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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 20172019

OR

For the transition period from                     to

Commission file number 1-37728

Donnelley Financial Solutions, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code—(844) 866-4337

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:  None

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☑    No  ☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“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 not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☑

The aggregate market value of the shares of common stock (based on the closing price of these shares on the NYSE) on June 30, 2017,28, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, held by nonaffiliates was $773,142,550.$413,269,478.

As of February 23, 2018, 33,844,90220, 2020, 34,253,926 shares of common stock were outstanding.

Documents Incorporated By Reference

Portions of the registrant’s proxy statement related to its annual meeting of stockholders scheduled to be held on May 24, 201818, 2020 are incorporated by reference into Part III of this Form 10-K.

DONNELLEY FINANCIAL SOLUTIONS, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 20172019

TABLE OF CONTENTS

PART I

Company Overview

Donnelley Financial Solutions, Inc. and subsidiaries (“Donnelley Financial,DFIN,” or the “Company”) is a financial communications services company that supportsleading global capital marketsrisk and compliance and transaction needs for its corporate clients and their advisors (such as law firms and investment bankers) and global investment management compliance and analytics needs for mutual fund companies, variable annuity providers and broker/dealers.solutions company. The Company provides regulatory filing and deal solutions via its software-as-a-service (“SaaS”), technology-enabled services and print and distribution solutions to public and private companies, mutual funds and other regulated investment firms, to serve their regulatory and compliance needs. For corporate clients within its capital markets offerings, the Company offers technology-enabled filing solutions that allow U.S. public companies to comply with applicable U.S. Securities and Exchange Commission (“SEC”) regulations including filing agent services, digital document creation and online content management multi-channel contenttools that support their corporate financial transactions and regulatory reporting; solutions to facilitate clients’ communications with their shareholders; and virtual data rooms and other deal management solutions. For the investment markets clients, including alternative investment and insurance investment companies, the Company provides technology-enabled filing solutions including cloud-based tools for creating and filing regulatory documents as well as solutions for investors designed to improve the speed of access to and accuracy of investment information. Throughout a company’s life cycle, the Company serves its clients’ regulatory and compliance needs. The Company’s deep industry and regulatory expertise and a commitment to exceptional service guides its clients to navigate a complex and ever-changing regulatory environment.

Global Capital Markets (“GCM”)

The Company provides a comprehensive set of solutions to corporate clients, domestically and internationally, to comply with disclosure obligations, create, manage and deliver accurate and timely financial communications, manage public and private transaction processes and provide clients with business intelligence from financial disclosures with data and analytics services. These solutions include the Company’s traditional full-service SEC’s Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) filing preparation and filing agent services, technology-enabled services and print and distribution solutions, as well as the Company’s SaaS solutions, ActiveDisclosure, Venue Virtual Data Room (“Venue”), EDGAR Online and eBrevia.

The Company’s GCM clients consist mainly of companies that are subject to the filing and reporting requirements of the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company also supports public and private companies throughout merger and acquisition transaction processes and in public and private capital markets transactions with deal management solutions focused on aiding transactional efficiency from inception to completion. In 2019, approximately 49% of GCM net sales were transactional in nature, approximately 36% of GCM net sales were compliance in nature, approximately 14% of GCM net sales were related to Venue services and the remainder of GCM net sales were related to data and analytics services.

Transaction Solutions

The Company helps GCM clients throughout the course of public and private business transactions. For mergers and acquisition (“M&A”) transactions the Company supports deal participants in creating transaction-related registration statements, proxies and prospectuses, files client documents as their filing agent through the EDGAR filing system and manages print for distribution to its clients’ shareholders. The Company also provides complete initial public offering (“IPO”) solutions that support the various stages of the IPO process. Solutions include preparing and filing registration statements and prospectuses, both through the Company’s filing agent solution and its ActiveDisclosure SaaS solution, the Venue Virtual Data Room and secure file sharing SaaS solution and the eBrevia contract analytics SaaS solution.

The Company’s cloud-based Venue® Virtual Data Room is a highly secure data room platform that allows GCM clients to share confidential information in real-time throughout the transaction lifecycle. Clients can maintain control over sensitive data when conducting due diligence for M&A, raising capital for an IPO or developing a document repository. Specifically, companies have used Venue to securely organize, manage, distribute and track corporate governance, financing, legal and other documents in an online workspace accessible to internal and outside advisors.

The Company acquired eBrevia, Inc. (“eBrevia”), a provider of artificial intelligence-based data extraction and contract analytics software solutions, on December 18, 2018. The eBrevia technology provides enterprise contract review and analysis solutions, leveraging machine learning to produce fast and accurate results. eBrevia's software, which extracts and summarizes key provisions and other information, is leveraged in due diligence, contract management, lease abstraction, and document drafting. The acquisition enhances the Company’s Venue offerings to provide clients with secure data aggregation, due diligence, compliance and risk management solutions. 

The Company also offers clients the use of private conferencing facilities in major cities in the U.S. and international jurisdictions. This service helps clients maintain confidentiality in deal negotiations and provides clients a place to host in-person working groups to meet, strategize and prepare documents for the transactional deal stream. The Company’s sites are outfitted to provide around-the-clock services to support the transaction process. 

Through an investment in and commercial agreement with Mediant Communications, Inc. (“Mediant”), the Company can simplify the annual meeting and proxy process for its capital markets customers via project management services and state of the art voting and tabulation technology. Additionally, the Company can help develop client-branded websites and enhanced online versions of the proxy statement and annual meeting documents to improve navigation, highlight key messaging and expand their reach to a broader investor base. This partnership allows the Company to manage and centralize communications for all investors, fulfill and distribute proxy materials and host virtual shareholder meetings, if desired.  

Compliance Solutions

The Company provides compliance solutions to GCM clients in preparing the Exchange Act filings that are compatible with the SEC’s EDGAR system. GCM clients leverage the Company’s deep industry expertise and experience to successfully navigate the SEC’s specified file formats when submitting compliance documents through the EDGAR system.

The Company’s cloud-based ActiveDisclosure platform provides GCM clients with end-to-end solutions to collaborate, tag, validate and file with the SEC efficiently.  

The Company supports GCM clients in meeting SEC-mandated regulatory filing requirements, including tagged filing in the eXtensible Business Reporting Language (“XBRL”) format. The Company provides clients with a suite of tagging, review and validation tools to assist them with the XBRL requirements. The Company has accounting and finance professionals that assist its GCM clients with the processes of tag selection, tag review, file creation, validation and distribution.

The Company helps GCM clients elevate their proxy filings from compliance documents to investor-focused strategic communications tools with Proxy Design services. The Company’s end-to-end proxy solutions include advisory services, proxy strategy and design, disclosure management, EDGAR filing and expertise, online hosting solutions, print production, distribution and annual meeting services.

The Company also provides additional compliance solutions through strategic partnerships, including a full suite of audit management and analytics services, collaborativecompliance solutions for Sarbanes-Oxley Act (“SOX”), operational audits, IT compliance, enterprise risk management and workflow management.

EDGAR® Online - Data and business reporting tools,Analytics 

The Company’s EDGAR® Online solution delivers intelligent solutions in financial disclosures, creating and translationsdistributing company data and public filings for equities, mutual funds and other languagepublicly traded assets. In addition to providing access to data sets, the Company provides subscription-based proprietary desktop and web tools for data analysis. EDGARPro enables investors, analysts, lawyers, auditors and corporate executives to access detailed company information, as-reported and standardized financial data, SEC filings, stock quotes and news.

Global Investment Markets (“GIM”)

The Company provides a comprehensive set of solutions to clients operating in global investment markets domestically and internationally, including United States-based mutual funds, hedge and alternative investment funds, insurance companies and overseas investment structures for collective investments (similar to mutual funds in the United States). The Company also provides products to third party service providers and custodians who support investment managers, and sells products and distribution services to broker networks and financial advisors that distribute and sell investment products.

In 2019, approximately 96% of GIM net sales, excluding postage and freight, were compliance in nature, while the remaining 4% of GIM net sales were transactional in nature. In addition, approximately 89% of the Company’s 2019 GIM net sales, excluding postage and freight, were derived predominantly from clients in the mutual fund and insurance industries, while the remaining 11% of net sales were derived primarily from clients in the healthcare industry. The Company’s services and sales teams currently support clients in the United States, Canada, Ireland, the United Kingdom, France, Luxembourg, Poland, India and Australia. 

The Company provides U.S. based mutual funds and investment insurance companies with solutions to prepare and file registration forms and subsequent ongoing disclosures, as well as XBRL-formatted filings pursuant to the Investment Company Act of its clients’ communications requirements. 1940 (the “Investment Act”), through the EDGAR system.

The Company’s proprietary FundSuiteArc software platform provides GIM clients with a comprehensive suite of cloud-based services and products that store and manage information in a self-service, central repository for compliance and regulatory documents to be easily accessed, assembled, edited, translated, rendered and submitted to regulators. Some of the products within FundSuiteArc are cloud-based and include automation and single-source data validation that streamlines processes and drives efficiency for clients. FundSuiteArc includes ArcFiling, ArcReporting, ArcPro, ArcExchange and ArcMarketing. The ArcFiling solution supports the newly required filing of Form N-CEN, as well as the filing of Form N-PORT, for which the initial filing dates began in April 2019. The Company’s ArcFiling software solution supports both filings. The Company expects an increase in SaaS revenue due to the increase in the frequency of filings for registered investment companies.

Through an investment in and commercial agreement with Mediant, the Company provides a suite of software to brokers and financial advisors that enable them to monitor and view shareholder communications. The Company offers various technology and electronic delivery services and products to make the distribution of documents and content more efficient. The Company also supports the distribution, tabulation and solicitation of shareholders for corporate elections and mutual fund proxy events.

The Company provides turn-key proxy services for mutual funds and investment insurance companies including discovery, planning and implementation, print and mail management, solicitation, tabulation services, shareholder meeting review and expert support for mutual funds, variable annuities, REITs and other alternative investments.  

The Company provides GIM clients with investor communication solutions including printing, digital distribution, e-Delivery and fulfillment systems.

The Company offers to healthcare providers a comprehensive set of solutions to support the creation, ordering and distribution of pre-enrollment and post-enrollment information in the form of customized and/or personalized kits, booklets and packets.  

Segments

The Company operates in two business segments:

The Company reports certain unallocated selling, general and administrative (“SG&A”) activities and associated expenses within “Corporate”Corporate, including, in part, executive, legal, finance, marketing and certain facility costs. In addition, certain costs and earnings of employee benefit plans, such as pension income and share-based compensation, are included in Corporate and are not allocated to the reportable segments. Prior to the Separation (as defined below), many of these costs were based on allocations from R.R. Donnelley & Sons Company (“RRD”); however, beginning October 1, 2016, the Company incurs such costs directly.

For the Company’s financial results and the presentation of certain other financial information by segment, see Note 17, Segment Information, to the Consolidated and Combined Financial Statements. For financial information by geographic area, including net sales and long-lived assets, see Note 18, Geographic Area and Products and Services Information, to the Consolidated and Combined Financial Statements.

Client Services 

The Company’s business is diversified across a range of products and services that enable it to work with companies and their advisors at different points throughout the business lifecycle, including private companies, public companies and companies that have filed for bankruptcy. The Company’s clientele is primarily focused in three areas: capital markets, investment markets, and language solutions, and the Company also provides clients with Data and Analytics services and products. The Company services clients in each of these areas with distinct, proprietary solutions tailored to meet their varying regulatory, transactional and communications needs and are able to achieve operational leverage through the use of common technology and service platforms. 

Global Capital Markets 

The Company’s global capital markets (“GCM”) clients consist mainly of companies that are subject to the filing and reporting requirements of the Securities Act of 1933, as amended (the “Securities Act”) and the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). In 2017, approximately 39% of GCM net sales were compliance in nature. The Company also supports public and private companies throughout the mergers and acquisitions transaction process and in public and private capital markets transactions with deal management solutions focused on aiding transactional efficiency from inception to completion. In 2017, approximately 49% of GCM net sales were transactional in nature and approximately 12% of GCM net sales were related to Venue data room services. The Company provides a comprehensive suite of products and services to help its GCM clients comply with disclosure obligations, create, manage and deliver accurate and timely financial communications and manage public and private transaction processes. The Company also provides GCM clients with data and analytics services focused on uncovering intelligence from financial disclosures and offering distribution of company data and public filings. 

Many of the Company’s GCM clients are companies required by the SEC to file reports pursuant to the Exchange Act, through the SEC’s Electronic Data Gathering, Analysis,Services and Retrieval (EDGAR) system. The EDGAR system requires filers to prepare and submit filings using the SEC’s specified file formats. The Company’s EDGAR filing services assist its GCM clients in preparing Exchange Act filings that are compatible with the EDGAR system, and its employees have expertise and significant experience navigating this process with companies and their advisors. Specifically, many of the Company’s GCM clients are required to file proxy statements pursuant to the Exchange Act, and the Company’s Proxy Design service allows its clients to tailor these proxies by helping them to identify and match an appropriate style and format to their unique corporate culture and proxy-related objectives. The Company serves its GCM clients from local offices in most major cities in the U.S. and international jurisdictions in which the Company has operations. The Company believes that its local teams set the standard for reliable and efficient service and convenience. Products

As part of their regulatory filing requirements, the Company’s GCM clients who submit Exchange Act reports are also required to submit tagged files in the SEC-mandated eXtensible Business Reporting Language (XBRL) format. The Company provides these clients with a suite of tagging, review and validation tools to assist them with the XBRL requirements, and the Company has teams of accounting and financing professionals that assist its GCM clients with the processes of tag selection, tag review, file creation, validation and distribution, if required for their Exchange Act filings with the SEC. 

In addition to the EDGAR filing services it provides, in which it formats and manages the content of the filings on behalf of its clients, the Company also offers a cloud-based disclosure management system called ActiveDisclosure that allows its GCM clients to collaboratively create, review and distribute financial communication and regulatory compliance documents on their own systems and then file directly on the SEC’s EDGAR system and File 16 for Section 16 filings, each of which, with assistance from the Company’s experienced professionals as needed, may reduce the time of the financial close process for its clients. 

The Company provides services for GCM clients throughout the course of public and private business transactions, including those transactions that are subject to the requirements of the Securities Act. The Company assists many of its clients with certain transaction-related EDGAR filing and print services (including registration statements, prospectuses, offering circulars, proxy statements and XBRL-tagged filings), as well as with the technical aspects of the regulatory filing process. The Company has conferencing facilities in most major cities in the U.S. and the international jurisdictions in which it has operations for in-person working groups to meet to strategize and prepare documents for the transactional deal stream. The Company’s sites are outfitted to provide EDGAR filing capabilities, typesetting, meeting rooms and around-the-clock service. 

In addition, for both public and private transactions, many of the Company’s GCM clients use its line of Venue products and services to manage the transaction process and increase efficiency. The Company’s Venue Virtual Data Room product is a cloud-based service that allows companies to securely organize, manage, distribute and track corporate governance, financing, legal and other documents in an online workspace accessible to internal and outside advisors alike. The Company’s GCM clients use Venue Virtual Data Rooms for capital markets transactions, mergers and acquisition transactions and other transactions to facilitate their document management and due diligence processes. 

Venue Deal Marketing is a service provided through Peloton Documents, a company in which the Company has made a strategic investment. The Peloton solution creates interactive transaction related documents that enable companies, investors and advisors to communicate a company’s value and market and manage large, complex deals directly from their data room. Peloton’s technology leverages video and other rich media content as the vehicle to illustrate the value of a business by enabling the user to tell a more dynamic company story to better gauge interest from potential buyers and investors. Users include some of the world’s largest investment banks and private equity firms. 

Venue Contract Analytics, part of the Venue Deal Solutions Suite, is a service provided through eBrevia, a company in which the Company has made a strategic investment.  The eBrevia technology provides leading enterprise contract review and analysis solutions, leveraging machine learning to produce faster and more accurate results. eBrevia's software, which extracts and summarizes key legal provisions and other information, can be used in due diligence, contract management, lease abstraction, and document drafting. 

SOXHUB, part of the ActiveDisclosure compliance solution, is a service provided through AuditBoard, a company in which the Company has made a strategic investment. AuditBoard is a SaaS technology company that provides a full suite of easy-to-use audit management and compliance solutions for SOX, operational audits, IT compliance, ERM and workflow management.  With AuditBoard, enterprises can collaborate, manage, analyze and report on critical internal controls data in real time. Users span from industry-leading pre-IPO to Fortune 50 companies looking to streamline their accounting and audit functions.

Global Investment Markets 

The Company provides products and services to clients operating in global investment markets (“GIM”) within the United States and internationally, including United States based mutual funds, hedge and alternative investment funds, insurance companies and overseas investment structures for collective investments (similar to mutual funds in the United States). The Company also provides products to third party service providers and custodians who support investment managers, and it sells products and distribution services to the broker networks and financial advisors that distribute and sell investment products. The Company services the top variable annuity and variable life providers as well. The firms use the Company’s software products to manage data and content for data driven regulatory reporting as well as the creation of financial reports, prospectuses, fact sheets and other marketing and disclosure documents. The Company also provides software products to manage the distribution of the data and content in support of marketing, sales, and enrollment processes for the purchase of investment products. The Company supports healthcare clients in content management and the creation of pre- and post-enrollment materials. The Company processes orders and distributes customized, digitized communication for its healthcare clients, their brokers and their plan sponsors.

In 2017, approximately 95% of GIM net sales, excluding postage and freight, were compliance in nature, while the remaining 5% of GIM net sales were transactional in nature. In addition, approximately 53% of the Company’s 2017 GIM net sales, excluding postage and freight, were derived from clients in the mutual funds industry, while the remaining 47% of net sales were derived from clients in the healthcare and insurance industries. The Company’s teams currently support clients in the United States, Canada, Ireland, the United Kingdom, France, Luxembourg, India and Australia. 

The Company offers its GIM clients a comprehensive set of products and services, including the FundSuiteArc software platform. FundSuiteArc is a suite of online content management products, which enable the Company’s GIM clients to store and manage information in a self-service, central repository so that compliance and regulatory documents can be easily edited, assembled, accessed, translated, rendered, and submitted to regulators. 

In the United States, mutual funds, variable annuity products, and qualifying institutional hedge funds are required by the SEC to file registration forms and subsequent ongoing disclosures as well as XBRL-formatted filings pursuant to the 1940 Act, through the SEC’s EDGAR system. Using its filing capabilities, the Company works with many of its GIM clients to prepare and submit these 1940 Act and XBRL filings using the SEC’s specified file formats. 

Changes in how investors consume information have led to new ways for investors to receive disclosure documents. GIM offers various technology and electronic delivery products and services to make the distribution of documents and content more efficient. Through an investment in, and an agreement with Mediant, the Company provides a suite of software to brokers and financial advisors which enable them to monitor and view shareholder communications.  The Company also supports the distribution, tabulation, and solicitation of shareholders for corporate elections and mutual fund proxy events.

Language Solutions 

The Company supports domestic and international businesses in a variety of industries by helping them adapt their business content into different languages for specific countries, markets and regions through a complete suite of language products and services. The Company’s suite of services includes translation, editing, interpreting, proof-reading and multilingual typesetting, plus specialized content services such as transcreation (cultural adaptation of marketing materials), copywriting, linguistic validation by subject matter experts (specifically in the life sciences sector), transcription, voice-over, subtitling, and localization (website software adaptation for a specific market). The Company also provides application testing and quality assurance, which enable consistent performance of web, desktop and mobile applications, as well as cultural consulting services, helping corporations with their cross-cultural communications. The Company engages with independent contractors through a network of over 6,000 accredited, in-country linguists to support any language translation. Linguists are recruited through a rigorous testing process carried out by the Company’s vendor management. Through previous professional experience, linguists specialize in one or more verticals and sub-verticals, which enable the Company’s clients to communicate with confidence to their markets using linguists who are experts in the field.

The Company’s language solutions services are supported by its innovative language technology, including a market leading proprietary Translation Management System (MultiTrans) with terminology management and translation memory features. This state-of-the-art system stores terminology preferences and reduces costs by using previously-translated content. In addition, the Company offers a website translation service which is a cloud-based platform that enables dynamic website translation. The Company also continually drives innovation with new technologies, such as voice recognition to gain efficiencies in audio-to-text solutions, and machine translation, combining this with existing services such as machine translation post-editing and a full suite of other add-on services. 

The Company generally provides its suite of services and technology to clients through project-by-project or preferred vendor arrangements. Donnelley Language Solutions clients are serviced from one of the Company’s global locations, in the Americas, the Asia Pacific region, or Europe, the Middle East and Africa.The Company provides its language solutions offerings to clients operating in a variety of industries, including the financial, corporate, life sciences and legal industries, among others. In 2017 the Company provided services to companies in 73 different countries.

Data and Analytics 

The Company also helps professionals uncover intelligence from financial disclosures, offering distribution of company data and public filings for equities, mutual funds and other publicly traded assets through Application Program Interfaces, or APIs, online subscriptions and data licenses. The Company extracts critical company data in real time, verifies its accuracy, converts it to value-added formats like XML, JSON and XBRL, securely stores the information and then provides clients access to the data through various delivery methods. 

The Company is able to leverage proprietary technology to create robust, timely and accurate data sets, distributing high quality, interactive financial data and services to the investment community. With deep experience and knowledge, the Company is advancing how financial data is consumed, delivered and analyzed, helping to transform data points into constructive, valuable information. 

In addition to access to data sets, the Company provides subscription-based proprietary desktop and web tools for data analysis. EDGARPro enables investors, analysts, lawyers, auditors and corporate executives to access detailed company information, as-reported and standardized financial data, SEC filings, stock quotes and news. I-Metrix, a Microsoft Excel plugin, provides quick and accurate XBRL-tagged financial statement data via an easy-to-use web interface for data downloads, enabling simple or complex modeling with the goal of providing better, faster and smarter financial analysis and company research. The Company’s additional offerings include solutions for E-Prospectus, Investor Relations websites and XBRL data set creation and validation for use outside of SEC filings. 

Products and Services

The Company separately reports its net sales and related cost of sales for its productsservices and servicesproducts offerings. The Company’s services offerings consist of all non-print offerings, including document composition, compliance relatedcompliance-related EDGAR filing services, transaction solutions, data and analytics, content storage servicesthe Company’s SaaS solutions, including Venue, FundSuiteArc, ActiveDisclosure, EDGAR Online and language solutions.others. The Company’s product offerings primarily consist of conventional and digital printed products and related distributionshipping costs. Prior to the sale of the Company’s Language Solutions business on July 22, 2018, the Company provided language solutions services to international clients.

Company History

Spin-off Transaction

Donnelley Financial’s Registration Statement on Form 10, as amended, was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on September 20, 2016. On October 1, 2016, Donnelley FinancialDFIN became an independent publicly traded company through the distribution by R.R. Donnelley & Sons Company (“RRD”)RRD of approximately 26.2 million shares, or 80.75%, of Donnelley FinancialDFIN common stock to RRD shareholders (the “Separation”). Holders of RRD common stock received one share of Donnelley FinancialDFIN common stock for every eight shares of RRD common stock held on September 23, 2016. As part of the Separation, RRD retained approximately 6.2 million shares of Donnelley FinancialDFIN common stock, or a 19.25% interest in Donnelley Financial. Donnelley Financial’sDFIN, of which 6.1 million shares and 0.1 million shares were subsequently sold in June 2017 and August 2017, respectively. DFIN’s common stock began regular-way trading under the ticker symbol “DFIN” on the New York Stock Exchange on October 3, 2016. On October 1, 2016, RRD also completed the previously announced separation of LSC Communications, Inc. (“LSC”), its publishing and retail-centric print services and office products business. On March 28, 2017, RRD completed the sale of 6.2 million shares of LSC common stock (RRD’s remaining ownership stake in LSC) in an underwritten public offering. As

Language Solutions Disposition

On July 22, 2018, the Company sold its Language Solutions business. Prior to its sale, the Language Solutions business supported domestic and international businesses in 73 different countries and in a result, beginningvariety of industries, including the financial, corporate, life sciences and legal industries, among others, by helping them adapt their business content into different languages for specific countries, markets and regions through a complete suite of language services and products.

eBrevia Acquisition

On December 18, 2018, the Company acquired eBrevia, a provider of artificial intelligence-based data extraction and contract analytics software solutions. Prior to the acquisition, the Company held a 12.8% investment in eBrevia. The purchase price for the remaining equity of eBrevia, which includes the Company’s estimate of contingent consideration, was $23.3 million, net of cash acquired of $0.2 million. The eBrevia technology provides enterprise contract review and analysis solutions, leveraging machine learning to produce fast and accurate results. eBrevia's software, which extracts and summarizes key legal provisions and other information, is used in due diligence, contract management, lease abstraction and document drafting. eBrevia’s operations are included within the Capital Markets reporting unit in the quarter ended June 30, 2017, LSC no longer qualified as a related party of the Company.

On March 24, 2017, pursuant to the Stockholder and Registration Rights Agreement, dated as of September 30, 2016, by and between the Company and RRD, the Company filed a Registration Statement on Form S-1 to register the offering and sale of shares ofU.S. segment. The acquisition enhances the Company’s common stock retained by RRD. The Registration Statement on Form S-1, as amended, was declared effective by the SEC on June 13, 2017. On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. Upon the consummation of the offering, RRD retained approximately 0.1 million shares of the Company’s common stock which were subsequently sold by RRD on August 4, 2017. In conjunctionVenue offerings to provide clients with the underwritten public offering, the underwriters exercised their option to purchase approximately 0.9 million of the Company’s shares (the “Option Shares”) from the Company. The Company received approximately $18.8 million in net proceeds from the sale of the Option Shares, after deducting estimated underwriting discountssecure data aggregation, due diligence, compliance and commissions. risk management solutions. 

Competition

Technological and regulatory changes, including the electronic distribution of documents, and data hosting of media content, continue to impact the market for our productsthe Company’s services and services. Oneproducts. In addition to the Company’s ongoing innovation in its SaaS solutions, one of the Company’s competitive strengths is that it offers a wide array of communications products, compliance services, and technologies, a global platform, exceptional sales and service and regulatory domain expertise, which provide differentiated solutions for its clients.

The financial communications servicesglobal risk and compliance industry, in general, is highly competitive and barriers to entry have decreased as a result of technology innovation.innovation and the simplification of EDGAR filings. Despite some consolidation in recent years, the industry remains highly fragmented in the United States and even more so internationally with many in-country alternative providers. The Company expects competition to increase from existing competitors as well as new and emerging market entrants. In addition, as the Company expands its product and service offerings, it may face competition from new and existing competitors. The Company competes primarily on product quality and functionality, service levels, subject matter regulatory expertise, security, and compliance characteristics, price and reputation.

The impact of digital technologies has been feltimpacted many of the products and markets in many print products,which the Company competes, most acutely in the Company’s mutual fund, variable annuity and public company compliance business offerings. While the Company maintainsoffers a high-touch, service oriented businessexperience, technology changes have provided alternatives to the Company’s clients that allow them to manage more of the financial disclosure process themselves. For years, theThe Company has invested in its own applications,SaaS solutions, ActiveDisclosure, FundSuiteArc and Venue to serve clients and increase retention, and has invested to expand capabilities and address new market sectors. The future impact of technology as well as the streamlining and modernizing of disclosure requirements on the business is difficult to predict and could result in additional expenditures to restructure impacted operations or develop new technologies. In addition, the Company has made targeted acquisitions and investments in its existing business to offer clients innovative services and solutions, including acquisitions of eBrevia and EDGAR Online and MultiCorpora and investments in AuditBoard, (formerly known as Soxhub), Mediant, Peloton and eBreviaGain Compliance that support the Company’s position as a technology service leader in thethis evolving industry.  

The Company’s competitors for SEC filing services for public company compliance clients include full service financial communications providers, technology point solution providers focused on financial communications and general technology providers. The Company’s competitors for Venue Virtual Data Room include providers of virtual data room-specific solutions and enterprise software providers that offer online products that serve as document repositories, virtual data rooms as well as file sharing and collaboration solutions. The Company’s competitors for SEC filing services for investment markets clients include full service traditional providers, small niche technology providers and local and regional print providers that bid against the Company for printing, mailing and fulfillment services.  Language solutions competes with global and local language service providers and language/globalization software vendors.

Market Volatility/Cyclicality

The Company is subject to market volatility in the United States and world economy, as the success of the transactional offering is largely dependent on the global market for IPOs, secondary offerings, mergers and acquisitions, public and private debt offerings, leveraged buyouts, spinouts and other transactions. A variety of factors impact the global markets, including the regulatory and political environment. In the past, U.S. IPO, M&A and public debt offerings were disrupted by the U.S. federal government shutdown that occurred, most recently, from December 2018 to January 2019. Future government shutdowns could result in additional volatility. The International segment is particularly susceptible to capital market volatility as most of the International business is capital markets transaction focused. The Company mitigates some of that risk by offering services in higher demand during a down market, like document management tools for the bankruptcy/restructuring process, and also by moving upstream from the filing process with products like Venue, the Company’s data room solution. The Company also attempts to balance this volatility through supporting the quarterly/annual public company reporting process through its EDGAR filing services and ActiveDisclosure product, its investment markets regulatory and shareholder communications offering and continues to expand into adjacent growth businesses like language solutions and data and analytics, which havehas recurring revenues and areis not as susceptible to market volatility and cycles. ThisThe quarterly/annual public company reporting process work also subjects the Company to filing seasonality shortly after the end of each fiscal quarter, with peak periods during the course of the year that have operational implications. Suchyear. The seasonality and associated operational implications include the need to increase staff during peak periods through a combined strategy of hiring additional full-time and temporary personnel, increasing the premium time of existing staff, and outsourcing production for a number of services. Additionally, clients and their financial advisors have begun to increasingly rely on web-based services which allow clients to autonomously file and distribute compliance documents with regulatory agencies, such as the SEC. While the Company believes that its ActiveDisclosure and FundSuiteArc solutions are competitive in this space, competitors are continuing to develop technologies that aim to improve clients’ ability to autonomously produce and file documents to meet their regulatory obligations. The Company continues to remainremains focused on driving recurring revenue in order to mitigate market volatility.

Regulatory Impact

The SEC is adopting new as well as amending existing rules and forms to modernize the reporting and disclosure of information by registered investment companies. These changes are driving significant regulatory changes which impact the Company’s customers within its Investment Markets business. On October 13, 2016, the SEC adopted a new N-PORT filing requirement, which requires certain registered investment companies to report information about their portfolio in XML, a structured data format, on a monthly basis, replacing what was previously a quarterly filing requirement. This rule also includes an annual N-CEN filing in XML, replacing a semi-annual filing requirement. Compliance dates depend on asset size and began as soon as June 1, 2018 for larger funds. In 2019, the SEC amended the rule and Funds now file three months of N-PORT on a quarterly basis. The first N-PORT filing deadlines began in April 2019 for larger funds with over $1 billion in assets. Beginning in April 2020, smaller funds will begin filing N-PORT on a quarterly basis. The Company’s ArcFiling software solution can support both filings.

On June 5, 2018, the SEC adopted Rule 30e-3 which provides certain registered investment companies with an option to electronically deliver shareholder reports and other materials rather than providing such reports in paper. Investors who prefer to receive reports in paper will continue to receive them in that format. While Rule 30e-3 was effective January 1, 2019, default electronic distribution pursuant to the rule will begin on January 1, 2021 due to a 24-month transition period, during which registered investment companies must notify investors of the upcoming change in transmission format of shareholder reports. The Company expects a decline in the volume of printed annual and semi-annual shareholder reports in 2021 and beyond as a result of Rule 30e-3.

Raw Materials

The primary raw materials used in the Company’s printed products are paper and ink. The paper and ink supply is sourced from a small set of select suppliers in order to ensure consistent quality that meets the Company’s performance expectations and provides for continuity of supply. The Company believes that the risk of incurring material losses as a result of a shortage in raw materials is unlikely and that the losses, if any, would not have a materially negative impact on the Company’s business.

Distribution

The Company’s products are distributed to end-users through the U.S or foreign postal services, through retail channels, electronically or by direct shipment to customer facilities.

Customers

For each of the years ended December 31, 2017, 20162019, 2018 and 2015,2017, no customer accounted for 10% or more of the Company’s consolidated and combined net sales.

Technology

The Company invests resources in developing software solutions to improvecomplement its services. The Company invests in its core composition systems and client facing solutions and has also adopted market-leading third party systems which have improved the efficiency of its sales and operations processes. The Company has continued to invest in enhancements of its technology-based offerings including EDGAR filing and XBRL services, Venue Virtual Data Room, ActiveDisclosure, FundSuiteArc software platform, and its data and analytics solutions. The Company continues to invest in leading and innovative technology such as robotic process automation, machine learning and hybrid cloud architecture.

Cybersecurity & Data Protection

A core aspect of the Company’s business relies on technology and software; as a result, the security of those technologies and software, as well as the protection of the confidential information entrusted to the Company by its customers, are key parts of the Company’s business and strategy. The DFIN Cybersecurity Program is based upon industry leading frameworks, which include International Standardization Organization #27001 (ISO 27001), Control Objectives for Information Technology (COBIT), and the National Institute of Standards and Technology Framework for Improving Critical Infrastructure Cybersecurity (commonly known as NIST). The Company’s technologies and software must also comply with domestic and international regulatory and legal requirements. Ensuring that these technologies and software comply with those regulations is a key focus of the Company’s efforts.

The Company leverages cybersecurity technologies designed to ensure that client, employee and business confidential data is secure. The Company’s cybersecurity portfolio is inclusive of, but not limited to, data encryption, data masking, leading secure software development methodologies, aggressive application and network penetration testing, incident response, digital forensics, least-privileged access controls, anti-malware, virtual private networks and cyber threat intelligence. Additionally, the Company manages a 24x7 Security Operations capability that monitors and responds to cyber threats in real time.

To demonstrate transparency, the Company’s commitment to effective cybersecurity and data protection efforts and in pursuit of continuous improvement, the Company undergoes a series of third-party security reviews, including third-party penetration tests.

Environmental Compliance

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

Employees

As of December 31, 2017,2019, the Company had approximately 3,4002,900 employees.

Available Information

The Company maintains a website at www.dfsco.comwww.dfinsolutions.com where the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, as well as other SEC filings, are available without charge, as soon as reasonably practicable following the time they are filed with, or furnished to, the SEC. The Principles of Corporate Governance of the Company’s Board of Directors, the charters of the Audit, Compensation, Corporate Responsibility & Governance Committees of the Board of Directors and the Company’s Principles of Ethical Business Conduct are also available on the Investor Relations portion of the Company’s website, and will be provided, free of charge, to any shareholder who requests a copy. References to the Company’s website address do not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of or incorporated by reference in this document.

Special Note Regarding Forward-Looking Statements

The Company has made forward-looking statements in this Annual Report on Form 10-K (the “Annual Report”) within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the Company. Generally, forward-looking statements include information concerning possible or assumed future actions, events, or results of operations of the Company.

These statements may include words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “continues,” “believes,” “may,” “will,” “goals” and variations of such words and similar expressions are intended to identify our forward-looking statements.

Forward-looking statements are not guarantees of performance. These forward-looking statements are subject to a number of important factors, including those factors discussed in detail in “Item 1A: Risk Factors” and elsewhere in this Annual Report, on Form 10-K, that could cause ourthe Company’s actual results to differ materially from those indicated in any such forward-looking statements. These factors include, but are not limited to:

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

Consequently, readers of the Annual Report on Form 10-K should consider these forward lookingforward-looking statements only as the Company’s current plans, estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. The Company undertakes no obligation to update or revise any forward-looking statements in this Annual Report on Form 10-K to reflect any new events or any change in conditions or circumstances.

The Company’s consolidated and combined 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 the Annual Report on Form 10-K.Report. You should carefully consider all of these risks.

A significant part of ourthe Company’s business is derived from the use of ourDFIN’s services and products and services in connection with financial and strategic business transactions. Economic trendsTrends that affect the volume of these transactions may negatively impact the demand for our productsDFIN’s services and services.

products.

A significant portion of ourthe Company’s net sales depends on the purchase of ourDFIN’s services and products and use of our services by parties involved in GCM compliance and transactions. As a result, ourthe Company’s business is largely dependent on the global market for IPOs, secondary offerings, mergers and acquisitions, public and private debt offerings, leveraged buyouts, spinouts, bankruptcy and claims processing and other transactions. These transactions are often tied to economicmarket conditions and dependent upon the performance of the overall economy, and the resulting volume of these types of transactions drivesaffects demand for our productsthe Company’s services and services.products. Downturns in the financial markets, global economy or in the economies of the geographies in which we dothe Company does business and reduced equity valuations all create risks that could negatively impact ourthe Company’s business. For example, in the past, economic volatility has led to a decline in the financial condition of a number of ourthe Company’s clients and led to the postponement of their capital markets transactions. To the extent that there is continued volatility, wethe Company may face increasing volume pressure. Furthermore, ourthe Company’s offerings for GIM clients can be affected by fluctuations in the inflow and outflow of money into investment management funds which determines the number of new funds that are opened as well as,and closed. As a result, we are not ablethe Company is unable to predict the impact of any potential worsening of macroeconomic conditions which could have on ourimpacts to the Company’s results of operations. The level of activity in the financial communications services industry, including the financial transactions and related compliance needs ourDFIN’s services and products and services are used to support, is sensitive to many factors beyond ourthe Company’s control, including interest rates, regulatory policies, general economic conditions, ourthe Company’s clients’ competitive environments, business trends, terrorism and political change, such as the impacts fromimpact of the 2016 United Kingdom referendum to withdrawKingdom’s (the “UK”) recent withdrawal from the European Union.Union (the “EU”). While EU rules will continue to apply in the UK until the end of 2020 (which period may be extended by one or two years), there can be no assurance that an agreement between the UK and the EU with regard to future trade and co-operation will be reached prior to the end of this transition period. In addition, a weak economy could hinder ourthe Company’s ability to collect amounts owed by clients. Failure of ourthe Company’s clients to pay the amounts owed to us, or to pay such amounts in a timely manner, may increase ourthe Company’s exposure to credit risks and result in bad debt write-offs. Unfavorable conditions or changes in any of these factors could negatively impact ourthe Company’s results of operations, financial position and cash flow.

The quality of ourthe Company’s customer support and services offerings is important to ourthe Company’s clients, and if we failthe Company fails to offer high quality customer support and services, clients may not use ourDFIN’s solutions and ourresulting in a potential decline in net sales may decline.sales.

A high level of customer support is critical for the successful marketing and sale of ourDFIN’s solutions. If we arethe Company is unable to provide a level of customer support and service to meet or exceed clients’ expectations, the expectations of our clients, weCompany could experience a loss of clients and market share, a failure to attract new clients, including in new geographic regions and increased service and support costs and a diversion of resources. Any of these results could negatively impact ourthe Company’s results of operations, financial position and cash flow.

A substantial part of ourthe Company’s business depends on clients continuing their use of our productsDFIN’s services and services.products. Any decline in ourthe Company’s client retention would harm ourthe Company’s future operating results.

We doThe Company does not have long term contracts with most of our GCM and GIM clients and, therefore, relyrelies on their continued use of ourDFIN’s services and products, and services, particularly for compliance relatedcompliance-related services. As a result, client retention, particularly during periods of declining transactional volume, is an important part of ourthe Company’s strategic business plan. There can be no assurance that our clients will continue to use ourDFIN’s services and products and services to meet their ongoing needs, particularly in the face of competitors’ services and products and services offerings. Our clientClient retention rates may decline due to a variety of factors, including:

If ourthe Company’s retention rates are lower than anticipated or decline for any reason, ourthe Company’s net sales may decrease and ourthe Company’s profitability may be harmed, which could negatively impact ourthe Company’s results of operations, financial position and cash flow.

OurThe Company’s business may be adversely affected by new technologies enabling clients to produce and file documents on their own.

The Company’s business may be adversely affected as clients seek out opportunities to produce and file regulatory documentation on their own and begin to implement technologies that assist them in this process. For example, clients and their financial advisors have increasingly relied on web-based services which allow clients to autonomously file and distribute reports required pursuant to the Exchange Act, prospectuses and other materials as a replacement for using ourthe Company’s EDGAR filing services. If technologies are further developed to provide our clients with the ability to autonomously produce and file documents to meet their regulatory obligations, and we dothe Company does not develop products or provide services to compete with such new technologies, ourthe Company’s business may be adversely affected by those clients who choose alternative solutions, including self-serving or filing themselves.

OurThe Company’s performance and growth depend on ourits ability to generate client referrals and to develop referenceable client relationships that will enhance ourthe Company’s sales and marketing efforts.

We dependThe Company depends on users of ourits solutions to generate client referrals for ourthe Company’s services. We dependThe Company depends, in part, on the financial institutions, law firms and other third parties who use ourDFIN’s services and products and services to recommend our solutions to their client base, which allows usprovides the Company the opportunity to reach a larger client base than weit can reach through ourthe direct sales and internal marketing efforts. For instance, a portion of ourthe Company’s net sales from GCM clients is derived fromgenerated through referrals by investment banks, financial advisors and law firms that have utilized ourthe Company’s services in connection with prior transactions. These referrals are an important source of new clients for ourthe Company’s services.

A decline in the number of referrals we receive could require usthe Company to devote substantially more resources to the sales and marketing of ourits services, which would increase our costs, potentially lead to a decline in our net sales, slow ourthe Company’s growth and negatively impact ourits results of operations, financial position and cash flow.

The spin-off from RRD could result in significant liability to Donnelley Financial.

The spin-off was intended to qualify for tax-free treatment to RRDCompany’s indebtedness may adversely affect the Company’s business and its stockholders under Sections 355 and 368(a)(1)(D)results of the Internal Revenue Code of 1986, as amended (the Code). Completion of the spin-off was conditioned upon, among other things, the receipt of a private letter ruling from the Internal Revenue Service (“IRS”) regarding certain issues relating to the tax-free treatment of the spin-off. Although the IRS private letter ruling is generally binding on the IRS, the continuing validity of such ruling is subject to the accuracy of factual representations and assumptions made in the ruling.   Completion of the spin-off was also conditioned upon RRD’s receipt of a tax opinion from Sullivan & Cromwell LLP regarding certain aspects of the spin-off not covered by the IRS private letter ruling. The opinion was based upon various factual representations and assumptions, as well as certain undertakings made by RRD, Donnelley Financial and LSC. If any of the factual representations or assumptions in the IRS private letter ruling or tax opinion are untrue or incomplete in any material respect, an undertaking is not complied with, or the facts upon which the IRS private letter ruling or tax opinion are based are materially different from the actual facts relating to the spin-off, the opinion or IRS private letter ruling may not be valid. Moreover, opinions of a tax advisor are not binding on the IRS. As a result, the conclusions expressed in the opinion of a tax advisor could be successfully challenged by the IRS.

If the Separation is determined to be taxable, RRD and its stockholders could incur significant tax liabilities, and under the tax matters agreement and the letter agreement, Donnelley Financial may be required to indemnify RRD for any liabilities incurred by RRD if the liabilities are caused by any action or inaction undertaken by Donnelley Financial following the spin-off.  For additional detail, refer to Tax Disaffiliation Agreement (Exhibit 2.4 to this Annual Report on Form 10-K).

The tax rules applicable to the Separation may restrict us from engaging in certain corporate transactions or from raising equity capital beyond certain thresholds for a period of time after the separation.

To preserve the tax-free treatment of the Separation from RRD under the Tax Disaffiliation Agreement, for the two-year period following the Separation, we are subject to restrictions with respect to:

These restrictions may limit our ability during such period to pursue strategic transactions of a certain magnitude that involve the issuance or acquisition of our stock or engage in new businesses or other transactions that might increase the value of our business. These restrictions may also limit our ability to raise significant amounts of cash through the issuance of stock, especially if our stock price were to suffer substantial declines, or through the sale of certain of our assets. For more information, refer to Tax Disaffiliation Agreement (Exhibit 2.4 to this Annual Report on Form 10-K).

Donnelley Financial’s historicaloperations, financial information is not necessarily representative of the results that it would have achieved as a separate, publicly traded company and may not be a reliable indicator of its future results, particularly in light of ongoing costs of operating as a public company.

The historical information about Donnelley Financial prior to October 1, 2016 included in this Annual Report on Form 10-K refers to Donnelley Financial’s business as operated by and integrated with RRD. Donnelley Financial’s historical financial information for such periods was derived from the consolidated financial statements and accounting records of RRD. Accordingly, such historical financial information does not necessarily reflect the combined statements of income, balance sheetsposition and cash flows that Donnelley Financial would have achieved as a separate, publicly traded company during the periods presented or those that Donnelley Financial will achieve in the future primarily as a result of the following factors:

Other significant changes may occur in Donnelley Financial’s cost structure, management, financing and business operations as a result of operating as a company separate from RRD. For additional information about the past financialperformance of Donnelley Financial’s business and the basis of presentation of the historical consolidated and combined financial statements of Donnelley Financial’s business, refer to the discussion in Note 1, Overview and Basis of Presentation, to the consolidated and combined Financial Statements of this Annual Report on Form 10-K.

We may be unable to achieve some or all of the benefits that we expect to achieve from the Separation.

We believe that the Separation from RRD has allowed, and will continue to allow, among other benefits, us to focus on our distinct strategic priorities; afford us direct access to the capital markets and facilitate our ability to capitalize on growth opportunities and effect future acquisitions utilizing our common stock; facilitate incentive compensation arrangements for our employees more directly tied to the performance of our business; and enable us to concentrate our financial resources solely on our own operations. However, we may be unable to achieve some or all of these benefits. For example, in order to prepare ourselves for the Separation, we undertook a series of strategic, structural and process realignment and restructuring actions within our operations. These actions may not provide the benefits we currently expect, and could lead to disruption of our operations, loss of, or inability to recruit, key personnel needed to operate and grow our businesses after the Separation, weakening of our internal standards, controls or procedures and impairment of key client relationships. If we fail to achieve some or all of the benefits that we expect to achieve as an independent company, or do not achieve them in the time we expect, our business and consolidated and combined statements of income, balance sheets and cash flows could be materially and adversely affected.

RRD or LSC may not satisfy their respective obligations under the Transition Services Agreements that were entered into as part of the Separation, or we may not have necessary systems and services in place when the transition services terms expire.

In connection with the separation, we entered into Transition Services Agreements with both RRD and LSC. Refer to Exhibits 2.2 and 2.3 to this Annual Report on Form 10-K, both titled Transition Services Agreement, related to the agreements with RRD and LSC, respectively. These Transition Services Agreements provide for the performance of services by each company for the benefit of the other for a period of time after the separation. We rely on RRD and LSC to satisfy their respective performance and payment obligations under these Transition Services Agreements. If RRD or LSC is unable to satisfy its respective obligations under these Transition Services Agreements, we could incur operational difficulties. The agreements relating to the separation provide for indemnification in certain circumstances. There can be no guarantee that RRD or LSC, as the case may be, will satisfy any obligations owed to us under such agreements, including any indemnification obligations.

Further, if we do not have our own systems and services in place, or if we do not have agreements in place with other providers of these services when the term of a particular transition service terminates, we may not be able to operate our business effectively, which could negatively impact our consolidated and combined statements of income, balance sheets and cash flows. We are in the process of creating our own, or engaging third parties to provide, systems and services to replace many of the systems and services RRD and LSC have provided us since the Separation. We may not be successful in effectively or efficiently implementing the remaining systems and services or in transitioning data from RRD’s or LSC’s systems to our systems, which could disrupt our business and have a negative impact on our consolidated and combined statements of income, balance sheets and cash flows. These systems and services may also be more expensive or less efficient than the systems and services RRD and LSC have been providing during the transition period since the Separation.

We have incurred substantial indebtedness and the degree to which we are currently leveraged may materially and adversely affect our business and consolidated and combined statements of income, balance sheets and cash flows.flow.

As of December 31, 2017, we2019, the Company had $458.3$300 million of indebtedness8.25% senior unsecured notes due October 15, 2024 (“Notes”) outstanding. OurAs of December 31, 2019, the Company did not have any amounts outstanding under its Credit Facilities, as defined below. The Company’s ability to make payments on and to refinance our indebtedness, as well as any future debt that weit may incur, will depend on ourthe Company’s ability to generate cash in the future from operations, financings or asset sales. OurThe Company’s ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond ourthe Company’s control. WeThe Company may not generate sufficient funds to service ourits debt and meet ourits business needs, such as funding working capital or the expansion of ourthe Company’s operations. If we arethe Company is not able to repay or refinance our debt as it becomes due, weit may be forced to take disadvantageous actions, including facility closure, staff reductions, reducing financing in the future for working capital, capital expenditures and general corporate purposes, selling assets or dedicating an unsustainable level of our cash flowflows from operations to the payment of principal and interest on ourits indebtedness, and restricting future capital return to stockholders. In addition, our ability to withstand competitive pressures and to react to changes in the print and related services industry could be impaired. The lenders who hold ourthe Company’s debt could also accelerate amounts due in the event that weof a default, which could potentially trigger a default or acceleration of the maturity of our otherthe Company’s debt.

In addition, our leverage could put us at a competitive disadvantage compared to ourthe Company’s competitors who may be less leveraged.leveraged, could put the Company at a competitive disadvantage. These competitors could have greater financial flexibility to pursue strategic acquisitions, and secure additional financing for their operations. Our leverage could also impede our ability toand may better withstand downturns in ourthe Company’s industry or the economy in general.

The agreements and instruments that govern ourthe Company’s debt impose restrictions that may limit ourthe Company’s operating and financial flexibility.

On September 30, 2016, in connection with the Separation, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement (as defined below)provides for a $350.0 million senior secured term loan B facility (the “Term Loan Credit Facility”) and a $300.0 million senior secured revolving credit facility (the “Revolving Facility,” and, together with the Term Loan Credit Facility, the “Credit Facilities”). The Credit Agreement that governs ourthe Company’s Credit Facilities (as defined below) and the indenture that governs the Notes (as defined below) contain a number of significant restrictions and covenants that limit ourthe Company’s ability to:

These covenants can have the effect of limiting ourthe Company’s flexibility in planning for or reacting to changes in ourthe Company’s business and the markets in which we compete.it competes. In addition, the Credit Agreement that governs ourthe Credit Facilities requires usthe Company to comply with certain financial maintenance covenants. Operating results below current levels or other adverse factors, including a significant increase in interest rates, could result in ourthe Company being unable to comply with the financial covenants contained in ourthe Term Loan Credit Facility and indenture. If we violatethe Company violates covenants under ourthe Credit Facilities and indenture and areis unable to obtain a waiver from ourthe lenders, ourthe Company’s debt under ourthe Credit Facilities and indenture would be in default and could be accelerated by ourthe Company’s lenders. Because ofDue to cross-default provisions in the agreements and instruments governing ourthe Company’s debt, a default under one agreement or instrument could result in a default under, and the acceleration of, our other debt.

If ourthe Company’s debt is accelerated, wethe Company may not be able to repay ourits debt or borrow sufficient funds to refinance it. Even if we arethe Company is able to obtain new financing, it may not be on commercially reasonable terms, on terms that are acceptable, to us, or at all. If ourthe Company’s debt is in default for any reason, ourthe Company’s business and consolidated and combined statementsresults of income, balance sheets operations, financial position and cash flowsflow could be materially and adversely affected. In addition, complying with these covenants may also cause usthe Company to take actions that are not favorable to holders of the Notes and may make it more difficult for usthe Company to successfully execute ourits business strategy and compete against companies that are not subject to such restrictions.

Despite our substantialthe Company’s current level of indebtedness, weit may be able to incur significantly more debt.

Despite our substantial amountthe Company’s current level of indebtedness, wethe Company may be able to incur significant additional debt, including secured debt, in the future. Although the indenture governing ourthe Notes and the Credit Agreement governing the Credit Facilities restrict the incurrence of additional debt, these restrictions are subject to a number of qualifications and exceptions. Also, these restrictions do not prevent usthe Company from incurring obligations that do not constitute indebtedness. In addition, as of December 31, 2017, we2019, the Company had $300.0$231.6 million available for additional borrowing under ourthe Revolving Facility (as defined in Note 12, Debt).Facility. The more indebtedness we incur,the Company incurs, the further exposed we becomeit becomes to the risks associated with substantial leverage described above.

Adverse credit market conditions may limit the Company’s ability to obtain future financing.

The Company may, from time to time, depend on access to credit markets. Uncertainty and volatility in global financial markets may cause financial markets institutions to fail or may cause lenders to hoard capital and reduce lending. As a result, DFIN may not obtain financing on terms and conditions that are favorable, or at all.

The highly competitive market for ourDFIN’s services and products and services and industry fragmentation may continue to create adverse price pressures.

The financial communications services industry is highly competitive with relatively low barriers to entry and the industry remains highly fragmented in North America and internationally. Management expects that competition will increase from existing competitors, as well as new and emerging entrants. Additionally, as we expand ourthe Company expands its product and service offerings, weit may face competition from new and existing competitors. As a result, competition may lead to additional pricing pressure on ourDFIN’s services and products, and services, which could negatively impact ourits results of operations, financial position and cash flow.

AThe business plan management announced at the Company’s 2018 investor day relies on the Company’s ability to transform into a software-as-a-service company, and a failure to adapt to technological changes to address the changing demands of clients may adversely impact ourthe Company’s business, and if we failthe Company fails to successfully develop, introduce or integrate new services or enhancements to ourits services and products and services platforms, systems or applications, Donnelley Financial’sDFIN’s reputation, net sales and operating income may suffer.

OurIn May 2018, management introduced the Company’s new business plan that focuses on transitioning its business to a software and technology focused company. In order to do that, the Company must attract new clients for those businesses, and its ability to attract new clients and increase sales to existing clients will depend in large part on ourthe Company’s ability to enhance and improve our existing productsservices and servicesproducts platforms, including our application solutions, and to introduce new functionality either by acquisition or internal development. OurThe Company’s operating results would suffer if ourits innovations are not responsive to the needs of ourthe Company’s clients, are not appropriately timed with market opportunities or are not brought to market effectively. In addition, it is possible that ourmanagement’s assumptions about the features that wethey believe will drive purchasing decisions for ourthe Company’s potential clients or renewal decisions for ourthe existing clients could be incorrect. In the past, we have experienced delays in the planned release dates of new products and services and upgrades to such products and services.inaccurate. There can be no assurance that new products or services, or upgrades to ourDFIN’s products or services, will be released on scheduleas anticipated or that, when released, they will not contain defects. If product defects as a result of poor planning, execution or other factors duringarise, the product development lifecycle. If any of these situations were to arise, weCompany could suffer adverseexperience negative publicity, damage to ourits reputation, loss ofdecline in net sales, delay in market acceptance or claims by clients brought against us.the Company. Moreover, upgrades and enhancements to ourthe Company’s platforms may require substantial capital investment and there can be nowithout assurance that our investmentsthe upgrades and enhancements will help usenable the Company to achieve or sustain a durable competitive advantage in our productsthe product and servicesservice offerings. If clients do not widely adopt our solutions or new innovations to our solutions, we may not be able to justify the investments we have made. If we areCompany is unable to develop, license or acquire new technology solutions or enhancements to enhance existing services on a timelyproduct and cost-effective basis, or if our new or enhanced solutions do not achieve market acceptance, our business,service offerings, the results of operations, financial position and financial condition willcash flow may be materially negatively impacted.

Undetected errors or failures found in ourDFIN’s services and products and services may result in loss of or delay in market acceptance of ourthe services and products and services that could seriously harm ournegatively impact its business.

OurDFIN’s services and products and services may contain undetected errors or scalability limitations at any point induring their lives,life cycle, but particularly when first introduced or as new versions are released. We frequently release newreleased to the market. The Company releases enhanced versions of our products and different aspects of our platform are inincluding platforms during various stages of development. Despite production testing by usthe Company and operational testing by current and potential clients, errors may not be found in new productsservices and servicesproducts until after commencement of commercial availability or use, resulting in a loss of or a delay in market acceptance, damage to ourthe Company’s reputation, client dissatisfaction and reductionsdecline in net sales and margins, any of which could negatively impact our business.operating income.

ChangesModifications in the rules and regulations to which clients or potential clients are subject to may impact the demand for our productsthe Company’s product and services.service offerings.

Many of our clientsClients are subject to rules and regulations requiring certain printed or electronic communications governing the form, content and delivery methods of such communications. Changescommunications, such as SEC Rule 30e-3 which provides certain registered investment companies with an option to electronically deliver shareholder reports and other materials rather than providing such reports in paper. Modifications in these regulations may impact clients’ business practices and could reduce demand for ourDFIN’s services and products and services. Changesofferings. Modifications in such regulations could eliminate the need for certain types of communications altogether or such changes may impact the quantity or format of required communications.

OurThe Company’s failure to maintain the confidentiality, integrity and availability of ourits systems, software and solutions could seriously damage ourthe Company’s reputation and affect ourits ability to retain clients and attract new business.

Maintaining the confidentiality, integrity and availability of ourDFIN’s systems, software and solutions is an issue of critical importance for usthe Company and for ourits clients and users who rely on ourDFIN’s systems to prepare regulatory filings and store and exchange large volumes of information, much of which is proprietary, confidential and may constitute material nonpublic information. Given DFIN’s systems contain material nonpublic information for our clients.about public reporting companies and potential mergers and acquisitions activities prior to its public release, the Company may be a target of hacking or cybercrime. Inadvertent disclosure of the information maintained on ourDFIN’s systems (or on the systems of the vendors on which we rely)the Company relies) due to human error, breach of ourthe systems through hacking, or cybercrime or a leak of confidential information due to employee misconduct, could seriously damage ourthe Company’s reputation, could cause it to expend significant resources responding to document requests from government agencies and customers and could cause significant reputational harm for ourthe Company and its clients. The Company’s technologies, systems, networks and software have been and continue to be subject to cybersecurity threats and attacks, which range from uncoordinated individual attempts to sophisticated and targeted measures directed at the Company. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased and the Company has in the past and may in the future be subject to security breaches. For example, during 2019 the Company experienced two cyber incidents, one of which was through a commercial partner. The incident involving the Company’s commercial partner was a result of a compromise to the partner’s email server and the DFIN incident was, the Company believes, the result of a compromised login credential, each of which allowed unauthorized viewing of client information on that system. In each incident, the Company believes the unauthorized access was limited to that system. The Company has contacted, and, in the future will contact, impacted customers as appropriate with respect to all cyber incidents.

The Company’s customers and employees have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate login credentials, including passwords, or to introduce viruses or other malware programs to its information systems, the information systems of its vendors or third-party service providers and/or its customers' computers. Though the Company endeavors to mitigate these threats through product improvements, use of encryption and authentication technology and customer and employee education, such cyber attacks against the Company or its vendors and third-party service providers remain a serious issue. Further, to access the Company’s services and products, the Company’s customers use personal electronic devices that are beyond DFIN’s security control systems. Techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and generally are not recognized until launchedexecuted against a target. LikeConsistent with all software solutions, ourDFIN’s software may be vulnerable to these types of attacks. Breaches and other inappropriate access can be difficult to detect and any delay in identifying them could increase their harm. An attack of this type could disrupt the proper functioning of ourthe Company’s software solutions, cause errors in the output of our clients’ work, allow unauthorized access to sensitive, proprietary or confidential information of ours or our clients and other undesirable or destructive outcomes.

As a result of these types of risks and attacks, the Company has implemented and continuously reviews and updates systems, processes and procedures to protect against unauthorized access to or use of data and to prevent data loss. For example, in 2019 the Company refreshed relevant security standards to reflect changes in current security threats, increased the number of cyber security resources monitoring DFIN systems for cyber threats, enhanced intrusion and detection capabilities and refreshed mandatory information security awareness training content, including awareness around phishing. However, the ever-evolving threats mean the Company and its third-party service providers and vendors must continually evaluate and adapt their respective systems and processes and overall security environment. There is no guarantee that these measures will be adequate to safeguard against all data security breaches, system compromises or misuses of data.

Furthermore, ourDFIN’s systems allow usthe Company to share information that may be confidential in nature to ourits clients across ourthe Company’s offices worldwide. This design allows usthe Company to increase global reach for ourits clients and increase ourits responsiveness to client demands, but also increases the risk of a security breach or a leak of such information becauseas it allows additional points of access to information by increasing the number of employees and facilities working on certain jobs. In addition, ourDFIN’s systems leverage third party outsourcing arrangements, which expedites ourthe Company’s responsiveness but exposes information to additional access points. If an actual or perceived information leak or breach of our security were to occur, ourthe Company’s reputation could suffer, clients could stop using our products andDFIN’s services and weproducts offerings, the Company could have to respond to document requests from government agencies and customers and it could face lawsuits and potential liability, any of which could cause ourDFIN’s financial performance to be negatively impacted. The Company has incurred, and expects to continue to incur, expenses to prevent, investigate and remediate security breaches and vulnerabilities, including deploying additional personnel and protection technologies, training employees and engaging third-party experts and consultants. Though we maintainthe Company maintains professional liability insurance that includes coverage if a cybersecurity incident were to occur, there can be no assurance that insurance coverage will be available, responsive, or that the available coverage will be sufficient to cover losses and claims related to any cybersecurity incidents wethe Company may experience.

A number of core processes, such as software development, sales and marketing, client service and financial transactions, rely on ourDFIN’s IT infrastructure and applications. Defects or malfunctions in ourthe Company’s IT infrastructure and applications could cause ourDFIN’s services and products and services offerings not to perform as our clients expect, which could harm ournegatively impact the Company’s reputation and business. In addition, malicious software, sabotage and other cybersecurity breaches of the types described above could cause an outage of ourin DFIN’s infrastructure, which could lead to a substantial denialdelay of service and ultimately downtimes, recovery costs and client claims, any of which could negatively impact ourthe Company’s results of operations, financial position and cash flow.

Some of ourDFIN’s systems and services are developed by third parties or supported by third party hardware and software and oursoftware. The Company’s business and reputation could suffer if these third party systems and services fail to perform properly or are no longer available to us.the Company.

Some of ourDFIN’s systems and services are developed by third parties or rely on hardware purchased or leased and software licensed from third parties. These systems and services, or the hardware and software required to run ourthe Company’s existing systems and services, may not continue to be available on commercially reasonable terms or at all. Any loss of the right to use any of this hardware or software could result in delays in the provisioning of ourDFIN’s services, which could negatively affect ourthe Company’s business until equivalent technology is either developed by usthe Company or, if available, is identified, obtained and integrated. In addition, it is possible that ourthe Company’s hardware vendors or the licensors of third party software could increase thetheir prices, they charge, which could have an adverse impact on ourDFIN’s business, operating results and financial condition. Further, changing hardware vendors or software licensors could detract from management’s ability to focus on the ongoing operations of ourthe Company’s business or could cause delays in the operations of ourthe business.

Additionally, third party software underlying ourDFIN’s services can contain undetected errors or bugs, or be susceptible to cybersecurity breaches described above. WeThe Company may be forced to delay commercial release of ourits services until any discovered problems are corrected and, in some cases, may need to implement enhancements or modifications to correct errors that we dothe Company does not detect until after deployment of ourits services.

Increasing regulatory focus on privacy issues and expanding laws could impact ourDFIN’s software products and expose usthe Company to increased liability.

Privacy and data security laws apply to ourDFIN’s various businesses in all jurisdictions in which we operate.the Company operates. In particular, clients use ourDFIN’s software services, including Venue, datarooms, to share personal data and information on a confidential basis, and such sharing may be subject to privacy and data security laws. OurDFIN’s global business operates in countries that have more stringent data protection laws than those in the United States. These data protection laws may be inconsistent across jurisdictions and are subject to evolving and differing interpretations. New laws, such as the General Data Protection Regulation (“GDPR”) expected to goGDPR which went into effect in May 2018 in Europe, and industry self-regulatory codes have been or are being enacted to protect personal data. Complying with these regulations has been, and will continue to be, costly, and there are or will be significant penalties for failure to comply with these regulations, including significant penalties for failing to comply with GDPR. Further, any perception of ourDFIN’s practices, products or services as a violation of individual privacy rights may subject usthe Company to public criticism, class action lawsuits, reputational harm, or investigations or claims by regulators, industry groups or other third parties, all of which could disrupt ourDFIN’s business and expose usthe Company to liability.

Transferring personal data and information across international borders is becoming increasingly complex. For example, Europe has stringent regulations regarding transfer of personal data and information. The mechanisms that weDFIN and many other companies rely upon for data transfers from Europe to the United States (e.g., Privacy Shield and Model Clauses) are being contested in the European court systems. We areThe Company is closely monitoring developments related to requirements for transferring personal data and information. These requirements may result in an increase in the obligations required to provide ourDFIN’s services in the EU or in sanctions and fines for non-compliance. Several other countries, including Australia and Japan, have also established specific legal requirements for cross-border transfers of personal information. These developments in Europe and elsewhere could harm ourDFIN’s business, financial condition and results of operations.

Adverse credit market conditions may limit our ability to obtain future financing.

We may, from time to time, depend on access to credit markets. Uncertainty and volatility in global financial markets may cause financial markets institutions to fail or may cause lenders to hoard capital and reduce lending. As a result, we may not obtain financing on terms and conditions that are favorable to us, or at all.

Fluctuations in the costs and availability of paper, ink, energy and other raw materials may adversely impact us.the Company.

Increases in the costs of these inputs may increase ourDFIN’s costs and wethe Company may not be able to pass these costs on to clients through higher prices. Moreover, rising raw materials’materials costs, and any consequent impact on our pricing, could lead to a decrease in demand for our productsDFIN’s services and services.products.

If we arethe Company is unable to protect ourits proprietary technology and other rights, the value of ourDFIN’s business and ourits competitive position may be impaired.

If we arethe Company is unable to protect ourits intellectual property, ourthe Company’s competitors could use ourits intellectual property to market productsservices and servicesproducts similar to ours,DFIN’s, which could decrease demand for ourits services. We relyThe Company relies on a combination of patents, trademarks, licensing and other proprietary rights laws, as well as third party nondisclosure agreements and other contractual provisions and technical measures, to protect ourits intellectual property rights. These protections may not be adequate to prevent our competitors from copying or reverse-engineering ourDFIN’s technology and services to create similar offerings. Additionally, any of ourDFIN’s pending or future patent applications may not be issued with the scope of protection we seek,the Company seeks, if at all. The scope of patent protection, if any, wethe Company may obtain from our patent applications is difficult to predict and ourthe patents may be found invalid, unenforceable or of insufficient scope to prevent competitors from offering similar services. OurDFIN’s competitors may independently develop technologies that are substantially equivalent or superior to ourthe Company’s technology. To protect ourDFIN’s proprietary information, we requirethe Company requires employees, consultants, advisors, independent contractors and collaborators to enter into confidentiality agreements and maintain policies and procedures to limit access to ourthe Company’s trade secrets and proprietary information. These agreements and the other actions we take may not provide meaningful protection for ourDFIN’s proprietary information or know-how from unauthorized use, misappropriation or disclosure. Further, existing patent laws may not provide adequate or meaningful protection in the event competitors independently develop technology, products or services similar to ours.DFIN’s. Even if the laws governing intellectual property rights provide protection, wethe Company may have insufficient resources to take the legal actions necessary to protect ourits interests. In addition, ourDFIN’s intellectual property rights and interests may not be afforded the same protection under the laws of foreign countries as they are under the laws of the United States.

DFIN’s business is dependent upon brand recognition and reputation, and the failure to maintain or enhance the Company’s brand or reputation would likely have an adverse effect on its business.

DFIN’s brand recognition and reputation are important aspects of the Company’s business. Maintaining and further enhancing DFIN’s brands and reputation will be important to retaining and attracting clients for DFIN’s products. The Company also believes that the importance of DFIN’s brand recognition and reputation for products will continue to increase as competition in the market for DFIN’s products and industry continues to increase. The Company’s success in this area will be dependent on a wide range of factors, some of which are beyond the Company’s control, including the efficacy of the Company’s marketing efforts, its ability to retain existing and obtain new clients and strategic partners, human error, the quality and perceived value of DFIN’s services and products offerings, actions of the Company’s competitors and positive or negative publicity. Damage to the Company’s reputation and loss of brand equity may reduce demand for DFIN’s services and products offerings and negatively impact its results of operations, financial position and cash flow.

WeThe Company may be unable to hire and retain talented employees, including management.

DFIN’s success depends, in part, on its general ability to attract, develop, motivate and retain highly skilled employees. The loss of a significant number of employees or the inability to attract, hire, develop, train and retain additional skilled personnel could have a serious negative effect on DFIN’s business. Management believes the Company’s ability to retain its client base and to attract new clients is directly related to DFIN’s sales force and client service personnel, and if the Company cannot retain these key employees, its business could suffer. In addition, many members of DFIN’s management have significant industry experience that is valuable to competitors. The Company expects that its executive officers will have non-solicitation agreements contractually prohibiting them from soliciting clients and employees within a specified period of time after they leave DFIN. If one or more members of the senior management team leave and cannot be replaced with a suitable candidate quickly, the Company could experience difficulty in managing its business properly, which could negatively impact its results of operations, financial position and cash flow.

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

DFIN provides health care and other benefits to both employees and retirees. For many years, costs for health care have increased more rapidly than general inflation in the U.S. economy. If this trend in health care costs continues, the cost to provide such benefits could increase, adversely impacting profitability. Changes to health care regulations in the U.S. and internationally may also increase cost of providing such benefits.

Changes in market conditions, changes in discount rates, or lower returns on assets may increase required pension and other post-retirement benefit plan contributions in future periods.

The funded status of DFIN’s pension and other post-retirement benefits plans is dependent upon many factors, including returns on invested assets and the level of certain interest rates. As experienced in prior years, declines in the market value of the securities held by the plans coupled with historically low interest rates have substantially reduced, and in the future could further reduce, the funded status of the plans. These reductions may increase the level of expected required pension and other post-retirement benefit plan contributions in future years. Various conditions may lead to changes in the discount rates used to value the year-end benefit obligations of the plans, which could partially mitigate, or worsen, the effects of lower asset returns. If adverse conditions were to continue for an extended period of time, the Company’s costs and required cash contributions associated with pension and other post-retirement benefit plans may substantially increase in future periods.

The Company is exposed to risks related to potential adverse changes in currency exchange rates.

The Company is exposed to market risks resulting from changes in the currency exchange rates of the currencies in the countries in which it does business. Although operating in local currencies may limit the impact of currency rate fluctuations on the operating results of non-U.S. activities, fluctuations in such rates may affect the translation of these results into DFIN’s financial statements. To the extent borrowings, sales, purchases, net sales and expenses or other transactions are not in the applicable local currency, the Company may enter into foreign currency spot and forward contracts to hedge the currency risk. Management cannot be sure, however, that its efforts at hedging will be successful, and such efforts could, in certain circumstances, lead to losses.

There are risks associated with operations outside the United States.

The Company has operations outside the United States. DFIN works with capital markets clients around the world, and in 2019 the International segment accounted for 13% of DFIN’s net sales. The Company’s operations outside of the United States are primarily focused in Europe, Asia, Canada and Latin America. As a result, the Company is subject to the risks inherent in conducting business outside the United States, including:

The Company cannot be sure that its investments or operations in other countries will produce desired levels of net sales or that one or more of the factors listed above will not affect the Company’s global business.

The Company has in the past acquired and intendmay in the future to acquire other businesses, and weit 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 ourDFIN’s 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 wethe Company 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 the day-to-day operations of the Company. In addition, the process of integrating operations may cause an interruption of, or loss of momentum in, the activities of one or more of the Company’s businesses and the loss of key personnel from the Company or the acquired businesses. Further, employee uncertainty and lack of focus during the integration process may disrupt the businesses of the Company or the acquired businesses. The Company’s strategy is, in part, predicated on the Company’s ability to realize cost savings and to increase net sales through the acquisition of businesses that add to the breadth and depth of the Company’s products and services. Achieving these cost savings and net sales increases is dependent upon a number of factors, many of which are beyond the Company’s control. In particular, the Company 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.

Our business is dependent upon brand recognition and reputation, and the failure to maintain or enhance our brand or reputation would likely have an adverse effect on our business.

Our brand recognition and reputation are important aspects of our business. Maintaining and further enhancing our brands and reputation will be important to retaining and attracting clients for our products. We also believe that the importance of our brand recognition and reputation for products will continue to increase as competition in the market for our products and industry continues to increase. Our success in this area will be dependent on a wide range of factors, some of which are out of our control, including the efficacy of our marketing efforts, our ability to retain existing and obtain new clients and strategic partners, human error, the quality and perceived value of our products and services, actions of our competitors and positive or negative publicity. Damage to our reputation and loss of brand equity may reduce demand for our products and services and negatively impact our results of operations, financial position and cash flow.

We may be unable to hire and retain talented employees, including management.

Our success depends, in part, on our general ability to attract, develop, motivate and retain highly skilled employees. The loss of a significant number of our employees or the inability to attract, hire, develop, train and retain additional skilled personnel could have a serious negative effect on our business. We believe our ability to retain our client base and to attract new clients is directly related to our sales force and client service personnel, and if we cannot retain these key employees, our business could suffer. In addition, many members of our management have significant industry experience that is valuable to our competitors. We expect that our executive officers will have non-solicitation agreements contractually prohibiting them from soliciting our clients and employees within a specified period of time after they leave Donnelley Financial. If one or more members of our senior management team leave and cannot be replaced with a suitable candidate quickly, we could experience difficulty in managing our business properly, which could negatively impact our results of operations, financial position and cash flow.

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 both employees and retirees. For many years, 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 could increase, adversely impacting our profitability. Changes to health care regulations in the U.S. and internationally may also increase our cost of providing such benefits.

Changes in market conditions, changes in discount rates, or lower returns on assets may increase required pension and other post-retirement benefits plan contributions in future periods.

The funded status of our pension and other post-retirement benefits plans is dependent upon many factors, including returns on invested assets and the level of certain interest rates. As experienced in prior years, declines in the market value of the securities held by the plans coupled with historically low interest rates have substantially reduced, and in the future could further reduce, the funded status of the plans. These reductions may increase the level of expected required pension and other post-retirement benefits plan contributions in future years. Various conditions may lead to changes in the discount rates used to value the year-end benefit obligations of the plans, which could partially mitigate, or worsen, the effects of lower asset returns. If adverse conditions were to continue for an extended period of time, our costs and required cash contributions associated with pension and other post-retirement benefits plans may substantially increase in future periods.

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

We are exposed to market risks resulting from changes in the currency exchange rates of the currencies in the countries in which we do business. Although operating in local currencies may limit the impact of currency rate fluctuations on the operating results of our non-U.S. activities, fluctuations in such rates may affect the translation of these results into our financial statements. To the extent borrowings, sales, purchases, net sales and expenses or other transactions are not in the applicable local currency, we may enter into foreign currency spot and forward contracts to hedge the currency risk. Management cannot be sure, however, that our efforts at hedging will be successful, and such efforts could, in certain circumstances, lead to losses.

There are risks associated with operations outside the United States.

We have operations outside the United States. We work with capital markets clients around the world, and in 2017 our International segment accounted for 16% of our consolidated net sales. Our operations outside of the United States are primarily focused in Europe, Asia, Canada and Latin America. As a result, we are subject to the risks inherent in conducting business outside the United States, including:

We cannot be sure that our investments or operations in other countries will produce desired levels of net sales or that one or more of the factors listed above will not affect our global business.

OurCompany’s reliance on strategic partnerships as part of ourits business strategy may adversely affect the development of ourDFIN’s business in those areas.

OurThe Company’s business strategy includes pursuing and maintaining strategic partnerships in order to facilitate ourits entry into adjacent lines of business. This approach may expose usthe Company to risk of conflict with ourits strategic arrangement partners and the need to divert management resources to oversee these partnership arrangements. Further, as these arrangements require cooperation with third party partners, these strategic arrangements may not be able to make decisions as quickly as weDFIN would if we wereit was operating on ourits own or may take actions that are different from what wethe Company would do on a standalone basis in light of the need to consider ourDFIN partners’ interests. As a result, wethe Company may be less able to respond timely to changes in market dynamics, which could have a material adverse effect on ourits business, financial condition and results of operations.

The ongoing effects of the Tax Act and the refinement of provisional estimates could make our results difficult to predict.

Our effective tax rate may fluctuate in the future as a result of the Tax Act, which was enacted on December 22, 2017. The Tax Act introduces significant changes to U.S. income tax law that will have a meaningful impact on our provision for income taxes. Accounting for the income tax effects of the Tax Act requires significant judgments and estimates in the interpretation and calculations of the provisions of the Tax Act.

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded provisional amounts in our financial statements for the year ended December 31, 2017. The U.S. Treasury Department, the IRS, and other standard-setting bodies may issue guidance on how the provisions of the Tax Act will be applied or otherwise administered that may be different from our interpretation. As we collect and prepare necessary data, and interpret the Tax Act and any additional guidance issued by the IRS or other standard-setting bodies, we may make adjustments to the provisional amounts that could materially affect our financial position and results of operations as well as our effective tax rate in the period in which the adjustments are made.

The Company has no unresolved written comments from the SEC staff regarding its periodic or current reports under the Securities Exchange Act of 1934.

None.

The Company’s corporate office is located in leased office space at 35 West Wacker Drive, Chicago, Illinois, 60601. As of December 31, 2017,2019, the Company leased or owned 4740 U.S. facilities, some of which had multiple buildings and warehouses, and these U.S. facilities encompassed approximately 1.41.3 million square feet. The Company leased 2522 international facilities, some of which had multiple buildings and warehouses, encompassing approximately 0.1 million square feet in Europe, Asia, Canada and Latin America. Of the Company’s U.S. and internationalworldwide facilities, approximately 0.40.3 million square feet of space was owned, while the remaining 1.1 million square feet of space was leased.

For a discussion of certain litigation involving the Company, see Note 9,13, Commitments and Contingencies, to the Consolidated and Combined Financial Statements.

Not applicable.

PART II

Principal Market

Donnelley Financial’sDFIN’s common stock began regular-way“regular-way” trading under the ticker symbol “DFIN” on the New York Stock Exchange (“NYSE”) on October 3, 2016. Below areThe following table sets forth, for the periods indicated, the range of the high and low market price per share ofclosing prices for the Company’s common stock as reported onby the NYSE, during the year ended December 31, 2017 and the fourth quarter of 2016.NYSE:

Stockholders

As of February 23, 2018,20, 2020, there were 4,8374,200 stockholders of record of the Company’s common stock.

DividendsIssuer Purchases of Equity Securities

We have not paid any cash dividends

Common Stock Repurchases—On February 4, 2020, the Board of Directors (the “Board”) authorized a stock repurchase program, under which the Company is authorized to repurchase up to $25.0 million of its outstanding common stock from time to time in one or more transactions on the open market or in privately negotiated purchases in accordance with all applicable securities laws and we currently do not anticipate paying any cash dividendsregulations and all repurchases in the foreseeable future.

Issuer Purchases Of Equity Securities

There were no repurchasesopen market will be made in compliance with Rule 10b-18 under the Exchange Act. The timing and amount of equity securities duringany shares repurchased will be determined by the three months endedCompany based on its evaluation of market conditions and other factors. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The stock repurchase program will be effective through December 31, 2017.2021, however, it may be suspended or discontinued at any time.

Equity Compensation Plans

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

Report.

PEER PERFORMANCE TABLE

The following graph compares the cumulative total shareholder return on Donnelley Financial’sDFIN’s common stock from October 3, 2016, when “regular way”“regular-way” trading in Donnelley Financial’sDFIN’s common stock began on the NYSE, through December 31, 2017,2019, with the comparable cumulative return of the Standard & Poor’s (“S&P”) SmallCap 600 Index and a selected peer group of companies. The comparison assumes all dividends have been reinvested and an initial investment of $100 on October 3, 2016. The returns of each company in the peer group have been weighted to reflect their market capitalizations. The stock price performance on the following graph is not necessarily indicative of future stock price performance.

Below are the specific companies included in the peer group.

___________

This performance graph and other information furnished under this Part II Item 5 of this Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.

SELECTED FINANCIAL DATA

(in millions, except per share data)

For periods prior to the Separation, basic and diluted earnings per share were calculated using the number of shares distributed and retained by RRD, totaling 32.4 million. The same number of shares was used to calculate basic and diluted earnings per share since there were no Donnelley FinancialDFIN equity awards outstanding prior to the spin-off.

ReflectsThe above table reflects results of acquired businesses from the relevant acquisition dates.

Includesdates and includes the following significant items:

The following discussion of Donnelley Financial’sDFIN’s financial condition and results of operations should be read together with other sections of this Annual Report, including “Item 1. Business,” “Item 6. Selected Financial Data” and the consolidated and combined financial statements and notes to those statements included in Item 15this Annual Report.

This Management’s Discussion and Analysis of Part IV, Exhibits, Financial Statement Schedules,Condition and Results of Operations contains a number of forward-looking statements, all of which are based on the Company’s current expectations and could be affected by the uncertainties and other factors described throughout this Annual Report on Form 10-K.and particularly in “Item 1A. Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

Business

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

The Company separately reports its net sales and related cost of sales for its productsservices and servicesproducts offerings. The Company’s services offerings consist of all non-print offerings, including document composition, compliance relatedcompliance-related EDGAR filing services, transaction solutions, and the Company’s SaaS solutions, including Venue, FundSuiteArc, ActiveDisclosure and data and analytics, content storage services and language solutions.others. The Company’s product offerings primarily consist of conventional and digital printed products and related distributionshipping costs.

Spin-off Transaction

On October 1, 2016, Donnelley FinancialDFIN became an independent publicly traded company through the distribution by RRD of approximately 26.2 million shares, or 80.75%, of Donnelley FinancialDFIN common stock to RRD shareholders (the “Separation”).shareholders. Holders of RRD common stock received one share of Donnelley FinancialDFIN common stock for every eight shares of RRD common stock held on September 23, 2016. As part of the Separation, RRD retained approximately 6.2 million shares of Donnelley FinancialDFIN common stock, or a 19.25% interest (asin DFIN, of the separation date)which 6.1 million shares and 0.1 million shares were subsequently sold in Donnelley Financial, as part of the Separation.June 2017 and August 2017, respectively.

Donnelley Financial’sDFIN’s common stock began regular-way“regular-way” trading under the ticker symbol “DFIN” on the New York Stock Exchange on October 3, 2016. On October 1, 2016, RRD also completed the previously announced separation of LSC, its publishing and retail-centric print services and office products business. On March 28, 2017, RRD completed the sale of 6.2 million shares of LSC common stock (RRD’s remaining ownership stake in LSC) in an underwritten public offering. As a result, beginning in the quarter ended June 30, 2017, LSC no longer qualified as a related party of the Company.

On March 24, 2017, pursuant to the Stockholder and Registration Rights Agreement, the Company filed a Registration Statement on Form S-1 to register the offering and sale of the Company’s common stock retained by RRD. The Registration Statement on Form S-1, as amended, was declared effective by the SEC on June 13, 2017. On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. RRD retained approximately 0.1 million shares of the Company’s common stock upon consummation of the offering which were subsequently sold by RRD on August 4, 2017. In conjunction with the underwritten public offering, the underwriters exercised their option to purchase approximately 0.9 million Option Shares from the Company. The Company received approximately $18.8 million in net proceeds from the sale of the Option Shares, after deducting estimated underwriting discounts and commissions. The proceeds were used to reduce outstanding debt under the Revolving Facility (as defined in Liquidity and Capital Resources).  

Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party, therefore amounts disclosed related to RRD are presented through June 30, 2017 only.

Executive Overview

20172019 Overview

Net sales increaseddecreased by $21.4$88.3 million, or 2.2%9.2%, in 20172019 compared to 2016.  There was2018, including a $1.8$41.8 million, or 0.2%4.3%, decrease due to the impact of the sale of the Language Solutions business in July 2018 and a $3.0 million decrease due to changes in foreign exchange rates. NetThe remaining decline in net sales increasedwas primarily due to higherlower capital markets transactions and compliance volumes, which was partially offset by growth in SaaS solutions, primarily in ActiveDisclosure and FundSuiteArc, growth in mutual funds,fund print volumes and the impact from the acquisition of eBrevia.

Income from operations for the year ended December 31, 2019 decreased $42.6 million, or 35.2%, to $78.5 million from $121.1 million for the year ended December 31, 2018, primarily due to the $53.8 million gain on sale of the Language Solutions business recognized during the year ended December 31, 2018, partially offset by the $19.2 million net gain recognized from the sale of a building during the year ended December 31, 2019. The remaining decrease in income from operations was driven by lower capital markets transactions and compliance virtual data room services, translations servicesvolumes, as well as higher restructuring, impairment and content management,other charges, partially offset by lower volumesspin-off related transaction expenses, disposition-related expenses and incentive compensation expense, as well as growth in capital markets transactionsthe Company’s SaaS offerings and healthcare.mutual fund print volume.

OUTLOOKOutlook

In 2018,2020, the Company expects net sales to increase slightly primarily duebe relatively flat, as compared to 2019, with the Company’s SaaS portfolio providing top line growth, offset by a decline in software offerings.print-related services and products sales in both Capital Markets and Investment Markets. Accordingly, the Company also expects margin improvement in 2020 from mix and cost control actions. The Company’s outlook assumes a stable capital markets environment andCompany does not expect foreign exchange rates to have a significant impact on results.

In 2018, the Company will adopt Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The Company evaluated the impacts of ASU 2014-09 and does not expect a material change in the timing of revenue recognition for the majority of the Company’s revenue.  Revenue recognition will be accelerated for certain arrangements with multiple performance obligations as revenue will be recognized upon the completion of each performance obligation rather than upon final delivery of the printed product.  The Company also expects to accelerate the recognition of revenue for certain inventory which has been invoiced but not yet shipped at the customer’s request. Additionally, certain revenues related to virtual data room services will be deferred as a result of the new standard. Refer to Note 20, New Accounting Pronouncements, to the consolidated and combined financial statements for further detail.

The Company initiated several restructuring actions in 2016 and 2017 to further reduce the Company’s overall cost structure. These restructuring actions included the reorganization of certain functions. These actions, as well as planned actions for 2018, are expected to have a positive impact on operating earnings in 2018 and in future years.

Cash flows from operations in 20182020 are expected to benefit from cost control actions and significantly lower cash interest expense and a lower U.S. corporate income tax rate.expense. The Company expects capital expenditures to be in the range of $40.0 million to $45.0approximately $35.0 million in 2018,2020, as compared to $27.8$44.8 million in 2017.2019.

Financial Review

In the financial review that follows, the Company discusses its consolidated results of operations, cash flows and certain other information. This discussion should be read in conjunction with the Company’s consolidated financial statements and the related notes.

The Company expectsCompany’s Annual Report on Form 10-K for the year ended December 31, 2018 includes a discussion and analysis of the Company’s financial condition and results of operations for the year ended December 31, 2017 and year-to-year comparisons of 2018 and 2017, which are not included in this Annual Report, in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Results of Operations for the Year Ended December 31, 2019 as Compared to continuethe Year Ended December 31, 2018

The following table shows the results of operations for the years ended December 31, 2019 and 2018:

Consolidated

Net sales of services for the year ended December 31, 2019 decreased $64.0 million, or 10.4%, to incur$554.0 million versus the year ended December 31, 2018, including a significant amountdecrease of $41.8 million, or 6.8%, due to the July 2018 sale of the Language Solutions business and a $2.4 million decrease due to changes in foreign exchange rates. In addition, net sales of services decreased due to lower capital markets transactions and compliance volumes, partially offset by growth in SaaS solutions, primarily in ActiveDisclosure and FundSuiteArc, as well as impact from the acquisition of eBrevia.

Net sales of products for the year ended December 31, 2019 decreased $24.3 million, or 7.0%, to $320.7 million versus the year ended December 31, 2018, including a $0.6 million decrease due to changes in foreign exchange rates. Net sales of products decreased due to lower volumes in capital markets transactions and commercial print volumes, partially offset by higher mutual fund print volumes.

Services cost of sales decreased $44.0 million, or 13.4%, to $284.8 million for the year ended December 31, 2019, versus the year ended December 31, 2018, primarily due to the impact from the sale of the Language Solutions business. In addition, services cost of sales decreased due to lower capital markets transactions and compliance volumes and the impact of cost control initiatives. As a percentage of net services sales, services cost of sales decreased 1.8%, primarily due to favorable mix.

Products cost of sales decreased $0.9 million, or 0.3%, to $257.6 million for the year ended December 31, 2019, versus the year ended December 31, 2018. Products cost of sales decreased due to lower capital markets transactions and commercial print volumes as well as cost control initiatives, partially offset by higher mutual fund print volumes. As a percentage of net product sales, products cost of sales increased 5.4%, primarily due to unfavorable mix.

SG&A expenses for the year ended December 31, 2019 decreased $52.4 million, or 20.3%, to $205.8 million, as compared to the year ended December 31, 2018, primarily due to cost control initiatives, lower spin-off related transitionand disposition-related expenses, inlower selling expenses as a result of lower volume, and the impact from the sale of the Language Solutions business. As a percentage of net sales, SG&A expenses decreased from 26.8% for the year ended December 31, 2018 including information technologyto 23.5% for the year ended December 31, 2019.

Restructuring, impairment and other expenses.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation into Federal law referred to as the Tax Act.  The Tax Act includes a number of provisions that are effective January 1, 2018, including the lowering of the U.S. corporate income tax rate from the maximum 35% to a flat 21% and eliminating the corporate alternative minimum tax (AMT). The Tax Act also includes provisions that may partially offset the benefit of such rate reduction, including repeal of Section 199 (the deduction for domestic production activities) and limitations on certain deductions, such ascharges, net interest expense and certain employee remuneration. The Tax Act changes the current U.S. worldwide system of taxation by establishing a territorial-style system for taxing foreign-source income of domestic multinational corporations.  This allows U.S. companies to repatriate future foreign source earnings without additional U.S taxes by providing a 100% exemption for the foreign source portionyear ended December 31, 2019, totaled $13.6 million compared to $4.4 million for the year ended December 31, 2018, an increase of dividends from certain foreign subsidiaries. In order to transition to the territorial tax system, the Act requires companies to pay a one-time mandatory tax (“the transition tax”) on certain accumulated unremitted earnings$9.2 million. The increase was primarily driven by $9.1 million of foreign subsidiaries, with an option to pay over eight years. The Company estimated its transition tax liabilityemployee termination costs for 271 employees, substantially all of whom were terminated as of December 31, 2017 to be $14.2 million (which includes $0.62019. For the year ended December 31, 2018, the Company incurred $3.4 million of employee termination costs for 89 employees, all of whom were terminated as of December 31, 2019. These restructuring charges in both periods primarily related to the reorganization of certain operations and certain administrative functions. Additionally, the Company recognized a $2.0 million impairment charge related to an equity investment during the year ended December 31, 2019.

Depreciation and amortization for the year ended December 31, 2019 increased $3.8 million, or 8.3%, to $49.6 million compared to the year ended December 31, 2018. Depreciation and amortization included $14.3 million and $13.7 million of amortization of other intangible assets for the years ended December 31, 2019 and 2018, respectively.

Other operating income for the year ended December 31, 2019 included a $19.2 million net gain recognized from the sale of a building, partially offset by a $4.0 million loss recognized in 2019 related to the 2018 disposition of the Language Solutions business. Other operating income for the year ended December 31, 2018 included a $53.8 million gain recognized on the sale of the Language Solutions business.

Income from operations for the year ended December 31, 2019 decreased $42.6 million, or 35.2%, to $78.5 million from $121.1 million for the year ended December 31, 2018, primarily due to the $53.8 million gain on sale of the Language Solutions business recognized during the year ended December 31, 2018, partially offset by the $19.2 million net gain recognized from the sale of a building during the year ended December 31, 2019. The remaining decrease in income from operations was driven by lower capital markets transactions and compliance volumes, as well as higher restructuring, impairment and other charges, partially offset by lower spin-off related transaction expenses, disposition-related expenses and incentive compensation expense, as well as growth in the Company’s SaaS offerings and mutual fund print volume.

Net interest expense increased by $1.4 million for the year ended December 31, 2019, to $38.1 million, versus the year ended December 31, 2018, primarily due to a loss on extinguishment of debt of $4.1 million, partially offset by a decrease in average outstanding debt. Refer to Liquidity and Capital Resources for further discussion.

Net investment and other income for the year ended December 31, 2019 of $11.7 million primarily consisted of a $13.6 million gain related to an equity investment, partially offset by $1.8 million of non-cash pension expense. Net investment and other income for the year ended December 31, 2018 primarily consisted of an $11.8 million gain related to an equity investment and net pension plan income.

The effective income tax rate was 27.8% for the year ended December 31, 2019 compared to 28.3% for the year ended December 31, 2018. The 2019 effective income tax rate was impacted by favorable return to provision adjustments primarily related to foreign-derived intangible income, state and local income taxes and income tax liabilities that could becredits, partially offset by increases in valuation allowances and non-deductible expenses. Refer to Note 15, Income Taxes, for further details.

Information by Segment

The following tables summarize net sales, income (loss) from operations and certain items impacting comparability within each of the operating segments and Corporate.

U.S.

Net sales for the U.S. segment for the year ended December 31, 2019 were $761.4 million, a decrease of $50.4 million, or 6.2%, compared to the year ended December 31, 2018. Net sales decreased due to lower capital markets transaction volumes, the sale of the Language Solutions business and lower volumes in capital markets compliance and commercial print, partially offset by growth in SaaS solutions, primarily ActiveDisclosure, FundSuiteArc and the acquisition of eBrevia. An analysis of net sales by reporting unit follows: