UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

OR

Commission file number 1-4694

R. R. DONNELLEY & SONS COMPANY

(Exact name of registrant as specified in its charter)

(312) 326-8000

(Registrant’s telephone number, including area code—(312) 326-8000code)

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

IndicatedIndicate 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 (§229.405 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐    

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

The aggregate market value of the shares of registrant’s common stock held by non-affiliates based on the sale price of the common stock on June 30, 20172019 was $866,581,829.$137,855,455.

As of February 22, 2018, 70,083,91521, 2020, 70,911,552 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 17, 201814, 2020 are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

PART I

Company Overview

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

Competitive Strategy

Our key strategic focus areas, which leverage our long-standing client relationships and comprehensive portfolio of capabilities, allow us to focus on the following key strategies:are as follows:

Segment Descriptions

Our reportable segments and where applicable, operating segments, their solutions and product and service offerings are summarized below.

Variable PrintBusiness Services

Our Business Services segment provides customized solutions at scale to help clients inform, service and transact with their customers. The Variable Print segment includes our U.S. short-runsegment’s primary product and transactional printing operations and includes the following reporting units:service offerings include commercial and digital print, direct mail, labels,logistics, packaging, statement printing, labels, supply chain management, forms and forms.business process outsourcing. This segment also includes all of our operations in Asia, Canada, Europe and Latin America. In 2017, the Variable Print2019, our Business Services segment accounted for 44.9%79.6% of our consolidated net sales.

Commercial and Digital Print

We provide various commercial printing products and print-related services. These services consistoffer a full range of traditional print services,branded materials including electronic prepress, digitalmanuals, publications, brochures, business cards, flyers, post cards, posters and offset printing, finishing, storage and delivery of high-quality printed documents which are custom manufactured to our clients’ design specifications. Our Print Fulfillment and Distribution solution allows us to combine Just-In-Time and Digital Print-On-Demand product with off-the-shelf inventory through a national platform of networked facilities in quantities and timeframes desired by the end user. Additionally, our product offerings include packaging, structural engineering and prototyping services, as well as in-store marketing, including in-store signage and point-of-purchase displays. We partner with our clients to help them re-imagine their in-store experience by providing creative and design services in order to present innovative, new ideas for complete store design or individual merchandising materials.promotional items. Commercial and digital print accounted for 51.7%33.9% of the Variable Printour Business Services segment’s net sales for the fiscal year ended December 31, 2017.2019.

Direct MailLogistics

We provide specialized transportation and distribution services using our third party logistics solutions. These services are an industry leader in creatingcomprised of freight services, including truckload, less-than-truckload, intermodal and implementing fully integrated directinternational freight forwarding; international mail communications programs. We provide solutions ranging from guidance in overall copyrighting, design and print production to postal optimization strategies. We have a diverseparcel distribution; and comprehensive mail production platform with significant digital production capabilities. Our proprietary ProteusJet^SM imaging systems, customized softwarecourier services including same day and marketing strategies enable our clients to communicate to an audience of any size. We believe we are well positioned to meet our direct mail clients’ specific needs by offering cadenced, multiple touch mailings and multi-media communications such as websites, email and mobile contact. Through advanced data analytics, we assist our clients in targeting their customers to deliver the right message at the right time and through the right channel to their intended audience. Direct mailnext day delivery. Logistics accounted for 17.5%16.3% of the Variable Printour Business Services segment’s net sales for the fiscal year ended December 31, 2017.2019.

Packaging

We provide packaging solutions, ranging from rigid boxes to in-box print materials, for clients in consumer electronics, life sciences, cosmetics and consumer packaged goods industries. Packaging accounted for 13.4% of our Business Services segment’s net sales for the year ended December 31, 2019.

Statements

We create critical business communications, including customer billings, financial statements, healthcare communications and insurance documents. Our capabilities include design and composition, variable imaging, email, archival and digital mail interaction, as well as our innovative RRDigital solution set. Statements accounted for 10.9% of our Business Services segment’s net sales for the fiscal year ended December 31, 2019.

Labels

We produce custom labels for clients across multiple industries including warehouse and distribution, retail, pharmaceutical, manufacturing and consumer packaging. Our manufacturing capabilities provide a diverse product offering, includingWe offer distribution and shipping labels, healthcare and durable goods labels, promotional labels and consumer product goods packaging labels. Our network of production facilities enables the optimal combination of regional or national distribution for us. Labels accounted for 12.9%10.0% of the Variable Printour Business Services segment’s net sales for the fiscal year ended December 31, 2017.2019.

Statement PrintingSupply Chain Management

We enable enhanced relationships between ourprovide workflow design to assembly, configuration, kitting and fulfillment for clients in consumer electronics, telecommunications, life sciences, cosmetics, education and their customers by creating and managing critical business communications across multiple channels. These essential business communications include customer billing, financial statements, healthcare communications and insurance documents. We support these communications according to customer preferences allowing clients to benefit from our offerings via hosted managed services or with a fully outsourced solution. The breadthindustrial industries. Supply chain management accounted for 6.0% of our capabilities includes design and composition, variable imaging, email, archival, digital mail interaction, and payment services, as well as our innovative RRDigital solution set. Our platform, scale and breadth of offering combined with our technology and innovation provide our clients with low cost solutions that assist them in servicing their customers. Statement printing accounted for 12.4% of the Variable PrintBusiness Services segment’s net sales for the fiscal year ended December 31, 2017.2019.

Forms

We produce a variety of forms including invoices, order forms and other business forms that support both the private and public sectors. The primary industries we serve aresectors for clients in financial, government, retail, healthcare and business services. services industries. Forms accounted for 5.5% of the Variable Print segment’s net sales for the fiscal year ended December 31, 2017.

Strategic Services

The Strategic Services segment accounted for 25.4%4.9% of our consolidated net sales in 2017 and includes the following reporting units: logistics, sourcing and digital and creative solutions.

Logistics

Our logistics services consist of a portfolio of specialized transportation and distribution services targeting a number of unique industry verticals. Our worldwide business is a leading third party logistics provider that utilizes a leveraged platform and a nationwide sales network to offer clients a full suite of freight services, including truckload, less-than-truckload, intermodal and international freight forwarding. We are a leading international mail and parcel distributor with an extensive 200 country network of postal and foreign distribution partners that we manage to meet the unique requirements of international mailers. Domestically, we are a leading provider of print logistics services in the U.S., with the scale, technology and expertise in USPS® rules and regulations to maximize distribution savings for our mail clients. We are also a leading distributor of retail and newsstand print materials, utilizing a nationwide network of consolidation facilities to provide unique distribution solutions for a number of clients. We offer our print and mail clients access to proprietary technology that is designed to determine the most efficient and cost-effective method of shipping depending on their needs. Our integrated distribution management business, last mile, is an extensive nationwide courier network that offers customized same day and next day delivery solutions with optimized route planning and web-based tracking. We continue to leverage our unique courier capabilities to build a position in the growing last-mile delivery sector. Logistics accounted for 69.8% of the StrategicBusiness Services segment’s net sales for the fiscal year ended December 31, 2017.

Sourcing

We utilize ISO certified platforms to provide print management solutions including consulting and systems solutions to allow our clients to more efficiently and cost-effectively manage their print needs. We allow our clients to use our proprietary CustomBuy software for increased visibility, control and rationalization of expenditures, and consult our clients on supplier management, vendor consolidation and offshore production, as well as advising on paper management solutions and other cost optimization opportunities. We guide and support our clients with the development and fulfillment of promotional product strategies that meet their desired objectives within budgetary constraints. Sourcing accounted for 21.7% of the Strategic Services segment’s net sales for the year ended December 31, 2017.

Digital and Creative Solutions2019.

We utilize teams of photographers, videographers, web designers, writers, editors, designers and various digital experience experts who assist brands in creating, augmenting and managing content designed to speak directly to their targeted audiences. With our breadth of capabilities, we provide cost effective solutions to bring the creative concepts of our clients and their agencies to life. We assist our clients in facilitating a common creative approach to all of their communications needs, including print and digital advertising, direct marketing and direct mail design, packaging design, marketing and sales collateral and in-store marketing. We also advise on corporate communications and interactive experiences and services. Digital and creative solutions accounted for 8.5% of the Strategic Services segment’s net sales for the year ended December 31, 2017.

International

The International segment includes our non-U.S. printing operations in Asia, Canada, Latin America and Europe, as well as our Global Turnkey Solutions and business process outsourcing reporting units. This segment accounted for 29.7% of our consolidated net sales in 2017.

Asia

We are a strategically integrated network of eleven locations, which provides in-box materials, packaging, labels, and export and domestic book production to our major international clients. Asia accounted for 40.3% of the International segment’s net sales for the year ended December 31, 2017.

Global Turnkey Solutions

We provide complex supply chain management and outsourcing capabilities, including product configuration, packaging, customized kitting and order fulfillment for companies around the world through our operations in Europe, North America, and Asia. Global Turnkey Solutions accounted for 23.0% of the International segment’s net sales for the fiscal year ended December 31, 2017.

Business Process Outsourcing

We provide transactional print and outsourcing services including inbound and outbound document processing, creative services, research and analytics, financial management and other services for legal providers, insurance, telecommunications, utilities, retail and financial services companies. Business process outsourcing accounted for 18.7%4.6% of the Internationalour Business Services segment’s net sales for the fiscal year ended December 31, 2017.2019.

CanadaMarketing Solutions

Our Marketing Solutions segment leverages an integrated portfolio of data analytics, creative services and multichannel execution to deliver comprehensive, end-to-end solutions. The segment’s primary product and service offerings include direct marketing, in-store marketing, digital print, kitting, fulfillment, digital and creative solutions and list services. In 2019, our Marketing Solutions segment accounted for 20.4% of our consolidated net sales.

Direct Marketing

We provide commercial printing, statement printing, labels, forms, in-storeaudience segmentation, creative development, program testing, print production, postal optimization and performance analytics for large-scale personalized direct mail programs. Direct marketing sourcing and print fulfillment to major companies in the financial, insurance, transportation, retail, education and restaurant verticals across ten integrated locations. Canada accounted for 9.5%52.9% of the Internationalour Marketing Solutions segment’s net sales for the fiscal year ended December 31, 2017.2019.

Latin AmericaDigital Print and Fulfillment

We have operations in Brazil, Chile, Central AmericaUsing digital and offset production capabilities, we provide in-store marketing materials, including signage and point-of-purchase materials, as well as custom marketing kits that require multiple types of marketing collateral. Under the Caribbean. We provide highly secure educational testing materials, inserts, books, statements, forms, labelstrade name Motif^TM, we also create custom photobooks. Digital print and fulfillment to local and regional clients. Latin America accounted for 8.5%38.4% of the Internationalour Marketing Solutions segment’s net sales for the fiscal year ended December 31, 2017.2019.

CorporateDigital and Creative Solutions

We help clients manage their customer data in order to better understand their customers and guide more effective marketing communications efforts. In addition, we create, edit and manage content for delivery across multiple marketing communications channels including print and digital advertising, direct marketing and mail, packaging, sales collateral, in-store marketing and social media. Digital and creative solutions accounted for 8.7% of our Marketing Solutions segment’s net sales for the year ended December 31, 2019.

Corporate

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

FinancialBusiness Dispositions and other information related to these segments is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Note 16, Segment Information, to the Consolidated Financial Statements and within Note 17, Geographic Area and Products and Services Information, to the Consolidated Financial Statements.

Spinoff TransactionsAcquisition

On October 1, 2016,25, 2019, we completed the separationsale of our financial communications and data services business (“Donnelley Financial Solutions, Inc.” or “Donnelley Financial”) and our publishing and retail-centric print services and office products business (“LSC Communications, Inc.” or “LSC”) into two separate publicly-traded companies (the “Separation”). We completed the tax free distribution of approximately 26.2 million shares, or 80.75%,substantially all of the outstanding common stock of each of Donnelley FinancialGlobal Document Solutions (“GDS”) business within the Business Services segment. GDS primarily provided statements and LSC, to RRD stockholders (the “Distribution”). The Distribution was made to RRD stockholders of record as ofprint management services in Europe. Additionally, during the close of business on September 23, 2016, who received one share of Donnelley Financial common stock and one share of LSC common stock for every eight shares of RRD common stock held as of the record date. As a result of the Distribution, Donnelley Financial and LSC are now independent public companies trading under the symbols “DFIN” and “LKSD”, respectively, on the New York Stock Exchange. Immediately following the Distribution and as ofyear ended December 31, 2016, we held approximately 6.2 million shares of Donnelley Financial common stock and approximately 6.2 million shares of LSC common stock.

In March 2017,2019, we sold the approximately 6.2 million sharesR&D business and our subsidiary, RR Donnelley Editora e Grafica Ltda., filed for bankruptcy liquidation in bankruptcy court in Brazil. The operations of LSC common stock retained by us and usedthese two businesses were included in the proceeds to repayBusiness Services segment. During 2019, we also acquired a portion of the outstanding borrowings under the Company’s then-existing credit facility. In June 2017 and August 2017, we exchanged our approximately 6.2 million shares of Donnelley Financial common stock for certain outstanding senior indebtedness of the Company, which obligations were subsequently cancelled and discharged upon delivery to the Company. As of December 31, 2017, we no longer held any shares of the common stock of either Donnelley Financial or LSC.

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

Business Acquisition and DispositionsServices segment, which was not material.

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

On January 11, 2016,July 2, 2018, we sold two entitiesthe Print Logistics business within the business process outsourcing reporting unit.

On April 29, 2015, we sold our 50.1% interest in our Venezuelan operating entity.Business Services segment.

For further information on the above acquisitiondispositions and dispositions,acquisition, see Note 3,2, AcquisitionsDispositions and DispositionsAcquisition, to the Consolidated Financial Statements.

Competitive Environment

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

We work with our clients to create, manage, deliver and optimize their multichannel communications strategies by providing innovative solutions to meet increasing customer demands in light of the large and evolving marketplace. One of our competitive strengths is that we offer a wide array of communications products and services, including print and content management, which provide differentiated solutions for our clients. We are also able to manage the storage and distribution of products for our clients by offering warehousing and inventory management solutions that allow clients to store printed materials and to efficiently ship them using our platform. Our logistics operations offer our clients access to our proprietary technology that is designed to determine the most efficient and cost-effective method of shipping depending on our clients’ needs. We believe our breadth of offerings provides us with a distinct competitive advantage. We have and will continue to develop and expand our creative and design, content management, digital and print production, supply chain management and distribution services to address our clients’ evolving needs while supporting the strategic objective of becoming a leading global provider of integrated communication products and services.

The print and related services industry, in general, continues to have excess capacity and remains highly competitive and fragmented.

We believe that, across our range of products and services, competition is based primarily on quality and the ability to service the special needs of clients at a competitive price. Therefore, we believe we need to continue to differentiate our product and service offerings and aggressively manage our cost structure to remain competitive.

Our business is differentiated by the wide array of quality communications products and services, including print and content management, we provide for our clients. We work with our clients to create, manage, deliver and optimize their multichannel communications strategies by providing innovative solutions to meet increasing customer demands in light of the large and evolving marketplace. We also operate incontinue to develop and expand our creative and design, content management, digital and print production, supply chain management and distribution services to address our clients’ evolving needs while supporting the strategic objective of becoming a highly competitiveleading global provider of integrated communication products and fragmented market for commercial freight transportation and third-party logistics services. Primary competitors to our services include other national non-asset based third-party logistics companies, as well as regional or niche freight brokerages, asset-based carriers offering brokerage and/or logistics services, wholesale intermodal transportation service providers and rail carriers. In addition, we may from time to time compete against carriers’ internal sales forces or shippers’ internal transportation departments.

Seasonality

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

Raw Materials

The primary raw materials we use in our print businesses are paper and ink. We negotiate with leading suppliers to maximize our purchasing efficiencies. Some of the paper we use is supplied directly by clients. Variations in the cost and supply of certain paper grades and ink formulations used in the manufacturing process may affect the Company’sour consolidated financial results. Paper prices have fluctuated during 2017over the past few years and we expect continued volatility in the future is expected.foreseeable future. Generally, clients directly absorb the impact of changing prices on client-supplied paper. With respect to paper we purchase, we have historically passed most changes in price through to our clients.clients although in many cases there is a delay based on terms within individual client contracts. We believe contractual arrangements and industry practice will support our continued ability to pass on any future paper price increases, but there is no assurance that market conditions will continue to enable us to successfully do so. We believe that the paper supply is consolidating, and there may be shortfalls in the future in supplies necessary to meet the demands of the entire marketplace. Higher paper prices and tight paper supplies may have an impact on clients’ demand for printed products. We have undertaken various strategic initiatives to mitigate any foreseeable supply disruptions with respect to our paper and ink requirements.

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

Distribution

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

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

On January 22, 2017, the USPS implemented a CPI based postage increase of approximately 1.0%, as allowed under postal law, entitledIn accordance with the 2006 Postal Accountability and Enhancement Act (“PAEA”).

In addition, there is a pending bi-partisan legislative proposal (still in Committee) agreed to on March 16, 2017 that seeks to stabilize the financial condition of the USPS, which among other things calls for levying a 2.15% increase on market-dominant mail products. Nevertheless,, the Postal Regulatory Commission (“PRC”) on November 6, 2017 adjusted and approved a USPS filingfilings for a CPI based average price increasesincrease of 1.9%1.5% to 2.0%1.9% depending on the major class of mail, which became effectivemail. The new prices took effect on January 21, 2018.26, 2020.

Additionally, as required byon the 10-year anniversary of PAEA, the PRC initiated a comprehensive review of PAEA on December 20, 2016, to determine if the current system for regulating rates and classes for market-dominant products is still achieving the original objectives of the law. On December 1, 2017, theThe PRC issued its findings on December 1, 2017 and concluded that the current system was not meeting all of PAEA’s original objectives. To remedy this situation, the PRC has proposed recommendations, which among other things, allows the Postal Service pricing flexibility of “CPI + 2%” on market-dominant mail products for a 5 year5-year period of time. The PRC has asked for industry stakeholder input, comments and alternative suggestions to these recommendations which arewere due by March 1, 2018. This will be followedThe industry reaction to the PRC’s recommendations was overwhelmingly negative, which in turn caused the PRC to reconsider and issue an amended proposal on December 12, 2019, nearly 21 months later. Industry stakeholders are expected to reply to the newest proposal by March 2020.

In other developments, the Trump administration on April 12, 2018 issued an Executive Order establishing a reply comment period ending March 30, 2018. The impact of these actions cannot currently be estimated.

Mail delivery services throughTask Force (“TF”) to evaluate the USPS accountedUSPS. On December 4, 2018, the TF issued a formal report calling for approximately 29%a total reevaluation of the revenue within our logistics reporting unit duringPostal Service business model to make the fiscal year ended December 31, 2017.organization more viable and sustainable going into the future. No further action related to the TF report occurred in 2019.

Clients

We have more than 50,000 clients worldwide, including 99%94% of the Fortune 100, 96%85% of the Fortune 500 and 89%74% of the Fortune 1000. Our products and services enable some of the world’s largest companies to create, manage and deliver comprehensive and cost-effective multi-channel communications around the world. worldIn connection with the Separation, we entered into a number of agreements with LSC and Donnelley Financial with respect to our ongoing commercial relationships. For the year ended December 31, 2017, LSC and Donnelley Financial accounted for 10.1% of total net sales in our Strategic Services segment.. For each of the years ended December 31, 2017, 20162019, 2018 and 2015,2017, no single client accounted for 10% or more of the Company’s consolidated net sales.

Technology, Research and Development

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

Cybersecurity

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

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

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

The Company believes our security and compliance team diminishes the risk of system compromise and data exposure by rapidly and effectively addressing security incidents as they arise.

Environmental Compliance

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

Employees

As of December 31, 2017, the Company2019, we had 42,70036,400 employees.

As of December 31, 2017, 4382019, 431 of our U.S. employees were covered by collective bargaining agreements at twelve10 of our U.S. facilities, representing 2.5%2.8% of our U.S. workforce. We also have collective bargaining agreements with unionized employees in China, Canada, Mexico, Brazil, Chile and Europe. We have not experienced a work stoppage during the past five years. Management believesWe believe that our relationships with our employees and collective bargaining groups are good.

Available Information

We maintain an Internet website at www.rrdonnelley.comwww.rrd.com where the Company’sour Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports are available without charge, as soon as reasonably practicable following the time they are filed with, or furnished to, the Securities and Exchange Commission (“SEC”).Copies of the materials filed by the Company with the SEC are available at the Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information regarding the operation of the Public Reference Room is available by calling the SEC at 1-800-SEC-0330. Reports, proxy and information statements and other information that is filed electronically with the SEC are available on the SEC’s website at www.sec.gov.

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

Forward-Looking Statements

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

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

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

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

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

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

Risks related to our business

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

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

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

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

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

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

During 2017,2019, our five largest clients accounted for 11.1%9.5% of our net sales in the aggregate. In addition, we continue to provide products and services, including logistics, pre-media, production and sales services, to LSC and Donnelley Financial and their respective customers. There can be no assurance that our clients including LSC and Donnelley Financial, will continue to purchase our products in the same mix or quantities or on the same terms as in the past. The loss of or disruptions related to significant clients may result in a reduction in sales or change in the mix of products we sell to significant clients. This may adversely affect our results of operations, financial condition and cash flows.

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

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

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

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

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

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

We are subject to taxation related risks in multiple jurisdictions.

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

Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law on December 22, 2017 and represents the most significant change to U.S. tax law since 1986. As a resultDuring 2017, we recorded provisional estimates of the Tax Act, we are subject to a one-time transition tax on foreign earnings and have recorded a provisional estimate for this item, as well as other items, in our 2017 results of operations. We continue to analyze the impact of the Tax Act, onand during the fourth quarter of 2018, we finalized our Company. Inaccounting analysis for the income tax effects of the Tax Act. However, in the future, we may be subject to additional taxes as required under the Tax Act, including current tax on foreign earningsbased upon new regulations and possibly significant limitations on deductions for certain items, such as interest on debt. In addition, we may be required to make material adjustments to provisional items recorded. All of these factorsguidance which may adversely affect our results of operations, financial position and cash flows.

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

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

We have a substantial amount of outstanding debt at December 31, 2017 which could adversely affect our business, results of operations, financial condition and cash flows. Uncertainty and volatility in global financial markets may cause financial institutions to fail, lenders to reduce lending or investors to reinvest in assets that are considered less risky. The failure of a financial institution that supportsis a lender under our existing senior secured asset-based revolving credit agreementfacility (the “ABL Credit Facility”) would reduce theits size of its committed facility unless a replacementanother financial institution was added. Any futurewilling to replace such commitments. Future capital markets transactions will beare dependent on our financial performance as well as market conditions, which may result in receiving financing on terms less favorable to us than our existing financings. In addition, our access to future financing and our ability to refinance existing debt will depend on a variety of factors such as our financial performance, the general availability of credit, our credit ratings and credit capacity at the time we pursue such financing.

Our current corporate credit ratings are below investment grade and, as a result, our borrowingfinancing costs may further increase and our ability to borrowobtain financing may be limited. In September 2017, we amended and restated our revolving credit facility (the “Credit Agreement”). The Credit Agreement provides for a senior secured asset-based revolving credit facility, which is scheduled to mature on September 29, 2022, of up to $800.0 million, subject to a borrowing base. The maximum availability under the Credit Agreement increases and decreases with changes in the amount of accounts receivable, inventory, machinery, equipment and fee-owned real estate of the Company and the Guarantors (collectively, the “Borrowing Base”), subject to certain eligibility criteria and advance rates.

If adequate capital is not available to us on reasonable terms and our internal sources of liquidity prove to be insufficient, or if future financings require more restrictive covenants, such combination of events could adversely affect our ability to (i) acquire new businesses or enter new markets, (ii) service or refinance our existing debt, (iii) pay dividends on common stock, (iv) make necessary capital investments, and (v) make other expenditures necessary for the ongoing conduct of our business.

Our ABL Credit Agreement limits our borrowing capacity to the value of certain of our assets. In addition, our obligations under our ABL Credit Agreement isand Term Loan Credit Agreement are secured by certainsubstantially all of the assets of the Company and itsour material domestic subsidiaries and lenders may exercise remedies against the collateral in theif an event of our default.default occurs.

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

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

Restrictive covenants in our ABL Credit Agreement and Term Loan Credit Agreement could limit our financial and operating flexibility.

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

In the event of a default under our Credit Agreement, the lenders’ commitment to extend further credit under our Credit AgreementAn increase in interest rates could be terminated, our outstanding obligations could become immediately due and payable, outstanding letters of credit may be required to be cash collateralized and remedies may be exercised against the collateral. If we are unable to borrow under our Credit Agreement, we may not have the necessary cash resources for our operations and, if any event of default occurs, there is no assurance that we would have the cash resources available to repay such accelerated obligations, refinance such indebtedness on commercially reasonable terms, or at all, or cash collateralize our letters of credit, which would have a material adverse effect on our business.

Borrowings under our Credit Agreements bear interest at rates that are calculated based on the London Interbank Offered Rate (LIBOR) or a base rate plus, in each case, an applicable margin which, in the case of the ABL Credit Agreement, is dependent on the average quarterly borrowing availability under our ABL Credit Agreement. As a result, we are exposed to risks associated with fluctuations in interest rates, including if the U.S. Federal Reserve raises its benchmark interest rate. We may utilize derivative financial instruments, such as interest rate swaps, to manage our interest rate risk. There can be no assurance, however, that increases in interest rates will not adversely affect our business, financial condition,position and results of operations by causing an increase in interest expense. Significantly higher interest rates may also, among other things, reduce the availability and liquidity.increase the cost of obtaining new debt and refinancing existing indebtedness, as well as negatively impact the market price of our common stock.

In July 2017 the United Kingdom Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that the FCA intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. It is unknown whether any banks will continue to voluntarily submit rates for the calculation of LIBOR after 2021 or whether LIBOR will continue to be published by its administrator based on these submissions or on any other basis. It is not possible to predict the effect of these changes, other reforms, or the establishment of alternative reference rates, but the potential phase out of LIBOR could cause market volatility or disruption, which could adversely affect our current or future floating rate debt obligations, including obligations under our ABL Credit Agreement and Term Loan Agreement, our current or future derivative financial instruments that utilize LIBOR, and our overall cost of funding.

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

We may not be able to reduce or extinguish our material indebtedness. We have substantial indebtedness and ifour interest and principal payments are significant. In addition, our Term Loan Credit Agreement requires us to make quarterly principal payments and to make prepayments with excess cash flow and asset sale proceeds in certain circumstances. If we are unable to reduce this indebtedness, we will continue to have increased financial leverage. Our interest and principal payments are significant.leverage, which may limit or restrict our ability to operate our business. In addition, our ability to make payments on, repay or refinance, such debt, will depend largely upon our future operating performance.

The indentures governing our outstanding notes and debentures do not contain restrictive covenants and we may incur substantially more debt or take other actions, including engaging in mergers and acquisitions, paying dividends and making other distributions to holders of equity securities, and disposing of certain assets, which may adversely affect our ability to satisfy our obligations under the notes and debentures issued under our indentures.

Although the Credit Agreement is subject to a number of negative and financial covenants, including a minimum fixed charge coverage ratio, and covenants that restrict our ability to incur additional indebtedness, engage in mergers and acquisitions, pay dividends and make other distributions to the holders of our equity securities, and dispose of certain assets, the indentures governing our outstanding notes and debentures do not contain financial or operating covenants or restrictions on the incurrence of indebtedness, the payment of dividends or making other distributions, or the disposition of certain assets. In addition, the limited covenants applicable to the notes and debentures do not require us to achieve or maintain any minimum financial results relating to our financial position or results of operations.

In carrying out our strategy focused on maximizing long-term stockholder value, we may enter into transactions which may increase our financial leverage. Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the indentures governing our notes and debentures may have the effect of diminishing our ability to make payments on those notes and debentures when due, and require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, which would reduce the availability of cash flow to fund our operations, working capital and capital expenditures.

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

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

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

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

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

InDuring 2019 and in prior years we have recorded significant goodwill and other long-lived asset impairments and continue to hold goodwill, other long-lived assets and deferred tax assets on our balance sheet. A decline in expected profitability may call into question the recoverability of our relatedremaining goodwill, other long-lived tangible and intangible assets or deferred tax assets and require the write down or write off of these assets or, in the case of deferred tax assets, recognition of a valuation allowance through a charge to income. Such events have had and may continue to have an adverse effect on our results of operations and financial position and cash flows.position.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Further, our business could be adversely affected by the risksrecent outbreak of the respiratory illness caused by COVID-19, which was first identified in Wuhan, China. This situation is evolving and challenges associated withany further significant spread of this virus may have a material and adverse effect on our international business and operationsmay include temporary closures of our facilities or the facilities of our suppliers and clients, restrictions on our ability to distribute and sell our products, and other disruptions caused to us, our suppliers or clients as a result of this virus. This may adversely affect our results of operations, financial position and cash flows.

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

We are exposed to market risks resulting from changesthe impact of foreign currency fluctuations based on our global operations. Although the results in theour Consolidated Financial Statements are reported in U.S. dollars, we also earn revenues, pay expenses, own assets and incur liabilities in various foreign currencies. Fluctuations in currency exchange rates of the currencieshave had, and will continue to have, an impact on our results expressed in the countries in which we do business. Although operating in local currencies may limit the impact of currency rate fluctuations on the operating results of our non-U.S. subsidiaries, fluctuations in such rates may affect the translation of these results into our consolidated financial statements. To the extent borrowings, sales, purchases, revenues and expenses or other transactions are not in the applicable local currency, weU.S. dollars. We may enter into derivative instruments, such as foreign currency spot and forward contracts, to hedge the currency risk. We cannotcertain exposures to exchange rate fluctuations. There can be sure,no assurance, however, that our efforts at hedging will be successful and such efforts may, in certain circumstances,that currency exchange rate fluctuations will not adversely affect our results of operations, financial position and cash flows.

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

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

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

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

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

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

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

Postal costs are a significant component of many of our clients’ cost structure and postal rate changes can influence the number of pieces and types of mailings that our clients mail. On April 10, 2016, the USPS removed the exigent surcharge, which was approved in December 2013, resulting in a 4.3% decrease in postage rates for all significant mail categories. As allowed under postal law, entitledIn accordance with the 2006 Postal Accountability and Enhancement Act (“PAEA”),PAEA, the USPS implemented a CPI based postage increase on January 22, 2017 of approximately 1.0%. In addition, there is a pending bi-partisan legislative proposal (still in Committee) agreed to on March 16, 2017 that seeks to stabilize the financial condition of the USPS, which among other things calls for levying a 2.15% increase on market-dominant mail products. Nevertheless, the Postal Regulatory Commission (“PRC”) on November 6, 2017PRC adjusted and approved a USPS filingfilings for a CPI based average price increase of 1.927%1.5% to 1.9% depending on the major class of mail. The new prices took effect on January 26, 2020.

Additionally, as required on the 10-year anniversary of PAEA, the PRC initiated a comprehensive review of PAEA on December 20, 2016, to determine if the current system for First-Class Mail, 1.936%regulating rates and classes for Marketing Mail (aka Standard Mail), 1.924%market-dominant products is still achieving the original objectives of the law. The PRC issued its findings on December 1, 2017 and concluded that the current system was not meeting all of PAEA’s original objectives. To remedy this situation, the PRC proposed recommendations, which among other things, allows the Postal Service pricing flexibility of “CPI + 2%” on market-dominant mail products for Periodicals Mail, 1.960%a 5-year period of time. The PRC asked for Package Services Mailindustry stakeholder input, comments and 1.987%alternative suggestions to these recommendations which were due by March 1, 2018. The industry reaction to the PRC’s recommendations was overwhelmingly negative, which in turn caused the PRC to reconsider and issue an amended proposal on December 12, 2019, nearly 21 months later. Industry stakeholders are expected to reply to the newest proposal by March 2020.

In other developments, the Trump administration on April 12, 2018 issued an Executive Order establishing a Task Force (“TF”) to evaluate the USPS. On December 4, 2018, the TF issued a formal report calling for Special Services which became effective January 21, 2018.a total reevaluation of the Postal Service business model to make the organization more viable and sustainable going into the future. No further action related to the TF report occurred in 2019.

In addition, the USPS has incurred significant financial losses in recent years and may, as a result, implement significant changes to the breadth or frequency of its mail delivery. The impact of any restructuring of the USPS’s restructuring plans, many ofUSPS, which may require legislative action, cannot currently be estimated. If implemented, suchcertain changes wouldmay impact our clients’ ability or willingness to communicate by mail. Declines in print volumes mailed would have an adverse effect on our results of operations, financial condition and cash flows.

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

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

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

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

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

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

We may be contingently liable for various LSC Communications, Inc. and Donnelley Financial Solutions, Inc. operating leases.

Subsequent to the spinoff of LSC Communications, Inc. (“LSC”) and Donnelley Financial Solutions, Inc. (“Donnelley Financial”), we may be contingently liable for obligations under various operating leases for office, warehouse and manufacturing locations of LSC and Donnelley Financial. In the event that LSC or Donnelley Financial fail to make lease payments or fail to pay other obligations under these lease agreements, we may be required to satisfy those obligations to the lessor. Under various agreements executed at the time of the spinoff, LSC and Donnelley Financial agreed to fully indemnify us in the event that we would be required to make a payment on their behalf; however, there can be no assurance that the indemnities from LSC and Donnelley Financial will be sufficient to satisfy the full amount of any such contingent obligations. Our exposure to these potential contingent liabilities will decrease over time as LSC and Donnelley Financial pay monthly lease obligations and as the leases expire. As of December 31, 2019, these potential contingent obligations were approximately $78.8 million and $5.5 million for LSC and Donnelley Financial, respectively. If we are required to make payments pursuant to these arrangements, it may adversely affect our results of operations, financial condition or cash flows.

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

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

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

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

The Company’sOur corporate office is located in leased office space in Chicago, Illinois. As of December 31, 2017, the Company2019, we leased or owned 237198 U.S. facilities, some of which had multiple buildings and warehouses, and these U.S. facilities encompassed approximately 17.815.3 million square feet. The CompanyWe leased or owned 9163 international facilities, some of which had multiple buildings and warehouses, encompassing approximately 6.75.6 million square feet primarily in Asia, Canada, Europe Canada and Latin America. Of the Company’sour U.S. and international facilities, approximately 9.48.9 million square feet of space was owned, while the remaining 15.112.0 million square feet of space was leased.

From time to time, the Company’sour clients and others file voluntary petitions for reorganization under United States bankruptcy laws. In such cases, certain pre-petition payments we received by the Company from these parties could be considered preference items and subject to return. In addition, the Company is

we are party to certain litigation arising in the ordinary course of business. Management believesWe believe that the final resolution of these preference items and litigation will not have a material effect on the Company’sour consolidated results of operations, financial position or cash flows.

For a discussion of certain litigation involving the Company,us, see Note 8, Commitments and Contingencies, to the Consolidated Financial Statements.

Not applicable.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS OF R.R. DONNELLEY & SONS COMPANY (As of February 1, 2018)2020)

PART II

Effective August 22, 2016, RRD’sOur common stock is listed and traded on the New York Stock Exchange (NYSE) under the symbol “RRD”. Prior to that date, the Company’s stock was listed and traded on the Nasdaq Stock Market (“NASDAQ”).

As of February 23, 2018,21, 2020, there were 4,1233,617 stockholders of record of the Company’sour common stock. Quarterly closing prices of the Company’s common stock, as reported on the NYSE and the NASDAQ, and dividends paid per share during the years ended December 31, 2017 and 2016, are contained in the chart below:

The Credit Agreement generally allows annual dividend payments of up to $60.0 million in aggregate, though additional dividends may be allowed subject to certain conditions. For more detail refer to the Credit Agreement and its amendments filed as exhibits to this Annual Report on Form 10-K.

ISSUER PURCHASES OF EQUITY SECURITIES

There were no repurchases of equity securities during the three months ended December 31, 2017.2019.

EQUITY COMPENSATION PLANS

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

PEER PERFORMANCE TABLE

The graph below compares five-year returns of the Company’sour common stock with those of the S&P SmallCap 600 and the S&P 1500 Industrials Index. The comparison assumes an initial investment of $100 on December 31, 20122014 and that all dividends have been reinvested. The Company'sOur performance through September 30, 2016 has been adjusted for the spinoffs of LSC and Donnelley Financial which occurred on October 1, 2016 and are reflected in the table below as a dividend. Additionally, the Company’sour performance has been adjusted for the 1-for-3 reverse stock split for the Company'sour stock which also occurred on October 1, 2016.

SELECTED FINANCIAL DATA

(in millions, except per share data)

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

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

Business

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

The CompanyWe separately reports itsreport our net sales, related costs of sales and gross profit for itsour product and service offerings. The Company’sOur product offerings primarily consist of commercial andprint, packaging, statements, direct marketing, labels, digital print statement printing, direct mail, packaging, labels, forms, manuals and other related products procured through our printfulfillment, supply chain management offering.and forms. Our service offerings primarily consist of logistics, certain business process outsourcing services and digital and creative solutions.

Revision of Net Sales and Cost of Sales

During the third quarter of 2017, the Company identified an error in the accounting for certain contracts with an inventory buy-back option within the Asia reporting unit, which is in the International segment. As a result, the error which had no impact on reported gross margins or income from operations and which was determined by management to be immaterial to the previously issued financial statements, has been corrected herein from the amounts previously reported. See Note 1, Basis of Presentation and Summary of Significant Accounting Policies, to the Consolidated Financial Statements for additional information regarding the revision.

Executive Overview

20172019 OVERVIEW

Net sales increased $106.6 million, or 1.6%, for the year ended December 31, 2017 versus 2016. The increase2019 were $6,276.2 million, a decrease of $524.0 million, or 7.7%, compared to the year ended December 31, 2018. Net sales decreased $307.3 million due to business dispositions and $54.9 million due to changes in foreign exchange rates. Net sales also decreased due to lower volume in commercial print due to ongoing secular pressure and the continued planned reductions in low margin sales, as well as price pressures. Decreases in net sales was drivenwere partially offset by higher volume in direct marketing primarily attributable to the Asia and sourcing reporting units, partially offset by lower volume in2020 Census contract.

Income from operations for the Variable Print segment and certain other reporting units withinyear ended December 31, 2019 was $98.6 million, a decrease of $110.0 million compared to the International segment, lower postage pass-through salesyear ended December 31, 2018. Income from operations decreased due to a non-cash charge of $98.5 million to recognize the impairment of goodwill in the logistics reporting unit within the Business Services segment, as well as cost inflation, price pressures across all segments.and lower sales volume, partially offset by lower selling, general and administrative expenses and lower depreciation and amortization expense.

The Company continuesWe continue to strategically assess opportunities to reduce itsour cost structure and enhance productivity throughout the business.business. During the year ended December 31, 2017, the Company2019, we realized cost savings from previous restructuring activities, including the reorganization of administrative and support functions across all segments, as well as facility consolidations.

Net cash provided by operating activities for the year ended December 31, 20172019 was $217.9$139.3 million as compared to $127.2$203.5 million for the year ended December 31, 2016.2018. The increasedecrease in net cash flow from operating activities wasrelated primarily driven by improvements in working capital in 2017 versus 2016, lower interest expense, lower spinoff-related transactionto higher tax and restructuring payments, in 2017 versus 2016 and lower tax payments.

2017 Financial Performance – Continuing Operations

The changes in the Company’s income (loss) from operations, operating margin, net loss attributable to RRD common stockholders and net loss attributable to RRD common stockholders per diluted share for the year ended December 31, 2017, from the year ended December 31, 2016, were due to the following:

2017 restructuring, impairment and other charges-net: included pre-tax charges of $23.5 million for employee termination costs; $21.3 million for the impairment of goodwill in the digital and creative solutions reporting unit within the Strategic Services segment; $4.8 million of lease termination and other restructuring costs; $2.3 million for multi-employer pension plan withdrawal obligations unrelated to facility closures; $0.2 million related to the impairment of intangible assets in the commercial and digital print reporting unit within the Variable Print segment; and $0.9 million impairment charges of other long-lived assets related to facility closures. See Note 4, Restructuring, Impairment and Other Charges, to the Consolidated Financial Statements for further discussion.

2016 restructuring, impairment and other charges-net: included pre-tax charges of $527.8 million for the impairment of goodwill in the commercial and digital print and statement printing reporting units within the Variable Print segment; $29.7 million related to the impairment of intangible assets in the commercial and digital print reporting unit within the Variable Print segment; $21.9 million for employee termination costs; $3.5 million of lease termination and other restructuring costs; $2.3 million of other charges; and $0.9 million net gain on the sale of previously impaired other long-lived assets. See Note 4, Restructuring, Impairment and Other Charges, to the Consolidated Financial Statements for further discussion.

Spinoff-related transaction expenses: included pre-tax charges of $3.3 million ($2.1 million after-tax) related to consulting and other expenses for the year ended December 31, 2017 associated with the Separation and Distribution. For the year ended December 31, 2016, these pre-tax charges were of $8.0 million ($4.9 million after-tax).

Other postretirement benefit plan obligation (OPEB) curtailment gain: included a pre-tax gain of $19.5 million ($12.0 million after-tax) as a result of curtailments of the Company’s OPEB plans during the year ended December 31, 2016.

Pension settlement charges: included pre-tax charges of $1.6 million ($1.4 million after-tax) for the year ended December 31, 2017 related to lump-sum pension settlement payments. For the year ended December 31, 2016, these pre-tax charges were $21.1 million ($12.9 million after-tax).

Acquisition-related expenses: included pre-tax charges of $2.7 million ($1.8 million after-tax) related to legal, accounting and other expenses for the year ended December 31, 2016 associated with completed or contemplated acquisitions.

Net gain on disposal of businesses: included a pre-tax gain of $11.9 million ($12.1 million after-tax) for the year ended December 31, 2016, related to the disposal of entities in the International segment.

Loss on debt extinguishments: included a pre-tax net loss of $20.1 million ($12.6 million after-tax), recorded in the Corporate segment, related to the premiums paid in connection with the tender offers, unamortized debt issuance costs and other expenses due to the debt-for-equity exchange of senior notes, the repurchase of debentures and senior notes and the amendment and restatement of the credit agreement during the year ended December 31, 2017. See Note 11, Debt, to the Consolidated Financial Statements for further discussion.

Net gain on investments: included a pre-tax non-cash net realized gain of $94.0 million ($95.7 million after-tax) resulting from the debt-for-equity exchange of the Company’s retained shares of Donnelley Financial for certain outstanding senior notes and a pre-tax gain of $1.3 million ($0.8 million after-tax) resulting from the sale of certain of the Company’s affordable housing investments, partially offset by a pre-tax loss of $51.6 million ($51.6 million after-tax) resulting from the sale of the Company’s retained shares in LSC during the year ended December 31, 2017. The year ended December 31, 2016 included a pre-tax loss of $1.4 million ($1.4 million after-tax) resulting from the impairment of an equity investment and a pre-tax gain of $0.1 million ($0.1 million after-tax) resulting from the sale of one of the Company’s affordable housing investments.

Income tax adjustment: included the recognition of $3.0 million and $0.4 million deferred income tax benefit during the years ended December 31, 2017 and 2016, respectively.

Tax expense related to the enactment of the Tax Act: reflects the impact associated with the enactment of the Tax Act which included a provisional estimate for the one-time transition tax on foreign earnings of $103.5 million, as well as a provisional adjustment to the net deferred tax assets for the reduced corporate income tax rate of $6.8 million.lower interest payments.

OUTLOOK

Vision and Strategy

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

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

Management believesWe believe productivity improvementimprovements and cost reductions are critical to the Company’sour competitiveness. The Company continuesWe continue to implement strategic initiatives across all platformseach of our segments to reduce itsour overall cost structure and enhance productivity includingprimarily through restructuring consolidation, reorganizationwhich includes consolidations, reorganizations and integrationintegrations of operations and streamlining of administrative and support activities.

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

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

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

20182020 Outlook

In 2018, the Company expects2020, we expect net sales to be lower as compared to 2019 primarily due to current year dispositions. On an organic basis, we expect net sales to range from a slight decrease to a slight increase as compared to 20172019 primarily driven by organicexpected growth in the International segment, partially offset by the anticipated continuing volumeour direct marketing, packaging and labels products. We also expect continued secular declines in the Variable Print segmentour commercial print and forms products and continued price pressures in most parts of the business. The highly competitive market conditions and unused industry capacity will continue to put price pressure on both transactional work and contract renewals across allboth segments. The Company’sOur outlook assumes that the U.S. economy and the economies of the foreign countries in which we operate will remain stable. The CompanyWe will continue to leverage itsour client relationships in order to provide a larger share of their communications needs. In addition, the Company expectswe expect to continue cost control and productivity initiatives, including selected facility consolidations.

The CompanyWe initiated several restructuring actions during the years ended December 31, 2017, 20162019, 2018 and 20152017, to further reduce the Company’sour overall cost structure. These restructuring actions included the closures of manufacturing facilities as well as the reorganization and consolidation of certain operations. These and future cost reduction actions are expected to have a positive impact on operating earnings in 20182020 and in future years. In addition, the Company expectswe expect to identify other cost reduction opportunities and possibly take further actions, in 2018, which may result in significant additional restructuring charges. These restructuring actions will be funded by cash generated from operations and cash on hand or, if necessary, by utilizing the Company’sour credit facilities.

We expect lower interest expense on lower average borrowings and a lower average interest rate in 20182020 and we expect the effective tax rate to be significantly higher than the statutory rate primarily due to anticipated limitations on the Company’sour domestic interest expense deduction as a result of the Tax Act.

Cash flows from operations in 20182020 are expected to range from a slight decrease to a slight increasebe higher versus 20172019 as lower interest expense and expectedtax payments and targeted working capital improvements will beare expected to more than offset by higher payments for income taxes. The Company expectsrestructuring payments. We expect capital expenditures to be between $100significantly lower in 2020 as the 2019 expenditures associated with building the new printing facility in China and additional investments related to the 2020 Census contract will not repeat in 2020. Also, as part of our agreement to sell the printing facility in China, we expect to collect one additional non-refundable deposit of $24 million in 2020 and we expect to $115 million.

Financial Review

In the financial review that follows, the Company discusses its consolidated results of operations, financial position, cash flows and certaincontinue generating additional proceeds from monetizing other information. This discussion should be read in conjunction with the Company’s Consolidated Financial Statements and related notes that begin on page F-1.assets including proceeds from selling additional facilities.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 20172019 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 20162018

Consolidated

The following table shows the results of operations for continuing operations for the years ended December 31, 20172019 and 2016, which reflects the results of an acquired business from the relevant acquisition date:2018: