UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2018~~2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-37728

Donnelley Financial Solutions, Inc.

(Exact name of registrant as specified in its charter)

Delaware		36-4829638
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

35 West Wacker Drive, Chicago, Illinois		60601
(Address of principal executive offices)		(Zip code)

(844) 866-4337

(Registrant’s telephone number, including area code)

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

Title of each Class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock (Par Value $0.01)

DFIN

NYSE

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer	☒	Accelerated filer	☐

Non-Accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of ~~November 2, 2018, 34.1~~July 26, 2019, 34.3 million shares of common stock were outstanding.

DONNELLEY FINANCIAL SOLUTIONS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2018~~2019

TABLE OF CONTENTS

Part I
FINANCIAL INFORMATION		Page
Item 1:	Condensed Consolidated Financial Statements (unaudited)	3

	Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	3

	Condensed Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	4

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018	5

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	6

	Condensed Consolidated Statements of Equity for the three months ended June 30, 2019 and 2018	7

	Condensed Consolidated Statements of Equity for the six months ended June 30, 2019 and 2018	8

	Notes to Condensed Consolidated Financial Statements	79

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3531

Item 3:	Quantitative and Qualitative Disclosure About Market Risk	5246

Item 4:	Controls and Procedures	5246

Part II
OTHER INFORMATION		Page
Item 1:	Legal Proceedings	5347

Item 1A:	Risk Factors	5347

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	5347

Item 4:	Mine Safety Disclosures	5347

Item 6:	Exhibits	5448

Signatures		5851

Donnelley Financial Solutions, Inc. and Subsidiaries (“~~Donnelley Financial”~~DFIN”)

Condensed Consolidated Statements of Operations

For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018

(in millions, except per share data)

(UNAUDITED)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2018

2017

2018

2017

Services net sales
$
138.5

$
140.3

$
485.9

$
471.4

Products net sales

78.4

82.3

276.8

308.7

Total net sales

216.9

222.6

762.7

780.1

Services cost of sales (exclusive of depreciation and amortization)
75.5

81.7

253.4

240.2

Services cost of sales with R.R. Donnelley affiliates (exclusive of depreciation and amortization)*

—

—

—

19.5

Products cost of sales (exclusive of depreciation and amortization)

57.8

58.9

204.1

190.7

Products cost of sales with R.R. Donnelley affiliates (exclusive of depreciation and amortization)*

—

—

—

32.3

Total cost of sales

133.3

140.6

457.5

482.7

Selling, general and administrative expenses (exclusive of depreciation and amortization)
62.6

54.8

203.8

173.7

Restructuring, impairment and other charges-net

0.8

(0.6
)

4.1

6.4

Depreciation and amortization

11.6

10.6

33.1

31.7

Other operating income

(53.5
)

—

(53.5
)

—

Income from operations

62.1

17.2

117.7

85.6

Interest expense-net

8.4

10.6

27.2

32.7

Investment and other income-net

(14.0
)

(0.8
)

(15.6
)

(2.5
)
Earnings before income taxes

67.7

7.4

106.1

55.4

Income tax expense

19.7

2.1

31.5

22.0

Net earnings
$
48.0

$
5.3

$
74.6

$
33.4

Net earnings per share (Note 12):

Basic net earnings per share

1.42

0.16

2.21

1.01

Diluted net earnings per share

1.40

0.16

2.19

1.01

Weighted average number of common shares outstanding

Basic

33.9

33.6

33.8

33.0

Diluted

34.2

33.8

34.0

33.2

*Beginning in the quarter ended June 30, 2017, LSC Communications (“LSC”) no longer qualified as a related party, therefore the amounts disclosed related to LSC are presented through March 31, 2017 only. Beginning in the quarter ended September 30, 2017, R.R. Donnelley & Sons Company (“RRD”) no longer qualified as a related party, therefore the amounts disclosed related to RRD are presented through June 30, 2017 only.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Services net sales	$	161.2		$	187.9		$	289.1		$	347.4
Products net sales		97.7			102.7			199.4			198.4
Total net sales		258.9			290.6			488.5			545.8
Services cost of sales (exclusive of depreciation and amortization)		75.6			92.0			151.0			177.9
Products cost of sales (exclusive of depreciation and amortization)		73.4			73.6			151.9			146.3
Total cost of sales		149.0			165.6			302.9			324.2
Selling, general and administrative expenses (exclusive of depreciation and amortization)		57.9			75.1			112.8			141.2
Restructuring, impairment and other charges-net		3.8			2.6			5.9			3.3
Depreciation and amortization		12.0			11.1			24.1			21.5
Other operating loss		2.8			—			2.8			—
Income from operations		33.4			36.2			40.0			55.6
Interest expense-net		9.1			9.8			18.0			18.8
Investment and other income-net		(0.5	)		(0.8	)		(1.1	)		(1.6	)
Earnings before income taxes		24.8			27.2			23.1			38.4
Income tax expense		7.5			8.3			7.2			11.8
Net earnings	$	17.3		$	18.9		$	15.9		$	26.6

Net earnings per share (Note 10):
Basic net earnings per share		0.51			0.56			0.47			0.79
Diluted net earnings per share		0.51			0.56			0.47			0.78
Weighted average number of common shares outstanding
Basic		34.1		33.8				34.0			33.7
Diluted		34.2			34.0			34.1		33.9

See Notes to Unaudited Condensed Consolidated Financial Statements

Donnelley Financial Solutions, Inc. and Subsidiaries (“~~Donnelley Financial”~~DFIN”)

Condensed Consolidated Statements of Comprehensive Income

For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018

(in millions)

(UNAUDITED)

	Three Months Ended				Nine Months Ended					Three Months Ended					Six Months Ended
	September 30,				September 30,					June 30,					June 30,
	2018		2017		2018			2017		2019		2018			2019		2018
Net earnings	$	48.0	$	5.3	$	74.6		$	33.4	$	17.3	$	18.9		$	15.9	$	26.6

Other comprehensive (loss) income, net of tax:
Other comprehensive income, net of tax:
Translation adjustments		0.4		2.2		(2.3	)		4.6		0.5		(3.4	)		2.7		(2.7	)
Adjustment for net periodic pension and other postretirement benefits plan cost		0.4		0.3		1.4			1.0		0.3		0.5			0.7		1.0
Other comprehensive income (loss), net of tax		0.8		2.5		(0.9	)		5.6		0.8		(2.9	)		3.4		(1.7	)
Comprehensive income	$	48.8	$	7.8	$	73.7		$	39.0	$	18.1	$	16.0		$	19.3	$	24.9

See Notes to Unaudited Condensed Consolidated Financial Statements

Donnelley Financial Solutions, Inc. and Subsidiaries (“~~Donnelley Financial”~~DFIN”)

Condensed Consolidated Balance Sheets

As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018

(in millions, except per share data)

(UNAUDITED)

	September 30			December 31,			June 30,			December 31,
	2018			2017			2019			2018
ASSETS
Cash and cash equivalents	$	56.2		$	52.0		$	9.5		$	47.3
Receivables, less allowances for doubtful accounts of $8.7 in 2018 (2017 - $7.3)		221.5			165.2
Receivables, less allowances for doubtful accounts of $10.7 in 2019 (2018 - $7.9)								260.7			172.9
Inventories		13.8			23.3			13.0			12.1
Prepaid expenses and other current assets		16.4			29.6			17.7			16.7
Total current assets		307.9			270.1			300.9			249.0
Property, plant and equipment-net		31.7			34.7			37.0			32.2
Right-of-use assets								84.4			—
Software-net								51.6			47.8
Goodwill		437.5			447.4			450.3			450.0
Other intangible assets-net		29.3			39.9			30.0			37.2
Software-net		46.4			41.1
Deferred income taxes		14.0			22.2			14.3			9.7
Other noncurrent assets		46.6			38.1			40.6			42.8
Total assets	$	913.4		$	893.5		$	1,009.1		$	868.7
LIABILITIES
Accounts payable	$	67.5		$	67.8		$	78.0		$	72.4
Accrued liabilities		137.3			119.2			123.2			126.0
Total current liabilities		204.8			187.0			201.2			198.4
Long-term debt (Note 15)		397.2			458.3
Long-term debt (Note 13)								419.1			362.7
Deferred compensation liabilities		21.7			22.8			19.9			19.5
Pension and other postretirement benefits plan liabilities		47.7			52.5			49.0			51.3
Noncurrent lease liabilities								62.8			—
Other noncurrent liabilities		10.3			23.5			8.0			10.8
Total liabilities		681.7			744.1			760.0			642.7
Commitments and Contingencies (Note 16)
Commitments and Contingencies (Note 14)
EQUITY
Preferred stock, $0.01 par value
Authorized: 1.0 shares; Issued: None		—			—			—			—
Common stock, $0.01 par value
Authorized: 65.0 shares;
Issued: 34.1 shares in 2018 (2017 - 33.8 shares)		0.3			0.3
Treasury stock, at cost: 0.1 shares in 2018 (2017 - less than 0.1 shares)		(1.7	)		(0.9	)
Issued: 34.5 shares in 2019 (2018 - 34.2 shares)								0.3			0.3
Treasury stock, at cost: 0.2 shares in 2019 (2018 - 0.1 shares)								(3.7	)		(2.4	)
Additional paid-in-capital		214.2			205.7			221.6			216.5
Retained earnings		84.4			8.9			110.2			94.3
Accumulated other comprehensive loss		(65.5	)		(64.6	)		(79.3	)		(82.7	)
Total equity		231.7			149.4			249.1			226.0
Total liabilities and equity	$	913.4		$	893.5		$	1,009.1		$	868.7

See Notes to Unaudited Condensed Consolidated Financial Statements

Donnelley Financial Solutions, Inc. and Subsidiaries (“~~Donnelley Financial”~~DFIN”)

Condensed Consolidated Statements of Cash Flows

For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018

(in millions)

(UNAUDITED)

	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2018			2017			2019			2018
OPERATING ACTIVITIES
Net earnings	$	74.6		$	33.4		$	15.9		$	26.6
Adjustments to reconcile net earnings to net cash provided by operating activities:
Impairment charges		—			0.2
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization		33.1			31.7			24.1			21.5
Provision for doubtful accounts receivable		4.5			4.3			3.2			3.5
Share-based compensation		7.2			5.2			5.1			5.1
Deferred income taxes		6.4			(2.7	)		(4.8	)		1.7
Changes in uncertain tax positions		(0.2	)		(0.2	)
Net pension plan income		(2.4	)		(2.5	)		(1.0	)		(1.6	)
Gain on change in fair value of investment		(11.8	)		—
Gain on disposition		(53.5	)		—
Other		0.6			1.7			18.3			1.7
Changes in operating assets and liabilities - net of acquisitions:
Accounts receivable - net		(70.8	)		(36.6	)
Accounts receivable – net								(90.7	)		(102.1	)
Inventories		(2.7	)		0.6			(0.9	)		(4.8	)
Prepaid expenses and other current assets		2.5			(2.0	)		(0.9	)		0.8
Accounts payable		3.4			(11.7	)		6.1			13.3
Income taxes payable and receivable		17.2			3.7			(5.2	)		3.9
Accrued liabilities and other		4.0			10.3			(34.1	)		(18.3	)
Pension and other postretirement benefits plan contributions		(1.7	)		(1.7	)		(0.4	)		(1.5	)
Net cash provided by operating activities		10.4			33.7
Net cash used in operating activities								(65.3	)		(50.2	)
INVESTING ACTIVITIES
Capital expenditures		(22.8	)		(20.0	)		(26.2	)		(15.6	)
Sale (purchase) of investment		3.1			(3.4	)
Proceeds from disposition		77.1			—
Acquisition of business, net of cash acquired								(2.6	)		—
Other investing activities		—			0.3			0.1			—
Net cash provided by (used in) investing activities		57.4			(23.1	)
Net cash used in investing activities								(28.7	)		(15.6	)
FINANCING ACTIVITIES
Revolving facility borrowings		255.0			230.0			337.0			206.5
Payments on revolving facility borrowings		(255.0	)		(230.0	)		(281.5	)		(179.5	)
Payments on long-term debt		(62.5	)		(100.0	)
Proceeds from the issuance of common stock		1.2			18.8			—			1.2
Treasury share repurchases		(0.8	)		(0.9	)		(1.3	)		(0.8	)
Debt issuance costs		—			(1.5	)		(0.2	)		—
Separation-related payment from R.R. Donnelley		—			68.0
Other financing activities		—			0.4
Net cash used in financing activities		(62.1	)		(15.2	)
Net cash provided by financing activities								54.0			27.4
Effect of exchange rate on cash and cash equivalents		(1.5	)		0.6			2.2			(1.8	)
Net increase (decrease) in cash and cash equivalents		4.2			(4.0	)
Net decrease in cash and cash equivalents								(37.8	)		(40.2	)
Cash and cash equivalents at beginning of year		52.0			36.2			47.3			52.0
Cash and cash equivalents at end of period	$	56.2		$	32.2		$	9.5		$	11.8

Supplemental cash flow information
Income taxes paid							$	17.6		$	6.1
Interest paid							$	16.5		$	17.8

See Notes to Unaudited Condensed Consolidated Financial Statements

Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)

Condensed Consolidated Statements of Equity

For the Three Months Ended June 30, 2019 and 2018

(in millions)

(UNAUDITED)

	Common Stock				Treasury Stock					Additional Paid-in- Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Total Equity
	Shares		Amount		Shares		Amount
Balance at March 31, 2019		34.4	$	0.3		0.2	$	(3.6	)	$	218.0		$	92.9	$	(80.1	)	$	227.5
Net earnings		—		—		—		—			—			17.3		—			17.3
Other comprehensive income		—		—		—		—			—			—		0.8			0.8
Share-based compensation		—		—		—		—			3.6			—		—			3.6
Issuance of share-based awards, net of withholdings and other		0.1		—		—		(0.1)			—			—		—			(0.1)
Balance at June 30, 2019		34.5	$	0.3		0.2	$	(3.7	)	$	221.6		$	110.2	$	(79.3	)	$	249.1

	Common Stock				Treasury Stock					Additional Paid-in- Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Total Equity
	Shares		Amount		Shares		Amount
Balance at March 31, 2018		34.0	$	0.3		0.1	$	(1.7	)	$	208.9		$	17.5	$	(63.4	)	$	161.6
Net earnings		—		—		—		—			—			18.9		—			18.9
Other comprehensive income		—		—		—		—			—			—		(2.9	)		(2.9	)
Share-based compensation		—		—		—		—			3.3			—		—			3.3
Issuance of share-based awards, net of withholdings and other		0.1		—		—		—			(0.1	)		—		—			(0.1	)
Balance at June 30, 2018		34.1	$	0.3		0.1	$	(1.7	)	$	212.1		$	36.4	$	(66.3	)	$	180.8

Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)

Condensed Consolidated Statements of Equity

For the Six Months Ended June 30, 2019 and 2018

(in millions)

(UNAUDITED)

	Common Stock				Treasury Stock					Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Total Equity
	Shares		Amount		Shares		Amount
Balance at December 31, 2018		34.2	$	0.3		0.1	$	(2.4	)	$	216.5	$	94.3	$	(82.7	)	$	226.0
Net earnings		—		—		—		—			—		15.9		—			15.9
Other comprehensive income		—		—		—		—			—		—		3.4			3.4
Share-based compensation		—		—		—		—			5.1		—		—			5.1
Issuance of share-based awards, net of withholdings and other		0.3		—		0.1		(1.3	)		—		—		—			(1.3	)
Balance at June 30, 2019		34.5	$	0.3		0.2	$	(3.7	)	$	221.6	$	110.2	$	(79.3	)	$	249.1

	Common Stock				Treasury Stock					Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Total Equity
	Shares		Amount		Shares		Amount
Balance at December 31, 2017		33.8	$	0.3		—	$	(0.9	)	$	205.7	$	8.9	$	(64.6	)	$	149.4
Net earnings		—		—		—		—			—		26.6		—			26.6
Other comprehensive income		—		—		—		—			—		—		(1.7	)		(1.7	)
Adoption of ASU 2014-09		—		—		—		—			—		0.9		—			0.9
Share-based compensation		—		—		—		—			5.1		—		—			5.1
Issuance of share-based awards, net of withholdings and other		0.3		—		0.1		(0.8	)		1.3		—		—			0.5
Balance at June 30, 2018		34.1	$	0.3		0.1	$	(1.7	)	$	212.1	$	36.4	$	(66.3	)	$	180.8

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Note 1. Overview and Basis of Presentation

Description of Business

Donnelley Financial Solutions, Inc. ~~(the“Company”~~(“DFIN,” or~~“Donnelley Financial”~~ the “Company”) is a ~~financial communications~~leading global risk and compliance solutions company. The Company provides regulatory filing and deal solutions via its software-as-a-service (“SaaS”), technology-enabled services ~~company that supports global~~and print and distribution solutions to public and private companies, mutual funds and other regulated investment firms, to serve their regulatory and compliance needs. For corporate clients within its capital markets ~~compliance and transaction needs for its corporate clients and their advisors (such as law firms and investment bankers) and global investment markets compliance and analytics needs for mutual fund~~offerings, the Company offers technology-enabled filing solutions that allow U.S. public companies variable annuity providers and broker/dealers. With proprietary technology such as data storage and workflow collaboration tools, deep subject matter expertise and a global footprint, Donnelley Financial produces, manages, stores, distributes and translates documents and electronic communications in order to ~~deliver timely financial communications to investors and documents in a manner that complies~~comply with ~~regulatory commissions.~~

~~Donnelley Financial’s Registration Statement on Form 10, as amended, was declared effective by the~~applicable U.S. Securities and Exchange Commission ~~(the “SEC”~~(“SEC”) ~~on September 20, 2016. On October 1, 2016, Donnelley Financial became an independent publicly traded company through~~regulations including filing agent services, digital document creation and online content management tools that support their corporate financial transactions and regulatory reporting; solutions to facilitate clients’ communications with their shareholders; and virtual data rooms and other deal management solutions. For the distribution by R.R. Donnelley & Sons Company (“RRD”) of approximately 26.2 million shares, or 80.75%, of Donnelley Financial common stock to RRD shareholders (the “Separation”). Holders of RRD common stock received one share of Donnelley Financial common stock for every eight shares of RRD common stock held on September 23, 2016. As part of the Separation, RRD retained approximately 6.2 million shares of Donnelley Financial common stock, or a 19.25% interest in Donnelley Financial. Donnelley Financial’s common stock began regular-way trading under the ticker symbol “DFIN” on the New York Stock Exchange on October 3, 2016. On October 1, 2016, RRD also completed the previously announced separation of LSC Communications, Inc. (“LSC”), its publishinginvestment markets, including alternative investment and retail-centric print services and office products business. On March 28, 2017, RRD completed the sale of 6.2 million shares of LSC common stock (RRD’s remaining ownership stake in LSC) in an underwritten public offering. Beginning in the quarter ended June 30, 2017, LSC no longer qualified as a related party, therefore amounts disclosed related to LSC are presented through March 31, 2017 only.

~~On March 24, 2017, pursuant to the Stockholder and Registration Rights Agreement, dated as of September 30, 2016, by and between~~insurance investment companies, the Company provides technology-enabled filing solutions including cloud-based tools for creating and ~~RRD,~~filing high-quality regulatory documents and solutions for investors designed to improve the speed and accuracy of their access to investment information. Throughout a company’s life cycle, the Company ~~filed~~serves its clients’ regulatory and compliance needs. The Company’s deep industry and regulatory expertise and a ~~Registration Statement on Form S-1~~commitment to ~~register the offering~~exceptional service guides our clients to navigate a high-stakes and sale of shares of the Company’s common stock retained by RRD. The Registration Statement on Form S-1, as amended, was declared effective by the SEC on June 13, 2017. On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. Upon the consummation of the offering, RRD retained approximately 0.1 million shares of the Company’s common stock which were subsequently sold by RRD on August 4, 2017. In conjunction with the underwritten public offering, the underwriters exercised their option to purchase approximately 0.9 million of the Company’s shares (the “Option Shares”). The Company received approximately $18.8 million in net proceeds from the sale of the Option Shares, after deducting estimated underwriting discounts and commissions. ~~The proceeds were used to reduce outstanding debt under the Revolving Facility (as defined in Note 15,~~ ~~Debt). Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party, therefore amounts disclosed related to RRD are presented through June 30, 2017 only.~~ever-changing regulatory environment.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of ~~Donnelley Financial~~DFIN and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The financial data presented herein should be read in conjunction with the audited consolidated and combined financial statements and accompanying notes included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 filed with the SEC on February ~~28, 2018.~~27, 2019. In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Results of interim periods should not be considered indicative of the results for the full year. These unaudited condensed consolidated interim financial statements include estimates and assumptions of management that affect the amounts reported in the unaudited condensed consolidated financial statements. Actual results could differ from these estimates.

Changes in Presentation

Certain prior year amounts have been restated to conform to the Company’s current reporting unit structure. Due to the sale of the Language Solutions business in 2018, the Company made changes to the reporting units within the U.S. segment. The former Language Solutions and other reporting unit has been renamed “Language Solutions.” Certain results previously included within the former Language Solutions and other reporting unit are now included within the Investment Markets reporting unit.

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

Note 2. Revenue

Revenue Recognition

The Company manages highly-customized data and materials, such as Exchange Act, Securities Act and Investment Company Act filings with the SEC on behalf of its customers, manages virtual data rooms and performs XBRL and related services. Clients are provided with EDGAR filing services, XBRL compliance services and translation, editing, interpreting, proof-reading and multilingual typesetting services, among others. The Company’s ~~software-as-a-service solutions (“SaaS”)~~SaaS offerings include the Venue Virtual Data Room (“Venue”), the FundSuiteArc software platform, ActiveDisclosure and data and analytics, among others.

Substantially all of the Company’s revenue is derived from contracts with an initial expected duration of one year or less. Generally, customer payment is due within ten days upon invoicing.

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Revenue is recognized upon transfer of control of promised services or products to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services or products. The Company’s arrangements with customers often include promises to transfer multiple services or products to a customer. Determining whether services and products are considered distinct performance obligations that should be accounted for separately requires significant judgment. Certain customer arrangements have multiple performance obligations as certain promises are both capable of being distinct and are distinct within the context of the contract. Other customer arrangements have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts, and therefore are not distinct.

Revenue for the Company’s services and products is recognized either over time or at a point in time, as outlined below.

Over time

The Company recognizes revenue for certain services over time.

•

The Company’s SaaS solutions, including ~~the~~ Venue, ~~Virtual Data Room,~~ the FundSuiteArc software platform, ActiveDisclosure, data and analytics and others, are generally provided on a subscription basis and allow customers access to use the products over the contract period. As a result, revenue for SaaS solutions ~~are~~is recognized ratably over time as the customer receives the benefit throughout the contract period. The timing of invoicing varies, however the customer may be invoiced before the end of the contract period, resulting in a deferred revenue balance.

•

Revenue for warehousing services ~~are~~is recognized ratably over time as the customer receives the benefit throughout the storage period.

Point in time

All remaining revenue arrangements are generally recognized at a point in time and are primarily invoiced upon completion of all services or upon shipment to the customer.

•

Certain of these arrangements include multiple performance obligations and revenue is recognized upon completion of each performance obligation, such as when a document is filed with a regulatory agency and upon completion of printing the related document. For arrangements with multiple performance obligations, the transaction price is allocated to the separate performance obligations. The Company provides customer specific solutions and as such, observable standalone selling price is rarely available. Standalone selling price is more frequently determined using an estimate of the standalone selling price of each distinct service or product, taking into consideration historical selling price by customer for each distinct service or product. These estimates may vary from the final amounts invoiced to the customer and are adjusted upon completion of all performance obligations. Customers may be invoiced subsequent to the recognition of revenue for completed performance obligations, resulting in contract asset balances.

•

Revenue for arrangements which include assisting customers in completing regulatory filings for transactions, such as mergers and acquisitions or other public capital market transactions, is recognized upon completion of all promises, including the services performed and printing of the related document, if applicable.

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

•

Revenue for arrangements without a regulatory filing generally have a single performance obligation, as the services and products provided are not distinct within the context of the contract, and are recognized upon completion of the services performed or upon completion of printing of the related product.

•

Warehousing, fulfillment services and shipping and handling are each separate performance obligations. As a result, when the Company provides warehousing and future fulfillment services, revenue for the composition services performed and printing of the product is recognized upon completion of the performance obligation(s), as control of the inventory has transferred to the customer and the inventory is being stored at the customer’s request.

Because substantially all of the Company’s products are customized, product returns are not significant; however, the Company accrues for the estimated amount of customer credits at the time of sale.

The Company records deferred revenue when amounts are invoiced but the revenue recognition criteria are not yet met. Such revenue is recognized when all criteria are subsequently met.

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Certain revenues earned by the Company require significant judgment to determine if revenue should be recorded gross, as a principal, or net of related costs, as an agent. Billings for shipping and handling costs as well as certain postage costs, and out-of-pocket expenses are recorded gross. Revenue is not recognized for customer-supplied postage. The Company’s printing operations process paper that may be supplied directly by customers or may be purchased by the Company from third parties and sold to customers. Revenue is not recognized for customer-supplied paper, however revenues for Company-supplied paper are recognized on a gross basis. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to authorities.

~~Adoption of ASU 2014-09~~

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue using a five-step process that supersedes virtually all existing revenue guidance. ASU 2014-09 also requires additional quantitative and qualitative disclosures. On January 1, 2018, the Company adopted the standard and all related amendments, using the modified retrospective approach applied to contracts that were not completed as of January 1, 2018. The Company recognized the cumulative effect of applying the standard as an opening transition adjustment to retained earnings. The comparative periods have not been restated and continue to be reported under the accounting standards in effect for those periods (“Previous Revenue Standard”).

As a result of the adoption of ASU 2014-09, revenue recognition has been accelerated for certain arrangements with multiple performance obligations as revenue is now recognized upon the completion of each performance obligation rather than upon completion of all services and shipment of the related document, if applicable. Revenue has also been accelerated for certain inventory which has been invoiced but not yet shipped at the customer’s request. Additionally, certain revenues related to virtual data room services have been deferred to be recognized over the term of the contract.

As substantially all of the Company’s revenue is derived from contracts with an initial expected duration of one year or less, the Company has applied the practical expedient for performance obligations related to contracts with an initial duration of less than one year and is therefore not required to disclose information regarding remaining performance obligations at the end of the reporting period. The Company has also elected the practical expedient to recognize costs to obtain the contract, primarily commissions, as incurred.

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

Disaggregation of revenue

The ~~cumulative effect~~following tables disaggregate revenue by reporting unit and timing of revenue recognition for the ~~changes made~~three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30, 2019
	Point in time		Over time		Total
U.S.
Capital Markets	$	102.6	$	25.7	$	128.3
Investment Markets		80.9		14.0		94.9
Total U.S.		183.5		39.7		223.2
International		28.6		7.1		35.7
Total net sales	$	212.1	$	46.8	$	258.9

	Three Months Ended June 30, 2018
	Point in time		Over time		Total
U.S.
Capital Markets	$	120.5	$	24.1	$	144.6
Investment Markets*		78.1		13.4		91.5
Language Solutions*		6.4		—		6.4
Total U.S.		205.0		37.5		242.5
International		43.3		4.8		48.1
Total net sales	$	248.3	$	42.3	$	290.6

	Six Months Ended June 30, 2019
	Point in time		Over time		Total
U.S.
Capital Markets	$	187.6	$	50.4	$	238.0
Investment Markets		161.4		26.6		188.0
Total U.S.		349.0		77.0		426.0
International		49.7		12.8		62.5
Total net sales	$	398.7	$	89.8	$	488.5

	Six Months Ended June 30, 2018
	Point in time		Over time		Total
U.S.
Capital Markets	$	214.0	$	48.1	$	262.1
Investment Markets*		154.1		26.9		181.0
Language Solutions*		12.5		—		12.5
Total U.S.		380.6		75.0		455.6
International		81.2		9.0		90.2
Total net sales	$	461.8	$	84.0	$	545.8

* Certain prior year amounts were restated to conform to the Company’s ~~consolidated January 1, 2018 balance sheet for the adoption of ASU 2014-09 were as follows:~~current reporting unit structure.

Balance at December 31, 2017

Adoption of ASU 2014-09

Balance at January 1, 2018

Assets

Receivables, less allowances for doubtful accounts
$
165.2

$
8.9

$
174.1

Inventories

23.3

(10.6
)

12.7

Deferred income taxes

22.2

(0.5
)

21.7

Total assets

893.5

(2.2
)

891.3

Liabilities

Accrued liabilities

119.2

(3.1
)

116.1

Equity

Retained earnings

8.9

0.9

9.8

Total liabilities and equity
$
893.5

$
(2.2
)

$
891.3

The impact of the adoption of ASU 2014-09 on the Company’s condensed consolidated statement of operations for the three months and nine months ended September 30, 2018 and condensed consolidated balance sheet as of September 30, 2018 was as follows:

Three Months Ended September 30, 2018

Previous Revenue Standard

Adoption of ASU 2014-09

As Reported

Services net sales
$
139.1

$
(0.6
)

$
138.5

Products net sales

80.3

$
(1.9
)

78.4

Total net sales

219.4

(2.5
)

216.9

Services cost of sales (exclusive of depreciation and amortization)

75.5

—

75.5

Products costs of sales (exclusive of depreciation and amortization)

60.0

(2.2
)

57.8

Total cost of sales

135.5

(2.2
)

133.3

Selling, general and administrative expenses (exclusive of depreciation and amortization)

62.6

—

62.6

Income tax expense (benefit)

19.8

(0.1
)

19.7

Net earnings
$
48.2

$
(0.2
)

$
48.0

Earnings per share

Basic

1.43

(0.01
)

1.42

Diluted

1.41

(0.01
)

1.40

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

Nine Months Ended September 30, 2018

Previous Revenue Standard

Adoption of ASU 2014-09

As Reported

Services net sales
$
484.9

$
1.0

$
485.9

Products net sales

278.6

(1.8
)

276.8

Total net sales

763.5

(0.8
)

762.7

Services cost of sales (exclusive of depreciation and amortization)

253.0

0.4

253.4

Products costs of sales (exclusive of depreciation and amortization)

205.0

(0.9
)

204.1

Total cost of sales

458.0

(0.5
)

457.5

Selling, general and administrative expenses (exclusive of depreciation and amortization)

203.8

—

203.8

Income tax expense (benefit)

31.6

(0.1
)

31.5

Net earnings
$
74.8

$
(0.2
)

$
74.6

Earnings per share

Basic

2.22

(0.01
)

2.21

Diluted

2.20

(0.01
)

2.19

September 30, 2018

Previous Revenue Standard

Adoption of ASU 2014-09

As Reported

Assets

Receivables, less allowances for doubtful accounts
$
215.7

$
5.8

$
221.5

Inventories

23.8

(10.0
)

13.8

Deferred income taxes

14.5

(0.5
)

14.0

Total assets

918.1

(4.7
)

913.4

Liabilities

Accrued liabilities

142.7

(5.4
)

137.3

Equity

Retained earnings

83.7

0.7

84.4

Total liabilities and equity
$
918.1

$
(4.7
)

$
913.4

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

~~Disaggregation of revenue~~

~~The following tables disaggregates revenue by reporting unit and timing of revenue recognition for the three and nine months ended September 30, 2018:~~

Three Months Ended September 30, 2018

Point in time

Over time

Total

U.S.

Capital Markets
$
78.1

$
24.4

$
102.5

Investment Markets*

70.1

11.7

81.8

Language Solutions*

1.2

—

1.2

Total U.S.

149.4

36.1

185.5

International

26.7

4.7

31.4

Total net sales
$
176.1

$
40.8

$
216.9

Nine Months Ended September 30, 2018

Point in time

Over time

Total

U.S.

Capital Markets
$
292.1

$
72.5

$
364.6

Investment Markets*

224.2

38.6

262.8

Language Solutions*

13.7

—

13.7

Total U.S.

530.0

111.1

641.1

International

107.9

13.7

121.6

Total net sales
$
637.9

$
124.8

$
762.7

* Certain prior quarter amounts were restated to conform to the Company’s current reporting unit structure.

Contract Balances

Contract assets represent revenue recognized for performance obligations completed before an unconditional right to payment exists, and therefore invoicing has not yet occurred. Contract assets were $~~6.1~~ $8.2 million at ~~September~~June 30, ~~2018~~2019 and ~~$9.0~~$8.7 million at ~~January 1,~~December 31, 2018, respectively. Generally, the contract assets balance is impacted by the recognition of additional contract assets, offset by amounts invoiced to customers. For the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, final amounts invoiced to customers exceeded estimates of standalone selling price as of January 1, ~~2018~~2019 for the related arrangements by approximately ~~$0.7~~$1.4 million. Contract assets are included in accounts receivable on the condensed consolidated balance sheet.

Contract liabilities consist of deferred revenue and progress billings which are included in accrued liabilities on the condensed consolidated balance sheet. Changes in contract liabilities for the six months ended June 30, 2019 and 2018, respectively, were as follows:

Balance at January 1, 2018
$
14.2

Deferral of revenue

35.4

Revenue recognized

(35.9
)
Disposition

(1.6
)
Balance at September 30, 2018
$
12.1

Balance at January 1, 2019	$	12.0
Deferral of revenue		25.1
Revenue recognized		(25.2	)
Balance at June 30, 2019	$	11.9

Balance at January 1, 2018	$	14.2
Deferral of revenue		22.8
Revenue recognized		(23.8	)
Reclassified to liabilities held for sale		(1.7	)
Balance at June 30, 2018	$	11.5

Note 3. Acquisitions and Dispositions

Acquisition

On December 18, 2018, the Company acquired eBrevia, a leading provider of artificial intelligence-based data extraction and contract analytics software solutions. The eBrevia technology provides leading enterprise contract review and analysis solutions, leveraging machine learning to produce faster and more accurate results. eBrevia's software, which extracts and summarizes key legal provisions and other information, can be used in due diligence, contract management, lease abstraction and document drafting. The acquisition enhances the Company’s Venue Deal Solutions offerings to provide clients with secure data aggregation, due diligence, compliance and risk management solutions. The Company previously held a 12.8% investment in eBrevia prior to the acquisition. The purchase price for the remaining equity of eBrevia, which includes the Company’s estimate of contingent consideration, was $23.3 million, net of cash acquired of $0.2 million. $1.8 million of the purchase price, excluding contingent consideration and amounts held in escrow, remains payable as of June 30, 2019. The fair value of the Company’s previously held investment was $3.3 million, resulting in the recognition of a $1.8 million gain, which is reflected in investment and other income in the consolidated statements of operations for the year ended December 31, 2018. The fair value of the previously held investment was determined based on the purchase price paid for the remaining equity less an estimated control premium. The former owners of eBrevia, excluding the Company, may receive additional contingent consideration of up to $3.5 million in cash subject to eBrevia achieving certain financial targets during the twenty-four months post acquisition. As of the acquisition date and June 30, 2019, the Company estimated the fair value of contingent consideration to be $0.8 million using a probability weighting of the potential payouts. Subsequent changes in the estimated contingent consideration from the final purchase price allocation will be recognized in the Company’s consolidated statement of operations. The operations of eBrevia are included within the Capital Markets reporting unit in the U.S. segment.

During the three and six months ended June 30, 2019, there were no acquisition-related expenses. For the three and six months ended June 30, 2018, the Company recorded $0.3 million and $0.5 million, respectively, of acquisition-related expenses associated with acquisitions completed or contemplated within selling, general and administrative expenses in the condensed consolidated statement of operations.

The eBrevia acquisition was recorded by allocating the cost of the acquisition to the assets acquired, including other intangible assets, based on their estimated fair values at the acquisition date. The excess of the cost of the acquisition over the net amounts assigned to the fair value of the assets acquired was recorded as goodwill.

There is no tax deductible goodwill related to the eBrevia acquisition.

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

The purchase price allocation for eBrevia is preliminary as the Company is still in the process of obtaining data to finalize the estimated fair values of certain deferred tax account balances. The final purchase price allocation may differ from what is currently reflected in the consolidated financial statements. Based on the current valuation, the preliminary purchase price allocation for this acquisition is as follows:

Accounts receivable	$	0.3
Other intangible assets		11.4
Software		0.8
Goodwill		12.9
Accounts payable and accrued liabilities		(0.4	)
Deferred taxes-net		(1.7	)
Total purchase price-net of cash acquired		23.3
Less: fair value of the Company's previously held investment in eBrevia		(3.3	)
Less: fair value of contingent consideration		(0.8	)
Less: payable for initial consideration		(1.8	)
Less: amounts held in escrow and liabilities assumed		(2.2	)
Net cash paid	$	15.2

Disposition

On July 22, 2018, the Company sold its Language Solutions business, which helped companies adapt their business content into different languages for specific countries, markets and regions, for net proceeds of $77.5 million in cash, ~~substantially~~ all of which was received as of ~~September 30,~~December 31, 2018, resulting in a gain of ~~$53.5~~$53.8 million, which was recognized in other operating income in the ~~condensed~~ consolidated statement of operations for the year ended December 31, 2018. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019, the Company recognized a $2.8 million loss in other operating loss in the consolidated statement of operations for the estimated payment of amounts related to the disposition of the Language Solutions business. Language Solutions' operating results were included within the Language Solutions reporting unit within the U.S. segment as well as the International segment.

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

Note 4. Inventories

The components of the Company’s inventories, net of excess and obsolescence reserves for raw materials, ~~and finished goods,~~ at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 were as follows:

	September 30, 2018		December 31, 2017		June 30, 2019		December 31, 2018
Raw materials and manufacturing supplies	$	3.2	$	3.3	$	4.1	$	4.0
Work in process		10.6		13.7		8.9		8.1
Finished goods		—		6.3
Total	$	13.8	$	23.3	$	13.0	$	12.1

Note 5. Property, Plant and Equipment

The components of the Company’s property, plant and equipment at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 were as follows:

	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
Land	$	10.0		$	10.0		$	10.0		$	10.0
Buildings		36.3			36.1			37.7			36.2
Machinery and equipment		105.3			104.0			112.9			106.3
		151.6			150.1			160.6			152.5
Less: Accumulated depreciation		(119.9	)		(115.4	)		(123.6	)		(120.3	)
Total	$	31.7		$	34.7		$	37.0		$	32.2

Depreciation expense was ~~$1.6~~$1.8 million and $1.9 million for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$5.4~~$3.3 million and ~~$5.0~~$3.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017, respectively.~~ 2018.

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Note 6. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill by segment for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 were as follows:

U.S.

International

Total

Net book value as of December 31, 2017
$
429.2

$
18.2

$
447.4

Disposition

(3.5
)

(5.8
)

(9.3
)
Foreign exchange and other adjustments

—

(0.6
)

(0.6
)
Net book value as of September 30, 2018
$
425.7

$
11.8

$
437.5

	U.S.		International		Total
Net book value as of December 31, 2018	$	438.5	$	11.5	$	450.0
Purchase accounting adjustments		0.1		—		0.1
Foreign exchange and other adjustments		—		0.2		0.2
Net book value as of June 30, 2019	$	438.6	$	11.7	$	450.3

The components of other intangible assets at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 were as follows:

	September 30, 2018							December 31, 2017
	Gross							Gross							June 30, 2019							December 31, 2018
	Carrying		Accumulated			Net Book		Carrying		Accumulated			Net Book		Gross							Gross
	Amount		Amortization			Value		Amount		Amortization			Value		Carrying		Accumulated			Net Book		Carrying		Accumulated			Net Book
															Amount		Amortization			Value		Amount		Amortization			Value
Customer relationships	$	139.5	$	(110.2	)	$	29.3	$	140.6	$	(100.7	)	$	39.9	$	149.6	$	(120.5	)	$	29.1	$	149.3	$	(113.1	)	$	36.2
Trade names		2.9		(2.9	)		—		2.9		(2.9	)		—		3.9		(3.0	)		0.9		3.9		(2.9	)		1.0
Total other intangible assets	$	142.4	$	(113.1	)	$	29.3	$	143.5	$	(103.6	)	$	39.9	$	153.5	$	(123.5	)	$	30.0	$	153.2	$	(116.0	)	$	37.2

Amortization expense for other intangible assets was ~~$3.4~~$3.6 million and ~~$3.6~~$3.5 million for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$10.3~~$7.3 million and ~~$10.7~~$6.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

13The following table outlines the estimated annual amortization expense related to other intangible assets as of June 30, 2019:

For the year ending December 31,	Amount
2019	$	14.6
2020		13.0
2021		0.9
2022		0.9
2023		0.9
2024 and thereafter		7.0
Total	$	37.3

Note 7. Leases

The Company elected the optional package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. The Company also elected the practical expedient to not separate lease components from non-lease components for real estate leases. As a result of the adoption of ASU 2016-02, the Company recognized a lease liability of $101.6 million and a right-of-use (“ROU”) asset of $100.8 million for operating leases at January 1, 2019.

The Company has operating leases for certain service centers, office space, warehouses and equipment. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. Upon adoption of ASU 2016-02, ROU assets were adjusted for deferred rent, restructuring liabilities, prepaids and favorable/onerous lease balances as of January 1, 2019. Lease expense is recognized on a straight-line basis over the expected lease term. The Company’s incremental borrowing rate is used in determining the present value of future payments at the commencement date of the lease, or for the adoption of ASU 2016-02, at January 1, 2019. Balances related to operating leases are included in ROU assets, accrued liabilities and noncurrent lease liabilities on the condensed consolidated balance sheet.

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

All real estate leases are recorded on the balance sheet. Equipment and other non-real estate leases with an initial term of twelve months or less are not recorded on the balance sheet. Lease agreements for some locations provide for rent escalations and renewal options. Lease terms include the option to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Certain real estate leases require payment for taxes, insurance and maintenance which are considered non-lease components. The Company accounts for real estate leases and the related fixed non-lease components together as a single component.

The ~~following table outlines~~Company determines if an arrangement is a lease at inception. The Company must consider whether the ~~estimated annual amortization~~contract conveys the right to control the use of an identified asset. Certain arrangements require significant judgment to determine if an asset is specified in the contract and if the Company directs how and for what purpose the asset is used during the term of the contract.

The Company has non-cancelable sublease rental arrangements which did not reduce the future maturities of the operating lease liabilities at June 30, 2019 and did not reduce future rental commitments at December 31, 2018.

The components of lease expense for the three and six months ended June 30, 2019 were as follows:

	Three months ended			Six months ended
	June 30, 2019			June 30, 2019
Operating lease expense	$	6.4		$	13.2
Sublease income		(1.7	)		(2.5	)
Net lease expense	$	4.7		$	10.7

Other information related to ~~other intangible assets~~operating leases as of ~~September~~and for the six months ended June 30, ~~2018:~~2019 were as follows:

For the year ending December 31,
Amount

2018
$
13.7

2019

13.7

2020

12.2

2021

—

2022

—

2023 and thereafter

—

Total
$
39.6

Lease Term and Discount Rate	June 30, 2019
Weighted average remaining lease term	4.8 years
Weighted average discount rate	4.6	%

	Six months ended
Lease Liabilities	June 30, 2019
Cash paid related to lease liabilities	$	13.7
Non-cash disclosure:
Increase in lease liabilities due to new ROU assets	$	2.3
Decrease in lease liabilities due to lease modifications and remeasurements		(7.6	)

Maturities of lease liabilities for operating leases as of June 30, 2019 were as follows:

~~Note 7. Investments~~

	Amount
2019 ^(a)	$	13.8
2020		23.7
2021		18.6
2022		14.2
2023		10.0
2024 and thereafter		16.4
Total lease payments		96.7
Less: Interest		(11.4	)
Present value of lease liabilities	$	85.3

(a)	Excluding payments for the six months ended June 30, 2019

As of June 30, 2019
Accrued liabilities	$	22.5
Noncurrent lease liabilities		62.8
Total	$	85.3

~~In January 2016,~~15

Donnelley Financial Solutions, Inc.

Notes to the ~~FASB issued Accounting Standards Update No. 2016-01 “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of~~Unaudited Condensed Consolidated Financial ~~Assets and Financial Liabilities” (“ASU 2016-01”), which requires that investments~~ Statements

(in ~~equity securities,~~millions, except ~~those accounted for under the equity method of accounting or those that result in consolidation,~~per share data, unless otherwise indicated)

Disclosures related to ~~be measured at fair value with changes in fair value recognized in net income. The Company adopted ASU 2016-01 on January 1, 2018. Upon~~periods prior to adoption of ASU ~~2016-01, there~~2016-02

Future minimum rental commitments under non-cancellable operating leases as of December 31, 2018 were expected to be as follows:

Year ended December 31	Amount
2019	$	26.4
2020		22.6
2021		16.6
2022		10.9
2023		8.7
2024 and thereafter		16.3
Total	$	101.5

Rent expense for facilities in use and equipment was ~~no material impact on the Company’s consolidated financial position, results of operations or cash flows.~~

~~The carrying value of the Company’s equity investments within the scope of ASU 2016-01 was $23.6~~$6.2 million and ~~$14.9~~$12.6 million ~~as of September 30, 2018 and December 31, 2017, respectively. The Company measures its equity investments that do not have a readily determinable fair value, atcost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions~~ for the identical or a similar investment of the same issuer. The Company performs an assessment on a quarterly basis to determine whether triggering events for impairment exist and to identify any observable price changes.

The following table summarizes realized and unrealized gains and losses on equity investments recognized in investment and other income in the unaudited condensed consolidated statements of operations during the three and ~~nine~~six months ended ~~September~~June 30, ~~2018:~~2018, respectively.

Three months ended September 30, 2018

Nine months ended September 30, 2018

Net gain on equity securities
$
11.8

$
11.8

Less: net gain recognized on equity securities sold

(2.4
)

(2.4
)
Unrealized net gain recognized on equity securities still held at the reporting date
$
9.4

$
9.4

Note 8. Restructuring, Impairment and Other Charges

Restructuring, Impairment and Other Charges recognized in Results of Operations

For the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, the Company recorded the following net restructuring ~~impairment~~charges:

Three Months Ended	Employee		Total Restructuring
June 30, 2019	Terminations		Charges		Total
U.S.	$	2.7	$	2.7	$	2.7
International		0.4		0.4		0.4
Corporate		0.7		0.7		0.7
Total	$	3.8	$	3.8	$	3.8

Three Months Ended	Employee		Other Restructuring		Total Restructuring
June 30, 2018	Terminations		Charges		Charges		Total
U.S.	$	0.4	$	0.2	$	0.6	$	0.6
International		1.9		—		1.9		1.9
Corporate		0.1		—		0.1		0.1
Total	$	2.4	$	0.2	$	2.6	$	2.6

For the six months ended June 30, 2019 and 2018, the Company recorded the following net restructuring and other charges:

Three Months Ended	Employee		Other Restructuring		Total Restructuring
September 30, 2018	Terminations		Charges		Charges		Total
Six Months Ended									Employee		Total Restructuring		Other
June 30, 2019									Terminations		Charges		Charges		Total
U.S.	$	0.6	$	—	$	0.6	$	0.6	$	3.2	$	3.2	$	0.1	$	3.3
International		0.1		—		0.1		0.1		1.0		1.0		—		1.0
Corporate		0.1		—		0.1		0.1		1.6		1.6		—		1.6
Total	$	0.8	$	—	$	0.8	$	0.8	$	5.8	$	5.8	$	0.1	$	5.9

Six Months Ended	Employee		Other Restructuring		Total Restructuring		Other
June 30, 2018	Terminations		Charges		Charges		Charges		Total
U.S.	$	0.5	$	0.7	$	1.2	$	0.1	$	1.3
International		1.8		—		1.8		—		1.8
Corporate		0.2		—		0.2		—		0.2
Total	$	2.5	$	0.7	$	3.2	$	0.1	$	3.3

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Three Months Ended

Employee

Other
Restructuring

Total
Restructuring

September 30, 2017

Terminations

Charges

Charges

Total

U.S.

$
0.2

$
(1.0
)

$
(0.8
)

$
(0.8
)
International

0.1

—

0.1

0.1

Corporate

0.1

—

0.1

0.1

Total

$
0.4

$
(1.0
)

$
(0.6
)

$
(0.6
)

For the ~~nine~~three and six months ended ~~September~~June 30, ~~2018 and 2017,~~2019, the Company recorded ~~the following~~ net restructuring ~~impairment~~charges of $3.8 million and $5.8 million, respectively, for employee termination costs for 164 employees, substantially all of whom were terminated as of June 30, 2019. These charges primarily related to the reorganization of certain operations. For the six months ended June 30, 2019, the Company also incurred $0.1 million for other ~~charges:~~

Nine Months Ended

Employee

Other
Restructuring

Total
Restructuring

Other

September 30, 2018

Terminations

Charges

Charges

Charges

Total

U.S.

$
1.1

$
0.7

$
1.8

$
0.1

$
1.9

International

1.9

—

1.9

—

1.9

Corporate

0.3

—

0.3

—

0.3

Total

$
3.3

$
0.7

$
4.0

$
0.1

$
4.1

Nine Months Ended

Employee

Other
Restructuring

Total
Restructuring

Other

September 30, 2017

Terminations

Charges

Charges

Impairment

Charges

Total

U.S.

$
3.2

$
0.9

$
4.1

$
0.2

$
0.1

$
4.4

International

1.3

—

1.3

—

—

1.3

Corporate

0.7

—

0.7

—

—

0.7

Total

$
5.2

$
0.9

$
6.1

$
0.2

$
0.1

$
6.4

~~Restructuring and Impairment Charges~~charges associated with Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate.

For the three and ~~nine~~six months ended ~~September~~June 30, 2018, the Company recorded net restructuring charges of ~~$0.8~~$2.4 million and ~~$3.3~~$2.5 million, respectively, for employee termination costs for 7647 employees, ~~substantially~~ all of whom were terminated as of ~~September~~June 30, ~~2018.~~2019. These charges primarily related to the reorganization of certain operations. Additionally, the Company incurred net lease termination and other restructuring ~~charges~~cost of $0.2 million and $0.7 million, respectively, for ~~the nine months ended September 30, 2018.~~

~~For~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, the Company recorded net restructuring charges of $0.4 million and $5.2 million, respectively, for employee termination costs for 169 employees, all of whom were terminated as of September 30,~~ 2018. These charges primarily related to the reorganization of certain operations and certain administrative functions. Additionally, the Company recognized a net reversal of $1.0 million of other restructuring charges during the three months ended September 30, 2017, primarily due to the reversal of previously recognized lease termination costs associated with a facility that the Company began using during the third quarter of 2017. The Company incurred net lease termination and other restructuring charges of $0.9 million for the nine months ended September 30, 2017. For the nine months ended September 30, 2017, the Company also recorded $0.2 million of net impairment charges primarily related to leasehold improvements associated with facility closures. The nine months ended September 30, 2017 includes $0.1 million for other charges associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate.

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

Restructuring Reserve

The restructuring reserve as of December 31, ~~2017~~2018 and ~~September~~June 30, ~~2018,~~2019, and changes during the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, were as follows:


	December 31,		Restructuring					Cash			September 30,		December 31,		Restructuring					Adoption of			Cash			June 30,
	2017		Charges		Reversals			Paid			2018		2018		Charges		Reversals			ASU 2016-02			Paid			2019
Employee terminations	$	1.3	$	3.5	$	(0.2	)	$	(3.3	)	$	1.3	$	0.4	$	5.9	$	(0.1	)	$	—		$	(3.3	)	$	2.9
Lease terminations and other		2.1		0.7		—			(1.3	)		1.5
Lease terminations														1.1		—		—			(1.1	)		—			—
Other														0.2		—		—			—			—			0.2
Total	$	3.4	$	4.2	$	(0.2	)	$	(4.6	)	$	2.8	$	1.7	$	5.9	$	(0.1	)	$	(1.1	)	$	(3.3	)	$	3.1

The current portion of restructuring reserves of ~~$2.3~~$3.0 million at ~~September~~June 30, ~~2018~~2019 was included in accrued liabilities, while the long-term portion of ~~$0.5~~$0.1 million ~~primarily related to lease termination costs,~~ was included in other noncurrent liabilities at ~~September~~June 30, ~~2018.~~2019.

The Company anticipates that payments associated with the employee terminations reflected in the table above will be substantially completed by December 31, ~~2018.~~2019.

The restructuring liabilities classified as “lease ~~terminations and other”~~terminations” consisted of lease terminations, other facility closing costs and contract termination costs. ~~Payments on certain~~Upon adoption of ASU 2016-02, the ~~lease obligations are scheduled to continue until 2021. Market conditions and the Company’s ability to sublease these properties could affect the ultimate charges related~~restructuring liabilities as of January 1, 2019 were recorded as a reduction to the ~~lease obligations. Any potential recoveries or additional charges could affect amounts reported in the Company’s financial statements.~~related ROU assets recorded on January 1, 2019. Refer to Note 7, Leases, for further information.

Note 9. Retirement Plans

The components of the estimated net pension plan income for ~~Donnelley Financial’s~~DFIN’s pension plans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2018

2017

2018

2017

Pension expense (income)

Interest cost
$
2.6

$
2.6

$
7.7

$
7.9

Expected return on assets

(4.0
)

(4.0
)

(12.0
)

(12.0
)
Amortization, net

0.6

0.6

1.9

1.6

Net pension income
$
(0.8
)

$
(0.8
)

$
(2.4
)

$
(2.5
)

~~During the first quarter of 2018, the Company adopted Accounting Standards Update~~ No. 2017-07 “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”), which requires an employer to report the service cost component of net periodic benefit cost in the same line item(s) as other employee compensation costs arising from services rendered during the period. The other components of net periodic benefit cost are presented in the income statement separately from the line item(s) that includes the service cost and outside of any subtotal of operating income. ASU 2017-07 was adopted on a retrospective basis. The adoption of ASU 2017-07 resulted in the presentation of net pension income within investment and other income in the condensed consolidated statement of operations instead of selling, general and administrative expenses. Prior period net pension income was also reclassified.

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

~~Note 10. Income Taxes~~

The Company’s provision for income taxes for the three and nine months ended September 30, 2018 and 2017 is based on the estimated annual effective tax rate, plus discrete items. The following table presents the provision for income taxes and the effective income tax rates for the three and nine months ended September 30, 2018 and 2017:

Three Months Ended September 30,

2018

2017

$ Change

% Change

(in millions, except percentages)

Earnings before income taxes
$
67.7

$
7.4

$
60.3

814.9
%
Income tax expense

19.7

2.1

17.6

838.1
%
Effective income tax rate

29.1
%

28.4
%

Nine Months Ended September 30,

2018

2017

$ Change

% Change

(in millions, except percentages)

Earnings before income taxes
$
106.1

$
55.4

$
50.7

91.5
%
Income tax expense

31.5

22.0

9.5

43.2
%
Effective income tax rate

29.7
%

39.7
%

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Pension expense (income)
Interest cost	$	2.7		$	2.5		$	5.5		$	5.1
Expected return on assets		(3.7	)		(4.0	)		(7.4	)		(8.0	)
Amortization, net		0.5			0.7			0.9			1.3
Net pension income	$	(0.5	)	$	(0.8	)	$	(1.0	)	$	(1.6	)

Cash payments (net of refunds) for U.S. federal, states and foreign income taxes were $1.5 million and $8.9 million for the three months ended September 30, 2018 and 2017, respectively, and $7.6 million and $21.8 million for the nine months ended September 30, 2018 and 2017, respectively.

The decrease in the effective income tax rate to 29.7% for the nine months ended September 30, 2018 compared to 39.7% for the nine months ended September 30, 2017 was primarily due to changes in U.S. corporate tax law pursuant to the enactment of the U.S. Federal Tax Cut and Jobs Act (“the Tax Act”) on December 22, 2017, and includes a reduction of the corporate income tax from 35% to 21%, partially offset by an increase in non-deductible expenses and the taxation of certain foreign earnings referred to in the Tax Act as global intangible low-taxed income. The effective income tax rate for the nine months ended September 30, 2018 also reflects the tax impact of the sale of the Language Solutions business.

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the tax effects and recorded provisional amounts in its consolidated financial statements for the year ended December 31, 2017. Staff Accounting Bulletin No. 118 (“SAB 118”) provided a measurement period of one year from the Tax Act enactment date for companies to complete their accounting for the enactment-date effects of the Tax Act that were considered provisional estimates at December 31, 2017. During the first quarter of 2018, the Company recognized a measurement-period adjustment of $0.4 million to decrease the income tax liability with a corresponding $0.4 million income tax benefit related to the one-time transition tax on foreign subsidiaries’ untaxed accumulated earnings. The Company is continuing to gather and review additional information needed to complete the accounting for the tax effects of the Tax Act. As a result, the Company has not made any additional measurement-period adjustments during the three months ended September 30, 2018 with respect to the one-time transition tax, re-measurement of deferred tax assets and liabilities and the Company’s indefinite reinvestment assertion. The Company will complete its accounting for these items within the prescribed measurement period.

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

~~Note 11. Equity~~

~~The Company’s equity as of December 31, 2017 and September 30, 2018, and changes during the nine months ended September 30, 2018, were as follows:~~

Total

Equity

Balance at December 31, 2017
$
149.4

Net earnings

74.6

Other comprehensive income

(0.9
)
Adoption of ASU 2014-09

0.9

Share-based compensation

7.2

Issuance of share-based awards, net of withholdings and other

0.5

Balance at September 30, 2018
$
231.7

~~The Company’s equity as of December 31, 2016 and September 30, 2017, and changes during the nine months ended September 30, 2017, were as follows:~~

Total

Equity

Balance at December 31, 2016
$
111.1

Net earnings

33.4

Other comprehensive income

5.6

Separation-related adjustments

0.2

Share-based compensation

5.2

Issuance of common stock

18.8

Issuance of share-based awards, net of withholdings and other

(0.7
)
Balance at September 30, 2017
$
173.6

Separation-related adjustments primarily relate to adjustments arising from the finalization of tax returns for periods prior to the Separation as well as the settlement of balances due to or from RRD for activity prior to the Separation.

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

Note ~~12.~~10. Earnings per Share

Basic earnings per share is calculated by dividing net earnings by the weighted average number of common shares outstanding for the period. In computing diluted earnings per share, basic earnings per share is adjusted for the assumed issuance of all potentially dilutive share-based awards, including stock options, restricted stock units, performance share units and restricted stock.

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

The Company’s share-based compensation plan under which it may grant future awards, the Donnelley Financial Solutions, Inc. Amended and Restated 2016 Performance Incentive Plan (as amended, the “2016 PIP”), was approved by the Board of Directors to provide incentives to key employees of the Company. Awards under the 2016 PIP may include, cash or stock bonuses, stock options, stock appreciation rights, restricted stock or restricted stock units (“RSUs”). In addition, non-employee members of the Board of Directors may receive awards under the 2016 PIP. On May 30, 2019, the Board of Directors authorized 3.4 million additional shares of common stock for issuance under the 2016 PIP. At June 30, 2019, there were 3.1 million remaining shares of common stock authorized and available for grant under the 2016 PIP.

The reconciliation of the numerator and denominator of the basic and diluted earnings per share calculation and the anti-dilutive share-based awards for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30				June 30
	2018		2017		2018		2017		2019		2018		2019		2018
Net earnings per share:
Basic	$	1.42	$	0.16	$	2.21	$	1.01	$	0.51	$	0.56	$	0.47	$	0.79
Diluted	$	1.40	$	0.16	$	2.19	$	1.01	$	0.51	$	0.56	$	0.47	$	0.78
Numerator:
Net earnings	$	48.0	$	5.3	$	74.6	$	33.4	$	17.3	$	18.9	$	15.9	$	26.6
Denominator:
Weighted average number of common shares outstanding		33.9		33.6		33.8		33.0		34.1		33.8		34.0		33.7
Dilutive awards		0.3		0.2		0.2		0.2		0.1		0.2		0.1		0.2
Diluted weighted average number of common shares outstanding		34.2		33.8		34.0		33.2		34.2		34.0		34.1		33.9
Weighted average number of anti-dilutive share-based awards:
Restricted stock units		—		—		0.3		0.2		0.3		0.2		0.4		0.4
Stock options		0.6		0.4		0.6		0.3		0.8		0.6		0.8		0.6
Total		0.6		0.4		0.9		0.5		1.1		0.8		1.2		1.0

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

Note ~~13.~~11. Comprehensive Income

The components of other comprehensive ~~(loss)~~ income and income tax expense allocated to each component for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017 were as follows:~~

Three Months Ended

Nine Months Ended

September 30, 2018

September 30, 2018

Before Tax

Income Tax

Net of Tax

Before Tax

Income Tax

Net of Tax

Amount

Expense

Amount

Amount

Expense

Amount

Translation adjustments
$
0.4

$
—

$
0.4

$
(2.3
)

$
—

$
(2.3
)
Adjustment for net periodic pension plan and other postretirement benefits plan cost

0.6

0.2

0.4

1.9

0.5

1.4

Other comprehensive income (loss)
$
1.0

$
0.2

$
0.8

$
(0.4
)

$
0.5

$
(0.9
)

Three Months Ended

Nine Months Ended

September 30, 2017

September 30, 2017

Before Tax

Income Tax

Net of Tax

Before Tax

Income Tax

Net of Tax

Amount

Expense

Amount

Amount

Expense

Amount

Translation adjustments
$
2.2

$
—

$
2.2

$
4.6

$
—

$
4.6

Adjustment for net periodic pension plan and other postretirement benefits plan cost

0.6

0.3

0.3

1.6

0.6

1.0

Other comprehensive income
$
2.8

$
0.3

$
2.5

$
6.2

$
0.6

$
5.6

~~Accumulated other comprehensive loss by component as of December 31, 2017 and September 30,~~ 2018 were as follows:

Pension and Other Postretirement Benefits Plan Cost

Translation Adjustments

Total

Balance at December 31, 2017
$
(52.9
)

$
(11.7
)

$
(64.6
)
Other comprehensive income before reclassifications

—

(2.3
)

(2.3
)
Amounts reclassified from accumulated other comprehensive loss

1.4

—

1.4

Net change in accumulated other comprehensive loss

1.4

(2.3
)

(0.9
)
Balance at September 30, 2018
$
(51.5
)

$
(14.0
)

$
(65.5
)

	Three Months Ended						Six Months Ended
	June 30, 2019						June 30, 2019
	Before Tax		Income Tax		Net of Tax		Before Tax		Income Tax		Net of Tax
	Amount		Expense		Amount		Amount		Expense		Amount
Translation adjustments	$	0.5	$	—	$	0.5	$	2.7	$	—	$	2.7
Adjustment for net periodic pension plan and other postretirement benefits plan cost		0.4		0.1		0.3		1.0		0.3		0.7
Other comprehensive income	$	0.9	$	0.1	$	0.8	$	3.7	$	0.3	$	3.4

	Three Months Ended								Six Months Ended
	June 30, 2018								June 30, 2018
	Before Tax			Income Tax		Net of Tax			Before Tax			Income Tax		Net of Tax
	Amount			Expense		Amount			Amount			Expense		Amount
Translation adjustments	$	(3.4	)	$	—	$	(3.4	)	$	(2.7	)	$	—	$	(2.7	)
Adjustment for net periodic pension plan and other postretirement benefits plan cost		0.7			0.2		0.5			1.3			0.3		1.0
Other comprehensive (loss) income	$	(2.7	)	$	0.2	$	(2.9	)	$	(1.4	)	$	0.3	$	(1.7	)

~~Accumulated other comprehensive loss by component as of December 31, 2016 and September 30, 2017 were as follows:~~

Pension and Other Postretirement Benefits Plan Cost

Translation Adjustments

Total

Balance at December 31, 2016
$
(52.2
)

$
(16.1
)

$
(68.3
)
Other comprehensive income before reclassifications

—

4.6

4.6

Amounts reclassified from accumulated other comprehensive loss

1.0

—

1.0

Net change in accumulated other comprehensive loss

1.0

4.6

5.6

Balance at September 30, 2017
$
(51.2
)

$
(11.5
)

$
(62.7
)

2018

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Accumulated other comprehensive loss by component as of December 31, 2018 and June 30, 2019 were as follows:

	Pension and Other Postretirement Benefits Plan Cost			Translation Adjustments			Total
Balance at December 31, 2018	$	(66.0	)	$	(16.7	)	$	(82.7	)
Other comprehensive income before reclassifications		0.1			2.7			2.8
Amounts reclassified from accumulated other comprehensive loss		0.6			—			0.6
Net change in accumulated other comprehensive loss		0.7			2.7			3.4
Balance at June 30, 2019	$	(65.3	)	$	(14.0	)	$	(79.3	)

Accumulated other comprehensive loss by component as of December 31, 2017 and June 30, 2018 were as follows:

	Pension and Other Postretirement Benefits Plan Cost			Translation Adjustments			Total
Balance at December 31, 2017	$	(52.9	)	$	(11.7	)	$	(64.6	)
Other comprehensive income before reclassifications		—			(2.7	)		(2.7	)
Amounts reclassified from accumulated other comprehensive loss		1.0			—			1.0
Net change in accumulated other comprehensive loss		1.0			(2.7	)		(1.7	)
Balance at June 30, 2018	$	(51.9	)	$	(14.4	)	$	(66.3	)

Reclassifications from accumulated other comprehensive loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:

	Three Months Ended				Nine Months Ended				Classification in the Condensed	Three Months Ended				Six Months Ended				Classification in the Condensed
	September 30,				September 30,				Consolidated	June 30,				June 30,				Consolidated
	2018		2017		2018		2017		Statements of Operations	2019		2018		2019		2018		Statements of Operations
Amortization of pension and other postretirement benefits plan cost:
Net actuarial income	$	0.6	$	0.6	$	1.9	$	1.6	_(a)
Net actuarial loss										$	0.5	$	0.7	$	0.9	$	1.3	_(a)
Reclassifications before tax		0.6		0.6		1.9		1.6			0.5		0.7		0.9		1.3
Income tax expense		0.2		0.3		0.5		0.6			0.2		0.2		0.3		0.3
Reclassifications, net of tax	$	0.4	$	0.3	$	1.4	$	1.0		$	0.3	$	0.5	$	0.6	$	1.0

(a)	This accumulated other comprehensive loss component is included in the calculation of net periodic pension and other postretirement benefits plan income recognized in investment and other income in the unaudited condensed consolidated statements of operations (see Note 9, Retirement Plans).

Note ~~14.~~12. Segment Information

The Company’s segments are summarized below:

United States

The U.S. segment serves capital market and investment market clients in the U.S. by delivering products and services to help create, manage, and deliver, accurate and timely financial communications to investors and regulators. The Company also provides virtual data rooms to facilitate the deal management requirements of capital markets and mergers and acquisitions transactions, and provides data and analytics services that help professionals uncover intelligence from disclosures contained within public filings made with the SEC. The U.S. segment also includes commercial print. In addition, the U.S. segment included language solutions capabilities, through which the Company translated documents and created content in up to 140 different languages for its clients.*

2119

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

International

The International segment includes the Company’s operations in Asia, Europe, Canada and Latin America. The international business is primarily focused on working with international capital markets clients on capital markets offerings and regulatory compliance related activities into or within the United States. In addition, the international segment provided language translation services and shareholder communication services to investment market clients.*

*The Company sold its Language Solutions business on July 22, 2018. Refer to Note 3, ~~Disposition~~Acquisitions and Dispositions, for further information.

Corporate

Corporate consists of unallocated general and administrative activities and associated expenses including, in part, executive, legal, finance, communications and certain facility costs. In addition, certain costs and earnings of employee benefit plans, such as pension and other postretirement benefit plan expense (income) and allocated costs for share-based compensation, are included in Corporate and not allocated to the operating segments.

Information by Segment

The Company has disclosed income (loss) from operations as the primary measure of segment earnings (loss). This is the measure of profitability used by the Company’s chief operating decision-maker and is most consistent with the presentation of profitability reported within the consolidated financial statements.

								Income (Loss)			Depreciation											Income (Loss)			Depreciation
	Total		Intersegment			Net		from			and		Capital		Total		Intersegment			Net		from			and		Capital
	Sales		Sales			Sales		Operations			Amortization		Expenditures		Sales		Sales			Sales		Operations			Amortization		Expenditures
Three Months Ended September 30, 2018
Three Months Ended June 30, 2019
U.S.	$	187.9	$	(2.4	)	$	185.5	$	48.4		$	10.3	$	7.2	$	225.2	$	(2.0	)	$	223.2	$	40.4		$	10.1	$	10.7
International		31.9		(0.5	)		31.4		27.0			1.2		—		36.2		(0.5	)		35.7		1.6			1.8		0.1
Total operating segments		219.8		(2.9	)		216.9		75.4			11.5		7.2		261.4		(2.5	)		258.9		42.0			11.9		10.8
Corporate		—		—			—		(13.3	)		0.1		—		—		—			—		(8.6	)		0.1		0.3
Total operations	$	219.8	$	(2.9	)	$	216.9	$	62.1		$	11.6	$	7.2	$	261.4	$	(2.5	)	$	258.9	$	33.4		$	12.0	$	11.1

								Income (Loss)			Depreciation											Income (Loss)			Depreciation
	Total		Intersegment			Net		from			and		Capital		Total		Intersegment			Net		from			and		Capital
	Sales		Sales			Sales		Operations			Amortization		Expenditures		Sales		Sales			Sales		Operations			Amortization		Expenditures
Three Months Ended September 30, 2017
Three Months Ended June 30, 2018
U.S.	$	188.9	$	(2.8	)	$	186.1	$	22.4		$	9.2	$	7.7	$	246.2	$	(3.7	)	$	242.5	$	46.9		$	9.5	$	8.3
International		37.1		(0.6	)		36.5		1.5			1.4		0.1		48.5		(0.4	)		48.1		1.6			1.4		0.8
Total operating segments		226.0		(3.4	)		222.6		23.9			10.6		7.8		294.7		(4.1	)		290.6		48.5			10.9		9.1
Corporate		—		—			—		(6.7	)		—		0.2		—		—			—		(12.3	)		0.2		0.1
Total operations	$	226.0	$	(3.4	)	$	222.6	$	17.2		$	10.6	$	8.0	$	294.7	$	(4.1	)	$	290.6	$	36.2		$	11.1	$	9.2

								Income (Loss)					Depreciation											Income (Loss)					Depreciation
	Total		Intersegment			Net		from			Assets of		and		Capital		Total		Intersegment			Net		from			Assets of		and		Capital
	Sales		Sales			Sales		Operations			Operations		Amortization		Expenditures		Sales		Sales			Sales		Operations			Operations		Amortization		Expenditures
Nine Months Ended September 30, 2018
Six Months Ended June 30, 2019
U.S.	$	648.7	$	(7.6	)	$	641.1	$	121.7		$	676.4	$	28.7	$	21.6	$	430.1	$	(4.1	)	$	426.0	$	61.7		$	805.7	$	20.4	$	25.7
International		123.1		(1.5	)		121.6		31.1			99.0		4.0		0.9		63.5		(1.0	)		62.5		(1.7	)		95.7		3.4		0.1
Total operating segments		771.8		(9.1	)		762.7		152.8			775.4		32.7		22.5		493.6		(5.1	)		488.5		60.0			901.4		23.8		25.8
Corporate		—		—			—		(35.1	)		138.0		0.4		0.3		—		—			—		(20.0	)		107.7		0.3		0.4
Total operations	$	771.8	$	(9.1	)	$	762.7	$	117.7		$	913.4	$	33.1	$	22.8	$	493.6	$	(5.1	)	$	488.5	$	40.0		$	1,009.1	$	24.1	$	26.2

2220

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

																								Income (Loss)					Depreciation
								Income (Loss)					Depreciation				Total		Intersegment			Net		from			Assets of		and		Capital
	Total		Intersegment			Net		from			Assets of		and		Capital		Sales		Sales			Sales		Operations			Operations		Amortization		Expenditures
	Sales		Sales			Sales		Operations			Operations		Amortization		Expenditures
Nine Months Ended September 30, 2017
Six Months Ended June 30, 2018
U.S.	$	665.8	$	(7.6	)	$	658.2	$	107.5		$	715.3	$	27.5	$	18.1	$	460.8	$	(5.2	)	$	455.6	$	73.3		$	726.5	$	18.4	$	14.4
International		124.8		(2.9	)		121.9		7.6			96.0		4.2		0.8		91.2		(1.0	)		90.2		4.1			102.9		2.8		0.9
Total operating segments		790.6		(10.5	)		780.1		115.1			811.3		31.7		18.9		552.0		(6.2	)		545.8		77.4			829.4		21.2		15.3
Corporate		—		—			—		(29.5	)		122.4		—		1.1		—		—			—		(21.8	)		99.8		0.3		0.3
Total operations	$	790.6	$	(10.5	)	$	780.1	$	85.6		$	933.7	$	31.7	$	20.0	$	552.0	$	(6.2	)	$	545.8	$	55.6		$	929.2	$	21.5	$	15.6

Note ~~15.~~13. Debt

The Company’s debt as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 consisted of the following:

	September 30,			December 31,			June 30,			December 31,
	2018			2017			2019			2018
8.25% senior notes due October 15, 2024	$	300.0		$	300.0		$	300.0		$	300.0
Term Loan Credit Facility		106.3			168.6			71.4			71.3
Borrowings under the Revolving Facility		—			—			55.5			—
Unamortized debt issuance costs		(9.1	)		(10.3	)		(7.8	)		(8.6	)
Total debt		397.2			458.3			419.1			362.7
Less: current portion		—			—			—			—
Long-term debt	$	397.2		$	458.3		$	419.1		$	362.7

The fair value of the senior notes, which was determined using the market approach based upon interest rates available to the Company for borrowings with similar terms and maturities, ~~were~~was determined to be Level 2 under the fair value hierarchy. The fair value of the Company’s senior notes was ~~$316.4~~$311.1 million and ~~$321.5~~$298.1 million at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

The Company has a Credit Agreement (“the Credit Agreement”) which provides for a $350.0 million senior secured term loan B facility (the “Term Loan Credit Facility”) and a $300.0 million senior secured revolving credit facility (the “Revolving Facility”, and, together with the Term Loan Credit Facility, the “Credit Facilities”). The Credit Agreement contains a number of covenants, including a minimum Interest Coverage Ratio and a maximum Leverage Ratio, as defined in and calculated pursuant to the Credit Agreement, that, in part, restrict the Company’s ability to incur additional indebtedness, create liens, engage in mergers and consolidations, make restricted payments and dispose of certain assets. The Credit Agreement generally allows annual dividend payments of up to $~~15.0~~20.0 million in the aggregate.

On December 18, 2018, the Company entered into a second amendment to the Credit Agreement which extended the maturity date of the Revolving Facility to December 18, 2023, reduced the interest rate margin percentages and facility fees applicable to the Revolving Facility, increased the allowable annual dividends from $15.0 million to $20.0 million in the aggregate and modified the financial maintenance and negative covenants in the Credit Agreement. As of ~~September~~June 30, ~~2018,~~2019, there ~~were no~~was $55.5 million of outstanding borrowings under the Revolving Facility.

The weighted average interest rate on borrowings under the Revolving Facility was ~~5.1%~~5.0% and ~~4.4% at September~~4.5% for the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

~~Interest paid was $19.9 million and $24.2 million for the nine months ended September 30, 2018 and 2017, respectively.~~

2321

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

The Company’s 8.25% senior unsecured notes due October 15, 2024 (the “Notes”) were issued pursuant to an indenture where certain wholly-owned domestic subsidiaries of the Company guarantee the Notes (the “Guarantors”). The Notes are jointly and severally guaranteed, on an unsecured basis, by the Guarantors, which are comprised of each of the Company’s existing and future direct and indirect wholly-owned U.S. subsidiaries that guarantee the Company’s obligations under the Credit Facilities. The Notes are not guaranteed by the Company’s foreign subsidiaries or unrestricted subsidiaries. The Notes and the related guarantees will be the Company and the Guarantors’, respective, senior unsecured obligations and will rank equally in right of payment to all present and future senior debt, including the obligations under the Company’s Credit Facilities, senior in right of payment to all present and future subordinated debt, and effectively subordinated in right of payment to any of the Company and the Guarantors’ secured debt, to the extent of the value of the assets securing such debt. The indenture governing the Notes contains certain covenants applicable to the Company and its restricted subsidiaries, including limitations on: (1) liens; (2) indebtedness; (3) mergers, consolidations and acquisitions; (4) sales, transfers and other dispositions of assets; (5) loans and other investments; (6) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (7) restrictions affecting subsidiaries; (8) transactions with affiliates; and (9) designations of unrestricted subsidiaries. Each of these covenants is subject to important exceptions and qualifications.

Note ~~16.~~14. Commitments and Contingencies

Litigation

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

~~Note 17. Related Parties~~

On March 28, 2017, RRD completed the sale of 6.2 million shares of LSC common stock (RRD’s remaining ownership stake in LSC) in an underwritten public offering. As a result, beginning in the quarter ended June 30, 2017, LSC no longer qualified as a related party of the Company and the amounts disclosed related to LSC are presented through March 31, 2017 only.

On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common. RRD retained approximately 0.1 million shares of the Company’s common stock which RRD sold on August 4, 2017. Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party and the amounts disclosed related to RRD are presented through June 30, 2017 only.

~~Transition Services Agreements~~

In connection with the Separation, the Company entered into transition services agreements separately with RRD and LSC, under which, in exchange for the fees specified in the arrangements, RRD and LSC agree to provide certain services to the Company and the Company agrees to provide certain services to RRD, respectively. These services have included, but are not limited to, information technology, accounts receivable, accounts payable, payroll and other financial and administrative services and functions. Most of the services provided under the transition services agreements terminated at September 30, 2018. Under certain transition services agreements, RRD agreed to provide information technology services to the Company for up to 36 months following the Separation. ~~These agreements facilitate the separation by allowing the Company to operate independently prior to establishing stand-alone back office systems across its organization.~~

~~Commercial Arrangements~~

The Company entered into a number of commercial and other arrangements with RRD and its subsidiaries. These include, among other things, arrangements for the provision of services, including global outsourcing and logistics services, printing and binding, digital printing, composition and access to technology. The terms of the arrangements with RRD do not exceed 36 months. Subsequent to the Separation, RRD and LSC are clients of the Company and expect to utilize SaaS solutions and services that the Company provides to all of its clients.

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

~~Sublease Agreement~~

In connection with the Separation, the Company assumed an operating lease through 2024 for the Company’s headquarters. There is a related non-cancelable sublease rental to RRD for the same period. The Company remains secondarily liable under this lease in the event that the sub-lessee defaults under the sublease terms. The Company does not believe that material payments will be required as a result of the secondary liability provisions of the primary lease agreement.

Note ~~18.~~15. New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In ~~May 2014,~~February 2016, the FASB issued ASU ~~2014-09,~~2016-02, which ~~outlines~~requires lessees to put most leases on the balance sheet but recognize expense on the income statement in a ~~single comprehensive model for entities~~manner similar to ~~use in~~the former accounting for revenue using a five-step process that supersedes virtually all existing revenue guidance. ASU 2014-09 also requires additional quantitative and qualitative disclosures. In August 2015, the FASB issued Accounting Standards Update No. 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”), which deferred the effective date of ASU 2014-09 to January 1, 2018.standard. The Company adopted the standard and all related amendments on January 1, ~~2018~~2019 using the ~~modified retrospective approach. The Company recognized the cumulative effect of applying the standard as an opening~~optional transition ~~adjustment to retained earnings.~~ method. The comparative periods have not been restated and continue to be reported under the accounting standards in effect for those periods. Refer to Note 2, ~~Revenue, for further information.~~

~~In March 2017, the FASB~~ ~~issued ASU 2017-07, which the Company adopted retrospectively in the first quarter of 2018. Refer to Note 9,~~7, ~~Retirement Plans~~Leases, for further information.

~~Recently Issued Accounting Pronouncements~~

In February 2018, the FASB issued Accounting Standards Update No. 2018-02 “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Income Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”), which provides entities the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of the Tax Act to retained earnings. ASU 2018-02 may be applied either in the period of adoption or retrospectively to each period in which the effect of the Tax Act is recognized. ASU 2018-02 is effective in the first quarter of 2019. Early adoption is permitted. The Company is evaluating the impact of ASU 2018-02.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 “Leases (Topic 842)” (“ASU 2016-02”), which requires lessees to put most leases on the balance sheet but recognize expense on the income statement in a manner similar to current accounting. For lessors, ASU 2016-02 also modifies the classification criteria and the accounting for sales-type and direct financing leases. The standard requires a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements and is effective in the first quarter of 2019. In July 2018, the FASB issued Accounting Standards Update 2018-11 (“ASU 2018-11”), which provides an optional transition method to apply ASU 2016-02 in the period of adoption and recognize a cumulative-effect opening transition adjustment to retained earnings, without applying the standard to comparative periods. ASU 2018-11 also provides lessors with a practical expedient to account for lease and associated non-lease components as a single component when certain criteria are met.

~~Early adoption of ASU 2016-02 is permitted; however, the Company will adopt the standard in the first quarter of 2019 and plans to apply the optional transition method upon adoption.~~

The Company is in the process of reviewing its existing lease portfolio, which is primarily comprised of real estate leases, to evaluate the impact of ASU 2016-02 on the consolidated financial statements. The Company currently expects to recognize a lease liability and corresponding right-of-use asset for substantially all operating lease agreements, which will have a significant impact on the Company’s consolidated balance sheet. The Company currently plans to elect the optional package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs and therefore, does not expect the adoption of ASU 2016-02 to have a significant impact on the consolidated statement of operations for existing operating leases. The ultimate impact of the standard will depend on the Company’s lease portfolio at the date of adoption. Additionally, the Company is evaluating the processes and internal controls needed to support the changes resulting from the new lease accounting standard.

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

Note ~~19.~~16. Guarantor Financial Information

As described in Note ~~15,~~13, Debt, on September 30, 2016, the Company issued the Notes. The Guarantors of the Notes, Donnelley Financial, LLC and DFS International Holding, Inc., entered into an agreement pursuant to which each agreed to guarantee the Company’s obligations under the Notes. All guarantees are full and unconditional and joint and several. The Guarantors are 100% directly owned subsidiaries of the Company.

The guarantee of the Notes by a subsidiary guarantor will be automatically released under certain situations, including upon the sale or disposition of such subsidiary guarantor to a person that is not ~~Donnelley Financial~~DFIN or a subsidiary guarantor of the ~~notes,~~Notes, the liquidation or dissolution of such subsidiary guarantor, and if such subsidiary guarantor is released from its guarantee obligations under the Company’s Credit Facilities.

The following tables set forth condensed consolidating statements of income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, condensed consolidating statements of financial position as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, and condensed consolidating statements of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018. The principal consolidating adjustments are to eliminate the investment in subsidiaries and intercompany balances and transactions. For purposes of the tables below, the Company is referred to as “Parent” and the Guarantors are referred to as “Guarantor Subsidiaries.”

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Condensed Consolidating Statements of Operations

For the Three Months Ended June 30, 2019

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Services net sales	$	—		$	136.5		$	26.3		$	(1.6	)	$	161.2
Products net sales		—			88.7			9.9			(0.9	)		97.7
Total net sales		—			225.2			36.2			(2.5	)		258.9
Services cost of sales (exclusive of depreciation and amortization)		—			58.9			18.1			(1.4	)		75.6
Products cost of sales (exclusive of depreciation and amortization)		—			68.6			5.9			(1.1	)		73.4
Total cost of sales		—			127.5			24.0			(2.5	)		149.0
Selling, general and administrative expenses (exclusive of depreciation and amortization)		—			50.8			7.1			—			57.9
Restructuring, impairment and other charges-net		—			3.4			0.4			—			3.8
Depreciation and amortization		—			10.2			1.8			—			12.0
Other operating loss		—			1.2			1.6			—			2.8
Income from operations		—			32.1			1.3			—			33.4
Interest expense (income)-net		9.4			(0.1	)		(0.2	)		—			9.1
Intercompany interest (income) expense-net		(5.7	)		5.7			—			—			—
Investment and other income-net		—			(0.5	)		—			—			(0.5	)
(Loss) earnings before income taxes and equity in net income of subsidiaries		(3.7	)		27.0			1.5			—			24.8
Income tax (benefit) expense		(1.6	)		9.0			0.1			—			7.5
(Loss) earnings before equity in net income of subsidiaries		(2.1	)		18.0			1.4			—			17.3
Equity in net income of subsidiaries		19.4			1.4			—			(20.8	)		—
Net earnings	$	17.3		$	19.4		$	1.4		$	(20.8	)	$	17.3
Comprehensive income	$	18.1		$	20.3		$	1.9		$	(22.2	)	$	18.1

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Condensed Consolidating Statements of Operations

For the Six Months Ended June 30, 2019

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Services net sales	$	—		$	246.3		$	45.9		$	(3.1	)	$	289.1
Products net sales		—			183.8			17.6			(2.0	)		199.4
Total net sales		—			430.1			63.5			(5.1	)		488.5
Services cost of sales (exclusive of depreciation and amortization)		—			121.5			32.2			(2.7	)		151.0
Products cost of sales (exclusive of depreciation and amortization)		—			141.7			12.6			(2.4	)		151.9
Total cost of sales		—			263.2			44.8			(5.1	)		302.9
Selling, general and administrative expenses (exclusive of depreciation and amortization)		—			98.0			14.8			—			112.8
Restructuring, impairment and other charges-net		—			4.9			1.0			—			5.9
Depreciation and amortization		—			20.7			3.4			—			24.1
Other operating loss		—			1.2			1.6			—			2.8
Income (loss) from operations		—			42.1			(2.1	)		—			40.0
Interest expense (income)-net		18.6			(0.1	)		(0.5	)		—			18.0
Intercompany interest (income) expense-net		(11.5	)		11.5			—			—			—
Investment and other income-net		—			(1.1	)		—			—			(1.1	)
(Loss) earnings before income taxes and equity in net income of subsidiaries		(7.1	)		31.8			(1.6	)		—			23.1
Income tax (benefit) expense		(2.2	)		9.9			(0.5	)		—			7.2
(Loss) earnings before equity in net income of subsidiaries		(4.9	)		21.9			(1.1	)		—			15.9
Equity in net income of subsidiaries		20.8			(1.1	)		—			(19.7	)		—
Net earnings (loss)	$	15.9		$	20.8		$	(1.1	)	$	(19.7	)	$	15.9
Comprehensive income	$	19.3		$	24.2		$	1.6		$	(25.8	)	$	19.3

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Condensed Consolidating Statements of Operations

For the Three Months Ended June 30, 2018

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Services net sales	$	—		$	153.4		$	37.1		$	(2.6	)	$	187.9
Products net sales		—			92.8			11.4			(1.5	)		102.7
Total net sales		—			246.2			48.5			(4.1	)		290.6
Services cost of sales (exclusive of depreciation and amortization)		—			69.0			25.1			(2.1	)		92.0
Products cost of sales (exclusive of depreciation and amortization)		—			67.8			7.8			(2.0	)		73.6
Total cost of sales		—			136.8			32.9			(4.1	)		165.6
Selling, general and administrative expenses (exclusive of depreciation and amortization)		—			64.4			10.7			—			75.1
Restructuring, impairment and other charges-net		—			0.7			1.9			—			2.6
Depreciation and amortization		—			9.7			1.4			—			11.1
Income from operations		—			34.6			1.6			—			36.2
Interest expense (income)-net		10.1			(0.1	)		(0.2	)		—			9.8
Intercompany interest (income) expense-net		(6.7	)		6.7			—			—			—
Investment and other income-net		—			(0.8	)		—			—			(0.8	)
Earnings (loss) before income taxes and equity in net income of subsidiaries		(3.4	)		28.8			1.8			—			27.2
Income tax (benefit) expense		(1.0	)		8.8			0.5			—			8.3
Earnings (loss) before equity in net income of subsidiaries		(2.4	)		20.0			1.3			—			18.9
Equity in net income of subsidiaries		21.3			1.3			—			(22.6	)		—
Net earnings	$	18.9		$	21.3		$	1.3		$	(22.6	)	$	18.9
Comprehensive income (loss)	$	16.0		$	18.3		$	(2.2	)	$	(16.1	)	$	16.0

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Condensed Consolidating Statements of Operations

For the Six Months Ended June 30, 2018

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Services net sales	$	—		$	282.1		$	69.2		$	(3.9	)	$	347.4
Products net sales		—			178.7			22.0			(2.3	)		198.4
Total net sales		—			460.8			91.2			(6.2	)		545.8
Services cost of sales (exclusive of depreciation and amortization)		—			136.5			44.7			(3.3	)		177.9
Products cost of sales (exclusive of depreciation and amortization)		—			132.9			16.3			(2.9	)		146.3
Total cost of sales		—			269.4			61.0			(6.2	)		324.2
Selling, general and administrative expenses (exclusive of depreciation and amortization)		—			119.7			21.5			—			141.2
Restructuring, impairment and other charges-net		—			1.5			1.8			—			3.3
Depreciation and amortization		—			18.7			2.8			—			21.5
Income from operations		—			51.5			4.1			—			55.6
Interest expense (income)-net		19.3			(0.3	)		(0.2	)		—			18.8
Intercompany interest (income) expense-net		(13.3	)		13.3			—			—			—
Investment and other income-net		—			(1.6	)		—			—			(1.6	)
(Loss) earnings before income taxes and equity in net income of subsidiaries		(6.0	)		40.1			4.3			—			38.4
Income tax (benefit) expense		(1.8	)		12.3			1.3			—			11.8
(Loss) earnings before equity in net income of subsidiaries		(4.2	)		27.8			3.0			—			26.6
Equity in net income of subsidiaries		30.8			3.0			—			(33.8	)		—
Net earnings	$	26.6		$	30.8		$	3.0		$	(33.8	)	$	26.6
Comprehensive income	$	24.9		$	29.1		$	0.2		$	(29.3	)	$	24.9

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Condensed Consolidating ~~Statements~~Balance Sheet

As of ~~Operations~~

~~For the Three Months Ended September~~June 30, ~~2018~~

2019

Parent

Guarantor Subsidiaries

Non-guarantor Subsidiaries

Eliminations

Consolidated

Services net sales
$
—

$
115.6

$
24.9

$
(2.0
)

$
138.5

Products net sales

—

72.3

7.0

(0.9
)

78.4

Total net sales

—

187.9

31.9

(2.9
)

216.9

Services cost of sales (exclusive of depreciation and amortization)

—

60.4

16.9

(1.8
)

75.5

Products cost of sales (exclusive of depreciation and amortization)

—

54.3

4.6

(1.1
)

57.8

Total cost of sales

—

114.7

21.5

(2.9
)

133.3

Selling, general and administrative expenses (exclusive of depreciation and amortization)

—

53.2

9.4

—

62.6

Restructuring, impairment and other charges-net

—

0.7

0.1

—

0.8

Depreciation and amortization

—

10.4

1.2

—

11.6

Other operating (income) expense

—

(26.6
)

(26.9
)

—

(53.5
)
Income from operations

—

35.5

26.6

—

62.1

Interest expense (income)-net

8.6

—

(0.2
)

—

8.4

Intercompany interest (income) expense - net

(6.1
)

6.1

—

—

—

Investment and other income-net

—

(12.6
)

(1.4
)

—

(14.0
)
Earnings (loss) before income taxes and equity in net income of subsidiaries

(2.5
)

42.0

28.2

—

67.7

Income tax (benefit) expense

(0.8
)

13.2

7.3

—

19.7

Earnings (loss) before equity in net income of subsidiaries

(1.7
)

28.8

20.9

—

48.0

Equity in net income of subsidiaries

49.7

20.9

—

(70.6
)

—

Net earnings
$
48.0

$
49.7

$
20.9

$
(70.6
)

$
48.0

Comprehensive income (loss)
$
48.8

$
50.5

$
21.5

$
(72.0
)

$
48.8

	Parent		Guarantor Subsidiaries		Non-guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	0.3	$	3.7	$	5.5	$	—		$	9.5
Receivables, less allowances		—		214.9		45.8		—			260.7
Intercompany receivables		—		44.6		—		(44.6	)		—
Intercompany short-term note receivable-net		—		—		7.0		(7.0	)		—
Inventories		—		10.9		2.1		—			13.0
Prepaid expenses and other current assets		1.6		12.8		3.3		—			17.7
Total current assets		1.9		286.9		63.7		(51.6	)		300.9
Property, plant and equipment-net		—		34.6		2.4		—			37.0
Right-of-use assets		—		69.0		15.4		—			84.4
Software-net		—		51.6		—		—			51.6
Goodwill		—		438.6		11.7		—			450.3
Other intangible assets-net		—		26.5		3.5		—			30.0
Deferred income taxes		—		12.7		3.3		(1.7	)		14.3
Intercompany long-term note receivable		298.0		—		—		(298.0	)		—
Other noncurrent assets		3.4		33.1		4.1		—			40.6
Investments in consolidated subsidiaries		418.2		54.1		—		(472.3	)		—
Total assets	$	721.5	$	1,007.1	$	104.1	$	(823.6	)	$	1,009.1
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	—	$	62.6	$	15.4	$	—		$	78.0
Intercompany payables		40.3		0.1		4.2		(44.6	)		—
Intercompany short-term note payable-net		7.0		—		—		(7.0	)		—
Accrued liabilities		3.3		101.3		18.6		—			123.2
Total current liabilities		50.6		164.0		38.2		(51.6	)		201.2
Long-term debt		419.1		—		—		—			419.1
Intercompany long-term note payable		—		298.0		—		(298.0	)		—
Deferred compensation liabilities		—		19.9		—		—			19.9
Pension and other postretirement benefits plan liabilities		—		48.0		1.0		—			49.0
Noncurrent lease liabilities		—		52.8		10.0		—			62.8
Other noncurrent liabilities		2.7		6.2		0.8		(1.7	)		8.0
Total liabilities		472.4		588.9		50.0		(351.3	)		760.0
Total equity		249.1		418.2		54.1		(472.3	)		249.1
Total liabilities and equity	$	721.5	$	1,007.1	$	104.1	$	(823.6	)	$	1,009.1

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Condensed Consolidating ~~Statements~~Balance Sheet

As of ~~Operations~~

~~For the Nine Months Ended September 30,~~December 31, 2018

Parent

Guarantor Subsidiaries

Non-guarantor Subsidiaries

Eliminations

Consolidated

Services net sales
$
—

$
397.7

$
94.1

$
(5.9
)

$
485.9

Products net sales

—

251.0

29.0

(3.2
)

276.8

Total net sales

—

648.7

123.1

(9.1
)

762.7

Services cost of sales (exclusive of depreciation and amortization)

—

196.9

61.6

(5.1
)

253.4

Products cost of sales (exclusive of depreciation and amortization)

—

187.2

20.9

(4.0
)

204.1

Total cost of sales

—

384.1

82.5

(9.1
)

457.5

Selling, general and administrative expenses (exclusive of depreciation and amortization)

—

172.9

30.9

—

203.8

Restructuring, impairment and other charges-net

—

2.2

1.9

—

4.1

Depreciation and amortization

—

29.1

4.0

—

33.1

Other operating (income) expense

—

(26.6
)

(26.9
)

—

(53.5
)
Income from operations

—

87.0

30.7

—

117.7

Interest expense (income)-net

27.9

(0.3
)

(0.4
)

—

27.2

Intercompany interest (income) expense - net

(19.4
)

19.4

—

—

—

Investment and other income-net

—

(14.2
)

(1.4
)

—

(15.6
)
Earnings (loss) before income taxes and equity in net income of subsidiaries

(8.5
)

82.1

32.5

—

106.1

Income tax (benefit) expense

(2.6
)

25.5

8.6

—

31.5

Earnings (loss) before equity in net income of subsidiaries

(5.9
)

56.6

23.9

—

74.6

Equity in net income of subsidiaries

80.5

23.9

—

(104.4
)

—

Net earnings (loss)
$
74.6

$
80.5

$
23.9

$
(104.4
)

$
74.6

Comprehensive income (loss)
$
73.7

$
79.6

$
21.7

$
(101.3
)

$
73.7

	Parent		Guarantor Subsidiaries		Non-guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	24.9	$	5.0	$	17.4	$	—		$	47.3
Receivables, less allowances		—		141.6		31.3		—			172.9
Intercompany receivables		—		123.6		—		(123.6	)		—
Intercompany short-term note receivable-net		—		—		60.5		(60.5	)		—
Inventories		—		10.4		1.7		—			12.1
Prepaid expenses and other current assets		—		13.5		3.2		—			16.7
Total current assets		24.9		294.1		114.1		(184.1	)		249.0
Property, plant and equipment-net		—		29.3		2.9		—			32.2
Software-net		—		47.8		—		—			47.8
Goodwill		—		438.5		11.5		—			450.0
Other intangible assets-net		—		32.6		4.6		—			37.2
Deferred income taxes		—		37.2		2.4		(29.9	)		9.7
Intercompany long-term note receivable		298.0		—		—		(298.0	)		—
Other noncurrent assets		3.6		35.1		4.1		—			42.8
Investments in consolidated subsidiaries		445.9		106.0		—		(551.9	)		—
Total assets	$	772.4	$	1,020.6	$	139.6	$	(1,063.9	)	$	868.7
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	—	$	61.0	$	11.4	$	—		$	72.4
Intercompany payables		120.9		—		2.7		(123.6	)		—
Intercompany short-term note payable-net		60.0		0.5		—		(60.5	)		—
Accrued liabilities		0.1		109.2		16.7		—			126.0
Total current liabilities		181.0		170.7		30.8		(184.1	)		198.4
Long-term debt		362.7		—		—		—			362.7
Intercompany long-term note payable		—		298.0		—		(298.0	)		—
Deferred compensation liabilities		—		19.5		—		—			19.5
Pension and other postretirement benefits plan liabilities		—		50.3		1.0		—			51.3
Other noncurrent liabilities		2.7		36.2		1.8		(29.9	)		10.8
Total liabilities		546.4		574.7		33.6		(512.0	)		642.7
Total equity		226.0		445.9		106.0		(551.9	)		226.0
Total liabilities and equity	$	772.4	$	1,020.6	$	139.6	$	(1,063.9	)	$	868.7

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

Condensed Consolidating Statements of ~~Operations~~Cash Flows

For the ~~Three~~Six Months Ended ~~September~~June 30, ~~2017~~2019

Parent

Guarantor Subsidiaries

Non-guarantor Subsidiaries

Eliminations

Consolidated

Services net sales
$
—

$
112.3

$
30.1

$
(2.1
)

$
140.3

Products net sales

—

76.6

7.0

(1.3
)

82.3

Total net sales

—

188.9

37.1

(3.4
)

222.6

Services cost of sales (exclusive of depreciation and amortization)

—

63.6

20.1

(2.0
)

81.7

Products cost of sales (exclusive of depreciation and amortization)

—

56.0

4.3

(1.4
)

58.9

Total cost of sales

—

119.6

24.4

(3.4
)

140.6

Selling, general and administrative expenses (exclusive of depreciation and amortization)

—

45.0

9.8

—

54.8

Restructuring, impairment and other charges-net

—

(0.7
)

0.1

—

(0.6
)
Depreciation and amortization

—

9.2

1.4

—

10.6

Income from operations

—

15.8

1.4

—

17.2

Interest expense-net

10.2

0.4

—

—

10.6

Investment and other income-net

—

(0.8
)

—

—

(0.8
)
Earnings (loss) before income taxes and equity in net income of subsidiaries

(10.2
)

16.2

1.4

—

7.4

Income tax (benefit) expense

(5.1
)

8.4

(1.2
)

—

2.1

Earnings (loss) before equity in net income of subsidiaries

(5.1
)

7.8

2.6

—

5.3

Equity in net income of subsidiaries

10.4

2.6

—

(13.0
)

—

Net earnings (loss)
$
5.3

$
10.4

$
2.6

$
(13.0
)

$
5.3

Comprehensive income (loss)
$
7.8

$
12.9

$
4.8

$
(17.7
)

$
7.8

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
OPERATING ACTIVITIES
Net cash (used in) provided by operating activities	$	(25.1	)	$	27.3		$	(14.4	)	$	(53.1	)	$	(65.3	)
INVESTING ACTIVITIES
Capital expenditures		—			(26.1	)		(0.1	)		—			(26.2	)
Acquisition of business, net of cash acquired		—			(2.6	)		—			—			(2.6	)
Intercompany note receivable, net		—			—			53.5			(53.5	)		—
Other investing activities		—			0.1			—			—			0.1
Net cash (used in) provided by investing activities		—			(28.6	)		53.4			(53.5	)		(28.7	)
FINANCING ACTIVITIES
Revolving facility borrowings		337.0			—			—			—			337.0
Payments on revolving facility borrowings		(281.5	)		—			—			—			(281.5	)
Intercompany note payable, net		(53.5	)		—			—			53.5			—
Dividends paid to Parent		—			—			(53.1	)		53.1			—
Treasury stock repurchases		(1.3	)		—			—			—			(1.3	)
Debt issuance costs		(0.2	)		—									(0.2	)
Net cash provided by (used in) financing activities		0.5			—			(53.1	)		106.6			54.0
Effect of exchange rate on cash and cash equivalents		—			—			2.2			—			2.2
Net decrease in cash and cash equivalents		(24.6	)		(1.3	)		(11.9	)		—			(37.8	)
Cash and cash equivalents at beginning of year		24.9			5.0			17.4			—			47.3
Cash and cash equivalents at end of period	$	0.3		$	3.7		$	5.5		$	—		$	9.5

*Beginning in the quarter ended June 30, 2017, LSC no longer qualified as a related party, therefore the amounts disclosed related to LSC are presented through March 31, 2017 only. Beginning in the quarter ended September 30, 2017, RRD no longer qualified as a related party, therefore the amounts disclosed related to RRD are presented through June 30, 2017 only.

Donnelley Financial Solutions, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in millions, except per share data, unless otherwise indicated)

~~Condensed Consolidating Statements of Operations~~

~~For the Nine Months Ended September 30, 2017~~

Parent

Guarantor Subsidiaries

Non-guarantor Subsidiaries

Eliminations

Consolidated

Services net sales
$
—

$
386.7

$
91.2

$
(6.5
)

$
471.4

Products net sales

—

279.1

33.6

(4.0
)

308.7

Total net sales

—

665.8

124.8

(10.5
)

780.1

Services cost of sales (exclusive of depreciation and amortization)

—

186.9

59.2

(5.9
)

240.2

Services cost of sales with R.R. Donnelley affiliates (exclusive of depreciation and amortization)*

—

18.4

1.1

—

19.5

Products cost of sales (exclusive of depreciation and amortization)

—

174.6

20.7

(4.6
)

190.7

Products cost of sales with R.R. Donnelley affiliates (exclusive of depreciation and amortization)*

—

30.1

2.2

—

32.3

Total cost of sales

—

410.0

83.2

(10.5
)

482.7

Selling, general and administrative expenses (exclusive of depreciation and amortization)

—

145.1

28.6

—

173.7

Restructuring, impairment and other charges-net

—

5.1

1.3

—

6.4

Depreciation and amortization

—

27.5

4.2

—

31.7

Income from operations

—

78.1

7.5

—

85.6

Interest expense-net

32.7

—

—

—

32.7

Investment and other income-net

—

(2.5
)

—

—

(2.5
)
Earnings (loss) before income taxes and equity in net income of subsidiaries

(32.7
)

80.6

7.5

—

55.4

Income tax (benefit) expense

(14.4
)

35.0

1.4

—

22.0

Earnings (loss) before equity in net income of subsidiaries

(18.3
)

45.6

6.1

—

33.4

Equity in net income of subsidiaries

51.7

6.1

—

(57.8
)

—

Net earnings (loss)
$
33.4

$
51.7

$
6.1

$
(57.8
)

$
33.4

Comprehensive income (loss)
$
39.0

$
57.3

$
10.7

$
(68.0
)

$
39.0

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

~~Condensed Consolidating Balance Sheet~~

~~As of September 30, 2018~~

Parent

Guarantor Subsidiaries

Non-guarantor Subsidiaries

Eliminations

Consolidated

ASSETS

Cash and cash equivalents
$
20.5

$
5.6

$
30.1

$
—

$
56.2

Receivables, less allowances

—

183.5

38.0

—

221.5

Intercompany receivables

—

116.1

—

(116.1
)

—

Intercompany short-term note receivable-net

—

—

45.0

(45.0
)

—

Inventories

—

10.9

2.9

—

13.8

Prepaid expenses and other current assets

—

14.1

2.3

—

16.4

Total current assets

20.5

330.2

118.3

(161.1
)

307.9

Property, plant and equipment-net

—

28.7

3.0

—

31.7

Goodwill

—

425.7

11.8

—

437.5

Other intangible assets-net

—

24.0

5.3

—

29.3

Software-net

—

46.4

—

—

46.4

Deferred income taxes

—

34.6

2.8

(23.4
)

14.0

Intercompany long-term note receivable

326.0

—

—

(326.0
)

—

Other noncurrent assets

2.7

37.8

6.1

—

46.6

Investments in consolidated subsidiaries

456.2

109.0

—

(565.2
)

—

Total assets
$
805.4

$
1,036.4

$
147.3

$
(1,075.7
)

$
913.4

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable
$
—

$
53.1

$
14.4

$
—

$
67.5

Intercompany payables

111.1

—

5.0

(116.1
)

—

Intercompany short-term note payable-net

45.0

—

—

(45.0
)

—

Accrued liabilities

18.1

103.3

15.9

—

137.3

Total current liabilities

174.2

156.4

35.3

(161.1
)

204.8

Long-term debt

397.2

—

—

—

397.2

Intercompany long-term note payable

—

326.0

—

(326.0
)

—

Deferred compensation liabilities

—

21.7

—

—

21.7

Pension and other postretirement benefits plan liabilities

—

46.6

1.1

—

47.7

Other noncurrent liabilities

2.3

29.5

1.9

(23.4
)

10.3

Total liabilities

573.7

580.2

38.3

(510.5
)

681.7

Total equity

231.7

456.2

109.0

(565.2
)

231.7

Total liabilities and equity
$
805.4

$
1,036.4

$
147.3

$
(1,075.7
)

$
913.4

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

~~Condensed Consolidating Balance Sheet~~

~~As of December 31, 2017~~

Parent

Guarantor Subsidiaries

Non-guarantor Subsidiaries

Eliminations

Consolidated

ASSETS

Cash and cash equivalents
$
8.3

$
27.9

$
15.8

$
—

$
52.0

Receivables, less allowances

—

131.3

33.9

—

165.2

Intercompany receivables

—

146.4

—

(146.4
)

—

Intercompany short-term note receivable-net

—

—

30.0

(30.0
)

—

Inventories

—

21.3

2.0

—

23.3

Prepaid expenses and other current assets

37.1

14.8

2.8

(25.1
)

29.6

Total current assets

45.4

341.7

84.5

(201.5
)

270.1

Property, plant and equipment-net

—

31.2

3.5

—

34.7

Goodwill

—

429.2

18.2

—

447.4

Other intangible assets-net

—

32.4

7.5

—

39.9

Software-net

—

40.6

0.5

—

41.1

Deferred income taxes

—

40.5

3.4

(21.7
)

22.2

Other noncurrent assets

3.4

30.0

4.7

—

38.1

Investments in consolidated subsidiaries

728.4

85.2

—

(813.6
)

—

Total assets
$
777.2

$
1,030.8

$
122.3

$
(1,036.8
)

$
893.5

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable
$
—

$
57.9

$
9.9

$
—

$
67.8

Intercompany payable

139.5

—

6.9

(146.4
)

—

Intercompany short-term note payable-net

30.0

—

—

(30.0
)

—

Accrued liabilities

—

127.6

16.7

(25.1
)

119.2

Total current liabilities

169.5

185.5

33.5

(201.5
)

187.0

Long-term debt

458.3

—

—

—

458.3

Deferred compensation liabilities

—

22.8

—

—

22.8

Pension and other postretirement benefits plan
liabilities

—

51.3

1.2

—

52.5

Other noncurrent liabilities

—

42.8

2.4

(21.7
)

23.5

Total liabilities

627.8

302.4

37.1

(223.2
)

744.1

Total equity

149.4

728.4

85.2

(813.6
)

149.4

Total liabilities and equity
$
777.2

$
1,030.8

$
122.3

$
(1,036.8
)

$
893.5

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

~~Condensed Consolidating Statements of Cash Flows~~

~~For the Nine Months Ended September 30, 2018~~

Parent

Guarantor Subsidiaries

Non-guarantor Subsidiaries

Eliminations

Consolidated

OPERATING ACTIVITIES

Net cash provided by (used in) operating activities
$
59.3

$
(38.0
)

$
(10.9
)

$
10.4

INVESTING ACTIVITIES

Capital expenditures

—

(21.9
)

(0.9
)

—

(22.8
)
Sale of investment

—

3.1

—

—

3.1

Proceeds from disposition

—

34.5

42.6

—

77.1

Intercompany note receivable, net

—

—

(15.0
)

15.0

—

Net cash provided by (used in) investing activities

—

15.7

26.7

15.0

57.4

FINANCING ACTIVITIES

Revolving facility borrowings

255.0

—

—

—

255.0

Payments on revolving facility borrowings

(255.0
)

—

—

—

(255.0
)
Payments on long-term debt

(62.5
)

—

—

—

(62.5
)
Intercompany note payable, net

15.0

—

—

(15.0
)

—

Proceeds from the issuance of common stock

1.2

—

—

—

1.2

Treasury stock repurchases

(0.8
)

—

—

—

(0.8
)
Net cash used in financing activities

(47.1
)

—

—

(15.0
)

(62.1
)
Effect of exchange rate on cash and cash equivalents

—

—

(1.5
)

—

(1.5
)
Net increase (decrease) in cash and cash equivalents

12.2

(22.3
)

14.3

—

4.2

Cash and cash equivalents at beginning of year

8.3

27.9

15.8

—

52.0

Cash and cash equivalents at end of period
$
20.5

$
5.6

$
30.1

$
—

$
56.2

Supplemental non-cash disclosure:

Intercompany debt allocation
$
(326.0
)

$
326.0

$
—

$
—

$
—

~~Donnelley Financial Solutions, Inc.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~(in millions, except per share data, unless otherwise indicated)~~

Condensed Consolidating Statements of Cash Flows

For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated			Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
OPERATING ACTIVITIES
Net cash (used in) provided by operating activities	$	(4.3	)	$	21.8		$	13.8		$	2.4		$	33.7
Net cash used in operating activities																$	(24.2	)	$	(10.3	)	$	(15.7	)	$	—		$	(50.2	)
INVESTING ACTIVITIES
Capital expenditures		—			(19.2	)		(0.8	)		—			(20.0	)		—			(14.7	)		(0.9	)		—			(15.6	)
Purchase of investment		—			(3.4	)		—			—			(3.4	)
Intercompany note receivable		—			—			(19.7	)		19.7			—
Intercompany note receivable, net																	—			—			11.5			(11.5	)		—
Other investing activities		—			0.3			—			—			0.3			—			(0.6	)		—			0.6			—
Net cash provided by (used in) investing activities		—			(22.3	)		(20.5	)		19.7			(23.1	)
Net cash (used in) provided by investing activities																	—			(15.3	)		10.6			(10.9	)		(15.6	)
FINANCING ACTIVITIES
Revolving facility borrowings		230.0			—			—			—			230.0			206.5			—			—			—			206.5
Payments on revolving facility borrowings		(230.0	)		—			—			—			(230.0	)		(179.5	)		—			—			—			(179.5	)
Payments on long-term debt		(100.0	)		—			—			—			(100.0	)
Debt issuance costs		(1.5	)		—			—			—			(1.5	)
Separation-related payment from R.R. Donnelley		68.0			—			—			—			68.0
Intercompany note payable, net																	(11.5	)		—			—			11.5			—
Proceeds from the issuance of common stock		18.8			—			—			—			18.8			1.2			—			—			—			1.2
Treasury stock repurchases		(0.9	)		—			—			—			(0.9	)		(0.8	)		—			—			—			(0.8	)
Intercompany note payable		19.7			—			—			(19.7	)		—
Other financing activities		0.4			—			—			—			0.4			—			—			0.6			(0.6	)		—
Net cash provided by (used in) financing activities		4.5			—			—			(19.7	)		(15.2	)
Net cash provided by financing activities																	15.9			—			0.6			10.9			27.4
Effect of exchange rate on cash and cash equivalents		—			—			0.6			—			0.6			—			—			(1.8	)		—			(1.8	)
Net increase (decrease) in cash and cash equivalents		0.2			(0.5	)		(6.1	)		2.4			(4.0	)
Net decrease in cash and cash equivalents																	(8.3	)		(25.6	)		(6.3	)		—			(40.2	)
Cash and cash equivalents at beginning of year		—			21.8			16.8			(2.4	)		36.2			8.3			27.9			15.8			—			52.0
Cash and cash equivalents at end of period	$	0.2		$	21.3		$	10.7		$	—		$	32.2		$	—		$	2.3		$	9.5		$	—		$	11.8

Supplemental non-cash disclosure:
Intercompany debt allocation																$	(376.0	)	$	376.0		$	—		$	—		$	—

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Company Overview

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

Segments

The Company operates in two business segments:

•

United States. The U.S. segment is comprised of three reporting units: capital ~~markets,~~markets; investment ~~markets and other,~~markets; and language ~~solutions.~~solutions, which was divested in 2018.* The Company services capital market and investment market clients in the U.S. by delivering products and technology-enabled services to help create, manage and deliver financial communications to investors and regulators. The Company provides capital market and investment market clients with communication tools, services and ~~services~~software to allow them to comply with their ongoing regulatory filings. In addition, the U.S. segment provides clients with communications services to create, manage and deliver registration statements, prospectuses, proxies and other communications to regulators and investors. The U.S. segment also includes commercial printing capabilities and language solutions.*

Due to the sale of the Language Solutions business, the Company made changes to the reporting units within the U.S. segment. The former Language Solutions and other reporting unit has been renamed “Language Solutions.” Certain results previously included within the former Language Solutions and other reporting unit are now included within the Investment Markets reporting unit.

•

International. The International segment includes operations in Asia, Europe, Canada and Latin America. The international business is primarily focused on working with international capital markets clients on capital markets offerings and regulatory compliance related activities within the United States. In addition, the International segment provides services to international investment market clients to allow them to comply with applicable ~~U.S. Securities and Exchange Commission (“SEC”)~~SEC regulations, as well as language solutions to international clients.*

*The Company sold its Language Solutions business on July 22, 2018. ~~See “~~Refer to Note 3, ~~Executive Overview~~Acquisitions and Dispositions, to the Unaudited Condensed Consolidated Financial Statements. Due to the sale of the Language Solutions business, the Company made changes to the reporting units within the U.S. segment. The former Language Solutions and other reporting unit has been renamed “Language Solutions.” ~~below.~~Certain results previously included within the former Language Solutions and other reporting unit are now included within the Investment Markets reporting unit. Prior year amounts have been restated to conform to the Company’s current reporting unit structure.

The Company reports certain unallocated general and administrative activities and associated expenses within “Corporate”, including, in part, executive, legal, finance, marketing and certain facility costs. In addition, certain costs and earnings of employee benefit plans, such as pension income and share-based compensation, are included in Corporate and are not allocated to the reportable segments.

For the Company’s financial results and the presentation of certain other financial information by segment, see Note ~~14,~~12, Segment Information, to the Unaudited Condensed Consolidated Financial Statements.

Products and Services

The Company separately reports its net sales and related cost of sales for its products and services offerings. The Company’s services offerings consist of ~~all non-print offerings, including~~ document composition, compliance related EDGAR filing services, transaction solutions, language solutions, and the Company’s ~~software-as-a-service~~SaaS solutions, ~~(“SaaS”),~~ including Venue Virtual Data Room (“Venue”), ~~the~~ FundSuiteArc, ~~software program,~~ ActiveDisclosure and ~~data and analytics,~~EDGAR Online, among others. The Company’s product offerings primarily consist of conventional and digital printed products and related shipping costs.

~~Spin-off Transaction~~

On October 1, 2016, Donnelley Financial became an independent publicly traded company through the distribution by RRD of approximately 26.2 million shares, or 80.75%, of Donnelley Financial common stock to RRD shareholders (the “Separation”). Holders of RRD common stock received one share of Donnelley Financial common stock for every eight shares of RRD common stock held on September 23, 2016. RRD retained approximately 6.2 million shares of Donnelley Financial common stock, or a 19.25% interest (as of the Separation date) in Donnelley Financial, as part of the Separation.

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

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

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

~~Executive Overview~~

~~Third~~Second Quarter Overview

Net sales decreased by ~~$5.7~~$31.7 million, or ~~2.6%~~10.9%, for the ~~third~~second quarter of ~~2018~~2019 compared to the same period in the prior year, including a ~~$0.7~~$1.1 million, or ~~0.3%~~0.4%, decrease due to changes in foreign exchange rates. Net sales decreased ~~primarily~~$19.8 million due to the impact of the sale of the Language Solutions business ~~and~~in July 2018. In addition, net sales decreased due to lower capital markets transactions and compliance ~~healthcare and commercial print volumes,~~volumes. The decrease in net sales was partially offset by higher ~~capital markets transactions~~volumes in mutual fund print and growth in SaaS solutions, primarily in ~~FundSuiteArc~~ActiveDisclosure, as well as the acquisition of eBrevia and ~~ActiveDisclosure.~~

On July 22, 2018, the Company sold its Language Solutions business, which helped companies adapt their business content into different languages for specific countries, markets and regions, for net proceeds of $77.5 milliongrowth in cash, substantially all of which was received during the three months ended September 30, 2018, resulting in a net gain of $53.5 million, which was recognized in other operating income in the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2018. The Company used approximately $60.0 million of net proceeds from the sale to pay down debt under the Term Loan Credit Facility (as defined in ~~Liquidity and Capital Resources) in July 2018 in accordance with the provisions of the Credit Agreement.~~FundSuiteArc.

OUTLOOK

Competition

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

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

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

The Company’s competitors for SEC filing services for public company compliance clients include full service financial communications providers, technology point solution providers focused on financial communications and general technology providers. The Company’s competitors for SEC filing services for investment markets clients include full service traditional providers, small niche technology providers and local and regional print providers that bid against the Company for printing, mailing and fulfillment services.~~Language solutions competes with global and local language service providers and language/globalization software vendors.~~

Market Volatility/Cyclicality

The Company is subject to market volatility in the United States and world economy, as the success of the transactional offering is largely dependent on the global market for IPOs, secondary offerings, mergers and acquisitions, public and private debt offerings, leveraged buyouts, spinouts and other transactions. A variety of factors impact the global markets, including the regulatory and political environment. Recently, the U.S. IPO market and public debt market were disrupted by the U.S. federal government shutdown that occurred from December 2018 to January 2019. Future government shutdowns could affect volatility of any of these markets. The International segment is particularly susceptible to capital market volatility as most of the International business is capital markets transaction focused. The Company mitigates some of that risk by offering services in higher demand during a down market, like document management tools for the bankruptcy/restructuring process, and also by moving upstream from the filing process with products like Venue, the Company’s data room solution. The Company also attempts to balance this volatility through supporting the quarterly/annual public company reporting process through its EDGAR filing services and ActiveDisclosure product, its investment markets regulatory and shareholder communications offering and continues to expand into adjacent growth businesses like ~~language solutions and~~ data and analytics, which ~~have~~has recurring revenues and ~~are~~is not as susceptible to market volatility and cycles. ~~This~~The quarterly/annual public company reporting process work also subjects the Company to filing seasonality shortly after the end of each fiscal quarter, with peak periods during the course of the ~~year that have operational implications. Such~~year. The seasonality and associated operational implications include the need to increase staff during peak

periods through a combined strategy of hiring additional full-time and temporary personnel, increasing the premium time of existing staff, and outsourcing production for a number of services. Additionally, clients and their financial advisors have begun to increasingly rely on web-based services which allow clients to autonomously file and distribute compliance documents with regulatory agencies, such as the SEC. While the Company believes that its ActiveDisclosure and FundSuiteArc solutions are competitive in this space, competitors are continuing to develop technologies that aim to improve clients’ ability to autonomously produce and file documents to meet their regulatory obligations. The Company continues to remain focused on driving recurring revenue ~~in order~~ to mitigate market volatility.

Regulatory Impact

The SEC is adopting new rules and forms ~~as well as amendments to its~~and amending rules and forms to modernize the reporting and disclosure of information by registered investment companies. These changes are driving significant regulatory changes which impact the Company’s customers within its Investment Markets business. On October 13, 2016, the SEC adopted a new N-PORT filing requirement, which requires certain registered investment companies to report information about their portfolio in XML, a structured data format, on a monthly basis, replacing what was previously a quarterly filing requirement. This rule also includes an annual N-CEN filing in XML, replacing a semi-annual filing requirement. Compliance dates depend on asset size and ~~begin~~began as soon as June 1, 2018 for larger ~~funds, with the~~funds. The first N-PORT filing deadlines ~~beginning~~began in April 2019. The Company’s ArcFiling software solution ~~can support~~supports both filings. The Company expects an increase in ~~services~~SaaS revenue due to the increase in the frequency of filings for registered investment companies.

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

Raw Materials

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

Distribution

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

Significant Accounting Policies and Critical Estimates

The preparation of financial statements in conformity with GAAP requires the extensive use of management’s estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. The Company’s significant accounting policies and critical estimates are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, as filed with the SEC on February ~~28, 2018. Significant changes to the Company’s significant accounting policies and critical estimates due to the adoption of the new revenue recognition standard are included in Note 2,~~ ~~Revenue, to the Unaudited Condensed Consolidated Financial Statements.~~27, 2019.

Financial Review

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

Results of Operations for the Three Months Ended ~~September~~June 30, ~~2018~~2019 as Compared to the Three Months Ended ~~September~~June 30, ~~2017~~2018

The following table shows the results of operations for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:

	2018			2017			$ Change			% Change			2019		2018		$ Change			% Change
	(in millions, except percentages)												(in millions, except percentages)
Services net sales	$	138.5		$	140.3		$	(1.8	)		(1.3	%)	$	161.2	$	187.9	$	(26.7	)		(14.2	%)
Products net sales		78.4			82.3			(3.9	)		(4.7	%)		97.7		102.7		(5.0	)		(4.9	%)
Net sales		216.9			222.6			(5.7	)		(2.6	%)		258.9		290.6		(31.7	)		(10.9	%)
Services cost of sales (exclusive of depreciation and amortization)		75.5			81.7			(6.2	)		(7.6	%)		75.6		92.0		(16.4	)		(17.8	%)
Products cost of sales (exclusive of depreciation and amortization)		57.8			58.9			(1.1	)		(1.9	%)		73.4		73.6		(0.2	)		(0.3	%)
Cost of sales		133.3			140.6			(7.3	)		(5.2	%)		149.0		165.6		(16.6	)		(10.0	%)
Selling, general and administrative expenses (exclusive of depreciation and amortization)		62.6			54.8			7.8			14.2	%		57.9		75.1		(17.2	)		(22.9	%)
Restructuring, impairment and other charges-net		0.8			(0.6	)		1.4			(233.3	%)		3.8		2.6		1.2			46.2	%
Depreciation and amortization		11.6			10.6			1.0			9.4	%		12.0		11.1		0.9			8.1	%
Other operating income		(53.5	)		—			(53.5	)		100.0	%
Other operating loss														2.8		—		2.8			100.0	%
Income from operations	$	62.1		$	17.2		$	44.9			261.0	%	$	33.4	$	36.2	$	(2.8	)		(7.7	%)

Consolidated

Net sales of services for the three months ended ~~September~~June 30, ~~2018~~2019 decreased ~~$1.8~~$26.7 million, or ~~1.3%~~14.2%, to ~~$138.5~~$161.2 million, versus the three months ended ~~September~~June 30, ~~2017,~~2018, including a ~~$0.6~~$0.7 million, or 0.4%, decrease due to changes in foreign exchange rates. Net sales of services decreased $19.8 million due to the ~~impact from the~~July 2018 sale of the Language Solutions ~~business and a $0.6 million, or 0.3%, decrease~~business. In addition, net sales of services decreased due to ~~the adoption of the new revenue recognition standard, partially offset by higher~~lower capital markets transactions and compliance volumes, ~~and~~partially offset by growth in SaaS solutions, primarily in ~~FundSuiteArc~~ActiveDisclosure, as well as the acquisition of eBrevia and ~~ActiveDisclosure.~~growth in FundSuiteArc.

Net sales of products for the three months ended ~~September~~June 30, ~~2018~~2019 decreased ~~$3.9~~$5.0 million, or ~~4.7%~~4.9%, to ~~$78.4~~$97.7 million versus the three months ended ~~September~~June 30, ~~2017,~~2018, including a ~~$0.1~~$0.4 million, or ~~0.1%~~0.4%, decrease due to changes in foreign exchange rates. Net sales of products decreased due to lower capital markets compliance ~~healthcare~~ and transactions volumes and lower commercial print volumes, ~~and a $1.9 million, or 2.3%, decrease due to the adoption of the new revenue recognition standard,~~ partially offset by higher ~~capital markets transactions and~~volumes in mutual fund ~~print volumes.~~print.

Services cost of sales decreased ~~$6.2~~$16.4 million, or ~~7.6%~~17.8%, for the three months ended ~~September~~ June 30, ~~2018,~~2019, versus the three months ended ~~September~~ June 30, ~~2017,~~2018, primarily due to the impact from the sale of the Language Solutions ~~business and~~business. In addition, services cost ~~control initiatives, partially offset by higher~~of sales decreased due to lower volumes in capital markets transactions and ~~growth in SaaS solutions, primarily in FundSuiteArc~~compliance and ~~ActiveDisclosure~~.cost control initiatives. As a percentage of net sales, services cost of sales decreased ~~3.7%~~2.1% primarily due to favorable mix ~~from higher capital markets transaction, FundSuiteArc and ActiveDisclosure volumes~~ and cost control initiatives.

Products cost of sales decreased ~~$1.1~~$0.2 million, or ~~1.9%~~0.3%, for the three months ended ~~September~~June 30, ~~2018,~~2019, versus the three months ended ~~September~~June 30, ~~2017.~~2018. Products cost of sales decreased due to lower ~~volumes in~~ capital markets compliance ~~healthcare~~and transactions volumes and commercial print ~~a $2.2 million, or 3.7%, decrease due to the adoption of the new revenue recognition standard and cost control initiatives,~~volumes, partially offset by higher ~~capital markets transaction and~~ mutual fund print volumes. As a percentage of net sales, products cost of sales increased ~~2.1%~~3.4%, primarily due to unfavorable ~~mix of products sales.~~mix.

Selling, general and administrative expenses ~~increased $7.8~~decreased $17.2 million, or ~~14.2%~~22.9%, to ~~$62.6~~$57.9 million, for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the three months ended ~~September~~June 30, ~~2017,~~2018, primarily due to ~~disposition-related expenses.~~lower spin-off related transaction expenses, the impact from the sale of the Language Solutions business and cost control initiatives. As a percentage of net sales, selling, general, and administrative expenses ~~increased~~decreased from ~~24.6%~~25.8% for the three months June 30, 2018 to 22.4% for the three months ended ~~September~~June 30, ~~2017 to 28.9% for the three months ended September 30, 2018~~2019, primarily due to ~~disposition-related expenses.~~lower spin-off related transaction expenses and cost control initiatives.

For the three months ended ~~September~~June 30, ~~2018,~~2019, the Company recorded net restructuring, impairment and other charges of ~~$0.8~~$3.8 million, as compared to a net restructuring, ~~reversal~~impairment and other charges of ~~$0.6~~$2.6 million for the three months ended ~~September~~June 30, ~~2017.~~2018. In ~~2018,~~2019, these charges included ~~$0.8~~$3.8 million of employee termination costs for 2996 employees. In ~~2017,~~2018, these charges included a $1.0 million net restructuring reversal of other restructuring charges, primarily related to the reversal of previously recognized lease termination charges associated with a facility that the Company began using during the third quarter of 2017, partially offset by $0.4$2.4 million of employee termination costs for ~~21 employees.~~47 employees and $0.2 million of lease termination and other restructuring costs.

Depreciation and amortization increased ~~$1.0~~$0.9 million, or ~~9.4%~~8.1%, to ~~$11.6~~$12.0 million for the three months ended ~~September~~June 30, ~~2018~~2019 compared to the three months ended ~~September~~June 30, ~~2017.~~2018. Depreciation and amortization included ~~$3.4~~$3.6 million and ~~$3.6~~$3.5 million of amortization of other intangible assets related to customer relationships and a tradename for the three months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ respectively.

Other operating ~~income~~loss for the three months ended ~~September~~June 30, 2019 included $2.8 million recognized for the estimated payment of amounts related to the 2018 ~~included a $53.5 million net gain recognized on the sale~~disposition of the Language Solutions business.

Income from operations for the three months ended ~~September~~June 30, ~~2018 increased $44.9~~2019 decreased $2.8 million, or ~~261.0%~~7.7%, to ~~$62.1~~$33.4 million versus the three months ended ~~September~~June 30, ~~2017,~~2018, primarily due to ~~the net gain recognized on the sale of the Language Solutions business,~~lower capital markets transactions and compliance volumes, partially offset by ~~disposition-related expenses.~~higher mutual fund volumes, lower spin-off related transaction expenses and cost control initiatives.

2018

2017

$ Change

% Change

(in millions, except percentages)

Interest expense-net
$
8.4

$
10.6

$
(2.2
)

(20.8
%)

	2019		2018		$ Change			% Change
	(in millions, except percentages)
Interest expense-net	$	9.1	$	9.8	$	(0.7	)		(7.1	%)

Net interest expense decreased ~~$2.2~~$0.7 million for the three months ended ~~September~~June 30, ~~2018 versus~~2019 compared to the ~~same period in 2017,~~three months ended June 30, 2018 due to a decrease in average outstanding debt.

	2018			2017			$ Change		% Change			2019			2018			$ Change			% Change
	(in millions, except percentages)											(in millions, except percentages)
Earnings before income taxes	$	67.7		$	7.4		$	60.3		814.9	%	$	24.8		$	27.2		$	(2.4	)		(8.8	%)
Income tax expense		19.7			2.1			17.6		838.1	%		7.5			8.3			(0.8	)		(9.6	%)
Effective income tax rate		29.1	%		28.4	%							30.2	%		30.5	%

The effective income tax rate was ~~29.1%~~30.2% for the three months ended ~~September~~June 30, ~~2018~~2019 compared to ~~28.4%~~30.5% for the three months ended ~~September~~June 30, 2017. The effective income tax rate for the three months ended September 30, 2018 reflects the impact to the Company of the changes in U.S. tax law pursuant to the enactment of the U.S. Federal Tax Cut and Jobs Act (“the Tax Act”), which includes a reduction of the corporate income tax rate from 35% to 21%, partially offset by an increase in non-deductible expenses and the taxation of certain foreign earnings referred to in the Tax Act as global intangible low-taxed income. Refer to Note 10, ~~Income Taxes~~, to the Unaudited Condensed Consolidated Financial Statements for additional information on the impact of the Tax Act to the Company’s financial statements. The effective income tax rate for the three months ended September 30, 2018 also reflects the tax impact of the sale of the Language Solutions business. The effective income tax rate for the three months ended September 30, 2017 reflected a favorable adjustment to reduce the Company’s forecasted full year income tax rate for 2017 which had a significant impact due to lower earnings before income taxes for that quarter. The effective income tax rate for the three months ended September 30, 2017 also reflected the positive settlement of prior years’ tax disputes.2018.

Information by Segment

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

U.S.

	Three Months Ended September 30,						Three Months Ended June 30,
	2018			2017			2019			2018
	(in millions, except percentages)						(in millions, except percentages)
Net sales	$	185.5		$	186.1		$	223.2		$	242.5
Income from operations		48.4			22.4			40.4			46.9
Operating margin		26.1	%		12.0	%		18.1	%		19.3	%
Gain on sale of Language Solutions business		26.6			—
Restructuring, impairment and other charges-net								2.7			0.6
Loss on sale of Language Solutions business								1.2			—
Spin-off related transaction expenses		1.6			2.2			—			7.7
Restructuring, impairment and other charges-net		0.6			(0.8	)

	Net Sales for the Three Months										Net Sales for the Three Months
	Ended September 30,										Ended June 30,
Reporting unit	2018		2017		$ Change			% Change			2019		2018		$ Change			% Change
	(in millions, except percentages)										(in millions, except percentages)
Capital Markets	$	102.5	$	93.8	$	8.7			9.3	%	$	128.3	$	144.6	$	(16.3	)		(11.3	%)
Investment Markets*		81.8		87.5		(5.7	)		(6.5	%)		94.9		91.5		3.4			3.7	%
Language Solutions*		1.2		4.8		(3.6	)		(75.0	%)		—		6.4		(6.4	)		(100.0	%)
Total U.S.	$	185.5	$	186.1	$	(0.6	)		(0.3	%)	$	223.2	$	242.5	$	(19.3	)		(8.0	%)

*Certain prior year amounts were restated to conform to the Company’s current reporting unit structure.

Net sales for the U.S. segment for the three months ended ~~September~~June 30, ~~2018~~2019 were ~~$185.5~~$223.2 million, a decrease of ~~$0.6~~$19.3 million, or ~~0.3%~~8.0%, compared to the three months ended ~~September~~June 30, ~~2017, including a $2.5 million, or 1.3%, decrease due to the adoption of the new revenue recognition standard.~~2018. Net sales decreased due to lower capital markets ~~compliance and healthcare~~transaction volumes, the sale of the Language Solutions business, lower capital markets compliance volumes and lower commercial print volumes, ~~mostly~~partially offset by higher ~~capital markets transactions,~~mutual fund print volumes and growth in SaaS solutions, primarily ~~in FundSuiteArc and~~due to ActiveDisclosure and ~~higher mutual fund volumes.~~the acquisition of eBrevia. An analysis of net sales by reporting unit follows:

•

Capital Markets: Sales ~~increased~~decreased due to ~~higher~~lower capital markets transactions, primarily as a result of fewer mergers and ~~ActiveDisclosure~~acquisitions deals completed, which was only partially offset by an increase in IPO activity. Sales also decreased due to lower compliance volumes, partially offset by ~~lower compliance volumes.~~higher volumes in ActiveDisclosure and the acquisition of eBrevia.

•

Investment Markets: Sales ~~decreased~~increased due to ~~lower healthcare and commercial print volumes and a $2.5 million decrease due to the adoption of the new revenue recognition standard, partially offset by growth in FundSuiteArc and~~ higher mutual fund print ~~related volume.~~and healthcare volumes, partially offset by lower commercial print volumes.

•

Language Solutions: ~~Sales decreased~~There were no sales in the three months ended June 30, 2019 due to the sale of the Language Solutions ~~business.~~business in July 2018.

U.S. segment income from operations ~~increased $26.0~~decreased $6.5 million, or ~~116.1%~~13.9%, for the three months ended ~~September~~June 30, ~~2018~~2019 as compared to the three months ended ~~September~~June 30, ~~2017~~2018 primarily due to the ~~gain recognized on the sale~~impact of ~~the Language Solutions business, partially offset by~~lower net sales volumes, unfavorable mix and higher restructuring, impairment and other ~~charges.~~charges, partially offset by lower spin-off related transaction expenses and cost control initiatives.

Operating margins ~~increased~~decreased from ~~12.0%~~19.3% for the three months ended ~~September~~June 30, ~~2017~~2018 to ~~26.1%~~18.1% for the three months ended ~~September~~June 30, ~~2018 of which 14.3 percentage points was~~2019 due to ~~the gain recognized on the sale of the Language Solutions business and 0.3 percentage points was due to lower spin-off related transaction expenses.~~unfavorable mix. Operating margins were also impacted by ~~an increase in~~higher restructuring, impairment and other charges, which negatively impacted margins by ~~0.7~~1.0 percentage points, and the estimated payment of amounts related to the 2018 sale of the Language Solutions business which negatively impacted margins by 0.5 percentage points, partially offset by lower spin-off related transaction expenses, which favorably impacted margins by 3.2 percentage points.

International

	Three Months Ended September 30,						Three Months Ended June 30,
	2018			2017			2019			2018
	(in millions, except percentages)						(in millions, except percentages)
Net sales	$	31.4		$	36.5		$	35.7		$	48.1
Income from operations		27.0			1.5			1.6			1.6
Operating margin		86.0	%		4.1	%		4.5	%		3.3	%
Gain on sale of Language Solutions business		26.9			—
Disposition-related expenses		1.2			—
Loss on sale of Language Solutions business								1.6			—
Restructuring, impairment and other charges-net		0.1			0.1			0.4			1.9

Net sales for the International segment for the three months ended ~~September~~June 30, ~~2018~~2019 were ~~$31.4~~$35.7 million, a decrease of ~~$5.1~~$12.4 million, or ~~14.0%~~25.8%, compared to the three months ended ~~September~~June 30, ~~2017~~2018 including a ~~$0.7~~$1.1 million, or ~~1.9%~~2.3%, decrease due to changes in foreign exchange rates. Net sales decreased $13.4 million due to the sale of the Language Solutions ~~business,~~business. Net sales also decreased due to lower mutual funds volumes, partially offset by higher capital markets ~~transaction,~~transactions and FundSuiteArc ~~and virtual data room services~~ volumes.

International segment income from operations ~~increased $25.5 million~~for the three months ended June 30, 2019 remained flat as compared to the three months ended ~~September~~June 30, ~~2017, primarily~~2018. Income from operations for the three months ended June 30, 2019 was unfavorably impacted by lower mutual funds and capital markets compliance volumes, the impact of the estimated payment of amounts related to the 2018 sale of the Language Solutions business and an increase in information technology expenses allocated to the International segment, offset by lower restructuring, impairment and other charges, higher FundSuiteArc volumes and cost control initiatives.

Operating margins increased from 3.3% for the three months ended June 30, 2018 to 4.5% for the three months ended June 30, 2019 due to lower restructuring, impairment and other charges which favorably impacted margins by 2.8 percentage points, partially offset by the ~~gain recognized~~impact of the loss on the sale of the Language Solutions ~~business.~~

~~Operating~~business which negatively impacted margins ~~increased from 4.1% for the three months ended September 30, 2017 to 86.0% for the three months ended September 30, 2018 due~~by 4.4 percentage points and higher information technology expenses allocated to the ~~gain recognized on the sale of the Language Solutions business.~~International segment.

Corporate

The following table summarizes unallocated operating expenses and certain items impacting comparability within the activities presented as Corporate:

	Three Months Ended September 30,				Three Months Ended June 30,
	2018		2017		2019		2018
	(in millions)				(in millions)
Operating expenses	$	13.3	$	6.7	$	8.6	$	12.3
Share-based compensation expense						3.6		3.3
Restructuring, impairment and other charges-net						0.7		0.1
Investor-related expenses						0.5		—
Spin-off related transaction expenses						—		0.7
Disposition-related expenses		3.3		—		—		1.5
Share-based compensation expense		2.1		1.7
Spin-off related transaction expenses		2.1		0.4
Restructuring, impairment and other charges-net		0.1		0.1
Acquisition-related expenses						—		0.3

Corporate operating expenses for the three months ended ~~September~~June 30, ~~2018 increased $6.6~~2019 decreased $3.7 million versus the same period in ~~2017~~2018 primarily due to a decrease in disposition-related expenses and ~~an increase in incentive compensation~~spin-off related transaction expenses, partially offset by higher restructuring, impairment and ~~share-based compensation expense.~~other charges and investor-related expenses.

Results of Operations for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 as Compared to the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018

The following table shows the results of operations for the ~~nine~~six months ~~ended September 30, 2018 and 2017:~~

2018

2017

$ Change

% Change

(in millions, except percentages)

Services net sales
$
485.9

$
471.4

$
14.5

3.1
%
Products net sales

276.8

308.7

(31.9
)

(10.3
%)
Net sales

762.7

780.1

(17.4
)

(2.2
%)
Services cost of sales (exclusive of depreciation and amortization)

253.4

240.2

13.2

5.5
%
Services cost of sales with RRD affiliates (exclusive of depreciation and amortization)*

—

19.5

(19.5
)

(100.0
%)
Products cost of sales (exclusive of depreciation and amortization)

204.1

190.7

13.4

7.0
%
Products cost of sales with RRD affiliates (exclusive of depreciation and amortization)*

—

32.3

(32.3
)

(100.0
%)
Cost of sales

457.5

482.7

(25.2
)

(5.2
%)
Selling, general and administrative expenses (exclusive of depreciation and amortization)

203.8

173.7

30.1

17.3
%
Restructuring, impairment and other charges-net

4.1

6.4

(2.3
)

(35.9
%)
Depreciation and amortization

33.1

31.7

1.4

4.4
%
Other operating income

(53.5
)

—

(53.5
)

100.0
%
Income from operations
$
117.7

$
85.6

$
32.1

37.5
%

	2019		2018		$ Change			% Change
	(in millions, except percentages)
Services net sales	$	289.1	$	347.4	$	(58.3	)		(16.8	%)
Products net sales		199.4		198.4		1.0			0.5	%
Net sales		488.5		545.8		(57.3	)		(10.5	%)
Services cost of sales (exclusive of depreciation and amortization)		151.0		177.9		(26.9	)		(15.1	%)
Products cost of sales (exclusive of depreciation and amortization)		151.9		146.3		5.6			3.8	%
Cost of sales		302.9		324.2		(21.3	)		(6.6	%)
Selling, general and administrative expenses (exclusive of depreciation and amortization)		112.8		141.2		(28.4	)		(20.1	%)
Restructuring, impairment and other charges-net		5.9		3.3		2.6			78.8	%
Depreciation and amortization		24.1		21.5		2.6			12.1	%
Other operating loss		2.8		—		2.8			100.0	%
Income from operations	$	40.0	$	55.6	$	(15.6	)		(28.1	%)

Consolidated

Net sales of services for the ~~nine~~six months ended ~~September~~June 30, ~~2018 increased $14.5~~2019 decreased $58.3 million, or ~~3.1%~~16.8%, to ~~$485.9~~$289.1 million, versus the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, including a ~~$2.9~~$1.5 million, or ~~0.6%~~0.4%, ~~increase~~decrease due to changes in foreign exchange rates. Net sales of services ~~increased~~decreased $38.6 million due to ~~higher~~the sale of the Language Solutions business. In addition, net sales of services decreased due to lower volumes in capital markets transactions, ~~virtual data room~~mutual fund print-related services and capital markets compliance, partially offset by growth in SaaS solutions, primarily in ~~FundSuiteArc~~ActiveDisclosure, as well as the acquisition of eBrevia and ActiveDisclosure, and a $1.0 million, or 0.2%, increase due to the adoption of the new revenue recognition standard, partially offset by the impact from the sale of the Language Solutions business and lower volumesgrowth in ~~capital markets compliance and mutual fund print-related services.~~FundSuiteArc.

Net sales of products for the ~~nine~~six months ended ~~September~~June 30, ~~2018 decreased $31.9~~2019 increased $1.0 million, or ~~10.3%~~0.5%, to ~~$276.8~~$199.4 million versus the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, including a $0.7 million, or ~~0.2%~~0.4%, ~~increase~~decrease due to changes in foreign exchange rates. Net sales of products ~~decreased~~increased due to ~~lower~~higher volumes in mutual fund print, partially driven by a special proxy project. The increase in net sales was partially offset by lower capital markets ~~compliance~~transactions and commercial print ~~volumes and a $1.8 million, or 0.6%, decrease due to the adoption of the new revenue recognition standard, partially offset by higher capital markets transactions~~ volumes.

Services cost of sales for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 decreased ~~$6.3~~$26.9 million, or ~~2.4%~~15.1%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017, including a $0.4 million, or 0.2%, increase~~2018, primarily due to the ~~adoption~~impact from the sale of the ~~new revenue recognition standard. Services~~Language Solutions business. In addition, services cost of sales decreased ~~primarily~~ due to lower capital markets transactions, mutual fund print-related services and capital markets compliance volumes and cost control initiatives. As a percentage of net sales, services cost of sales ~~decreased 2.9%~~increased 1.0% primarily due to ~~favorable mix and cost control initiatives.~~unfavorable mix.

Products cost of sales ~~decreased $18.9~~increased $5.6 million, or ~~8.5%~~3.8%, for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, versus the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Products cost of sales ~~decreased~~increased due to ~~lower~~higher mutual fund print volumes, partially offset by lower capital markets ~~compliance~~transactions and commercial print ~~volumes, a $0.9 million, or 0.4%, decrease due to the adoption of the new revenue recognition standard and cost control initiatives.~~volumes. As a percentage of net sales, products cost of sales increased ~~1.5%~~2.5% primarily due to unfavorable mix.

Selling, general and administrative expenses ~~increased $30.1~~decreased $28.4 million, or ~~17.3%~~20.1%, to ~~$203.8~~$112.8 million, for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, primarily due to ~~an increase in~~lower spin-off related transaction expenses, ~~which include system implementation~~the impact from the sale of the Language Solutions business, lower selling expenses ~~as a result of transitioning from transition services agreements~~ and ~~disposition-related~~cost control initiatives, partially offset by higher restructuring, impairment and other charges, higher incentive compensation expense and investor-related expenses. As a percentage of net sales, selling, general, and administrative expenses ~~increased~~decreased from ~~22.3%~~25.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 to ~~26.7%~~23.1% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 primarily due to ~~increased~~lower spin-off related transaction expenses and ~~disposition-related expenses.~~cost control initiatives.

For the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, the Company recorded net restructuring, impairment and other charges of ~~$4.1~~$5.9 million, as compared to ~~$6.4~~$3.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. In ~~2018,~~2019, these charges included ~~$3.3~~$5.8 million of employee termination costs for 76164 employees. In 2018, these charges included $2.5 million of employee termination costs for 47 employees and $0.7 million of lease termination and other restructuring costs and $0.1 million for other charges associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate. In 2017, these charges included $5.2 million of employee termination costs for 169 employees, $0.9 million of lease termination and other restructuring costs, $0.2 million of impairment charges for long-lived assets and $0.1 for other charges associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate.costs.

Depreciation and amortization increased ~~$1.4~~$2.6 million, or ~~4.4%~~12.1%, to ~~$33.1~~$24.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Depreciation and amortization included ~~$10.3~~$7.3 million and ~~$10.7~~$6.9 million of amortization of other intangible assets related to customer relationships and a tradename for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

Other operating ~~income~~loss for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 included ~~a $53.5~~$2.8 million ~~net gain~~ recognized onfor the ~~sale~~estimated payment of amounts related to the disposition of the Language Solutions business.

Income from operations for the ~~nine~~six months ended ~~September~~June 30, ~~2018 increased $32.1~~2019 decreased $15.6 million, or ~~37.5%~~28.1%, to ~~$117.7~~$40.0 million versus the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, primarily due to ~~the net gain recognized on the sale of the Language Solutions business~~lower capital markets transactions and ~~lower restructuring impairment and other charges,~~compliance volumes, partially offset by an increase in mutual fund print volumes and lower spin-off related transaction ~~expenses and disposition-related~~ expenses.

2018

2017

$ Change

% Change

(in millions, except percentages)

Interest expense-net
$
27.2

$
32.7

$
(5.5
)

(16.8
%)

	2019		2018		$ Change			% Change
	(in millions, except percentages)
Interest expense-net	$	18.0	$	18.8	$	(0.8	)		(4.3	%)

Net interest expense decreased ~~$5.5~~$0.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 versus the same period in ~~2017,~~2018, due to a decrease in average outstanding debt.

	2018			2017			$ Change		% Change			2019			2018			$ Change			% Change
	(in millions, except percentages)											(in millions, except percentages)
Earnings before income taxes	$	106.1		$	55.4		$	50.7		91.5	%	$	23.1		$	38.4		$	(15.3	)		(39.8	%)
Income tax expense		31.5			22.0			9.5		43.2	%		7.2			11.8			(4.6	)		(39.0	%)
Effective income tax rate		29.7	%		39.7	%							31.2	%		30.7	%

The effective income tax rate was ~~29.7%~~31.2% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to ~~39.7%~~30.7% for the ~~nine~~six months ended ~~September~~June 30, 2017. The decrease in the effective tax rate was primarily due to changes in U.S. corporate tax law pursuant to the enactment of the Tax Act and includes a reduction in the corporate income tax rate from 35% to 21%, partially offset by an increase in non-deductible expenses and the taxation of certain foreign earnings referred to in the Tax Act as global intangible low-taxed income. Refer to Note 10, ~~Income Taxes, to the Unaudited Condensed Consolidated Financial Statements for additional information on the impact of the Tax Act to the Company’s financial statements.~~2018. The effective income tax rate for the ~~nine~~six months ended ~~September~~June 30, ~~2018 also~~2019 reflects an increase in state tax expense and a decrease for the ~~tax impact of the sale of the Language Solutions business.~~foreign derived intangible income deduction.

Information by Segment

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

U.S.

	Nine Months Ended September 30,						Six Months Ended June 30,
	2018			2017			2019			2018
	(in millions, except percentages)						(in millions, except percentages)
Net sales	$	641.1		$	658.2		$	426.0		$	455.6
Income from operations		121.7			107.5			61.7			73.3
Operating margin		19.0	%		16.3	%		14.5	%		16.1	%
Gain on sale of Language Solutions business		26.6			—
Restructuring, impairment and other charges-net								3.3			1.3
Loss on sale of Language Solutions business								1.2			—
Spin-off related transaction expenses		15.6			4.0			—			14.0
Restructuring, impairment and other charges-net		1.9			4.4

	Net Sales for the Nine Months										Net Sales for the Six Months
	Ended September 30,										Ended June 30,
Reporting unit	2018		2017		$ Change			% Change			2019		2018		$ Change			% Change
	(in millions, except percentages)										(in millions, except percentages)
Capital Markets	$	364.6	$	349.8	$	14.8			4.2	%	$	238.0	$	262.1	$	(24.1	)		(9.2	%)
Investment Markets*		262.8		291.9		(29.1	)		(10.0	%)		188.0		181.0		7.0			3.9	%
Language Solutions*		13.7		16.5		(2.8	)		(17.0	%)		—		12.5		(12.5	)		(100.0	%)
Total U.S.	$	641.1	$	658.2	$	(17.1	)		(2.6	%)	$	426.0	$	455.6	$	(29.6	)		(6.5	%)

*Certain prior year amounts were restated to conform to the Company’s current reporting unit structure.

Net sales for the U.S. segment for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 were ~~$641.1~~$426.0 million, a decrease of ~~$17.1~~$29.6 million, or ~~2.6%~~6.5%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017, including a $1.0 million, or 0.2%, decrease due to the adoption of the new revenue recognition standard.~~2018. Net sales decreased due to lower capital markets transaction volumes, the sale of the Language Solutions business and lower volumes in ~~mutual fund print and print-related services and~~ capital markets compliance and commercial print, partially offset by higher mutual fund print volumes ~~in capital markets transactions~~ and growth in SaaS solutions, primarily ~~in FundSuiteArc, virtual data room services~~ActiveDisclosure and ~~ActiveDisclosure.~~the acquisition of eBrevia. An analysis of net sales by reporting unit follows:

•

Capital Markets: Sales ~~increased~~decreased due to lower capital markets transactions and compliance volumes, partially offset by higher volumes in ~~transactions, virtual data room services and~~ ActiveDisclosure and ~~a $0.7 million increase due to~~ the ~~adoption~~acquisition of ~~the new revenue recognition standard, partially offset by lower compliance volumes.~~eBrevia.

•

Investment Markets: Sales ~~decreased~~increased due to ~~lower volumes in~~higher mutual fund print ~~and print-related services, healthcare and commercial print and~~volumes, partially driven by a ~~$1.7 million decrease due to the adoption of the new revenue recognition standard,~~special proxy project. The increase in sales was partially offset by ~~higher FundSuiteArc~~lower commercial print volumes.

•

Language Solutions: ~~Sales decreased primarily~~There were no sales in the six months ended June 30, 2019 due to the sale of the Language Solutions ~~business.~~business in July 2018.

U.S. segment income from operations ~~increased $14.2~~decreased $11.6 million, or ~~13.2%~~15.8%, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, primarily due to the ~~gain recognized on~~impact of lower net sales volumes, unfavorable mix and higher restructuring, impairment and other charges, partially offset by lower spin-off related transaction expenses and cost control initiatives.

Operating margins decreased from 16.1% for the ~~sale~~six months ended June 30, 2018 to 14.5% for the six months ended June 30, 2019 of ~~the Language Solutions business, lower~~which 0.5 percentage points was due to higher restructuring, impairment and other charges and ~~cost control initiatives, partially offset by an increase in spin-off related transaction expenses and lower sales volumes.~~

~~Operating margins increased from 16.3% for the nine months ended September 30, 2017 to 19.0% for the nine months ended September 30, 2018 of which 4.1~~0.3 percentage points was due to the ~~gain on~~estimated payment of amounts related to the 2018 sale of the Language Solutions ~~business and 0.4 percentage points was due to lower restructuring, impairment and other charges.~~business. Operating margins were ~~also~~favorably impacted by ~~an increase in~~lower spin-off related transaction expenses which ~~negatively~~ impacted margins by ~~1.8~~3.1 percentage ~~points.~~points and cost control initiatives.

International

	Nine Months Ended September 30,						Six Months Ended June 30,
	2018			2017			2019			2018
	(in millions, except percentages)						(in millions, except percentages)
Net sales	$	121.6		$	121.9		$	62.5		$	90.2
Income from operations		31.1			7.6
(Loss) income from operations								(1.7	)		4.1
Operating margin		25.6	%		6.2	%		(2.7	%)		4.5	%
Gain on sale of Language Solutions business		26.9			—
Loss on sale of Language Solutions business								1.6			—
Restructuring, impairment and other charges-net		1.9			1.3			1.0			1.8
Disposition-related expenses		1.2			—

Net sales for the International segment for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 were ~~$121.6~~$62.5 million, a decrease of ~~$0.3~~$27.7 million, or ~~0.2%~~30.7%, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 including a ~~$3.6~~$2.2 million, or ~~3.0%~~2.4%, ~~increase~~decrease due to changes in foreign exchange ~~rates and a $0.2 million, or 0.2%, increase due to the adoption of the new revenue recognition standard.~~rates. Net sales decreased $26.1 million due to the sale of the Language Solutions ~~business and~~business. Net sales also decreased due to lower capital markets transactions and mutual fund volumes, partially offset by ~~growth in SaaS solutions, primarily in ActiveDisclosure and FundSuiteArc.~~higher FundSuiteArc volumes.

International segment income from operations ~~increased $23.5~~decreased $5.8 million compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, primarily due to lower capital markets transaction and mutual fund volumes, an increase in information technology expenses allocated to the ~~gain recognized on~~International segment and the impact of the estimated payment of amounts related to the 2018 sale of the Language Solutions business, partially offset by ~~lower volumes in capital markets transactions and an increase in restructuring, impairment and other charges.~~higher FundSuiteArc volumes.

Operating margins ~~increased~~decreased from ~~6.2%~~4.5% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 to ~~25.6%~~negative 2.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 due to unfavorable mix, higher information technology expenses allocated to the International segment and the impact of ~~which 22.1 percentage points was driven by~~ the ~~gain~~loss on the sale of the Language Solutions business ~~partially offset~~which negatively impacted margins by ~~0.5~~2.5 percentage ~~points due to higher restructuring, impairment and other charges. Operating margins were also impacted by unfavorable mix.~~points.

Corporate

The following table summarizes unallocated operating expenses and certain items impacting comparability within the activities presented as Corporate:

	Nine Months Ended September 30,				Six Months Ended June 30,
	2018		2017		2019		2018
	(in millions)				(in millions)
Operating expenses	$	35.1	$	29.5	$	20.0	$	21.8
Share-based compensation expense		7.2		5.2		5.1		5.1
Disposition-related expenses		5.3		—
Restructuring, impairment and other charges-net						1.6		0.2
Investor-related expenses						1.5		—
Spin-off related transaction expenses		4.3		5.8		0.4		2.2
Acquisition-related expenses		0.5		—		—		0.5
Restructuring, impairment and other charges-net		0.3		0.7
Disposition-related expenses						—		2.0

Corporate operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2018 increased $5.6~~2019 decreased $1.8 million versus the same period in ~~2017~~2018 due to lower disposition-related expenses and spin-off related transaction expenses, partially offset by an increase in ~~share-based~~investor-related expenses, incentive compensation expense ~~partially offset by a decrease in spin-off related transaction expenses.~~and restructuring, impairment and other charges.

Non-GAAP Measures

The Company believes that certain Non-GAAP measures, such as Non-GAAP adjusted EBITDA, provide useful information about the Company’s operating results and enhance the overall ability to assess the Company’s financial performance. The Company uses these measures, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business. Non-GAAP adjusted EBITDA allows investors to make a more meaningful comparison between the Company’s core business operating results over different periods of time. The Company believes that Non-GAAP adjusted EBITDA, when viewed with the Company’s results under GAAP and the accompanying reconciliations, provides useful information about the Company’s business without regard to potential distortions. By eliminating potential differences in results of operations between periods caused by factors such as depreciation and amortization methods, historic cost and age of assets, restructuring, impairment and other charges, acquisition-related expenses and gain or loss on certain equity investments and asset sales, the Company believes that Non-GAAP adjusted EBITDA can provide a useful additional basis for comparing the current performance of the underlying operations being evaluated.

Non-GAAP adjusted EBITDA is not presented in accordance with GAAP and has important limitations as an analytical tool. These measures should not be considered as a substitute for analysis of the Company’s results as reported under GAAP. In addition, these measures are defined differently by different companies in our industry and, accordingly, such measures may not be comparable to similarly-titled measures of other companies.

In addition to the factors listed above, the following items are excluded from Non-GAAP adjusted EBITDA:

•

~~Spin-off related transaction expenses.~~ The Company has incurred expenses related to the Separation to operate as a standalone publicly traded company. These expenses include third-party consulting fees, information technology expenses, employee retention payments, legal fees and other costs related to the Separation, including system implementation expenses related to transitioning from transition services agreements with RRD and LSC. Management does not believe that these expenses are reflective of ongoing operating results. This adjustment does not include expenses incurred prior to the Separation.

•

Share-based compensation expense. Although share-based compensation is a key incentive offered to certain of the Company’s employees, business performance is evaluated excluding share-based compensation expenses. Depending upon the size, timing and the terms of grants, non-cash compensation expense may vary but will recur in future periods.

•

Investor-related expenses. Expenses incurred related to non-routine investor matters, which include third-party advisory and consulting fees and legal fees.

•

Spin-off related transaction expenses. The Company has incurred expenses related to the Separation from R.R. Donnelley & Sons Company (“RRD”) (the “Separation”) to operate as a standalone publicly traded company. These expenses include third-party consulting fees, information technology expenses, employee retention payments, legal fees and other costs related to the Separation, including system implementation expenses related to transitioning from transition service agreements with RRD and LSC Communications, Inc. (“LSC”). Management does not believe that these expenses are reflective of ongoing operating results.

•

Disposition-related expenses.Expenses incurred related to the disposition of the Language Solutions business. These expenses primarily include legal fees, third-party advisory and consulting fees and other costs related to the disposition. ~~Prior periods have been revised to reflect this adjustment.~~

A reconciliation of GAAP net earnings to Non-GAAP adjusted EBITDA for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 for these adjustments is presented in the following table:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
	(in millions)												(in millions)
Net earnings	$	48.0		$	5.3		$	74.6		$	33.4		$	17.3		$	18.9		$	15.9		$	26.6
Net gain on sale of Language Solutions business		(53.5	)		—			(53.5	)		—
Gain on equity investment		(11.8	)		—			(11.8	)		—
Restructuring, impairment and other charges—net														3.8			2.6			5.9			3.3
Share-based compensation expense													3.6				3.3			5.1			5.1
Loss on sale of Language Solutions business														2.8			—			2.8			—
Investor-related expenses														0.5			—			1.5			—
Spin-off related transaction expenses		3.7			2.6			19.9			9.8			—			8.4			0.4			16.2
Share-based compensation expense		2.1			1.7			7.2			5.2
Disposition-related expenses		4.5			—			6.5			—			—			1.5			—			2.0
Restructuring, impairment and other charges—net		0.8			(0.6	)		4.1			6.4
Acquisition-related expenses		—			—			0.5			—			—			0.3			—			0.5
Depreciation and amortization		11.6			10.6			33.1			31.7			12.0			11.1			24.1			21.5
Interest expense—net		8.4			10.6			27.2			32.7			9.1			9.8			18.0			18.8
Investment and other income—net		(2.2	)		(0.8	)		(3.8	)		(2.5	)		(0.5	)		(0.8	)		(1.1	)		(1.6	)
Income tax expense		19.7			2.1			31.5			22.0			7.5			8.3			7.2			11.8
Non-GAAP adjusted EBITDA	$	31.3		$	31.5		$	135.5		$	138.7		$	56.1		$	63.4		$	79.8		$	104.2

~~Net gain on sale of Language Solutions business.~~ ~~Included pre-tax gain of $53.5 million for the three~~

2019 Restructuring, impairment and ~~nine months ended September 30, 2018.~~other charges—net.

~~Gain on equity investment.~~ ~~Included pre-tax gain of $11.8 million for the three and nine months ended September 30, 2018.~~

~~Spin-off related transaction expenses.~~ ~~Included pre-tax charges of $3.7 million and $2.6 million for the~~The three months ended ~~September~~June 30, ~~2018 and 2017, respectively, and $19.9 million and $9.8~~2019 included $3.8 million for ~~the nine~~employee termination costs. The six months ended ~~September~~June 30, ~~2018~~2019 included $5.8 for employee termination costs and ~~2017, respectively, related to third-party consulting fees, information technology expenses, legal fees and other costs related to the Separation.~~

~~Share-based compensation expense.~~ ~~Included pre-tax charges of $2.1 million and $1.7~~$0.1 million for other charges associated with the ~~three months ended September 30, 2018 and 2017, respectively, and $7.2 million and $5.2 million for the nine months ended September 30, 2018 and 2017, respectively.~~Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate.

~~Disposition-related expenses.~~ Included pre-tax charges of $4.5 million and $6.5 million primarily related to legal fees, third-party advisory and consulting fees and other costs for the three and nine months ended September 30, 2018, respectively.

2018 Restructuring, impairment and other charges—net. The three months ended ~~September~~June 30, 2018 included ~~$0.8~~$2.4 million for employee termination costs and $0.2 million of lease termination and other restructuring costs. The ~~nine~~six months ended ~~September~~June 30, 2018 included ~~$3.3~~$2.5 million for employee termination costs, $0.7 million of lease termination costs and other restructuring costs and $0.1 million for other charges associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate.

~~2017 Restructuring, impairment~~

Share-based compensation expense. Included pre-tax charges of $3.6 million and ~~other charges—net~~. ~~The~~$3.3 million for the three months ended ~~September~~June 30, ~~2017 included~~2019 and 2018, respectively, and $5.1 million for both the six months ended June 30, 2019 and 2018.

Loss on sale of Language Solutions business. Included pre-tax charges of $2.8 million for the three and six months ended June 30, 2019 for the estimated payment of amounts related to the July 2018 disposition of the Language Solutions business.

Investor-related expenses. Included pre-tax charges of $0.5 million and $1.5 million related to non-routine investor matters for the three and six months ended June 30, 2019. These expenses include third-party advisory and consulting fees and legal fees.

Spin-off related transaction expenses. Included pre-tax charges of $0.4 million for ~~employee termination costs and a $1.0 million net reversal of other restructuring charges,~~the six months ended June 30, 2019, primarily related to ~~the reversal of previously recognized lease termination costs associated with a facility that the Company began using during the third quarter of 2017.~~third-party consulting fees. The ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2018 included ~~$5.2~~pre-tax charges of $8.4 million ~~for employee termination costs, $0.9~~and $16.2 million, ~~of net lease termination~~respectively, related to third-party consulting fees, information technology expenses, legal fees and other ~~restructuring~~ costs ~~$0.2 million of net impairment~~related to the Separation.

Disposition-related expenses. Included pre-tax charges of ~~long-lived assets~~$1.5 million and ~~$0.1~~$2.0 million related to the disposition of the Language Solutions business, primarily related to legal fees, third party advisory and consulting fees and other costs for ~~other charges associated with~~ the ~~Company’s decision to withdraw in 2013 from certain multi-employer pension plans serving facilities that continued to operate.~~three and six months ended June 30, 2018, respectively.

Acquisition-related expenses. Included pre-tax charges of $0.3 million and $0.5 million primarily related to legal expenses for the ~~nine~~three and six months ended ~~September~~June 30, 2018, respectively, associated with completed or contemplated acquisitions.

Liquidity and Capital Resources

The Company believes it has sufficient liquidity to support its ongoing operations and to invest in future growth to create value for its shareholders. Cash on hand, operating cash flows and the Company’s $300.0 million senior secured revolving credit facility (the “Revolving Facility”) are the primary sources of liquidity and are expected to be used for, among other things, payment of interest and principal on the Company’s debt obligations, capital expenditures necessary to support productivity improvement and growth, acquisitions and completion of restructuring programs.

The following describes the Company’s cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018.

Cash Flows ~~Provided By~~Used in Operating Activities

Operating cash inflows are largely attributable to sales of the Company’s services and products. Operating cash outflows are largely attributable to recurring expenditures for labor, rent, raw materials and other operating activities.

Net cash ~~provided by~~used in operating activities was ~~$10.4~~$65.3 million for the ~~nine~~six months ended ~~September~~ June 30, ~~2018~~2019 compared to ~~$33.7~~$50.2 million net ~~cash provided by~~used in operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The ~~decrease~~increase in net cash ~~provided by~~used in operating activities reflected timing ~~of customer payments and higher payments for incentive compensation costs, partially offset by lower~~differences in payments related to taxes and ~~interest.~~the timing of supplier payments.

Cash Flows ~~Provided By~~Used in Investing Activities

Net cash ~~provided by~~used in investing activities was ~~$57.4~~$28.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to net cash used in investing activities of ~~$23.1~~$15.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Capital expenditures were ~~$22.8~~$26.2 million during the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, an increase of ~~$2.8~~$10.6 million as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The increase in capital expenditures was primarily driven by an investment in digital printers and additional investments in software development during the six months ended June 30, 2019. The Company expects that capital expenditures for ~~2018~~2019 will be approximately ~~$35.0~~$40.0 million to ~~$40.0~~$45.0 million, compared to ~~$27.8~~$37.1 million in 2017. For the nine months ended September 30, 2018, cash provided by investing activities included $77.1 million net proceeds from the sale of the Language Solutions business. For the nine months ended September 30, 2017, cash used in investing activities included $3.4 million for the purchase of an investment in AuditBoard.2018.

Cash Flows ~~Used for~~Provided by Financing Activities

Net cash ~~used in~~provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was ~~$62.1~~$54.0 million compared to ~~$15.2~~$27.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017. Net cash used in financing activities for~~2018. During the ~~nine~~six months ended ~~September~~June 30, ~~2018 reflected $62.5~~2019, the Company received $337.0 million of proceeds from revolving facility borrowings, partially offset by $281.5 million of payments on ~~long-term debt. Net cash used in financing activities for~~revolving facility borrowings. During the ~~nine~~six months ended ~~September~~June 30, ~~2017 reflected $100.0 million in payments on long-term debt, partially offset by a $68.0 million Separation-related payment from RRD and $18.8~~2018, the Company received $206.5 million of proceeds from ~~the issuance~~revolving facility borrowings, offset by $179.5 million of ~~common stock.~~

~~Contractual Cash Obligations and Other Commitments and Contingencies~~

~~See discussion in Liquidity related to the Company's debt obligations.~~payments on revolving facility borrowings.

Liquidity

Cash and cash equivalents of ~~$56.2~~$9.5 million at ~~September~~June 30, ~~2018~~2019 included ~~$26.1~~$4.0 million in the U.S. and ~~$30.1~~$5.5 million at international locations.~~The Company has not recognized deferred tax liabilities related to taxes on foreign earnings as foreign earnings are considered to be indefinitely reinvested.~~ As a result of the transition tax ~~that the Company will incur~~incurred pursuant to the Tax Act,, the Company now has the ability to repatriate ~~to the U.S. parent the~~any previously taxed foreign cash associated with the foreign earnings subject to the ~~transition~~U.S. parent with minimal tax ~~as these earnings have already been subject to U.S. federal taxes.~~consequences. The Company is currently analyzing its global working capital and cash requirements in order to determine the amount of excess cash at its foreign subsidiaries that can be repatriated to the U.S. with minimal additional taxes, but has not yet determined whether the Company plans to changemaintains its assertion of indefinite reinvestment on all foreign earnings and other outside basis ~~differences. Management regularly evaluates whether foreign earnings are expected~~differences to beindicate that the Company remains indefinitely ~~reinvested. This evaluation requires judgment about the future operating and liquidity needs~~reinvested in operations outside of the U.S. with the exception of the previously taxed foreign cash already subject to U.S. tax. The Company repatriated excess cash at its foreign subsidiaries to the U.S. during the six months ended June 30, 2019 and will evaluate its ability to make additional cash repatriations during the fourth quarter of 2019. The Company recorded deferred taxes attributable to the book-over-tax outside basis differences in its foreign ~~subsidiaries. Changes in economic and business conditions, foreign or U.S. tax laws, or~~subsidiaries for the ~~Company’s financial situation could result in changes to these judgments and the need to record additional tax liabilities.~~excess cash repatriated as of June 30, 2019.

On ~~October 2, 2017,~~December 18, 2018, the Company ~~repriced~~entered into a second amendment to the ~~$350.0 million senior secured term loan B facility (the “Term Loan~~ Credit ~~Facility”). As a result,~~Agreement which extended the maturity date of the Revolving Facility to December 18, 2023, reduced the interest rate ~~was reduced by 100 basis points~~margin percentages and facility fees applicable to ~~LIBOR plus 3.0% and~~ the ~~LIBOR floor was reduced by 25 basis points~~Revolving Facility, increased the allowable annual dividends from $15.0 million to 0.75%. Additionally, under the amended Credit Agreement, principal payments are due on a quarterly basis. Other terms, including the outstanding principal, maturity date, and debt covenants such as the minimum interest coverage ratio and the maximum leverage ratio are consistent with the original Credit Agreement.

On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. RRD retained approximately 0.1 million shares of the Company’s common stock upon consummation of the offering which were subsequently sold by RRD on August 4, 2017. In conjunction with the underwritten public offering, the underwriters exercised their option to purchase approximately 0.9 million Option Shares. The Company received approximately $18.8$20.0 million in ~~net proceeds from~~ the ~~sale of~~aggregate and modified the ~~Option Shares, after deducting estimated underwriting discounts~~financial maintenance and ~~commissions. The proceeds were used to reduce outstanding debt under~~negative covenants in the ~~Revolving Facility.~~Credit Agreement.

The Company’s debt maturity schedule as of ~~September~~June 30, ~~2018~~2019 is shown in the table below:

	Debt Maturity Schedule														Debt Maturity Schedule
	Total		2018		2019		2020		2021		2022		Thereafter		Total		2019		2020		2021		2022		2023		Thereafter
Notes ^(a)	$	300.0	$	—	$	—	$	—	$	—	$	—	$	300.0	$	300.0	$	—	$	—	$	—	$	—	$	—	$	300.0
Borrowings under the Term Loan Credit Facility ^(b)		107.5		—		—		2.5		10.0		10.0		85.0		72.5		—		—		—		—		72.5		—
Borrowings under the Revolving Facility		—		—		—		—		—		—		—		55.5				—		—		—		55.5		—
Total	$	407.5	$	—	$	—	$	2.5	$	10.0	$	10.0	$	385.0	$	428.0	$	—	$	—	$	—	$	—	$	128.0	$	300.0

(a)	Excludes unamortized debt issuance costs of ~~$4.1~~$4.4 million which do not represent contractual commitments with a fixed amount or maturity date.

(b)	Excludes unamortized debt issuance costs of ~~$5.0~~$3.4 million and a discount of ~~$1.2~~$1.1 million which do not represent contractual commitments with a fixed amount or maturity date.

The Credit Agreement contains a number of covenants, including, but not limited to, a minimum Interest Coverage Ratio and the Consolidated Net Leverage Ratio, as defined in and calculated pursuant to the Credit Agreement, that, in part, restrict the Company’s ability to incur additional indebtedness, create liens, engage in mergers and consolidations, make restricted payments and dispose of certain assets. The Credit Agreement generally allows annual dividend payments of up to ~~$15.0~~$20.0 million in aggregate, though additional dividends may be allowed subject to certain conditions. Each of these covenants is subject to important exceptions and qualifications.

The indenture governing the Notes contains certain covenants applicable to the Company and its restricted subsidiaries, including limitations on: (1) liens; (2) indebtedness; (3) mergers, consolidations and acquisitions; (4) sales, transfers and other dispositions of assets; (5) loans and other investments; (6) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (7) restrictions affecting subsidiaries; (8) transactions with affiliates; and (9) designations of unrestricted subsidiaries. Each of these covenants is subject to important exceptions and qualifications.

As of ~~September~~June 30, ~~2018,~~2019, there ~~were no~~was $55.5 million of outstanding borrowings under the Revolving Facility. Based on the Company’s results of operations for the twelve months ended ~~September~~June 30, ~~2018~~2019 and existing debt, the Company would have had the ability to utilize ~~$209.1~~an incremental $79.2 million of the $300.0 million Revolving Facility and not have been in violation of the terms of the agreement. The current availability under the Revolving Facility and net available liquidity as of ~~September~~June 30, ~~2018~~2019 is shown in the table below:

	September 30, 2018		June 30, 2019
Availability	(in millions)		(in millions)
Revolving Facility	$	300.0	$	300.0
Availability reduction from covenants		90.9		165.3
	$	209.1	$	134.7
Usage
Borrowings under the Revolving Facility		—		55.5
Impact on availability related to outstanding letters of credit		—		—
	$	—	$	55.5

Current availability at September 30, 2018	$	209.1
Current availability at June 30, 2019			$	79.2
Cash		56.2		9.5
Net Available Liquidity	$	265.3	$	88.7

The Company was in compliance with its debt covenants as of ~~September~~June 30, ~~2018,~~2019, and expects to remain in compliance based on management’s estimates of operating and financial results for ~~2018~~2019 and the foreseeable future. However, declines in market and economic conditions or demand for certain of the Company’s products and services could impact the Company’s ability to remain in compliance with its debt covenants in future periods. As of ~~September~~June 30, ~~2018,~~2019, the Company met all the conditions required to borrow under the Credit Agreement and management expects the Company to continue to meet the applicable borrowing conditions.

The failure of a financial institution supporting the Revolving Facility would reduce the size of the Company’s committed facility unless a replacement institution was added. As of ~~September~~June 30, ~~2018,~~2019, the Revolving Facility is supported by ~~seventeen~~sixteen U.S. and international financial institutions.

As of ~~September~~June 30, ~~2018,~~2019, the Company had ~~$2.7~~$2.9 million in outstanding letters of credit and bank guarantees, ~~none~~ of which none reduced the availability under the Revolving Facility.

Acquisitions and Dispositions

~~Disposition~~

~~On July 22,~~During the six months ended June 30, 2019 and the year ended December 31, 2018, the Company ~~sold~~paid $2.6 million and $12.5 million, net of cash acquired, respectively, for the ~~Language Solutions business for net proceeds~~acquisition of ~~approximately $77.5~~eBrevia. $1.8 million ~~substantially all~~ of ~~which~~the purchase price, excluding contingent consideration, was ~~received~~payable as of ~~September~~June 30, ~~2018. The Company used approximately $60.0~~2019 and is expected to be paid during 2019. $1.9 million of ~~net proceeds from~~ the ~~sale~~purchase price related to ~~pay down debt under the Term Loan Credit Facility~~amounts held in ~~July 2018 in accordance with the provisions of the Credit Agreement.~~

~~Debt Issuances~~

The Company’s 8.250% Senior Notes (the “Notes”) were issued pursuant to an indenture where certain wholly-owned domestic subsidiaries of the Company guarantee the Notes (the “Guarantors”). In connection with the offering of the Notes, the Company entered into a registration rights agreement, datedescrow was payable as of ~~September~~June 30, ~~2016 (the “Registration Rights Agreement”), pursuant~~2019 and is expected to which the Company agreed to file a registration statement with the SEC with respect to an offer to exchange the Notes for registered notes. On March 10, 2017, the Company filed a Registration Statement on Form S-4 (as amended, the “Exchange Offer Registration Statement”) to offer to exchange the Notes for registered notes which have terms identical in all material respects to the Notes except that the registered notes are not subject to transfer restrictions or registration rights. The Exchange Offer Registration Statement was declared effective by the SEC on March 22, 2017. An exchange offer for the Notes was launched on March 22, 2017 and settled on April 25, 2017, resulting in the exchange of $299.9 million aggregate principal amount of outstanding Notes for registered notes.be paid during 2020.

Risk Management

The Company is exposed to interest rate risk on its variable debt. At ~~September~~June 30, ~~2018,~~2019, the Company’s exposure to rate fluctuations on variable-interest borrowings was ~~$107.5~~$128.0 million.

The Company assesses market risk based on changes in interest rates utilizing a sensitivity analysis that measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change in interest rates. Using this sensitivity analysis, such changes would not have a material effect on interest income or expense and cash flows. A hypothetical 10% change in yield would change the fair values of fixed-rate debt at ~~September~~June 30, ~~2018~~2019 by approximately ~~$10.5~~$9.6 million, or ~~3.5%~~3.2%.

The Company is exposed to the impact of foreign currency fluctuations in certain countries in which it operates. The exposure to foreign currency movements is limited in many countries because the operating revenues and expenses of its various subsidiaries and business units are substantially in the local currency of the country in which they operate. To the extent that borrowings, sales, purchases, revenues, expenses or other transactions are not in the local currency of the subsidiary, the Company is exposed to currency risk and may enter into foreign exchange spot and forward contracts to hedge the currency risk. The Company does not use derivative financial instruments for trading or speculative purposes.

OTHER INFORMATION

Litigation and Contingent Liabilities

For a discussion of certain litigation involving the Company, see Note ~~16,~~14, Commitments and Contingencies, to the Unaudited Condensed ~~and~~ Consolidated Financial Statements.

New Accounting Pronouncements and Pending Accounting Standards

Recently issued accounting standards and their estimated effect on the Company’s consolidated financial statements are described in Note ~~18,~~15, New Accounting Pronouncements, to the Unaudited Condensed Consolidated Financial Statements.

CAUTIONARY STATEMENT

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

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

Forward-looking statements are not guarantees of performance. The following important factors, in addition to those discussed elsewhere in this Quarterly Report on Form 10-Q, ~~that~~ could cause our actual results to differ materially from those indicated in any such forward-looking statements. These factors include, but are not limited to:

•

the volatility of the global economy and financial markets, and its impact on transactional volume;

•

failure to offer high quality customer support and services;

•

the retention of existing, and continued attraction of additional, clients and key employees;

•

the growth of new technologies with which we may be able to adequately compete;

•

our inability to maintain client referrals;

•

vulnerability to adverse events as a result of becoming a stand-alone company following the Separation from RRD, including the inability to obtain as favorable of terms from third-party vendors;

•

the competitive market for our products and industry fragmentation affecting our prices;

•

the ability to gain client acceptance of our new products and technologies;

•

delay in market acceptance of our products and services due to undetected errors or failures found in our products and services;

•

failure to maintain the confidentiality, integrity and availability of our systems, software and solutions;

•

failure to properly use and protect client and employee information and data;

•

the effect of a material breach of security or other performance issues of any of our or our vendors’ systems;

•

factors that affect client demand, including changes in economic conditions, national or international regulations and clients’ budgetary constraints;

•

our ability to access debt and the capital markets due to adverse credit market conditions;

•

the effect of increasing costs of providing healthcare and other benefits to our employees;

•

~~the impact of the U.S. Tax Cuts and Jobs Act;~~

•

changes in the availability or costs of key materials (such as ink and paper) or in prices received for the sale of by-products;

•

failure to protect our proprietary technology;

•

failure to successfully integrate acquired businesses into our business;

•

availability to maintain our brands and reputation;

•

the retention of existing, and continued attraction of, key employees, including management;

•

the effects of operating in international markets, including fluctuations in currency exchange rates;

•

the effect of economic and political conditions on a regional, national or international basis;

•

lack of market for our common stock;

•

lack of history as an operating company and costs associated with being an independent company; and

•

failure to achieve certain intended benefits of ~~the Separation; and~~

•

~~failure of RRD or LSC to satisfy their respective obligations under transition services agreements or other agreements entered into in connection with~~ the Separation.

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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Refer to Item 2 of Part I under “Risk Management.” There have been no significant changes to the Company’s market risk since December 31, ~~2017.~~2018. For a discussion of exposure to market risk, refer to Part II, Item 7A – Quantitative and Qualitative Disclosures about Market Risk, of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, as filed with the SEC on February ~~28, 2018.~~27, 2019.

Item 4. Controls and Procedures

(a)	Disclosure controls and procedures.

Management, together with the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(b) and Rule 15d-15(e) of the Securities Exchange Act of 1934) as of ~~September~~June 30, ~~2018.~~2019. Based on that evaluation the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~September~~June 30, ~~2018.~~2019.

(b)	Changes in internal control over financial reporting.

During the third quarter of 2018, under the supervision of and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company completed the implementation of a new global operating and financial reporting information technology system. In connection with the implementation, the Company changed certain processes and procedures which resulted in changes to its internal controls over financial reporting. Management will continue to evaluate and monitor its internal controls as processes and procedures in the affected areas evolve. There were no ~~other~~ changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~September~~June 30, ~~2018~~2019 that have materially affected or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of certain litigation involving the Company, see Note ~~16,~~14, Commitments and Contingencies, to the Unaudited Condensed Consolidated Financial Statements.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, as filed with the SEC on February ~~28, 2018, other than the following:~~27, 2019.

~~Our business may be adversely affected by the implementation of a new global financial reporting information technology system.~~

We have implemented a new global financial reporting information technology system. There are inherent risks associated with upgrading or changing systems, including inaccurate data or reporting. In addition, the system implementation may not result in the anticipated improvements and the cost of implementation may outweigh the benefits. System implementation failures and the related costs to remedy such failures could have an adverse effect on our cash flows and financial condition, and may adversely affect the effectiveness of internal controls over financial reporting.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~None.~~

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased (a)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
April 1, 2019 - April 30, 2019	—		$	—	—	$	—
May 1, 2019 - May 31, 2019		1,528		12.33	—	$	—
June 1, 2019 - June 30, 2019		3,722		14.30	—	$	—
Total		5,250	$	13.73	—

(a)	Shares withheld for tax liabilities upon vesting of equity awards

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 6. Exhibits

~~2.1~~	~~Separation and Distribution Agreement, dated as of September 14, 2016, by and among R. R. Donnelley & Sons Company, LSC Communications, Inc. and Donnelley Financial Solutions, Inc.~~ ~~(the “Separation Agreement”) (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)~~

~~2.2~~	Transition Services Agreement, dated as of September 14, 2016, between Donnelley Financial Solutions, Inc. and R. R. Donnelley & Sons Company (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)

~~2.3~~	~~Transition Services Agreement, dated as of September 14, 2016, between LSC Communications, Inc. and Donnelley Financial Solutions, Inc.~~ ~~(incorporated by reference to Exhibit 2.3 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)~~

~~2.4~~	Tax Disaffiliation Agreement, dated as of September 14, 2016, between Donnelley Financial Solutions, Inc. and R. R. Donnelley & Sons Company (incorporated by reference to Exhibit 2.4 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)

~~2.5~~	~~Patent Assignment and License Agreement, dated as of September 27, 2016, between Donnelley Financial, LLC and R. R. Donnelley & Sons Company~~ ~~(incorporated by reference to Exhibit 2.5 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)~~

~~2.6~~	~~Trademark Assignment and License Agreement, dated as of September 27, 2016, between Donnelley Financial, LLC and R. R. Donnelley & Sons Company~~ ~~(incorporated by reference to Exhibit 2.6 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)~~

~~2.7~~	Data Assignment and License Agreement, dated as of September 27, 2016, between Donnelley Financial, LLC and R. R. Donnelley & Sons Company (incorporated by reference to Exhibit 2.7 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)

~~2.8~~	~~Software, Copyright and Trade Secret Assignment and License Agreement, dated as of September 27, 2016, between Donnelley Financial, LLC and R. R. Donnelley & Sons Company~~ ~~(incorporated by reference to Exhibit 2.8 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)~~

3.1		Amended and Restated Certificate of Incorporation of Donnelley Financial Solutions, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)

3.2		Amended and Restated By-laws of Donnelley Financial Solutions, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)

4.1	~~Stockholder and Registration Rights Agreement, dated as of September 14, 2016, between Donnelley Financial Solutions, Inc. and R. R. Donnelley & Sons Company~~ ~~(incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)~~

~~4.2~~		Indenture, dated as of September 30, 2016, among Donnelley Financial Solutions, Inc., the subsidiary guarantors party thereto and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 ~~to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)~~

~~4.3~~	Registration Rights Agreement, dated as of September 30, 2016, by and among Donnelley Financial Solutions, Inc., the subsidiary guarantors party thereto and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc. and MUFG Securities Americas Inc., as Representatives (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)

10.1		Credit Agreement, dated as of September 30, 2016, among Donnelley Financial Solutions, Inc., as Borrower, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)*

10.2		Amendment No. 1 to Credit Agreement, dated as of October 2, 2017, among Donnelley Financial Solutions, Inc., as Borrower, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q dated September 30, 2017, filed on November 2, 2017)

10.3			~~10.3~~Amendment No. 2 to Credit Agreement, dated as of December 18, 2018, by and among Donnelley Financial Solutions, Inc., the lenders party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 18, 2018, filed on December 18, 2018)

10.4			2016 Donnelley Financial Solutions, Inc. Performance Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)*

~~10.4~~10.5			Amended and Restated Donnelley Financial Solutions, Inc. 2016 Performance Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 18, 2017, filed on May 23, 2017)*
			��
~~10.5~~10.6			Amendment to the Donnelley Financial Solutions, Inc. Amended and Restated 2016 Performance Incentive Plan dated May 20, 2019 (incorporated herein by reference to Appendix A of the Company’s definitive proxy statement on Schedule 14A (file No. 001-37728) filed April 22, 2019)*

10.7			Amendment to Amended and Restated Donnelley Financial Solutions, Inc. 2016 Performance Incentive Plan dated June 27, 2019 (filed herewith)*

10.8			Donnelley Financial Solutions, Inc. Non-Employee Director Compensation Plan (incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K dated December 31, 2017, filed on February 28, 2018)*

~~10.6~~10.9			Policy on Retirement Benefits, Phantom Stock Grants and Stock Options for Directors (incorporated by reference to Exhibit 10.1 to R.R Donnelley & Sons Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, filed on August 6, 2008)*

~~10.7~~10.10			Donnelley Financial Solutions, Inc. Nonqualified Deferred Compensation Plan, dated as of September 22, 2016 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)*

~~10.8~~10.11			Donnelley Financial Unfunded Supplemental Pension Plan effective October 1, 2016 (incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K dated December 31, 2016, filed on February 28, 2017)*

~~10.9~~10.12			Donnelley Financial Solutions, Inc. Executive Severance Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 30, 2017, filed on June 5, 2017)*

~~10.10~~10.13			Letter Agreement to Employment Agreement, dated as of April 20, 2018, between the Company and Daniel N. Leib (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 10, 2018, filed on April 16, 2018)*

~~10.11~~10.14			Amended and Restated Employment Agreement, dated as of July 13, 2017, between the Company and Daniel N. Leib (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated July 13, 2017, filed on July 14, 2017)*

~~10.12~~10.15		Assignment of Employment Agreement and Acceptance of Assignment, dated as of September 29, 2016, between Donnelley Financial Solutions, Inc., R. R. Donnelley & Sons Company and Thomas F. Juhase (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)*

~~10.13~~10.16		Waiver of Severance Benefits, dated as of June 1, 2017, by and between Thomas F. Juhase and the Company (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated May 30, 2017, filed on June 5, 2017)*

~~10.14~~10.17		Assignment of Employment Agreement and Acceptance of Assignment, dated as of September 29, 2016, between Donnelley Financial Solutions, Inc., R. R. Donnelley & Sons Company and David A. Gardella (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)*

~~10.15~~10.18		Waiver of Severance Benefits, dated as of June 1, 2017, by and between David A. Gardella and the Company (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated May 30, 2017, filed on June 5, 2017)*

~~10.16~~10.19		Assignment of Severance Agreement and Acceptance of Assignment, dated as of September 29, 2016, between Donnelley Financial Solutions, Inc., R. R. Donnelley & Sons Company and Jennifer B. Reiners (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K dated September 30, 2016, filed on October 3, 2016)*

~~10.17~~10.20		Waiver of Severance Benefits, dated as of June 1, 2017, by and between Jennifer B. Reiners and the Company (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated May 30, 2017, filed on June 5, 2017)*

~~10.18~~		Written Description of the 2016 Annual Incentive Plan of the Company with respect to the period from October 1, 2016 to December 31, 2016 (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K dated December 31, 2016, filed on February 28, 2017)*

~~10.19~~10.21	Donnelley Financial Solutions Annual Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated March 2, 2018, filed on March 13, 2018)*

~~10.20~~10.22		Form of Founders Award (Restricted Stock) Agreement (incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K dated December 31, 2016, filed on February 28, 2017)*


~~10.21~~10.23		Form of Performance Restricted Stock Award Agreement (for 2017) (incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q dated March 31, 2017, filed on May 4, 2017)*

~~10.22~~10.24		Form of Amendment to Performance Restricted Stock Award Agreement (for 2017) (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated May 30, 2017, filed on June 5, 2017)*

~~10.23~~10.25		Form of Performance Share Unit Award Agreement (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K dated December 31, 2017, filed on February 28, 2018)*

~~10.24~~10.26		Form of Performance Share Unit Award Agreement (for 2017) (incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q dated March 31, 2017, filed on May 4, 2017)*

10.27		Form of Performance Share Unit Award Agreement (for 2019) (incorporated by reference to Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q dated March 31, 2018, filed on May 2, 2019)*

10.28		Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q dated March 31, 2017, filed on May 4, 2017)*

~~10.26~~10.29		Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.19 to the Company’s Quarterly Report on Form 10-Q dated March 31, 2017, filed on May 4, 2017)*


~~10.27~~	Form of Performance Share Unit Award Agreement (for 2015) converted from R. R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.19 to the R.R. Donnelley & Sons Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed on May 7, 2015)*

~~10.28~~	Form of Restricted Stock Unit Award Agreement for certain executive officers (for 2015 and 2016) converted from R. R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.12 to the R.R. Donnelley & Sons Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed on May 7, 2015)*

~~10.29~~	Form of Cash Award Agreement (for 2014) converted from R. R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K dated December 31, 2016, filed on February 28, 2017)*

10.30	Form of Cash Award Agreement (for 2015) converted from R. R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K dated December 31, 2016, filed on February 28, 2017)*

~~10.31~~	Form of Cash Award Agreement (for 2016) converted from R. R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K dated December 31, 2016, filed on February 28, 2017)*

~~10.32~~	Form of Amendment to Cash Retention Awards (for 2014) converted from R.R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.1 to the R.R. Donnelley & Sons Company Current Report on Form 8-K dated March 2, 2016, filed on March 2, 2016)*

~~10.33~~	Agreement regarding title and retention bonus for Thomas Juhase dated March 21, 2016 converted from R.R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K dated December 31, 2016, filed on February 28, 2017)*

~~10.34~~10.31		Form of Director Restricted Stock Unit Award (incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-K dated December 31, 2016, filed on February 28, 2017)*

~~10.35~~10.32		Form of Restricted Stock Unit Award Agreement for directors converted from R.R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.21 to the R.R. Donnelley & Sons Company Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed on March 14, 2005)*

~~10.36~~10.33		Form of Restricted Stock Unit Award Agreement for directors converted from R.R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.25 to the R.R. Donnelley & Sons Company Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed on February 27, 2008)*

~~10.37~~10.34			Form of Restricted Stock Unit Award Agreement for directors converted from R.R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.23 to the R.R. Donnelley & Sons Company Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed on February 25, 2009)*

~~10.38~~10.35			Form of Amendment to Director Restricted Stock Unit Awards converted from R.R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.22 to the R.R. Donnelley & Sons Company Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed on February 25, 2009)*


~~10.39~~10.36		Form of Amendment to Director Restricted Stock Unit Awards dated May 21, 2009 converted from R.R. Donnelley & Sons Company to the Company pursuant to the Separation Agreement (incorporated by reference to Exhibit 10.23 to the R.R. Donnelley & Sons Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, filed on August 5, 2009)*

~~10.40~~10.37		Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q dated September 30, 2016, filed on November 9, 2016)

10.38		Agreement, dated February 17, 2019, by and among the Company, Simcoe Capital Management, LLC and, solely for purposes of Section 2(g) thereof, Jeffrey Jacobowitz (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 17, 2019, filed on February 19, 2019)

14.1		Code of Ethics for the Chief Executive Officer and Senior Financial Officers (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K dated December 31, 2016, filed on February 28, 2017)

~~21.1~~	~~Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10-K dated December 31, 2017, filed on February 28, 2018)~~

31.1		Certification by Daniel N. Leib, President and Chief Executive Officer, required by Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934 (filed herewith)

31.2		Certification by David A. Gardella, Executive Vice President and Chief Financial Officer, required by Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934 (filed herewith)

32.1		Certification by Daniel N. Leib, President and Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code (filed herewith)

32.2		Certification by David A. Gardella, Executive Vice President and Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code (filed herewith)

101.INS		XBRL Instance Document -– the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*	Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DONNELLEY FINANCIAL SOLUTIONS, INC.

By:		/s/ DAVID A. GARDELLA
		David A. Gardella
		Executive Vice President and Chief Financial Officer

Date: ~~November 7, 2018~~August 1, 2019

5851

	Three Months Ended September 30, 2018
	Previous Revenue Standard		Adoption of ASU 2014-09			As Reported

Services net sales	$	139.1	$	(0.6	)	$	138.5
Products net sales		80.3	$	(1.9	)		78.4
Total net sales		219.4		(2.5	)		216.9

Services cost of sales (exclusive of depreciation and amortization)		75.5		—			75.5
Products costs of sales (exclusive of depreciation and amortization)		60.0		(2.2	)		57.8
Total cost of sales		135.5		(2.2	)		133.3

Selling, general and administrative expenses (exclusive of depreciation and amortization)		62.6		—			62.6
Income tax expense (benefit)		19.8		(0.1	)		19.7
Net earnings	$	48.2	$	(0.2	)	$	48.0

Earnings per share
Basic		1.43		(0.01	)		1.42
Diluted		1.41		(0.01	)		1.40

	Nine Months Ended September 30, 2018
	Previous Revenue Standard		Adoption of ASU 2014-09			As Reported

Services net sales	$	484.9	$	1.0		$	485.9
Products net sales		278.6		(1.8	)		276.8
Total net sales		763.5		(0.8	)		762.7

Services cost of sales (exclusive of depreciation and amortization)		253.0		0.4			253.4
Products costs of sales (exclusive of depreciation and amortization)		205.0		(0.9	)		204.1
Total cost of sales		458.0		(0.5	)		457.5

Selling, general and administrative expenses (exclusive of depreciation and amortization)		203.8		—			203.8
Income tax expense (benefit)		31.6		(0.1	)		31.5
Net earnings	$	74.8	$	(0.2	)	$	74.6

Earnings per share
Basic		2.22		(0.01	)		2.21
Diluted		2.20		(0.01	)		2.19

	Three months ended September 30, 2018			Nine months ended September 30, 2018
Net gain on equity securities	$	11.8		$	11.8
Less: net gain recognized on equity securities sold		(2.4	)		(2.4	)
Unrealized net gain recognized on equity securities still held at the reporting date	$	9.4		$	9.4

	Total
	Equity
Balance at December 31, 2016	$	111.1
Net earnings		33.4
Other comprehensive income		5.6
Separation-related adjustments		0.2
Share-based compensation		5.2
Issuance of common stock		18.8
Issuance of share-based awards, net of withholdings and other		(0.7	)
Balance at September 30, 2017	$	173.6

	Three Months Ended						Nine Months Ended
	September 30, 2017						September 30, 2017
	Before Tax		Income Tax		Net of Tax		Before Tax		Income Tax		Net of Tax
	Amount		Expense		Amount		Amount		Expense		Amount
Translation adjustments	$	2.2	$	—	$	2.2	$	4.6	$	—	$	4.6
Adjustment for net periodic pension plan and other postretirement benefits plan cost		0.6		0.3		0.3		1.6		0.6		1.0
Other comprehensive income	$	2.8	$	0.3	$	2.5	$	6.2	$	0.6	$	5.6