DFIN 2017 Annual Report

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period of one year from the Tax Act enactment date for companies to complete their accounting of the tax effects of the Tax Act. As stated by SAB 118, companies must reflect the income tax effects of those aspects of the Act for which the accounting is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply its accounting on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% pursuant to the Tax Act, the Company has revalued its U.S. net deferred tax assets at December 31, 2017. The Company has estimated a reduction in the value of its net deferred tax asset of approximately $8.2 million, which has been recorded as additional deferred income tax expense in the Company’s consolidated statement of operations for the year ended December 31, 2017. Due to the transition to a territorial tax system under the Tax Act, the Company will be deemed to repatriate its foreign subsidiaries’ untaxed accumulated earnings and pay a mandatory U.S. federal tax of 15.5% on the portion of the earnings that are in cash and cash equivalents and 8% on the portion of earnings that are in non-cash and non-cash equivalent assets. The Company has estimated the U.S. federal and state tax liability to be approximately $14.2 million (includes $0.6 million of state tax liabilities that could be due as a result of the Act) which has been recorded as income tax expense in the consolidated statement of operations for the year ended December 31, 2017. The Company’s revaluation of its net deferred tax asset as well as the calculation of the mandatory deemed repatriation tax are subject to further refinement as additional information on the specifics of the Tax Act becomes available and as further analysis is completed by the Company. As such and in accordance with SAB 118, the deferred and current income tax expense associated with the revaluation of the Company’s net deferred tax asset and the mandatory tax in the Company’s consolidated statement of operations as of December 31, 2017 are provisional estimates at this time. Pursuant to SAB 118, the Company will complete the accounting for these items within the twelve month measurement period. Refer to Note 11, Income Taxes , to the consolidated and combined financial statements for further detail on the accounting for income taxes and SAB 118. Commitments and Contingencies The Company is subject to lawsuits, investigations and other claims related to environmental, employment, commercial and other matters, as well as preference claims related to amounts received from customers and others prior to their seeking bankruptcy protection. Periodically, the Company reviews the status of each significant matter and assesses potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the related liability is estimable, the Company accrues a liability for the estimated loss. Because of uncertainties related to these matters, accruals are based on the best information available at the time. As additional information becomes available, the Company reassesses the related potential liability and may revise its estimates. With respect to claims made under the Company’s third-party insurance for workers’ compensation, automobile and general liability, the Company is responsible for the payment of claims below and above insured limits, and consulting actuaries are utilized to assist the Company in estimating the obligation associated with any such incurred losses, which are recorded in accrued and other non-current liabilities. Historical loss development factors for both the Company and the industry are utilized to project the future development of such incurred losses, and these amounts are adjusted based upon actual claims experience and settlements. If actual experience of claims development is significantly different from these estimates, an adjustment in future periods may be required. Expected recoveries of such losses are recorded in other current and other non-current assets. Restructuring The Company records restructuring charges when liabilities are incurred as part of a plan approved by management with the appropriate level of authority for the elimination of duplicative functions, the closure of facilities, or the exit of a line of business, generally in order to reduce the Company’s overall cost structure. Total restructuring charges were $6.7 million for the year ended December 31, 2017. The restructuring liabilities might change in future periods based on several factors that could differ from original estimates and assumptions. These include, but are not limited to: contract settlements on terms different than originally expected; ability to sublease properties based on market conditions at rates or on timelines different than originally estimated; or changes to original plans as a result of acquisitions or other factors. Such changes might result in reversals of or additions to restructuring charges that could affect amounts reported in the consolidated and combined statements of operations of future periods. 31