rrd-10k_20211231.htm

Indicate 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 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

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, 2021 was $440,834,717.

	Form 10-K Item No.	Name of Item	Page
Part I
	Item 1.	Business		3
	Item 1A.	Risk Factors		10
	Item 1B.	Unresolved Staff Comments		19
	Item 2.	Properties		20
	Item 3.	Legal Proceedings		20
	Item 4.	Mine Safety Disclosures		20
		Information About Our Executive Officers		21
Part II
	Item 5.	Market for R. R. Donnelley & Sons Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		22
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		35
	Item 8.	Financial Statements and Supplementary Data		36
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		36
	Item 9A.	Controls and Procedures		36
	Item 9B.	Other Information		39
	Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		39
Part III
	Item 10.	Directors and Executive Officers of R. R. Donnelley & Sons Company and Corporate Governance		39
	Item 11.	Executive Compensation		39
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		39
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		39
	Item 14.	Principal Accounting Fees and Services		39
Part IV
	Item 15.	Exhibits, Financial Statement Schedules		39
	Item 16.	Form 10-K Summary		40
		Signatures		44

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, 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.

On December 14, 2021, we entered into a definitive merger agreement under which we agreed to be acquired by affiliates of Chatham Asset Management, LLC (“Chatham”), a leading private investment firm. Under the terms of the merger agreement, an affiliate of Chatham will acquire all of the outstanding shares of RRD common stock not already owned by Chatham, and RRD stockholders will receive $10.85 per share in cash for each share of RRD common stock. All regulatory approvals have been obtained and at a special meeting on February 23, 2022, RRD’s stockholders approved the proposed merger. The merger with Chatham is expected to close on February 25, 2022. Upon completion of the transaction, RRD’s shares will no longer trade on the New York Stock Exchange and RRD will become a private company.

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

Business Services 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, packaging, labels, statement printing, supply chain management, forms and business process outsourcing. This segment also includes all of our operations in Asia, Europe, Canada and Latin America. In 2021, our Business Services segment accounted for 78.8% 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 39.3% of our Business Services segment’s net sales for the fiscal year ended December 31, 2021.

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 19.7% of our Business Services segment’s net sales for the fiscal year ended December 31, 2021.

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 13.6% of our Business Services segment’s net sales for the fiscal year ended December 31, 2021.

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 11.0% of our Business Services segment’s net sales for the fiscal year ended December 31, 2021.

We provide workflow design to assembly, configuration, kitting and fulfillment for clients in life sciences and healthcare, consumer electronics, telecommunications, cosmetics, education and industrial industries. During 2020 and 2021, we experienced a significant increase in demand for our kitting services driven by COVID-19-related orders. Supply chain management accounted for 7.2% of our Business Services segment’s net sales for the fiscal year ended December 31, 2021.

We produce a variety of forms including invoices, order forms and other business forms that support both the private and public sectors for clients in financial, government, retail, healthcare and business services industries. Forms accounted for 5.0% of our Business Services segment’s net sales for the fiscal year ended December 31, 2021.

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 4.2% of our Business Services segment’s net sales for the fiscal year ended December 31, 2021.

Marketing Solutions 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 2021, our Marketing Solutions segment accounted for 21.2% 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 50.7% of our Marketing Solutions segment’s net sales for the fiscal year ended December 31, 2021.

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 41.0% of our Marketing Solutions segment’s net sales for the fiscal year ended December 31, 2021.

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 8.3% of our Marketing Solutions segment’s net sales for the year ended December 31, 2021.

Our Corporate segment consists of unallocated 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.

In 2020, to focus on our core product and service offerings, we completed our plan to exit our Logistics Business. This business included Print Logistics, which was disposed of on July 2, 2018; Courier Logistics, which was disposed of on March 2, 2020; DLS Worldwide, which was disposed of November 2, 2020; and International Logistics which was disposed of on November 3, 2020. These businesses were included in the Business Services segment and primarily provided logistics services to a broad range of clients in the United States and globally. The financial results of these businesses have been excluded from continuing operations and segment results for all periods presented unless otherwise noted. Refer to Note 2 –Discontinued Operations to our Consolidated Financial Statements for additional information.

On October 25, 2019, we completed the sale of substantially all of the Global Document Solutions (“GDS”) business within the Business Services segment. GDS primarily provided statements and print management services in Europe. Additionally, during the year ended December 31, 2019, we sold the R&D business and our subsidiary, RR Donnelley Editora e Grafica Ltda. (“RRD Brazil”), filed for bankruptcy liquidation in bankruptcy court in Brazil. The operations of these three businesses were included in the Business Services segment.

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 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.

Refer to Part I Item 1A “Risk Factors” and Part II Item 7 ‑Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding the impact of COVID-19 on our business.

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. During 2021, we have seen price increases from nearly all of our material suppliers in all categories. Notably, paper products have seen significant price increases primarily caused by supply shortages from key suppliers. The supply shortages have been caused in part by manufacturing capacity reductions, labor shortages and other supply chain disruptions. We, and our suppliers, have also experienced labor shortages and increased wage pressure for manufacturing workers due to current market conditions. Further, we experienced supply chain disruptions and shipping delays caused by container shortages in key domestic and international ports, including China. We expect these factors to continue for the foreseeable future.

To mitigate the effect of raw material shortages, inflationary pressures and other supply chain disruptions, we have offered our clients product alternatives, new formats, and in some cases secured new suppliers. We have also implemented price increases to pass inflationary costs along to our clients. 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.

In addition, we are working closely with transportation suppliers and increasing inventory levels to help ensure product availability, and we continue to aggressively pursue cost reductions across the Company to offset inflationary pressures. However, variations in the cost and supply of raw materials used in the manufacturing process and rising labor costs, may affect our consolidated financial results.

We continue to monitor the impact of changes in the price of crude oil and other energy costs, which impact our ink suppliers and manufacturing costs. Crude oil, energy prices and market cost of transportation continue to be volatile. 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.

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 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 Mail and USPS Marketing mail, we are ranked by the USPS as one of the largest preparers of mailings 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 postage rates on our clients’ mailings, demand for products distributed through the U.S. or foreign postal services has been negatively impacted by increases in postage 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 increase of 1.5% to 1.8% depending on the major class of mail. The new prices took effect on January 24, 2021.

Additionally, as required on the 10-year anniversary of PAEA, the PRC initiated a comprehensive review of its regulations 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. After multiple years of deliberation the PRC concluded that the current system was not meeting all of PAEA’s original objectives and issued its final ruling on November 30, 2020, The ruling expanded USPS pricing authority to consider: 1) the higher cost implications caused by the declining average of the number of mail pieces delivered per delivery point, and 2) the congressionally mandated contributions by the Postal Service to fund future employee retirement benefits, respectively referred to as the “Density Adder”, and the “Retirement Adder ”. These additional price adders plus CPI percentage increases will in total determine the overall price increase allowed for the market dominant mail classes. The Postal Service then used and applied its expanded pricing authority and imposed a second increase during 2021 ranging from 6.8 to 8.8%, which became effective on August 29, 2021.

We have approximately 25,000 clients worldwide, including 92% of the Fortune 100, 79% of the Fortune 500 and 67% 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, 2021, 2020 and 2019, no single client accounted for 10% or more of consolidated net sales.

Our cybersecurity program is designed for 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 client or patient information be publicly disclosed. Our infrastructure and technology, highly-trained global workforce and comprehensive security and compliance program enable us to safely process, store and protect client information in compliance with relevant regulations.

Our infrastructure and technology security capabilities are bolstered by our relationship with a leading data center services provider. Furthermore, 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 trained to address security and compliance-related issues as they arise. Additionally, 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.

In December 2021, we identified a systems intrusion in our technical environment. In response, we promptly implemented a series of containment measures to address the situation, including activating our incident response protocols, shutting down servers and systems and commencing a forensic investigation. We also engaged cybersecurity experts to examine the incident and oversee the implementation of appropriate remedial actions. However, we became aware in mid-January 2022 that certain of our corporate data, the nature of which is continuing to be actively examined, was accessed and exfiltrated. To the extent any confidential client data is found in this data, the Company has and will continue to inform impacted clients within a reasonable time. We also notified and continue to work with appropriate law enforcement authorities. As a precautionary measure, we isolated a portion of our technical environment in an effort to contain the intrusion.

At this time, we have restored the affected systems and returned to normal levels of operations, and believe that the steps taken to isolate and remediate the identified threat have been effective. While we do not currently believe that this security event has or will result in a material adverse impact to the Company, data review and assessment related to this event remain ongoing, and we may determine in the future that such event had or will have a material adverse impact on our business, results of operations, financial condition or cash flows.

Our policy is 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 our compliance with these laws and regulations, including environmental matters and resulting remediation and other compliance efforts that we may undertake in the future. However, in our opinion, compliance with 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.

RRD’s approximately 32,000 employees worldwide represent our most important asset. We are committed to prioritizing a diverse, equitable and inclusive workplace, which allows us to attract and, importantly, retain high quality talent. Our laser focus on the health, safety and well-being of our employees helps us to maintain our qualified workforce and develop leaders for the future.

We are committed to diversity, equity and inclusion from the membership of the Board of Directors through all layers of our employee ranks. Women represent 50% of our independent directors on the Board of Directors and 25% of our executive leadership team. Our priorities and the signing of the Parity Pledge in 2017 reflect our commitment to increasing the percentage of women in leadership roles across our company.

We are also focused on representation by historically underrepresented groups including, racial minorities and LGBTQ employees in our U.S. businesses. We are committed to diversifying our workforce and increasing representation of all underrepresented groups in our Board and leadership teams.

In 2020, we launched a new committee, the purpose of which is to focus on and formalize diversity, equity and inclusion initiatives for the Company, communicate broadly, and ensure that every employee feels respected and appreciated and can contribute to their fullest potential.

To ensure RRD’s continued focus on diversity, equity and inclusion, executive team members are expected to consider at least one woman and one racial/ethnic minority in hiring for open positions on their teams. The Board receives ongoing updates on these priorities as well as on the hiring by the executive leadership team. In 2021, our CEO and CHRO were given a goal that all new hires or promotions into Director or higher levels at the Company must be at least 50% women or racially diverse candidates. The Company met that goal in 2021 despite a challenging labor market.

In January 2022, we announced that we received a score of 95 out of 100 on the Human Rights Campaign Foundations 2022 Corporate Equality Index, the nation’s foremost benchmarking survey and report measuring corporate policies and procedures related to LGBTQ+ workplace equality.

We are committed to paying employees equally for like work, at like levels, in like geographical areas, with similar years of experience, regardless of an employee’s gender, race, ethnicity, sexual orientation, or other personal characteristics. We have reviewed a variety of positions to ensure pay equity and made adjustments where needed. We regularly review our compensation process and, at this time, we have not identified any specific, significant systemic issues in our compensation process.

In 2020 and 2021, we were diligent in surveying our employees throughout the impact of COVID-19 to ensure that employees understood what resources were available to them, how to request assistance (including through our Employee Assistance Program), and how to navigate novel work environments in an unprecedented time. On the whole, the organization pivoted and adapted efficiently and without significant issues in a rapidly changing landscape. Essentially all of our manufacturing facilities were deemed to be essential by applicable government agencies, and as a result our employees have continued to work throughout the pandemic. As such, when COVID-19 hit our facilities in the U.S. and abroad, we immediately implemented rigorous cleaning procedures, mandated the wearing of masks, and required physical distancing where possible. If an employee disclosed a positive COVID-19 test, we deep cleaned areas the employee had visited and engaged in contact tracing.

Because of our successful performance and the extraordinary engagement of our essential employees, in December 2020, we were able to pay a year-end bonus to employees not otherwise eligible for a bonus. This employee group included full-time hourly workers, managers, supervisors, facility workers and other non-sales employees who are not eligible for the annual incentive plan or commissions that are available to certain managers, directors, vice presidents and other executives. Throughout 2021, we were able to increase hourly wages at a number of our facilities based on the continued extraordinary efforts of our employees.

We also maintain a robust open door process to capture, investigate and timely respond to employee concerns. Throughout 2020 and 2021, we listened carefully as employees raised new issues during these unprecedented times and responded with due speed.

Finally, we provided our workforce with engagement opportunities, including through our Global Women’s Business Resource Group, inclusion councils, and dialogues hosted by our diversity, equity and inclusion leadership team.

A critical component of our investment in our employees is the provision of virtual and self-directed learning and development. This training covers topics from sexual harassment prevention, ADA awareness, IT security and a wide variety of anti-corruption and compliance programs. In 2021, 99.7% of employees timely completed their required training.

In addition to compliance related training, we also offer leadership and job skills training in order to continue to grow and develop our diverse workforce.

In 2021, the Company engaged a vendor to train the Executive Leadership Team ("ELT") in diversity in hiring and retention at the Company. Since the Company prioritizes diversity in its hiring at all levels and understands that diversity in leadership will lead to more diversity throughout the Company, it has made continued education and heightened awareness of these issues a top priority for the ELT and for all leaders at the Company, including those on the Human Resources Team.

As a manufacturing company, operations in our facilities continue to represent our greatest safety and health risks for our employees. Managing and mitigating risks at our facilities is the top priority for the executive team and every employee around the world. Safety has routinely been a part of our performance metrics for leadership in our facilities and one indicator of success in this area is our recordable case rate, which is at the lowest level since becoming a stand-alone company in 2016.

We are continually evolving our policies and procedures to adhere to the latest best practices being provided by the Centers for Disease Control (“CDC”) and World Health Organization (“WHO”). Our cross-functional COVID Task Force created at the onset of the pandemic has developed safety measures, policies, and procedures for our workplace. We have implemented flexible working policies, including telecommuting and staggered shifts, while allowing for voluntary leaves of absence. We have encouraged vaccinations and have begun to welcome employees back into our offices on a voluntary basis using a cautious approach. We continue to enforce social distancing policies within all of our facilities, follow local and state guidelines concerning face coverings, and provide training for adherence to personal hygiene best practices in line with CDC and WHO guidelines.

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 also available on our website 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 incorporated by reference into this Annual Report on Form 10-K.

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 our possible or assumed future actions, events, or results of operations. 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 and their negative variations. 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. There may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on the business. 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 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.

The pendency of our merger agreement with Chatham Asset Management, LLC could have an adverse effect on our business.

On December 14, 2021, we entered into a definitive merger agreement under which we agreed to be acquired by affiliates of Chatham Asset Management, LLC (“Chatham”). Under the terms of the merger agreement, an affiliate of Chatham will acquire all of the outstanding shares not already owned by Chatham, and RRD stockholders will received $10.85 per share in cash for each share of RRD common stock. All regulatory approvals have been obtained and at a special meeting on February 23, 2022, RRD’s stockholders approved the proposed merger. The merger with Chatham is expected to close on February 25, 2022.

The announcement and pendency of the merger could cause disruption in our business, including the potential loss or disruption of commercial relationships prior to the completion of the merger. For example, parties with which we do business may be uncertain as to the effects on them of the merger, including with respect to their current or future business relationships with us. These relationships may be subject to disruption as clients, suppliers and other persons with whom we have a business relationship may delay or defer certain business decisions or might decide to terminate, change or renegotiate their relationships with us or consider entering into business relationships with other parties. These disruptions could have an adverse effect on the results of our operations, cash flows and financial position. The announcement and pendency of the merger could also have a potential negative effect on our ability to retain management, sales and other key personnel.

The merger agreement generally requires us to operate our business in the ordinary course of business pending consummation of the merger, but includes certain contractual restrictions on the conduct of our business prior to completion of the merger. These restrictions may prevent us from taking certain specified actions or otherwise pursuing business opportunities during the pendency of the merger that may be beneficial to us. In addition, matters relating to the merger (including integration planning) will require substantial commitments of time and resources by our management, which could divert their time and attention. We have also incurred, and will continue to incur, significant non-recurring costs in connection with the merger that we may be unable to recover.

The risk, and adverse effect, of any disruption could be exacerbated by a delay in completion of the merger or termination of the merger agreement. Completion of the merger is subject to the satisfaction or waiver of a number of conditions, many of which are not within our control. The failure to satisfy all of the required conditions could delay the completion of the merger for a significant period of time or prevent it from occurring. We cannot provide assurance that our pending merger with Chatham will be completed. Failure to complete the merger could also negatively affect our stock price and our future business and financial results.

Transactions like the merger are frequently the subject of litigation or other legal proceedings, including actions alleging that either our board of directors breached their respective fiduciary duties to their stockholders by entering into the merger agreement, by failing to obtain a greater value in the transaction for their stockholders or otherwise. Some stockholder litigation has been filed in connection with the planned merger, and additional claims could be filed in the future. We believe that such litigation, claims or proceedings are without merit and we will defend against them, but we might not be successful in doing so. An adverse outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on our business, results of operation or financial position, including through the possible diversion of either company’s resources or distraction of key personnel.

All of the matters described above, alone or in combination, could materially and adversely affect our business, financial condition, results of operations and stock price.

Global market and economic conditions, which have been significantly affected by the COVID-19 pandemic, 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 credit losses. 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.

As the COVID-19 pandemic spread across the globe during 2020 and 2021, it strained the global economy which resulted in decreased demand for certain of our products and services, and created tremendous business challenges for us and many of our clients and suppliers. We have taken a number of proactive measures to manage through the impact of the ongoing pandemic. The extent to which the pandemic continues to impact our operations and the operations of our suppliers and our clients will depend on future developments, which remain uncertain at this time, including the duration of the pandemic, the development and distribution of effective treatments and vaccines, and the degree and ultimate success of government intervention in stabilizing economies around the world. While we continue to identify and capitalize on pandemic-related opportunities, including producing pandemic-related orders, and we continue to implement cost-cutting measures to mitigate the effects of the pandemic, the decreased demand has adversely affected our business, operating results, financial condition and cash flows. Depending on the severity and duration of the global economic decline, revenue declines from decreased client demand has and could continue to materially adversely affect our business, operating results, financial condition and cash flows. Additionally, declining operating results and cash flows may also cause impairments of tangible and intangible assets and an increase in allowance for credit losses as a result of our inability to collect customer accounts receivable balances.

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 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 our 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 our clients and our client’s customers and regulators continue to accept these alternatives, demand for our products and services may be further adversely affected.

During 2021, our five largest clients accounted for 12.9% of our net sales in the aggregate. There can be no assurance that our clients 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.

We may be adversely affected by rising inflation, a decline in the availability of raw materials, supply chain disruptions, and labor shortages.

We are dependent on the availability of paper, ink, other raw materials, and labor to support our operations. During 2021, we have seen price increases from nearly all of our material suppliers in all categories. Notably, paper products have seen significant price increases primarily caused by supply shortages from key suppliers. The supply shortages have been caused in part by manufacturing capacity reductions, labor shortages and other supply chain disruptions. We, and our suppliers, have also experienced labor shortages and increased wage pressure for manufacturing workers due to current market conditions. Further, we experienced supply chain disruptions and shipping delays caused by container shortages in key domestic and international ports, including China. We expect these factors to continue for the foreseeable future.

Increases in the costs of our raw materials and labor 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, financial position 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 may 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.

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.

Adverse financial 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 which could adversely affect our business, results of operations, financial condition and cash flows. Uncertainty and volatility in global financial markets, including from impacts of the COVID-19 pandemic, 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 facility (the “ABL Credit Facility”) would reduce its size unless another financial institution was willing to replace 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 financing costs may further increase and our ability to obtain financing 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 a 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 U.S. assets. In addition, our obligations under our ABL Credit Agreement and Term Loan Credit Agreement along with our Secured Notes are secured by substantially all of the assets of the Company and our material domestic subsidiaries and lenders may exercise remedies against the collateral if an event of default occurs.

Our borrowing capacity under our ABL Credit Agreement is equal to the lesser of (i) $650.0 million and (ii) a borrowing base formula based on the amount of U.S. 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.

If an event of a default occurs under our ABL Credit Agreement, the lenders’ commitment to extend further credit under our ABL Credit Agreement could be terminated, our outstanding obligations under the ABL Credit Agreement, our credit agreement for the $550 million senior secured Term Loan B (the “Term Loan Agreement”)(collectively, the “Credit Agreements”) and the 6.125% Secured Notes due 2026 (the “Secured Notes”) 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 and the Secured Notes. If we are unable to borrow under our ABL Credit Agreement, we may not have the necessary cash resources to fund our operations or to meet scheduled repayments of other outstanding indebtedness and, if any event of default occurs under either Credit Agreement or the indenture for the Secured Notes, 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.

Restrictive covenants in our ABL Credit Agreement, Term Loan Credit Agreement, and the indenture for our Secured Notes could limit our financial and operating flexibility.

Our ABL Credit Agreement, Term Loan Credit Agreement, and the indenture for our Secured Notes contain various affirmative and negative covenants applicable to us and our subsidiaries. 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.

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 based on the London Interbank Offered Rate (LIBOR) or a base rate plus, in each case, 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. We may utilize derivative financial instruments, such as interest rate swaps, to manage our interest rate risk. There can be no assurance, however, that increases in interest rates will not 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.

In July 2017 the United Kingdom Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that the FCA intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. On December 31, 2021, the ICE Benchmark Administration (IBA), which administers LIBOR, ceased publication of one-week and two-month U.S. dollar (USD) LIBOR. The IBA has indicated that it expects to continue publishing other USD LIBOR tenors until June 2023. The Federal Reserve Board, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency also required banks to cease entering into new contracts that use USD LIBOR as a reference rate after December 31, 2021. The potential cessation of USD LIBOR could cause market volatility or disruption, which could adversely affect our floating rate debt obligations, including obligations under our ABL Credit Agreement and Term Loan Agreement, our outstanding derivative financial instrument that utilizes LIBOR, and our overall cost of funding.

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 and the indenture for our Secured Notes require us to make prepayments with excess cash flow and asset sale proceeds in certain circumstances. If we are unable to reduce this indebtedness, we may 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 contingently liable for certain liabilities related to the spin-off of LSC and DFIN

Subsequent to the spinoff of LSC and Donnelley Financial, we may be contingently liable for obligations under various operating leases for office, warehouse and manufacturing locations of LSC and Donnelley Financial. In the event that LSC or Donnelley Financial, or any successor lessee, fail to make lease payments or fail to pay other obligations under these lease agreements, we may be required to satisfy those obligations to the lessor. Our exposure to these potential contingent liabilities decreases over time as LSC and successor lessees and Donnelley Financial pay monthly lease obligations and as the leases expire. As of December 31, 2021, these potential contingent lease obligations were $29.0 million and $1.2 million for LSC and Donnelley Financial, respectively.

On April 13, 2020, LSC announced that it, along with most of its U.S. subsidiaries, voluntarily filed for business reorganization under Chapter 11 of the U.S. Bankruptcy Code. LSC was subsequently acquired by a third party buyer (“the Buyer”). The Buyer assumed the majority of LSC’s existing leases. We will continue to be contingently liable for these leases until their termination or renewal.

We may be also liable for liabilities where we share joint and several liability with LSC and other members of the control group including certain environmental liabilities. Refer to Footnote 8 – Commitments and Contingencies to the Consolidated Financial Statements for further details.

The spinoff transactions of LSC and Donnelley Financial in October 2016 could result in significant tax liability.

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.

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.

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, including 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, as well as the need to address any violations thereof, 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.

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.

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.

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 remaining 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 and financial position.

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.

Our success depends, in part, on our general ability to attract, develop, motivate and retain highly skilled and diverse workforce. 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.

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, adversely impacting our financial condition.

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, as well as human error, employee misconduct, hacking and cybercrime. We also periodically upgrade and install new systems, which if installed or programmed incorrectly, may cause significant disruptions. If a disruption, such as the security event identified in December 2021 described elsewhere in this Annual Report, occurs, we may incur further losses and costs for interruption of our operations, which may adversely affect our results of operations, financial condition and cash flows.

We have suffered and may in the future suffer a systems intrusion in our technical environment. If our efforts to protect the security of corporate information are unsuccessful, any such further failures may result in significant costs to us to investigate and remediate the data-breach, to defend against private litigation or government enforcement actions or to pay penalties. Any such failures may have a material adverse effect on our results of operations, financial condition, cash flows 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, particularly as a significant number of our employees continue to work from home during the COVID-19 pandemic. 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 clients. Confidential and sensitive information stored in our systems are susceptible to cybercrime, or threats of intentional disruption, which are increasing in sophistication and frequency. Exposure 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.

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.

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 adversely impacted as a result of 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 may limit the ability of any subsidiary we may establish in China to pay dividends and make other distributions to us; unfavorable results of ongoing trade negotiations between the U.S. and China, including potential unfavorable taxes and tariffs may limit our operations in China or make them more costly.

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

We are exposed to the impact of foreign currency fluctuations based on our global operations. Although the results in our Consolidated Financial Statements are reported in U.S. dollars, we also earn revenues, pay expenses, own assets and incur liabilities in various foreign currencies. Fluctuations in currency exchange rates have had, and will continue to have, an impact on our results expressed in U.S. dollars. We may enter into derivative instruments, such as foreign currency forward contracts, to hedge certain exposures to exchange rate fluctuations. There can be no assurance, however, that our efforts at hedging will be successful and that currency exchange rate fluctuations will not adversely affect our results of operations, financial position and cash flows.

We also face risks arising from the imposition of exchange controls, which may limit our ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by our foreign subsidiaries or businesses located in or conducted within a country imposing controls.

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 approved a USPS filing for a CPI based average price increase of 1.5% on average for the Market Dominant mail classes, which took effect January 24, 2021.

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. Accordingly, the PRC concluded that the current system was not meeting all of PAEA’s original objectives and after careful consideration of mailing industry stakeholder input, issued its final order on November 30, 2020. The final PRC order provides the USPS with additional discretionary rate-making authority, above CPI, estimated at 5.5 %, that was used during 2021 and could continue to be used during 2022.

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.

In addition, the onset of COVID-19 and the resulting rapid increase in eCommerce, especially residential delivery, caused significant increases in demand for both small parcel and trucking transportation services across all markets. Capacity and service challenges for the USPS and all other carriers, created an operating environment that included transit delays, suspension of guaranteed services, peak season surcharges, increased spot rates and allocated or restricted shipping. We expect high demand will continue to be a challenge to transportation providers in the future. Increased cost and order fulfillment limitations may have an adverse effect on our results of operations, financial condition and cash flows.

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, 2021, we leased or owned 119 U.S. facilities, some of which had multiple buildings and warehouses, and these U.S. facilities encompassed approximately 12.7 million square feet. We leased or owned 57 international facilities, some of which had multiple buildings and warehouses, encompassing approximately 5.2 million square feet primarily in Asia, Canada, Europe and Latin America. Of our U.S. and international facilities, approximately 7.4 million square feet of space was owned, while the remaining 10.5 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 8, 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		57	Since October 2016, Mr. Knotts has served as the Chief Executive Officer of RRD and a member of our board of directors.

Al R. Dupont Executive Vice President and Chief Commercial Officer		56	Since June 2021, Mr. Dupont has served as RRD’s Executive Vice President, Chief Commercial Officer. Prior to this, Mr. Dupont was our Group President of National Sales from January 2018 to May 2021, and prior to that was Senior Vice President of Enterprise Sales from October 2016 to December 2017.

David M. Houck Executive Vice President and Chief Information Officer		53	Since July 2021, Mr. Houck has served as RRD’s Executive Vice President, Chief Information Officer. Prior to joining RRD in April 2021, Mr. Houck served as Chief Information Officer at LSC Communications, Inc. from 2016 to December 2020.

John Pecaric President, RRD Business Services and Marketing Solutions		59	Since May 2021, Mr. Pecaric has served as President, RRD Business Services and Marketing Solutions. Prior to that, Mr. Pecaric served as President of RRD Business Services from 2018 to May 2021 and prior to this, Mr. Pecaric was our Executive Vice President, Chief Commercial Officer and President of International from 2016 to 2018.

Terry D. Peterson Executive Vice President and Chief Financial Officer		57	Since October 2016, Mr. Peterson has served as RRD’s Executive Vice President and Chief Financial Officer.

Michael J. Sharp Senior Vice President, Controller and Chief Accounting Officer		60	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.

Deborah L. Steiner Executive Vice President, Chief Administrative Officer, General Counsel, Secretary and Chief Compliance Officer		51	Since April 2020, Ms. Steiner has served as RRD’s Executive Vice President, Chief Administrative Officer, General Counsel, Secretary and Chief Compliance Officer. Prior to this, Ms. Steiner was our Executive Vice President, General Counsel, Secretary and Chief Compliance Officer from October 2016 to April 2020.

Our common stock is listed and traded on the New York Stock Exchange (NYSE) under the symbol “RRD”. As of February 18, 2022, there were 3,373 stockholders of record of our common stock.

Period	Total Number of Shares Purchased (a)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
October 1, 2021 - October 31, 2021		—	$	―		—	$	―
November 1, 2021 - November 30, 2021		—		—		—		—
December 1, 2021 - December 31, 2021		1,831,374		10.72		—		—
Total		1,831,374			—

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, 2016 and that all dividends have been reinvested.

	Base Period	Fiscal Years Ended December 31,
Company Name/Index	2016	2017		2018		2019		2020		2021
RR Donnelley	100		60.03		26.95		27.94		16.14		80.42
S&P SmallCap 600	100		113.23		103.63		127.24		141.60		179.58
S&P 1500 Industrials Index	100		121.06		104.87		136.12		152.03		185.75

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.

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.

Our product and service offerings primarily consist of commercial print, packaging, statements, direct marketing, labels, digital print and fulfillment, supply chain management, forms, business process outsourcing, and digital and creative solutions.

On November 2, 2020, we sold DLS Worldwide and on November 3, 2020 we sold International Logistics, which represented the remaining parts of the broader Logistics business and were components of the Business Services reporting segment, for a cash purchase price of $225.0 million and $13.0 million respectively, subject to customary working capital adjustments. These transactions are part of our strategy to optimize our portfolio and reduce debt. As part of our plan, we previously sold the Print Logistics business in July 2018 and the Courier Logistics business in March 2020. Accordingly, we have reflected the Print Logistics business, Logistics Courier business, the DLS Worldwide business, and the International Logistics business as discontinued operations. The financial results of these businesses have been excluded from continuing operations and segment results for all periods presented unless otherwise noted. Refer to Note 2 –Discontinued Operations to our Consolidated Financial Statements for additional information.

During 2021 and 2020, the COVID-19 pandemic created, and continues to create, significant business challenges for companies around the world, including many of our clients across the broad number of industries we serve. In response to the pandemic, we established a formal operating plan that we are utilizing to manage our business through this challenging global business environment. Our operating plan consists of three clear priorities: to protect the health and safety of our employees, to sustain operational and supply chain continuity, and to effectively manage our business performance and liquidity throughout this very volatile period.

We are continually evolving our policies and procedures to adhere to the latest best practices being provided by the Centers for Disease Control (“CDC”) and World Health Organization (“WHO”). Our cross-functional COVID Task Force created at the onset of the pandemic has developed safety measures, policies, and procedures for our workplace. We have implemented flexible working policies, including telecommuting and staggered shifts, while allowing for voluntary leaves of absence. We have encouraged vaccinations and recently have begun to welcome employees back into our offices using a cautious approach. We continue to enforce social distancing policies within all of our facilities, follow local and state guidelines concerning face coverings, and provide training for adherence to personal hygiene best practices in line with CDC and WHO guidelines.

We have activated our business continuity plans and are leveraging our strong supply chain partnerships to continue to meet the ongoing needs of our 25,000 global clients. We remain fully operational across the 28 countries in which we operate.

Although the COVID-19 pandemic continued to create challenges in 2021, we believe that there are three primary factors that are helping mitigate the top line impact from the pandemic. These factors include our diverse portfolio of products and services, the lack of client concentration, and the products and services we have introduced to meet the evolving needs of our clients.

The extent to which the pandemic will continue to impact our business, results of operations, financial position and cash flows will depend on future developments which remain highly uncertain and cannot be fully predicted or estimated at this time. However, amidst the global uncertainty posed by COVID-19, we are positioning the Company to weather economic uncertainty and protect the short and long-term interests of our stakeholders. Continuing into 2022, we remain laser-focused on lowering our cost structure and on maintaining a sufficient level of liquidity.

Net sales for the year ended December 31, 2021 were $4,963.7 million, an increase of $197.4 million, or 4.1%, compared to the year ended December 31, 2020. Net sales increased $50.0 million due to favorable changes in foreign exchange rates and were unfavorably impacted by $6.5 million due to the Chile business closure in 2020. Net sales also increased due to higher volume reflecting strengthening demand for many of our products and services and higher prices as we attempt to recover inflationary cost increases. Notably, higher demand for books and trading cards contributed to the growth in our Commercial Print and Packaging products. The increase also reflects continued recovery from the COVID-19 pandemic, partially offset by large, non-recurring pandemic-related orders in 2020 and the Census project, which was fully completed in the third quarter of 2020.

Income from operations for the year ended December 31, 2021 was $163.5 million, an increase of $55.4 million compared to the year ended December 31, 2020. The increase was primarily driven by higher sales, cost control initiatives and lower restructuring and impairment expenses, partially offset by merger related expenses and an unfavorable impact of foreign exchange rates on expenses.

We continue to assess opportunities to reduce our cost structure and enhance productivity throughout the business. During the year ended December 31, 2021, we realized significant cost savings from recent and previous restructuring activities including the reorganization of administrative and support functions across all segments, several facility consolidations, and asset rationalization. These savings were partially offset by higher variable incentive compensation and the effect of unfavorable exchange rates on expenses. Selling, general and administrative expenses (exclusive of depreciation and amortization) increased by $3.1 million, or 0.5%, for the twelve months ended December 31, 2021 compared to the same period in 2020 reflecting higher sales and increased compensation expense, partially offset by cost control initiatives.

Net cash provided by operating activities for the year ended December 31, 2021 was $92.1 million as compared to $149.8 million for the year ended December 31, 2020. The decrease in operating cash flow in 2021 was primarily driven by $44.2 million of merger related cash payments including accelerated incentive compensation, the payment of a break fee and other professional fees. Operating cash flow was also impacted by $31.1 million of LSC bankruptcy related payments primarily associated with lump sum settlements of two MEPP plans, and a $17.5 million repayment of payroll taxes that were deferred in 2020 as part of the CARES Act. Operating cash flow also decreased due to working capital investments, particularly inventory, higher incentive compensation payments, and a $9.2 million payment to terminate certain interest rate swaps, partially offset by lower restructuring, 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, streamlining of administrative and support activities, and asset rationalization.

We seek to deploy our capital using a balanced approach in order to ensure financial flexibility and provide returns to stockholders. Our near-term priority for capital deployment is principal and interest payments on our debt obligations. We believe that a strong financial condition is important to clients focused on establishing or growing long-term relationships.

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 improving 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.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2021 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2020

The following table shows the results of operations for the years ended December 31, 2021 and 2020:

	Year Ended December 31,
	2021		2020		$ Change			% Change
	(in millions, except percentages)
Net sales		4,963.7		4,766.3		197.4			4.1	%
Cost of sales		3,994.9		3,789.2		205.7			5.4	%
Gross profit		968.8		977.1		(8.3	)		(0.8	%)
Selling, general and administrative expenses (exclusive of depreciation and amortization)		600.6		597.5		3.1			0.5	%
Restructuring, impairment and other charges-net		33.3		100.0		(66.7	)		(66.7	%)
Depreciation and amortization		130.5		145.7		(15.2	)		(10.4	%)
Other operating expense		40.9		25.8		15.1			58.5	%
Income from operations	$	163.5	$	108.1	$	55.4			51.2	%

Net sales for the year ended December 31, 2021 increased $197.4 million, or 4.1%, to $4,963.7 million versus the same period in 2020. Net sales increased $50.0 million due to favorable changes in foreign exchange rates and were unfavorably impacted by $6.5 million due to the Chile business closure in 2020. In addition to these factors, net sales increased due to higher volume reflecting strengthening demand for many of our products and services. Notably, higher demand for e-commerce sales have contributed to the growth in our Packaging and Labels products and higher demand for books and cards have contributed to the growth of our Commercial Print and Packaging products. The increase also reflects continued recovery from the COVID-19 pandemic, partially offset by the Census project, which was fully completed in the third quarter of 2020. Higher prices from our efforts to recover inflationary cost increases also contributed to the net sales increase.

Cost of sales increased $205.7 million, or 5.4%, for the year ended December 31, 2021 versus the same period in 2020, primarily due to higher volume and higher cost of raw materials. As a percentage of net sales, cost of sales increased slightly for the twelve months ended December 31, 2021 versus the same period in 2020.

Gross profit decreased $8.3 million to $968.8 million for the year ended December 31, 2021 versus the same period in 2020. Gross margin decreased from 20.5% to 19.5% for the twelve months ended December 31, 2021 versus the same period in 2020, primarily reflecting the impact of unfavorable foreign exchange rates on expenses and rising costs of raw materials.

Selling, general and administrative expenses increased $3.1 million to $600.6 million for the year ended December 31, 2021 versus the same period in 2020, primarily as a result of higher volume, higher incentive compensation expense, partially due to the merger and the impact of a higher stock price on certain cash-settled incentive awards, and the impact of unfavorable exchange rates on expenses, partially offset by cost control initiatives. As a percentage of net sales, selling, general and administrative expenses decreased from 12.5% in the prior year to 12.1% in 2021.

For the year ended December 31, 2021, net restructuring, impairment and other charges decreased $66.7 million to $33.3 million versus the year ended December 31, 2020. The decrease was primarily driven by lower restructuring activity, gains on sale of several facilities, including the Chile facility, which was sold in the fourth quarter of 2021, and lower expenses related to LSC MEPP liabilities.

Depreciation and amortization decreased $15.2 million to $130.5 million for the year ended December 31, 2021 versus the same period in 2020, primarily due to lower capital spending in recent years compared to historical levels. Depreciation and amortization included $18.9 million and $19.3 million of amortization of other intangible assets related to client relationships, trade names, trademarks, licenses and agreements for the twelve months ended December 31, 2021 and 2020, respectively.

Other operating expense for the year ended December 31, 2021 was $40.9 million compared to $25.8 million for the same period in 2020. Other operating expenses in 2021 primarily included expenses related to the ongoing SEC and DOJ investigations, as well as a $12.0 million merger agreement break fee paid to Atlas River Parent Inc. (“Atlas”) and other professional fees related to the planned merger. The prior year included expenses related to the ongoing SEC and DOJ investigations, as well as a $2.9 million loss on a business disposition.

Income from operations for the year ended December 31, 2021 increased $55.4 million from 2020 to $163.5 million as a result of the factors discussed above.

	Year Ended December 31,
	2021			2020			$ Change			% Change
	(in millions, except percentages)
Interest expense-net	$	127.6		$	135.1		$	(7.5	)		(5.6	%)
Investment and other income-net		(19.9	)		(14.1	)		(5.8	)		41.1	%
Loss on debt extinguishment		7.1			3.0			4.1			136.7	%

Net interest expense decreased by $7.5 million to $127.6 million for the year ended December 31, 2021 versus the same period in 2020. Net interest expense included $9.2 million related to the termination of certain interest rate swaps in the second quarter of 2021. Excluding the effects of the swap termination, our interest expense decreased approximately $16.7 million, primarily due to prior repurchases and repayment of higher interest rate debt and lower average borrowings and interest rates on the ABL Credit Facility.

Investment and other income, net for the years ended December 31, 2021 and 2020 was $19.9 million and $14.1 million, respectively, and is principally comprised of net pension and OPEB income.

Loss on debt extinguishment for the year ended December 31, 2021 was $7.1 million primarily due to costs related to the partial repayment of the Term Loan in the second quarter of 2021. Loss on debt extinguishment for the year ended December 31, 2020 was $3.0 million. See Note 11, Debt, to the Consolidated Financial Statements for further discussion.

	Year Ended December 31,
	2021			2020			$ Change		% Change
	(in millions, except percentages)
Income (loss) from continuing operations before income taxes	$	48.7		$	(15.9	)	$	64.6	nm
Income tax expense		44.9			10.0			34.9	nm
Effective income tax rate		92.2	%		62.9	%

For 2021, we continue to report the tax impact of limitations on our interest expense deduction. Non-deductible interest expense will be carried forward as a deferred tax asset; however, it is more likely than not that the benefit of the deferred tax asset will not be fully realized and a full valuation allowance was recorded. Also included in 2021 is the tax impact of non-deductible compensation.

Included in 2020 is the impact from the surrender of corporate owned life insurance policies as well as tax benefits from additional interest expense deductions as result of the CARES Act and additional tax guidance issued in 2020.

Net income from discontinued operations was $0.6 million for the twelve months ended December 31, 2021 compared to $124.9 million for the twelve months ended December 31, 2020. The net income from discontinued operations for the twelve months ended December 31, 2021 reflects the settlement of certain contingencies associated with the business divestitures and final net working capital adjustments. Net income from discontinued operations in 2020 includes an after-tax net gain of $127.4 million (tax of $10.6 million) recorded on the sale of three Logistics businesses sold during 2020, partially offset by a $20.6 million non-cash charge related to impairment of goodwill recorded in the first quarter of 2020.

Net income attributable to RRD common stockholders for the year ended December 31, 2021 was $3.7 million compared to $98.5 million for the year ended December 31, 2020.

Net sales for the Business Services segment for the year ended December 31, 2021 were $3,909.5 million, an increase of $224.3 million, or 6.1%, compared to 2020. Net sales increased $50.0 million due to favorable changes in foreign exchange rates and were unfavorably impacted by $6.5 million due to the Chile business closure in 2020. Net sales also increased due to higher volume and higher prices reflecting strengthening demand for many of our products and services. Notably, higher demand for e-commerce sales have contributed to the growth in our Packaging and Labels products and higher demand for books and cards have contributed to the growth of our Commercial Print products. The increase also reflects continued recovery from the COVID-19 pandemic, partially offset by one-time pandemic related orders in 2020, primarily within our Supply chain management offerings and continued low demand of Statement printing partially resulting from secular decline accelerated by the COVID-19 pandemic. The following table summarizes net sales by products and services in the Business Services segment:

	Year Ended December 31,
Products and Services	2021		2020		$ Change			% Change
	(in millions, except percentages)
Commercial print	$	1,535.5	$	1,357.7	$	177.8			13.1	%
Packaging	$	770.5		687.6		82.9			12.1	%
Labels	$	532.9		496.6		36.3			7.3	%
Statements	$	430.0		441.6		(11.6	)		(2.6	%)
Supply chain management	$	279.7

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	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	RRD	New York Stock Exchange
Preferred Stock Purchase Rights		New York Stock Exchange


☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to