DFS Annual Report

Cash Flows Used For Investing Activities Net cash used in investing activities was $29.3 million for the year ended December 31, 2016 compared to $37.1 million for the year ended December 31, 2015. Capital expenditures were $26.2 million during the year ended December 31, 2016, a decrease of $0.9 million as compared to the same period of 2015. Net cash used in investing activities for the year ended December 31, 2016 also included $3.5 million used for the purchase of investments compared to $10.0 million used to purchase an equity investment for the year ended December 31, 2015. Cash Flows Used For Financing Activities Net cash used in financing activities for the year ended December 31, 2016 was $60.0 million compared to $94.8 million for the year ended December 31, 2015. The decrease in net cash used in financing activities reflected $348.2 million of proceeds from the issuance of long-term debt, offset by $50.0 million in payments on long-term debt and a $284.1 million increase in net transfers to RRD and its affiliates in connection with the Separation. Contractual Cash Obligations and Other Commitments and Contingencies In connection with the Separation, the Company entered into transition services agreements with RRD, covering certain support and back office services that the Company has historically received from RRD. Under the terms of the agreements, RRD will provide various services, including information technology, accounts receivable, accounts payable, payroll and other financial and administrative services and functions. The Company also entered into a transition services agreement with LSC, pursuant to which LSC will provide certain services to the Company. The services under the transition services agreements generally extend for up to 24 months following the Separation. 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, premedia and access to technology. The Company also entered into a number of commercial and other arrangements with LSC and its subsidiaries, pursuant to which LSC will print and bind products for the Company. The terms of the arrangements with RRD and LSC do not exceed 24 months following the Separation. The following table quantifies the Company’s future contractual obligations as of December 31, 2016: Payments Due In Total 2017 2018 2019 2020 2021 Thereafter (in millions) Debt (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 600.0 $ — $ — $ 6.9 $17.5 $17.5 $558.1 Interest due on debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361.4 39.7 39.7 39.7 39.1 38.2 165.0 Operating leases (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137.6 33.5 23.3 17.4 12.9 11.4 39.1 Outsourced services (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.3 31.0 1.9 0.7 0.7 — — Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.0 12.5 4.9 5.9 1.6 1.3 13.8 Multi-employer pension plan withdrawal obligations . . . . . . . . . 6.4 0.4 0.4 0.4 0.4 0.4 4.4 Incentive compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 4.5 — — — — — Pension and other postretirement benefits plan contributions (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8 2.3 2.5 — — — — Other (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.7 10.9 0.8 — — — — Total as of December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . $1,200.7 $134.8 $73.5 $71.0 $72.2 $68.8 $780.4 (a) Excludes unamortized debt issuance costs of $11.3 million and a discount of $1.7 million which do not represent contractual commitments with a fixed amount or maturity date. (b) Operating leases include obligations to landlords. (c) Includes information technology, professional, maintenance and other outsourced services. (d) Includes estimated pension and other postretirement benefits plan contributions for 2017 and 2018 and does not include the obligations for subsequent periods, as the Company is unable to reasonably estimate the ultimate amounts. (e) Other includes purchases of property, plant and equipment of $4.5 million, commercial agreement obligations of $1.8 million, employee restructuring-related severance payments of $1.6 million and miscellaneous other obligations. 39