DFIN 2017 Annual Report

Notes to the Consolidated and Combined Financial Statements (in millions, except per share data, unless otherwise indicated) On March 24, 2017, pursuant to the Stockholder and Registration Rights Agreement, the Company filed a Registration Statement on Form S-1 to register the offering and sale of the Company’s common stock retained by RRD. The Registration Statement on Form S-1, as amended, was declared effective by the SEC on June 13, 2017. On June 21, 2017, RRD completed the sale of approximately 6.1 million shares of the Company’s common stock in an underwritten public offering. Upon consummation of the offering, RRD retained approximately 0.1 million shares of the Company’s common stock which were subsequently sold by RRD on August 4, 2017. Sublease Agreement In connection with the Separation, the Company assumed an operating lease through 2024 for the Company’s headquarters. There is a related non-cancelable sublease rental to RRD 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 Pursuant to the Separation and Distribution Agreement, the Company received a cash payment of $68.0 million from RRD on April 3, 2017. The proceeds were used to reduce outstanding debt under the Term Loan Credit Facility. The Company has other amounts due to or from RRD in the normal course of business. The Company had $96.0 million of receivables from RRD and $27.1 million of payables to RRD included in the consolidated balance sheet at December 31, 2016. Allocations from RRD 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 unaudited consolidated and combined financial statements: 2016 2015 Costs of goods sold allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28.0 $ 38.5 Selling, general and administrative allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129.4 168.3 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.2 21.4 Total allocations from RRD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $172.6 $228.2 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. 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 $8.3 million for the six months ended June 30, 2017 and $19.4 million and $7.8 million for the years ended December 31, 2016 and 2015, 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 $32.3 million for the six months ended June 30, 2017 and $57.9 million and $68.3 million for the years ended December 31, 2016 and 2015, respectively, were included in the consolidated and combined statement of operations for these purchases. F-36