DFIN 2017 Annual Report

Net sales for the International segment for the year ended December 31, 2017 were $157.0 million, an increase of $18.7 million, or 13.5%, compared to the year ended December 31, 2016 including a $1.8 million, or 1.3%, decrease due to changes in foreign exchange rates. Net sales increased due to higher volumes in mutual funds, capital markets transactions, virtual data room and translation services. International segment income from operations for the year ended December 31, 2017 decreased $2.4 million, or 25.0%, compared to the year ended December 31, 2016, due to an increase in allocated expenses, including information technology expenses and an increase in incentive compensation expense and restructuring, impairment and other charges, partially offset higher volumes in mutual funds, capital markets transactions, virtual data room and translation services and cost control initiatives. Operating margins decreased from 6.9% for the year ended December 31, 2016 to 4.6% for the year ended December 31, 2017 of which 1.0 percentage points were due to higher restructuring, impairment and other charges. Operating margins were also impacted by an increase in allocated expenses, including information technology expenses and incentive compensation expense, partially offset by cost control initiatives. Corporate The following table summarizes unallocated operating expenses and certain items impacting comparability within the activities presented as Corporate: Year Ended December 31, 2017 2016 (in millions) Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35.8 $22.0 Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . 6.8 2.5 Spin-off related transaction expenses . . . . . . . . . . . . . . . . . . . . . . . . 6.5 4.6 Restructuring, impairment and other charges-net . . . . . . . . . . . . . . . 1.0 0.1 Acquisition-related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 — Corporate operating expenses for the year ended December 31, 2017 increased $13.8 million versus the year ended December 31, 2016 due to higher employee compensation costs incurred to operate as an independent public company and an increase in share-based compensation expense and spin-off related transaction expenses. Results of Operations for the Year Ended December 31, 2016 as Compared to the Year Ended December 31, 2015 The following table shows the results of operations for the year ended December 31, 2016 and 2015: 2016 2015 $ Change % Change (in millions, except percentages) Services net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $598.6 $ 628.6 $(30.0) (4.8%) Products net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384.9 420.9 (36.0) (8.6%) Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 983.5 1,049.5 (66.0) (6.3%) Services cost of sales (exclusive of depreciation and amortization) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297.1 291.9 5.2 1.8% Services cost of sales with RRD affiliates (exclusive of depreciation and amortization) . . . . . . . . . . . . . . . . . . . . . . . . . . 37.8 40.4 (2.6) (6.4%) Products cost of sales (exclusive of depreciation and amortization) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226.2 230.9 (4.7) (2.0%) Products cost of sales with RRD affiliates (exclusive of depreciation and amortization) . . . . . . . . . . . . . . . . . . . . . . . . . . 57.9 68.3 (10.4) (15.2%) Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619.0 631.5 (12.5) (2.0%) Selling, general and administrative expenses (exclusive of depreciation and amortization) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209.8 199.2 10.6 5.3% Restructuring, impairment and other charges-net . . . . . . . . . . . . . . . . . . 5.4 4.4 1.0 22.7% Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.3 41.7 1.6 3.8% Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $106.0 $ 172.7 $(66.7) (38.6%) 36