DFS Annual Report

Notes to the Consolidated and Combined Financial Statements (in millions, except per share data, unless otherwise indicated)-(Continued) Related Party Revenues Donnelley Financial generates a portion of net revenue from sales to RRD’s subsidiaries. Net revenues from sales to RRD and affiliates of $19.4 million, $7.8 million and $8.0 million for the years ended December 31, 2016, 2015 and 2014, respectively, were included in the consolidated and combined statement of operations. Related Party Purchases Donnelley Financial utilizes RRD for freight and logistics and services as well as certain production of printed products. Cost of sales of $57.9 million, $68.3 million and $76.5 million for the years ended December 31, 2016, 2015 and 2014, respectively, were included in the consolidated and combined statements of operations for these purchases. Donnelley Financial also utilizes RRD’s business process outsourcing business for certain composition, XBRL and other functions. Cost of sales of $37.8 million, $40.4 million and $39.3 million for the years ended December 31, 2016, 2015 and 2014, respectively, were included in the consolidated and combined statements of operations for these purchases. For periods prior to the Separation, intercompany payables with RRD and affiliates for these purchases are reflected within net parent company investment in the consolidated and combined financial statements. Share-Based Compensation Prior to Separation Prior to the Separation, certain Donnelley Financial employees participated in RRD’s share-based compensation plans, the costs of which have been allocated to Donnelley Financial and recorded in selling, general and administrative expenses in the consolidated and combined statements of operations. Share-based compensation costs allocated to the Company were $1.2 million for the nine months ended September 30, 2016 and $1.6 million and $2.1 million for the years ended December 31, 2015 and 2014, respectively. Retirement Plans Prior to Separation Prior to the Separation, Donnelley Financial employees participated in pension and other postretirement plans sponsored by RRD. These costs are reflected in the Company’s cost of sales and selling, general and administrative expenses in the consolidated and combined statements of operations. These costs were funded through intercompany transactions with RRD which are reflected within the net parent company investment. On October 1, 2016, Donnelley Financial recorded net pension plan liabilities of $68.3 million (consisting of a total benefit plan liability of $317.0 million, net of plan assets having fair market value of $248.7 million), as a result of the transfer of certain pension plan liabilities and assets from RRD to the Company upon the legal split of those plans. Refer to Note 11 , Retirement Plans , for further details regarding the Company’s pension and other postretirement benefit plans. Centralized Cash Management Prior to Separation RRD uses a centralized approach to cash management and financing of operations. Prior to the Separation, the majority of the Company’s foreign subsidiaries were party to RRD’s international cash pooling arrangements to maximize the availability of cash for general operating and investing purposes. As part of RRD’s centralized cash management process, cash balances were swept regularly from the Company’s accounts. Cash transfers to and from RRD’s cash concentration accounts and the resulting balances at the end of each reporting period are reflected in net parent company investment in the consolidated and combined balance sheets. During the fourth quarter of 2016, the Company paid a cash adjustment to RRD for the amount of the Company’s September 30, 2016 cash balance that was greater than the agreed-upon target cash balance of $50.0 million as defined in the Separation and Distribution Agreement. Debt RRD’s third party debt and related interest expense have not been allocated to the Company for any of the periods presented as the Company was not the legal obligor of the debt and the borrowings were not directly related to the Company’s business. An intercompany note payable with RRD at December 31, 2015 is presented in the accompanying consolidated and combined balance sheets. During the third quarter of 2016, the Company recorded a $29.6 million non-cash settlement related to this intercompany note payable. F-35