DFIN 2017 Annual Report

For the year ended December 31, 2017, the Company recorded net restructuring, impairment and other charges of $7.1 million compared to $5.4 million for the year ended December 31, 2016. For the year ended December 31, 2017, these charges included $6.4 million of employee termination costs for 192 employees, substantially all of whom were terminated as of December 31, 2017. These charges primarily related to the reorganization of certain operations and certain administrative functions. During the year ended December 31, 2017, the Company also incurred $0.3 million of lease termination and other restructuring costs, $0.2 million of net impairment charges primarily related to leasehold improvements associated with facility closures and $0.2 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. For the year ended December 31, 2016, these charges included $3.7 million of employee termination costs for 84 employees, all of whom were terminated as of December 31, 2016. These charges were primarily the result of the reorganization of certain administrative functions. The Company also incurred lease termination and other restructuring charges of $1.5 million and other charges of $0.2 million associated with the Company’s decision to withdraw in 2013 from certain multi-employer pension plans during the year ended December 31, 2016. Depreciation and amortization for the year ended December 31, 2017 increased $1.2 million, or 2.8%, to $44.5 compared to the year ended December 31, 2016. Depreciation and amortization included $15.0 million and $14.4 million of amortization of other intangible assets related to customer relationships, trade names and non-compete agreements for the years ended December 31, 2017 and 2016, respectively. Income from operations for the year ended December 31, 2017 decreased $7.0 million, or 6.6%, to $99.0 million versus the year ended December 31, 2016, due to lower volumes in capital markets transactions and healthcare print and an increase in expenses incurred to operate as an independent public company, including selling expenses, employee compensation costs and spin-off related transaction expenses, partially offset by cost control initiatives and higher volumes in capital markets compliance, virtual data room services, mutual funds print-related services and content management. 2017 2016 $ Change % Change (in millions, except percentages) Interest expense-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $42.9 $11.7 $31.2 266.7% Net interest expense increased by $31.2 million for the year ended December 31, 2017 versus the year ended December 31, 2016, due to the issuance of debt in connection with the Separation. Refer to “ Liquidity and Capital Resources ” for further discussion. 2017 2016 $ Change % Change (in millions, except percentages) Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56.2 $94.3 $(38.1) (40.4%) Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.5 35.2 11.3 32.1% Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82.7% 37.3% The effective income tax rate was 82.7% for the year ended December 31, 2017 compared to 37.3% for the year ended December 31, 2016. The 2017 effective income tax rate is higher as compared to the 2016 effective income tax rate primarily due to impacts of the recent changes to U.S. tax legislation as a result of the enactment of the Tax Act, including the transition tax imposed on the Company’s accumulated foreign earnings and the remeasurement of the Company’s U.S net deferred tax asset. The 2017 effective income tax rate was also impacted by non-deductible expenses incurred by the Company in 2017 which were previously incurred by RRD on behalf of the Company during pre-Separation periods, as well as a one-time favorable change in a valuation allowance in 2016 not present in 2017. 34