the Brazilian operations of Courier		—			—			—			2.8			—
Net gain on sale of LSC and Donnelley Financial shares		—			(42.4	)		—			—			—
Loss from the impairment of equity investments		—			—			1.4			1.3			1.3
Loss on debt extinguishment		32.4			20.1			—			—			77.1
Loss on bankruptcy liquidation of RRDA		—			—			—			—			16.4
Purchase accounting inventory adjustments		—			—			—			—			12.1
Total charges before taxes	$	69.1		$	34.3		$	586.0		$	109.4		$	194.2
Total after-tax impact of the above charges, excluding the impact of noncontrolling interests		61.4			11.2			534.9			87.9			138.3
Tax benefit related to the decline in value of an entity within the Business Services segment		—			—			—			—			(15.2	)
Deferred income tax benefit		(6.4	)		(3.0	)		(0.4	)		—			—
Tax expense related to the enactment of the Tax Act		5.7			110.3			—			—			—
Total charges, net of taxes	$	60.7		$	118.5		$	534.5		$	87.9		$	123.1

The following discussion of our financial condition and results of operations should be read together with the Consolidated Financial Statements and Notes to those statements included in Item 15 of Part IV of this Annual Report on Form 10-K.

On October 1, 2016, we completed the spinoff transactions of LSC and Donnelley Financial into two independent public companies as described in more detail in Item 1, Business –Spinoff Transactions, of Part I of this Annual Report on Form 10-K. The financial results of Donnelley Financial and LSC for periods prior to the Distribution have been reflected within the disclosures of this Management’s Discussion and Analysis of Financial Condition and Results of Operations as discontinued operations. Additionally, sales from RRD to Donnelley Financial and LSC previously eliminated in consolidation have been recast and are now shown as external sales of RRD within the financial results from continuing operations. See Note 2, Discontinued Operations, to the Consolidated Financial Statements for additional information.

For a description of our business, segments and product and service offerings, see Item 1, Business, of Part I of this Annual Report on Form 10-K.

We separately report our net sales, related costs of sales and gross profit for our product and service offerings. Our product offerings primarily consist of commercial print, packaging, statements, direct marketing, labels, digital print and fulfillment, supply chain management and forms. Our service offerings primarily consist of logistics, business process outsourcing and digital and creative solutions.

Net sales for the year ended December 31, 2018 were $6,800.2 million, a decrease of $139.4 million, or 2.0%, compared to the year ended December 31, 2017. Net sales decreased $225.9 million due to the disposition of our Print Logistics business. Net sales also decreased due to lower volume in commercial print due to ongoing secular pressure and lower specialty card sales, as well as price pressures. Decreases in net sales were offset by higher volume primarily in packaging, the remaining logistics business and direct marketing.

Income from operations for the year ended December 31, 2018 was $208.6 million, a decrease of $2.8 million compared to the year ended December 31, 2017. Income from operations decreased due to cost inflation, price pressures and unfavorable mix in sales, partially offset by cost control initiatives, higher volume net of the sale of Print Logistics, lower impairment and other charges and lower depreciation and amortization expense.

We continue to assess opportunities to reduce our cost structure and enhance productivity throughout the business. During the year ended December 31, 2018, we realized cost savings from previous restructuring activities, including the reorganization of administrative and support functions across all segments, as well as facility consolidations.

Net cash provided by operating activities for the year ended December 31, 2018 was $203.5 million as compared to $217.9 million for the year ended December 31, 2017. The decrease in net cash flow from operating activities related primarily to a reduction in operating income, including the sale of our Print Logistics business, partially offset by lower tax and interest payments.

We work with our clients to create, manage, deliver and optimize their multichannel communications strategies. We have and will continue to develop our creative and design, content management, digital and print production, supply chain management and distribution services to address our clients’ evolving needs.

Our global platform provides differentiated solutions for our clients through our broad range of complementary communications services and innovative leadership in both conventional print and digital technologies. This platform has enabled RRD to develop strong client relationships, and we are focused on expanding these relationships to a broader range of our offerings. The flexibility of our platforms enhances the value we deliver to our clients and we intend to expand our capabilities in order to make it easier for clients to manage their full range of communication needs.

We believe productivity improvements and cost reductions are critical to our competitiveness. We continue to implement strategic initiatives across each of our segments to reduce our overall cost structure and enhance productivity primarily through restructuring which includes consolidations, reorganizations and integrations of operations and streamlining of administrative and support activities.

We seek to deploy our capital using a balanced approach in order to ensure financial flexibility and provide returns to stockholders. Priorities for capital deployment, over time, include capital expenditures, principal and interest payments on debt obligations, distributions to stockholders and targeted acquisitions. We believe that a strong financial condition is important to clients focused on establishing or growing long-term relationships. We also expect to make targeted acquisitions that extend our capabilities, drive cost savings and reduce future capital spending needs.

We use several key indicators to gauge progress toward achieving these objectives. These indicators include organic sales growth, operating margins, cash flow from operations and capital expenditures. We target long-term net sales growth, while managing operating margins by achieving productivity improvements that offset the impact of price declines and cost inflation. Cash flows from operations are targeted to be stable over time, but in any given year can be significantly impacted by the timing of non-recurring or infrequent receipts and expenditures, the level of required pension and OPEB plan contributions, the timing of tax payments and the impact of working capital changes.

We face many challenges and risks as a result of competing in highly competitive global markets. Refer to Item 1A, Risk Factors, of Part I of this Annual Report on Form 10-K for further discussion.

In 2019, we expect net sales to be down as compared to 2018 primarily due to the sale of our Print Logistics business which reported net sales of $203.3 million in 2018. On an organic basis, we expect net sales to range from a slight decrease to a slight increase as compared to 2018 primarily driven by expected growth in our direct marketing, packaging and labels products as well as continued secular declines in our commercial print and forms products and continued price pressures in most parts of the business. The highly competitive market conditions and unused industry capacity will continue to put price pressure on both transactional work and contract renewals across both segments. Our outlook assumes that the U.S. economy and the economies of the foreign countries in which we operate will remain stable. We will continue to leverage our client relationships in order to provide a larger share of their communications needs. In addition, we expect to continue cost control and productivity initiatives, including selected facility consolidations.

We initiated several restructuring actions during the years ended December 31, 2018, 2017 and 2016, to further reduce our overall cost structure. These restructuring actions included the closures of manufacturing facilities as well as the reorganization and consolidation of certain operations. These and future cost reduction actions are expected to have a positive impact on operating earnings in 2019 and in future years. In addition, we expect to identify other cost reduction opportunities and possibly take further actions in, which may result in significant additional restructuring charges. These restructuring actions will be funded by cash generated from operations and cash on hand or, if necessary, by utilizing our credit facilities.

We expect lower interest expense on lower average borrowings and a lower average interest rate in 2019 and we expect the effective tax rate to be significantly higher than the statutory rate primarily due to anticipated limitations on our domestic interest expense deduction as a result of the Tax Act.

Cash flows from operations in 2019 are expected to be lower versus 2018 as lower interest expense and expected targeted working capital improvements will be offset by significantly higher payments for income taxes and restructuring. We collected domestic tax refunds in 2018 which we do not expect to repeat in 2019. In addition, we plan to re-locate a printing facility in China which we expect will result in additional severance and relocation costs. This move is necessary as we are selling our current printing facility. We expect capital expenditures to be temporarily higher in 2019 due to investments associated with building the new printing facility in China and additional investments related to the $115.0 million 2020 Census contract we were awarded at the end of 2018. In 2020, we expect our capital expenditures level to return to our previously stated range of 1.5 to 1.7 percent of revenue. Lastly, as part of our agreement to sell the printing facility in China, we expect to collect an additional non-refundable deposit of approximately $25.0 million in 2019.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2018 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2017

The following table shows the results of operations for the years ended December 31, 2018 and 2017:

	Year Ended December 31,
	2018			2017		$ Change			% Change
	(in millions, except percentages)
Products net sales	$	5,317.7		$	5,326.0	$	(8.3	)		(0.2	%)
Services net sales		1,482.5			1,613.6		(131.1	)		(8.1	%)
Total net sales		6,800.2			6,939.6		(139.4	)		(2.0	%)
Products cost of sales (exclusive of depreciation and amortization)		4,315.8			4,264.1		51.7			1.2	%
Services cost of sales (exclusive of depreciation and amortization)		1,229.0			1,359.3		(130.3	)		(9.6	%)
Total cost of sales		5,544.8			5,623.4		(78.6	)		(1.4	%)
Products gross profit		1,001.9			1,061.9		(60.0	)		(5.7	%)
Services gross profit		253.5			254.3		(0.8	)		(0.3	%)
Total gross profit		1,255.4			1,316.2		(60.8	)		(4.6	%)
Selling, general and administrative expenses (exclusive of depreciation and amortization)		830.4			860.4		(30.0	)		(3.5	%)
Restructuring, impairment and other charges-net		38.8			53.0		(14.2	)		(26.8	%)
Depreciation and amortization		181.4			191.4		(10.0	)		(5.2	%)
Other operating income		(3.8	)		—		(3.8	)	nm
Income from operations	$	208.6		$	211.4	$	(2.8	)		(1.3	%)

Net sales of products for the year ended December 31, 2018 decreased $8.3 million, or 0.2%, to $5,317.7 million versus the same period in 2017, including a $9.7 million, or 0.2%, increase due to changes in foreign exchange rates. Net sales of products decreased due to lower volume in commercial print due to ongoing secular pressure and lower specialty card sales, as well as price pressure, partially offset by higher volume in packaging and direct marketing.

Net sales from services for the year ended December 31, 2018 decreased $131.1 million, or 8.1%, to $1,482.5 million versus the same period in 2017, including a $2.9 million, or 0.2%, increase due to changes in foreign exchange rates. Net sales from services decreased $225.9 million due to the disposition of our Print Logistics business. Net sales increased due to higher volume in the remaining logistics business and business process outsourcing, partially offset by lower volume in digital and creative solutions as we continue our shift away from traditional pre-media services for non-core market segments.

Products cost of sales increased $51.7 million, or 1.2%, for the year ended December 31, 2018 versus the same period in 2017. Products cost of sales increased primarily due to higher volume in packaging and cost inflation, including higher paper costs in the U.S., partially offset by lower volume in commercial print, along with cost control initiatives across the organization. As a percentage of net sales, products cost of sales increased 1.1 percentage points to 81.2% for the year ended December 31, 2018 versus the same period in 2017.

Services cost of sales decreased $130.3 million, or 9.6%, for the year ended December 31, 2018 versus the same period in 2017, primarily due to the disposition of our Print Logistics business and cost control initiatives, partially offset by higher volume in the remaining logistics business and business process outsourcing. As a percentage of net sales, services cost of sales decreased 1.3 percentage points for the year ended December 31, 2018 versus the same period in 2017.

Products gross profit decreased $60.0 million to $1,001.9 million for the year ended December 31, 2018 versus the same period in 2017, primarily due to price pressures, partially offset by cost control initiatives. Products gross margin decreased from 19.9% to 18.8%.

Services gross profit decreased $0.8 million to $253.5 million for the year ended December 31, 2018 versus the same period in 2017. Services gross margin increased from 15.8% to 17.1% primarily due to the mix of services sold.

Selling, general and administrative expenses decreased $30.0 million to $830.4 million for the year ended December 31, 2018 versus the same period in 2017 reflecting cost control initiatives and lower foreign exchange losses, partially offset by higher bad debt expense in 2018, which included an $8.3 million charge due to a client-related bankruptcy and higher commission and performance-based incentive compensation expenses. As a percentage of net sales, selling, general and administrative expenses decreased from 12.4% to 12.2% for the years ended December 31, 2018 versus the same period in 2017.

For the year ended December 31, 2018, we recorded net restructuring, impairment and other charges of $38.8 million, including $16.6 million for lease termination and other restructuring charges, $12.9 million for employee termination costs and $9.3 million for impairment and other charges, including multi-employer pension plan (“MEPP”) withdrawal obligations. See Note 5, Restructuring, Impairment and Other Charges, to the Consolidated Financial Statements for further discussion.

Depreciation and amortization decreased $10.0 million to $181.4 million for the year ended December 31, 2018 versus the same period in 2017, primarily due to lower capital spending in recent years compared to historical levels.

During the year ended December 31, 2018, we completed the sale of our Print Logistics business and recorded a pre-tax gain of $3.6 million, which is reflected in Other operating income.

Income from operations for the year ended December 31, 2018 was $208.6 million, a decrease of $2.8 million compared to the year ended December 31, 2017.

Net interest expense decreased by $11.3 million for the year ended December 31, 2018 versus the same period in 2017, primarily due to lower average borrowings and interest rates during the year ended December 31, 2018.

Net investment and other income for the year ended December 31, 2018 was $20.4 million and principally comprised of net pension and OPEB income. Net investment and other income for the year ended December 31, 2017 was $63.8 million and included a non-cash net realized gain of $94.0 million on the retained shares of Donnelley Financial exchanged for certain of our senior notes outstanding, net pension and OPEB income and a gain of $1.3 million resulting from the sale of certain of our affordable housing investments, partially offset by a net realized loss of $51.6 million resulting from the sale of our retained shares of LSC.

Loss on debt extinguishments for the year ended December 31, 2018 was $32.4 million which primarily related to premiums paid in connection with tenders, unamortized debt issuance costs and other expenses associated with the October 2018 tender offer. Loss on debt extinguishments for the year ended December 31, 2017 was $20.1 million which related to premiums paid in connection with the 2017 tenders, unamortized debt issuance costs and other expenses associated with the debt-for-equity exchange of senior notes, the repurchase of debentures and senior notes and the amendment and restatement of the credit agreement. See Note 12, Debt, to the Consolidated Financial Statements for further discussion.

The effective income tax rate for the year ended December 31, 2018 was an expense of 133.9% and is primarily driven by limitations on our interest expense deduction as a result of the Tax Act. Non-deductible interest expense will be carried forward; however, it is more likely than not that the benefit of such deferred tax asset will not be fully realized and a valuation allowance of $23.9 million was recorded. The income tax expense also reflects final adjustments associated with the enactment of the Tax Act of $4.2 million to the one-time transition tax on foreign earnings, as well as $1.5 million to net deferred tax assets for the reduced corporate income tax rate. Additionally, the income tax expense reflects the inability to recognize a tax benefit on certain losses.

The effective income tax rate for the year ended December 31, 2017 was an expense of 144.0% which reflects the impact associated with the enactment of the Tax Act which included a provisional estimate for the one-time transition tax on foreign earnings of $103.5 million, as well as a provisional adjustment to the net deferred tax assets for the reduced corporate income tax rate of $6.8 million. The income tax expense also reflects the impact of impairment of goodwill, the inability to recognize a tax benefit on certain losses and the impact of the net gain on disposition of investments. The Donnelley Financial retained shares were disposed in a non-taxable debt-for-equity exchange. The sale of the LSC retained shares generated a capital loss which will be carried forward; however, it was determined at the time of the sale that the benefit of such deferred tax asset would not be fully realized and a valuation allowance was recorded.

Income attributable to noncontrolling interests was $1.4 million and $1.2 million for the years ended December 31, 2018 and 2017, respectively.

Net loss from continuing operations for the year ended December 31, 2018 was $9.6 million compared to $33.2 million for the year ended December 31, 2017.

Net sales for the Business Services segment for the year ended December 31, 2018 were $5,619.1 million, a decrease of $143.6 million, or 2.5%, compared to 2017. Net sales decreased $225.9 million due to the disposition of our Print Logistics business. Net sales also decreased due to lower volume in commercial print due to ongoing secular pressure and lower specialty card sales as well as price pressures across the segment. Decreases in net sales were offset by higher volume in packaging, the remaining logistics business and business process outsourcing, increased fuel surcharges in logistics, pass-through of higher paper costs in Asia as well as $12.6 million of favorable changes in foreign exchange rates. The following table summarizes net sales by products and services in the Business Services segment:

	Year Ended December 31,
Products and Services	2018		2017		$ Change			% Change
	(in millions, except percentages)
Commercial print	$	1,935.6	$	2,114.0	$	(178.4	)		(8.4	%)
Logistics		1,109.3		1,238.2		(128.9	)		(10.4	%)
Packaging		672.0		562.1		109.9			19.6	%
Statements		584.2		556.4		27.8			5.0	%
Labels		481.4		470.4		11.0			2.3	%
Supply chain management		321.0		314.9		6.1			1.9	%
Forms		267.5		284.5		(17.0	)		(6.0	%)
Business process outsourcing		248.1		222.2		25.9			11.7	%
Total Business Services	$	5,619.1	$	5,762.7	$	(143.6	)		(2.5	%)

Business Services segment income from operations decreased $6.3 million for the year ended December 31, 2018 compared to the same period in 2017, primarily due to an unfavorable mix in sales, price pressures across the segment and cost inflation, partially offset by pass-through of higher paper costs in Asia, cost control initiatives, lower depreciation expense, higher fuel surcharges and lower start-up expenses associated with the packaging business in Asia.

Net sales for the Marketing Solutions segment for the year ended December 31, 2018 were $1,181.1 million, an increase of $4.2 million, or 0.4%, compared to 2017. Net sales increased primarily due to higher volume in direct marketing, mostly offset by lower volume in digital and creative solutions as we continue our shift away from traditional pre-media services for non-core market segments and lower volume in digital print and fulfillment. The following table summarizes net sales by products and services in the Marketing Solutions segment:

	Year Ended December 31,
Products and Services	2018		2017		$ Change			% Change
	(in millions, except percentages)
Direct marketing	$	581.6	$	545.7	$	35.9			6.6	%
Digital print and fulfillment		474.4		478.0		(3.6	)		(0.8	%)
Digital and creative solutions		125.1		153.2		(28.1	)		(18.3	%)
Total Marketing Solutions	$	1,181.1	$	1,176.9	$	4.2			0.4	%

Marketing Solutions segment income from operations increased $23.8 million for the year ended December 31, 2018 compared to the same period in 2017, primarily due to lower restructuring and impairment charges and cost control initiatives, partially offset by lower volume in digital and creative solutions and unfavorable mix in direct marketing.

Corporate operating expenses in the year ended December 31, 2018 were $88.3 million, an increase of $20.3 million compared to the same period in 2017. The increase was primarily driven by lower allocation recoveries, higher bad debt expense in 2018 due to a client-related bankruptcy and higher healthcare costs, partially offset by cost control initiatives. The following table summarizes unallocated operating expenses and certain items impacting comparability within the activities presented as Corporate:

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2017 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2016

The following table shows the results of operations for continuing operations for the years ended December 31, 2017 and 2016, which reflects the results of acquired businesses from the relevant acquisition dates:

	Year Ended December 31,
	2017		2016		$ Change			% Change
	(in millions, except percentages)
Products net sales	$	5,326.0	$	5,225.4	$	100.6			1.9	%
Services net sales		1,613.6		1,607.6		6.0			0.4	%
Total net sales		6,939.6		6,833.0		106.6			1.6	%
Products cost of sales (exclusive of depreciation and amortization)		4,264.1		4,125.3		138.8			3.4	%
Services cost of sales (exclusive of depreciation and amortization)		1,359.3		1,359.0		0.3			0.0	%
Total cost of sales		5,623.4		5,484.3		139.1			2.5	%
Products gross profit		1,061.9		1,100.1		(38.2	)		(3.5	%)
Services gross profit		254.3		248.6		5.7			2.3	%
Total gross profit		1,316.2		1,348.7		(32.5	)		(2.4	%)
Selling, general and administrative expenses (exclusive of depreciation and amortization)		860.4		897.0		(36.6	)		(4.1	%)

Delaware		36-1004130
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
35 West Wacker Drive, Chicago, Illinois		60601
(Address of principal executive offices)		(ZIP Code)

	Title of each Class				Name of each exchange on which registered
Common Stock (Par Value $0.01)				New York Stock Exchange

	Form 10-K Item No.	Name of Item	Page
Part I
	Item 1.	Business		3
	Item 1A.	Risk Factors		9
	Item 1B.	Unresolved Staff Comments		17
	Item 2.	Properties		17
	Item 3.	Legal Proceedings		17
	Item 4.	Mine Safety Disclosures		17
		Executive Officers of R.R. Donnelley & Sons Company		18
Part II
	Item 5.	Market for R.R. Donnelley & Sons Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		19
	Item 6.	Selected Financial Data		20
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		39
	Item 8.	Financial Statements and Supplementary Data		39
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		39
	Item 9A.	Controls and Procedures		39
	Item 9B.	Other Information		42
Part III
	Item 10.	Directors and Executive Officers of R.R. Donnelley & Sons Company and Corporate Governance		42
	Item 11.	Executive Compensation		42
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		42
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		43
	Item 14.	Principal Accounting Fees and Services		43
Part IV
	Item 15.	Exhibits, Financial Statement Schedules		43
	Item 16.	Form 10-K Summary		43
		Signatures		48

	Year Ended December 31,
	2018			2017			$ Change			% Change
	(in millions, except percentages)
Interest expense-net	$	168.3		$	179.6		$	(11.3	)		(6.3	%)
Investment and other income-net		(20.4	)		(63.8	)		43.4			(68.0	%)
Loss on debt extinguishment		32.4			20.1			12.3			61.2	%

	Year Ended December 31,
	2018			2017			$ Change			% Change
	(in millions, except percentages)
Earnings before income taxes	$	28.3		$	75.5		$	(47.2	)		(62.5	%)
Income tax expense		37.9			108.7			(70.8	)		(65.1	%)
Effective income tax rate		133.9	%		144.0	%