DFS Annual Report

Notes to the Consolidated and Combined Financial Statements (in millions, except per share data, unless otherwise indicated)-(Continued) Stockholder and Registration Rights Agreement The Company and RRD entered into a Stockholder and Registration Rights Agreement with respect to the Company’s common stock retained by RRD pursuant to which the Company agrees that, upon the request of RRD, the Company will use its reasonable best efforts to effect the registration under applicable federal and state securities laws of the shares of the Company’s common stock retained by RRD after the Separation. In addition, RRD granted the Company a proxy to vote the shares of the Company’s common stock that RRD retained immediately after the Separation in proportion to the votes cast by the Company’s other stockholders. This proxy, however, will be automatically revoked as to a particular share upon any sale or transfer of such share from RRD to a person other than RRD, and neither the voting agreement nor the proxy will limit or prohibit any such sale or transfer. Sublease Agreement In connection with the Separation, the Company assumed an operating lease through 2024 for the Company’s headquarters, with a total commitment of $13.7 million at December 31, 2016. There is a related non-cancelable sublease rental to RRD of approximately $4.6 million 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. Related Party Receivables/Payables The Separation and Distribution Agreement includes a provision for RRD to make a future cash payment of $68.0 million to Donnelley Financial no later than April 1, 2017. The Company also has other amounts due to or from RRD and LSC in the normal course of business. The following is a summary of the amounts in the consolidated and combined balance sheet due to or from RRD and LSC as of December 31, 2016: December 31, 2016 Receivable from RRD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $96.0 Receivable from LSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.8 Due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96.8 Payable to RRD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27.1 Payable to LSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 Due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.6 Allocations from RRD Prior to Separation Prior to the Separation RRD provided Donnelley Financial with certain services, which include, but are not limited to information technology, finance, legal, human resources, internal audit, treasury, tax, investor relations and executive oversight. The financial information in these consolidated and combined financial statements does not necessarily include all the expenses that would have been incurred had Donnelley Financial been a separate, standalone entity for all periods presented. Prior to the Separation RRD charged Donnelley Financial for these services based on direct usage when possible. When specific identification was not practicable, the pro rata basis of revenue or employee headcount, or some other measure was used. These allocations were reflected as follows in the consolidated and combined financial statements: 2016 2015 2014 Costs of goods sold allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28.0 $ 38.5 $ 41.0 Selling, general and administrative allocation . . . . . . . . . . . . . . . . . . . . . . . . . 129.4 168.3 158.6 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.2 21.4 18.4 Total allocations from RRD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $172.6 $228.2 $218.0 The Company considers the expense methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual expenses that the Company would have incurred as an independent public company or the costs it may incur in the future. F-34