8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): September 26, 2016

R. R. DONNELLEY & SONS COMPANY

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction

of Incorporation)

1-4694	36-1004130
(Commission File Number)	(IRS Employer Identification No.)

35 West Wacker Drive,
Chicago, Illinois	60601
(Address of Principal Executive Offices)	(Zip Code)

(312) 326-8000

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01. Regulation FD Disclosure.

On September 26, 2016, R. R. Donnelley & Sons Company (“RR Donnelley”) announced it will adjust its operating segments in connection with its previously announced separation of its financial communications services business (“Donnelley Financial Solutions, Inc.” or “Donnelley Financial”) and its publishing and retail-centric print services and office products businesses (“LSC Communications, Inc.” or “LSC”) from its multichannel communications management business (the “Separation”) on October 1, 2016, to be accomplished by the distribution of approximately 80.75 percent of the outstanding common stock of Donnelley Financial and approximately 80.75 percent of the outstanding common stock of LSC to RR Donnelley stockholders as of the close of business on September 23, 2016, the record date for the distributions.

Filed as Exhibit 99.1 are the unaudited pro forma condensed consolidated financial statements of RR Donnelley presented to illustrate the anticipated effects of the Separation of Donnelley Financial and LSC from the historical combined company, and have been derived from the historical consolidated financial statements of RR Donnelley, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2016 and for the fiscal years ended December 31, 2015, 2014 and 2013 assume that the Separation occurred on January 1, 2013. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2016 assumes that the Separation occurred on that date. Beginning in the fourth quarter of 2016, the historical financial results Donnelley Financial and LSC for periods prior to the Separation will be reflected in RR Donnelley’s consolidated financial statements as discontinued operations.

Filed as Exhibit 99.2 is a reconciliation of GAAP Net Earnings to Non-GAAP Adjusted EBITDA Adjusted for the Separation of Donnelley Financial and LSC. This exhibit contains Non-GAAP financial measures, including Non-GAAP Operating Income and Non-GAAP Adjusted EBITDA and Margin Reconciliation. RR Donnelley believes that certain Non-GAAP measures, such as Non-GAAP Adjusted EBITDA for RR Donnelley continuing operations, provide useful information about RR Donnelley’s operating results and enhance the overall ability to assess RR Donnelley’s financial performance. RR Donnelley uses these measures, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business. Non-GAAP Adjusted EBITDA for RR Donnelley continuing operations allows investors to make a more meaningful comparison between RR Donnelley’s core business operating results over different periods of time. RR Donnelley believes that Non-GAAP Adjusted EBITDA for RR Donnelley continuing operations, when viewed with RR Donnelley’s results under GAAP, the pro forma financial statements included in Exhibit 99.1 and the accompanying reconciliations, provides useful information about RR Donnelley’s business without regard to potential distortions. By eliminating potential differences in results of operations between periods caused by factors such as depreciation and amortization methods, historic cost and age of assets, financing and capital structures, taxation positions or regimes, restructuring, impairment and other charges and gain or loss on certain equity investments and asset sales, RR Donnelley believes that Non-GAAP Adjusted EBITDA can provide a useful additional basis for comparing the current performance of the underlying operations being evaluated. Additional information relating to the adjustments for the Non-GAAP Adjusted EBITDA for RR Donnelley continuing operations is set forth in the notes to Exhibit 99.2.

Filed as Exhibit 99.3 are the retrospectively adjusted Unaudited Net Sales by Segment that give account to the operating segment adjustment. For a description of RR Donnelley’s adjusted operating segments, refer to the Business Section as filed under Exhibit 99.4 to this Current Report on Form 8-K. Filed as Exhibit 99.4 is a description of the business of RR Donnelley following the Separation.

Item 9.01. Financial Statements and Exhibits.

(b) Pro Forma Financial Information

The unaudited pro forma consolidated balance sheet of RR Donnelley as of June 30, 2016 and the unaudited pro forma condensed consolidated statements of operations of RR Donnelley for the six months ended June 30, 2016 and the years ended December 31, 2015, 2014 and 2014 are filed as Exhibit 99.1 to this Current Report on Form 8-K.

(d) Exhibits

Exhibit No.	Description of Exhibit
99.1	Unaudited Pro Forma Condensed Consolidated Financial Statements of RR Donnelley for the six months ended June 30, 2016 and the years ended December 31, 2015, 2014 and 2013
99.2	Reconciliation of GAAP Net Earnings to Non-GAAP Adjusted EBITDA of RR Donnelley Continuing Operations, Adjusted for the Separation of Donnelley Financial and LSC of RR Donnelley for the six months ended June 30, 2016 and the years ended December 31, 2015, 2014 and 2013
99.3	Unaudited Net Sales by Segment – Continuing Operations of RR Donnelley for the six months ended June 30, 2016 and the years ended December 31, 2015, 2014 and 2013
99.4	Description of RR Donnelley Business

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	R. R. DONNELLEY & SONS COMPANY
Date: September 26, 2016	By:	/s/ Daniel L. Knotts
	Name:	Daniel L. Knotts
	Title:	Chief Operating Officer

EX-99.1

Exhibit 99.1

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

R.R. Donnelley & Sons (the “Company” or “RR Donnelley”) will complete the previously announced separation of its financial communications services business (“Donnelley Financial Solutions, Inc.” or “Donnelley Financial”) and its publishing and retail-centric print services business (“LSC Communications, Inc.” or “LSC”) from its multichannel communications management business (the “Separation”) on October 1, 2016, to be accomplished by the distribution of approximately 80.75 percent of the outstanding common stock of Donnelley Financial and approximately 80.75 percent of the outstanding common stock of LSC to RR Donnelley stockholders as of the close of business on September 23, 2016, the record date for the distribution (the “Distribution”). RR Donnelley stockholders will receive one share of Donnelley Financial common stock and one share of LSC common stock for every eight shares of RR Donnelley stock held at the close of business on the record date. Upon completion of the Separation, Donnelley Financial and LSC will be separate independent public companies and will trade under the symbols “DFIN” and “LKSD”, respectively, on the New York Stock Exchange. The Company plans to retain approximately 19.25 percent ownership in both Donnelley Financial and LSC immediately following the Distribution.

The following unaudited pro forma condensed consolidated financial statements of RR Donnelley are presented to illustrate the estimated effects of the Separation of Donnelley Financial and LSC from the historical combined company, and have been derived from the historical consolidated financial statements of the Company, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The following unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2016 and for the fiscal years ended December 31, 2015, 2014, and 2013 assume that the Separation occurred on January 1, 2013. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2016 assumes that the Separation occurred on that date. Beginning in the fourth quarter of 2016, the historical financial results of Donnelley Financial and LSC for periods prior to the Separation will be reflected in RR Donnelley’s consolidated financial statements as discontinued operations.

The following unaudited pro forma condensed consolidated financial statements are intended for informational purposes only, and are not necessarily indicative of what RR Donnelley’s results of operations or financial condition would have been had the Separation been completed on the dates assumed. In addition, the unaudited pro forma condensed consolidated financial statements are not necessarily indicative of RR Donnelley’s future results of operations or financial condition.

The unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read together with the audited consolidated GAAP financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in RR Donnelley’s Form 10-K for the years ended December 31, 2015, 2014, and 2013, as well as the unaudited condensed consolidated interim financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in RR Donnelley’s Form 10-Q for the quarter ended June 30, 2016.

The Historical column in the unaudited pro forma condensed consolidated interim financial statements reflects RR Donnelley’s historical consolidated financial statements for the periods presented and does not reflect any adjustments related to the Distribution and related events.

The Donnelley Financial and LSC Separation column in the unaudited pro forma condensed consolidated financial statements reflects the revenues and expenses directly associated with the results of operations of each respective company and was derived from the annual combined financial statements and unaudited condensed combined interim financial statements included in both Donnelley Financial and LSC Registration Statements on Form 10, adjusted to exclude general corporate overhead costs previously allocated to the Forms 10 of $30.5 million, $62.4 million, $73.1 million and $74.8 million in the six months ended June 30, 2016 and the twelve months ended December 31, 2015, 2014 and 2013, respectively.

The Historical RR Donnelley Sales to Donnelley Financial and LSC column reflects net sales made to Donnelley Financial and LSC by RR Donnelley which were historically reflected as intercompany sales that were eliminated in RR Donnelley’s consolidated financial statements. These net sales and related cost of sales are governed by and expected to continue through the duration of the executed Commercial Agreements between RR Donnelley with Donnelley Financial and LSC.

The pro forma adjustments are based on available information and assumptions that RR Donnelley’s management believes are reasonable, reflect the impacts of events directly attributable to the Distribution and related transaction agreements that are factually supportable and for purposes of the statements of operations, are expected to have a continuing impact on RR Donnelley. The pro forma adjustments do not reflect future events that may occur after the Distribution, including potential selling, general and administrative dis-synergies and potential cost synergies.

R. R. Donnelley & Sons Company

Unaudited Pro Forma Condensed Consolidated Statements of Operations

For the Six Months Ended June 30, 2016

(in millions, except per share data)

	Historical			Donnelley Financial & LSC Separation			Historical RR Donnelley Sales to Donnelley Financial and LSC		RR Donnelley Continuing Operations			Pro Forma Adjustments			Notes		Pro Forma RR Donnelley Continuing Operations
Products net sales	$	4,424.7		$	1,994.0		$	53.9	$	2,484.6		$	—				$	2,484.6
Services net sales		956.4			186.0			33.4		803.8			—					803.8
Total net sales		5,381.1			2,180.0			87.3		3,288.4			—					3,288.4
Products cost of sales (exclusive of depreciation and amortization)		3,456.7			1,543.2			53.9		1,967.4			—					1,967.4
Services cost of sales (exclusive of depreciation and amortization)		750.2			111.5			33.4		672.1			—					672.1
Total cost of sales		4,206.9			1,654.7			87.3		2,639.5			—					2,639.5
Products gross profit		968.0			450.8			—		517.2			—					517.2
Services gross profit		206.2			74.5			—		131.7			—					131.7
Total gross profit		1,174.2			525.3			—		648.9			—					648.9
Selling, general and administrative expenses (exclusive of depreciation and amortization)		766.5			278.9			—		487.6			(24.7	)		(A)		462.9
Restructuring, impairment and other charges-net		23.4			9.9			—		13.5			—					13.5
Depreciation and amortization		211.0			108.5			—		102.5			—					102.5
Other operating income		(12.3	)		—			—		(12.3	)		—					(12.3	)
Income from operations		185.6			128.0			—		57.6			24.7					82.3
Interest expense (income)-net		137.0			(0.4	)		—		137.4			(35.4	)		(B)		102.0
Investment and other expense-net		1.0			0.4			—		0.6			—					0.6
Earnings (loss) before income taxes		47.6			128.0			—		(80.4	)		60.1					(20.3	)
Income tax expense (benefit)		21.8			62.1			—		(40.3	)		19.4			(C)		(20.9	)
Net earnings (loss)		25.8			65.9			—		(40.1	)		40.7					0.6
Less: Income attributable to noncontrolling interests		0.5			—			—		0.5			—					0.5
Net earnings (loss) attributable to RR Donnelley common shareholders	$	25.3		$	65.9		$	—	$	(40.6	)	$	40.7				$	0.1
Net earnings (loss) per share attributable to RR Donnelley common shareholders:
Basic net earnings (loss) per share	$	0.12															$	—
Diluted net earnings (loss) per share	$	0.12															$	—
Weighted average number of common shares outstanding:
Basic		209.8																209.8
Diluted		211.4																211.4

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

R. R. Donnelley & Sons Company

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Fiscal Year Ended December 31, 2015

(in millions, except per share data)

	Historical			Donnelley Financial & LSC Separation			Historical RR Donnelley Sales to Donnelley Financial and LSC		RR Donnelley Continuing Operations			Pro Forma Adjustments			Notes		Pro Forma RR Donnelley Continuing Operations
Products net sales	$	9,323.6		$	4,094.2		$	103.1	$	5,332.5		$	—				$	5,332.5
Services net sales		1,933.2			378.7			70.7		1,625.2			—					1,625.2
Total net sales		11,256.8			4,472.9			173.8		6,957.7			—					6,957.7
Products cost of sales (exclusive of depreciation and amortization)		7,282.3			3,186.1			103.1		4,199.3			—					4,199.3
Services cost of sales (exclusive of depreciation and amortization)		1,510.5			227.9			70.7		1,353.3			—					1,353.3
Total cost of sales		8,792.8			3,414.0			173.8		5,552.6			—					5,552.6
Products gross profit		2,041.3			908.1			—		1,133.2			—					1,133.2
Services gross profit		422.7			150.8			—		271.9			—					271.9
Total gross profit		2,464.0			1,058.9			—		1,405.1			—					1,405.1
Selling, general and administrative expenses (exclusive of depreciation and amortization)		1,300.0			416.0			—		884.0			(11.4	)		(A)		872.6
Restructuring, impairment and other charges-net		122.6			59.9			—		62.7			—					62.7
Depreciation and amortization		454.0			221.5			—		232.5			—					232.5
Income from operations		587.4			361.5			—		225.9			11.4					237.3
Interest expense (income)-net		276.0			(1.4	)		—		277.4			(71.4	)		(B)		206.0
Investment and other expense (income)-net		43.6			(0.3	)		—		43.9								43.9
Earnings (loss) before income taxes		267.8			363.2			—		(95.4	)		82.8					(12.6	)
Income tax expense (benefit)		129.4			141.1			—		(11.7	)		31.9			(C)		20.2
Net earnings (loss)		138.4			222.1			—		(83.7	)		50.9					(32.8	)
Less: (Loss) income attributable to noncontrolling interests		(12.7	)		—			—		(12.7	)		—					(12.7	)
Net earnings (loss) attributable to RR Donnelley common shareholders	$	151.1		$	222.1		$	—	$	(71.0	)	$	50.9				$	(20.1	)
Net earnings per share attributable to RR Donnelley common shareholders:
Basic net earnings per share	$	0.73															$	(0.10	)
Diluted net earnings per share	$	0.73															$	(0.10	)
Weighted average number of common shares outstanding:
Basic		205.6																205.6
Diluted		206.8																205.6

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

R. R. Donnelley & Sons Company

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Fiscal Year Ended December 31, 2014

(in millions, except per share data)

	Historical		Donnelley Financial & LSC Separation			Historical RR Donnelley Sales to Donnelley Financial and LSC		RR Donnelley Continuing Operations			Pro Forma Adjustments			Notes		Pro Forma RR Donnelley Continuing Operations
Products net sales	$	9,715.2	$	4,218.3		$	106.6	$	5,603.5		$	—				$	5,603.5
Services net sales		1,888.2		365.0			68.7		1,591.9			—					1,591.9
Total net sales		11,603.4		4,583.3			175.3		7,195.4			—					7,195.4
Products cost of sales (exclusive of depreciation and amortization)		7,581.6		3,288.5			106.6		4,399.7			—					4,399.7
Services cost of sales (exclusive of depreciation and amortization)		1,471.2		218.1			68.7		1,321.8			—					1,321.8
Total cost of sales		9,052.8		3,506.6			175.3		5,721.5			—					5,721.5
Products gross profit		2,133.6		929.8			—		1,203.8			—					1,203.8
Services gross profit		417.0		146.9			—		270.1			—					270.1
Total gross profit		2,550.6		1,076.7			—		1,473.9			—					1,473.9
Selling, general and administrative expenses (exclusive of depreciation and amortization)		1,427.0		493.9			—		933.1			—					933.1
Restructuring, impairment and other charges-net		133.7		61.4			—		72.3			—					72.3
Depreciation and amortization		474.0		219.4			—		254.6			—					254.6
Income from operations		515.9		302.0			—		213.9			—					213.9
Interest expense (income)-net		282.1		(2.4	)		—		284.5			(71.4	)		(B)		213.1
Investment and other expense (income)-net		9.6		(12.6	)		—		22.2								22.2
Loss on debt extinguishment		77.1		—			—		77.1								77.1
Earnings (loss) before income taxes		147.1		317.0			—		(169.9	)		71.4					(98.5	)
Income tax expense (benefit)		26.3		111.1			—		(84.8	)		27.8			(C)		(57.0	)
Net earnings (loss)		120.8		205.9			—		(85.1	)		43.6					(41.5	)
Less: Income attributable to noncontrolling interests		3.4		—			—		3.4			—					3.4
Net earnings (loss) attributable to RR Donnelley common shareholders	$	117.4	$	205.9		$	—	$	(88.5	)	$	43.6				$	(44.9	)
Net earnings (loss) per share attributable to RR Donnelley common shareholders:
Basic net earnings per share	$	0.59														$	(0.23	)
Diluted net earnings per share	$	0.59														$	(0.23	)
Weighted average number of common shares outstanding:
Basic		198.5															198.5
Diluted		200.0															198.5

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

R. R. Donnelley & Sons Company

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Fiscal Year Ended December 31, 2013

(in millions, except per share data)

	Historical			Donnelley Financial & LSC Separation			Historical RR Donnelley Sales to Donnelley Financial and LSC		RR Donnelley Continuing Operations			Pro Forma Adjustments			Notes		Pro Forma RR Donnelley Continuing Operations
Products net sales	$	8,765.8		$	4,173.3		$	109.0	$	4,701.5		$	—				$	4,701.5
Services net sales		1,714.5			298.5			59.1		1,475.1			—					1,475.1
Total net sales		10,480.3			4,471.8			168.1		6,176.6			—					6,176.6
Products cost of sales (exclusive of depreciation and amortization)		6,816.9			3,164.8			109.0		3,761.1			—					3,761.1
Services cost of sales (exclusive of depreciation and amortization)		1,332.9			176.9			59.1		1,215.1			—					1,215.1
Total cost of sales		8,149.8			3,341.7			168.1		4,976.2			—					4,976.2
Products gross profit		1,948.9			1,008.5			—		940.4			—					940.4
Services gross profit		381.6			121.6			—		260.0			—					260.0
Total gross profit		2,330.5			1,130.1			—		1,200.4			—					1,200.4
Selling, general and administrative expenses (exclusive of depreciation and amortization)		1,181.5			446.2			—		735.3			—					735.3
Restructuring, impairment and other charges-net		133.5			87.2			—		46.3			—					46.3
Depreciation and amortization		435.8			228.1			—		207.7			—					207.7
Income from operations		579.7			368.6			—		211.1			—					211.1
Interest expense (income)-net		261.4			(1.6	)		—		263.0			(71.4	)		(B)		191.6
Investment and other expense-net		27.4			2.6			—		24.8			—					24.8
Loss on debt extinguishment		81.9			—			—		81.9			—					81.9
Earnings (loss) before income taxes		209.0			367.6			—		(158.6	)		71.4					(87.2	)
Income tax (benefit) expense		(9.2	)		135.6			—		(144.8	)		27.8			(C)		(117.0	)
Net earnings (loss)		218.2			232.0			—		(13.8	)		43.6					29.8
Less: Income attributable to noncontrolling interests		7.0			—			—		7.0			—					7.0
Net earnings (loss) attributable to RR Donnelley common shareholders	$	211.2		$	232.0		$	—	$	(20.8	)	$	43.6				$	22.8
Net earnings (loss) per share attributable to RR Donnelley common shareholders:
Basic net earnings per share	$	1.16															$	0.13
Diluted net earnings per share	$	1.15															$	0.12
Weighted average number of common shares outstanding:
Basic		181.9																181.9
Diluted		183.5																183.5

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

R. R. Donnelley & Sons Company

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of June 30, 2016

(in millions, except per share data)

	Historical			Donnelley Financial & LSC Separation			RR Donnelley Continuing Operations			Pro Forma Adjustments			Notes		Pro Forma RR Donnelley Continuing Operations
ASSETS
Cash and cash equivalents	$	290.6		$	98.4		$	192.2		$	367.1			(E)	$	559.3
Receivables, net		1,968.4			816.1			1,152.3			—					1,152.3
Inventories		596.8			261.4			335.4			—					335.4
Prepaid expenses and other current assets		118.5			33.8			84.7			—					84.7
Investment in Donnelley Financial and LSC stock		—			—			—			—			(D)		—
Total current assets		2,974.3			1,209.7			1,764.6			367.1					2,131.7
Property, plant and equipment-net		1,375.0			696.1			678.9			—					678.9
Goodwill		1,746.2			528.3			1,217.9			—					1,217.9
Other intangible assets-net		404.5			200.9			203.6			—					203.6
Deferred income taxes		192.6			116.0			76.6			—					76.6
Other noncurrent assets		395.6			159.7			235.9			—					235.9
Total assets	$	7,088.2		$	2,910.7		$	4,177.5		$	367.1				$	4,544.6
LIABILITIES
Accounts payable	$	1,047.7		$	282.3		$	765.4		$	—				$	765.4
Accrued liabilities		720.0			266.4			453.6			78.0			(F)		531.6
Short-term and current portion of long-term debt		675.6			4.1			671.5			(251.0	)		(E)		420.5
Total current liabilities		2,443.3			552.8			1,890.5			(173.0	)				1,717.5
Long-term debt		2,943.8			3.3			2,940.5			(749.0	)		(E)		2,191.5
Pension liabilities (a)		555.5			463.6			91.9			—					91.9
Other postretirement benefits plan liabilities		168.6			—			168.6			—					168.6
Other noncurrent liabilities		357.5			155.7			201.8			—					201.8
Total liabilities		6,468.7			1,175.4			5,293.3			(922.0	)				4,371.3
EQUITY
RR Donnelley shareholders’ equity
Preferred stock, $1.00 par value
Authorized: 2.0 shares; Issued: None		—			—			—			—					—
Common stock, $0.01 par value
Authorized: 500.0 shares; Issued: 267.0 shares in 2016		2.7			—			2.7			—					2.7
Additional paid-in-capital		3,469.4			—			3,469.4			—					3,469.4
Accumulated deficit		(704.0	)		2,481.0			(3,185.0	)		1,289.1			(E)(D)		(1,895.9	)
Accumulated other comprehensive loss		(791.9	)		(745.7	)		(46.2	)		—			(D)		(46.2	)
Treasury stock, at cost, 57.5 shares in 2016		(1,370.4	)		—			(1,370.4	)		—					(1,370.4	)
Total RR Donnelley shareholders’ equity		605.8			1,735.3			(1,129.5	)		1,289.1					159.6
Noncontrolling interests		13.7			—			13.7			—					13.7
Total equity		619.5			1,735.3			(1,115.8	)		1,289.1					173.3
Total liabilities and equity	$	7,088.2		$	2,910.7		$	4,177.5		$	367.1				$	4,544.6

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2016 and for the years ended December 31, 2015, 2014 and 2013 and the unaudited pro forma condensed consolidated balance sheet as of June 30, 2016 includes the following pro forma adjustments:

(A) Reflects the one-time Spin-off related transaction expenses that are directly attributable to the separation of Donnelley Financial and LSC from RR Donnelley. The Company incurred $11.4 million in 2015 and $24.7 million in the six months ended June 30, 2016. These amounts are exclusive of financing fees to be incurred by the Company in connection with the spin-off.

(B) Reflects the estimated reduction in interest expense related to approximately $1 billion of debt that the Company announced it intends to tender.

$250 million 6.125% senior notes due January 15, 2017

$250 million 7.250% senior notes due May 15, 2018

$240 million 8.250% senior notes due March 15, 2019

$260 million 7.000% senior notes due February 15, 2022

Interest expense was calculated based on the current financial markets conditions and the estimated debt expected to be tendered. Interest expense may be higher or lower depending on the amount and type of debt currently expected to be tendered.

(C) The income tax expense was calculated at an estimated marginal tax rate of 39 percent applied to the pre-tax pro forma adjustments, except for the spin-off related costs which had an estimated marginal tax rate of 22 percent and 36 percent in 2016 and 2015, respectively, due to certain items that are not tax deductible. These rates reflect the U.S. marginal tax rate taking into consideration the nature of the adjustment.

(D) After giving effect to the expected Distribution, Donnelley will hold shares of Donnelley Financial and LSC common stock. As of the date of this filing, the value and share count are not-known but will be included within subsequent filings after the Separation and Distribution. For purposes of the unaudited pro forma condensed consolidated balance sheet, the difference between the cost basis and the fair value of the investment will be recorded as a component of accumulated other comprehensive loss in the unaudited pro forma condensed consolidated balance sheet.

(E) Reflects a net distribution of approximately $634.4 million and $805.3 million in cash to the Company from the proceeds of the intended debt to be incurred by Donnelley Financial and LSC, respectively, at the time of the Separation and the tender of approximately $1 billion in senior notes by the Company. Additionally reflected is $34.5 million of cash to be transferred to the Company from LSC and $16.1 million of cash to be transferred from the Company to Donnelley Financial in order to arrive at the agreed-upon cash needed for working capital purposes pursuant to the Separation and Distribution Agreement.

(F) Reflects the liability as required by a provision in the Separation and Distribution Agreement to make future cash payments of $68.0 million and $10.0 million to Donnelley Financial and LSC, respectively, no later than six months following the Separation.

The unaudited pro forma condensed consolidated balance sheet as of June 30, 2016 includes the following note:

(a) Effective as of the Distribution, RR Donnelley expects to transfer certain defined benefit pension plan net liabilities associated with Donnelley Financial and LSC active, retired and certain other employees. The net benefit obligations that the Company will transfer reflect estimated net benefit plan liabilities of $467.2 million (consisting of a total benefit plan liability of approximately $2.9 billion, net of plan assets, having a fair market value of $2.4 billion), accumulated other comprehensive losses, net of tax, of $571.8 million, and $181.2 million of related deferred tax assets. The Company’s

estimates may change prior to the Distribution date and continue to refine such estimates of the net liability transfers as of that date. The actual assumed net benefit plan obligations and pension income could change significantly from current estimates. The Company’s current estimates of the transfer of certain defined benefit pension plan net liabilities have been reflected within the Donnelley Financial & LSC Separation column on the unaudited pro forma condensed consolidated balance sheet as of June 30, 2016. Additionally, the impact of the transfer to the unaudited pro forma condensed consolidated statements of operations has been reflected within the Donnelley Financial & LSC Separation columns in each respective year.

EX-99.2

Exhibit 99.2

R.R. Donnelley & Sons Company

Reconciliation of GAAP Net Earnings to Non-GAAP Adjusted EBITDA Adjusted for the

Separation of Donnelley Financial Solutions and LSC Communications

(in millions)

	Six Months Ended June 30, 2016			Twelve Months Ended December 31, 2015			Twelve Months Ended December 31, 2014			Twelve Months Ended December 31, 2013
GAAP net earnings attributable to RR Donnelley common shareholders (A)	$	25.3		$	151.1		$	117.4		$	211.2
Adjustments
Less: income from discontinued operations, net of tax (B)		(65.9	)		(222.1	)		(205.9	)		(232.0	)
Income (loss) attributable to noncontrolling interests (C)		0.5			(12.7	)		3.4			7.0
Income tax benefit (C)		(40.3	)		(11.7	)		(84.8	)		(144.8	)
Interest expense - net (C)		137.4			277.4			284.5			263.0
Investment and other expense - net (C)		0.6			43.9			22.2			24.8
Depreciation and amortization (C)		102.5			232.5			254.6			207.7
Restructuring, impairment and other charges - net (D)		13.5			62.7			72.3			46.3
Acquisition-related expenses (D)		2.0			0.5			7.0			4.8
Spinoff-related transaction expenses (D)		24.7			11.4			—			—
Pension settlement charges (D)		20.4			—			—			—
Gain on disposals of businesses (D)		(12.3	)		—			—			—
Loss on debt extinguishment (D)		—			—			77.1			81.9
Purchase accounting inventory adjustments (D)		—			—			12.1			—
Total Non-GAAP adjustments (E)		183.1			381.9			442.5			258.7
Non-GAAP adjusted EBITDA RRD continuing operations (E)	$	208.4		$	533.0		$	559.9		$	469.9
Net sales (D)	$	3,288.4		$	6,957.7		$	7,195.4		$	6,176.6
Non-GAAP adjusted EBITDA margin % (E)		6.3	%		7.7	%		7.8	%		7.6	%

See accompanying notes to the unaudited non-GAAP financial information.

R. R. Donnelley & Sons Company

Unaudited Segment GAAP to Non-GAAP Operating Income and Non-GAAP

Adjusted EBITDA and Margin Reconciliation

For the Six Months Ended June 30, 2016

(in millions)

	Variable Print			Strategic Services			International			Corporate			Consolidated
Net sales (C)	$	1,521.5		$	784.6		$	982.3		$	—		$	3,288.4
Operating expense (C)		1,427.6			772.6			918.9			111.7			3,230.8
Income (loss) from operations (C)		93.9			12.0			63.4			(111.7	)		57.6
Operating margin %		6.2	%		1.5	%		6.5	%		nm			1.8	%
Non-GAAP Adjustments
Restructuring, impairment and other charges - net (D)		2.8			0.7			5.1			4.9			13.5
Spinoff-related transaction expenses (D)		—			—			0.4			24.3			24.7
Acquisition-related expenses (D)		—			—			—			2.0			2.0
Pension settlement charges (D)		—			—			—			20.4			20.4
Gain on disposals of businesses (D)		—			—			(12.3	)		—			(12.3	)
Total Non-GAAP adjustments		2.8			0.7			(6.8	)		51.6			48.3
Non-GAAP income (loss) from operations (E)	$	96.7		$	12.7		$	56.6		$	(60.1	)	$	105.9
Non-GAAP operating margin % (E)		6.4	%		1.6	%		5.8	%		nm			3.2	%
Depreciation and amortization (C)		60.0			9.7			31.9			0.9			102.5
Non-GAAP Adjusted EBITDA (E)	$	156.7		$	22.4		$	88.5		$	(59.2	)	$	208.4
Non-GAAP Adjusted EBITDA margin % (E)		10.3	%		2.9	%		9.0	%		nm			6.3	%

See accompanying notes to the unaudited non-GAAP financial information.

R. R. Donnelley & Sons Company

Unaudited Segment GAAP to Non-GAAP Operating Income and Non-GAAP

Adjusted EBITDA and Margin Reconciliation

For the Twelve Months Ended December 31, 2015

(in millions)

	Variable Print			Strategic Services			International			Corporate			Consolidated
Net sales (C)	$	3,214.9		$	1,604.6		$	2,138.2		$	—		$	6,957.7
Operating expense (C)		3,006.7			1,564.0			2,055.3			105.8			6,731.8
Income (loss) from operations (C)		208.2			40.6			82.9			(105.8	)		225.9
Operating margin %		6.5	%		2.5	%		3.9	%		nm			3.2	%
Non-GAAP Adjustments
Restructuring, impairment and other charges - net (D)		9.1			5.8			43.6			4.2			62.7
Spinoff-related transaction expenses (D)		—			—			—			11.4			11.4
Acquisition-related expenses (D)		—			—			—			0.5			0.5
Total Non-GAAP adjustments		9.1			5.8			43.6			16.1			74.6
Non-GAAP income (loss) from operations (E)	$	217.3		$	46.4		$	126.5		$	(89.7	)	$	300.5
Non-GAAP operating margin % (E)		6.8	%		2.9	%		5.9	%		nm			4.3	%
Depreciation and amortization (C)		134.1			19.5			75.7			3.2			232.5
Non-GAAP Adjusted EBITDA (E)	$	351.4		$	65.9		$	202.2		$	(86.5	)	$	533.0
Non-GAAP Adjusted EBITDA margin % (E)		10.9	%		4.1	%		9.5	%		nm			7.7	%

See accompanying notes to the unaudited non-GAAP financial information.

R. R. Donnelley & Sons Company

Unaudited Segment GAAP to Non-GAAP Operating Income and Non-GAAP

Adjusted EBITDA and Margin Reconciliation

For the Twelve Months Ended December 31, 2014

(in millions)

	Variable Print			Strategic Services			International			Corporate			Consolidated
Net sales (C)	$	3,268.5		$	1,563.0		$	2,363.9		$	—		$	7,195.4
Operating expense (C)		3,083.7			1,512.2			2,252.9			132.7			6,981.5
Income (loss) from operations (C)		184.8			50.8			111.0			(132.7	)		213.9
Operating margin %		5.7	%		3.3	%		4.7	%		nm			3.0	%
Non-GAAP Adjustments
Restructuring, impairment and other charges - net (D)		40.1			6.6			21.1			4.5			72.3
Purchase accounting inventory adjustments (D)		12.1			—			—			—			12.1
Acquisition-related expenses (D)		—			—			—			7.0			7.0
Total Non-GAAP adjustments		52.2			6.6			21.1			11.5			91.4
Non-GAAP income (loss) from operations (E)	$	237.0		$	57.4		$	132.1		$	(121.2	)	$	305.3
Non-GAAP operating margin % (E)		7.3	%		3.7	%		5.6	%		nm			4.2	%
Depreciation and amortization (C)		139.7			19.4			87.7			7.8			254.6
Non-GAAP Adjusted EBITDA (E)	$	376.7		$	76.8		$	219.8		$	(113.4	)	$	559.9
Non-GAAP Adjusted EBITDA margin % (E)		11.5	%		4.9	%		9.3	%		nm			7.8	%

See accompanying notes to the unaudited non-GAAP financial information.

R. R. Donnelley & Sons Company

Unaudited Segment GAAP to Non-GAAP Operating Income and Non-GAAP Adjusted EBITDA and Margin Reconciliation

For the Twelve Months Ended December 31, 2013

(in millions)

	Variable Print			Strategic Services			International			Corporate			Consolidated
Net sales (C)	$	2,350.0		$	1,404.7		$	2,421.9		$	—		$	6,176.6
Operating expense (C)		2,183.1			1,363.5			2,281.7			137.2			5,965.5
Income (loss) from operations (C)		166.9			41.2			140.2			(137.2	)		211.1
Operating margin %		7.1	%		2.9	%		5.8	%		nm			3.4	%
Non-GAAP Adjustments
Restructuring, impairment and other charges - net (D)		15.2			6.2			18.8			6.1			46.3
Acquisition-related expenses (D)		—			—			—			4.8			4.8
Total Non-GAAP adjustments		15.2			6.2			18.8			10.9			51.1
Non-GAAP income (loss) from operations (E)	$	182.1		$	47.4		$	159.0		$	(126.3	)	$	262.2
Non-GAAP operating margin % (E)		7.7	%		3.4	%		6.6	%		nm			4.2	%
Depreciation and amortization (C)		94.8			17.4			91.0			4.5			207.7
Non-GAAP Adjusted EBITDA (E)	$	276.9		$	64.8		$	250.0		$	(121.8	)	$	469.9
Non-GAAP Adjusted EBITDA margin % (E)		11.8	%		4.6	%		10.3	%		nm			7.6	%

See accompanying notes to the unaudited non-GAAP financial information.

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

Notes to Unaudited Non-GAAP Financial Information

(A) Reflects RR Donnelley’s consolidated historical financial statements prepared in accordance with GAAP and does not reflect any adjustments related to the Distribution.

(B) Reflects the discontinued operations of the Donnelley Financial Solutions and LSC Communications businesses. This represents the net earnings directly associated with the results of operations of Donnelley Financial Solutions and LSC Communications.

(C) Reflects only the results of RR Donnelley continuing operations.

(D) Reflects significant items that were previously identified in RR Donnelley’s quarterly and annual earnings releases dated August 3, 2016, February 25, 2016, February 25, 2015, and February 25, 2014 and that do not relate to income or expense items included in the Income from discontinued operations, net of tax line item above.

(E) The information contained in this line is a non-GAAP measure and thus is not calculated in accordance with GAAP. The Company believes that these non-GAAP measures, when presented in conjunction with comparable GAAP measures, are useful because that information is an appropriate measure for evaluating the Company’s operating performance. Internally, the Company uses this non-GAAP information as an indicator of business performance, and evaluates management’s effectiveness with specific reference to these indicators. These measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

EX-99.3

Exhibit 99.3

R.R. Donnelley & Sons Company

Unaudited Net Sales by Segment - Continuing Operations

(in millions)

	Six Months Ended June 30, 2016		Twelve Months Ended December 31, 2015		Twelve Months Ended December 31, 2014		Twelve Months Ended December 31, 2013
Commercial and digital print	$	786.9	$	1,682.2	$	1,714.1	$	811.7
Direct mail		251.3		522.2		512.0		468.2
Statement printing		197.7		394.1		390.9		397.2
Labels		195.1		417.0		422.4		419.4
Forms		90.5		199.4		229.1		253.5
Total Variable Print		1,521.5		3,214.9		3,268.5		2,350.0
Logistics		609.9		1,214.4		1,154.7		1,045.7
Sourcing		105.3		234.8		216.9		179.2
Digital and creative solutions		69.4		155.4		191.4		179.8
Total Strategic Services		784.6		1,604.6		1,563.0		1,404.7
Asia		325.9		739.2		745.7		745.5
Global turnkey solutions		259.5		538.6		546.7		505.0
Business process outsourcing		223.7		483.5		513.1		533.0
Canada		114.2		197.1		218.8		234.0
Latin America		59.0		179.8		339.6		404.4
Total International	$	982.3	$	2,138.2	$	2,363.9	$	2,421.9
Total net sales from continuing operations	$	3,288.4	$	6,957.7	$	7,195.4	$	6,176.6

See accompanying notes to the unaudited net sales by Segment - continuing operations.

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

Notes to Unaudited Net Sales by Segment – Continuing Operations

For description of RR Donnelley’s segments, refer to the Business Section as filed under Exhibit 99.4 to this Form 8-K.

EX-99.4

Exhibit 99.4

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

BUSINESS DESCRIPTION

BUSINESS

Company Overview

Following the anticipated completion of its previously announced spinoff transactions of LSC Communications, Inc. (“LSC”) and Donnelley Financial Solutions, Inc. (“Donnelley Financial”), R.R. Donnelley & Sons Company (“RR Donnelley,” the “Company,” “we,” “us,” and “our”), a Delaware corporation, is a global, integrated communications provider enabling organizations to create, manage, deliver and optimize their multichannel marketing and business communications. Unless the context indicates otherwise, all references to “RR Donnelley”, the “Company”, “we”, “us” or “our” refer to the Company after giving effect to the previously announced spinoff transactions of LSC and Donnelley Financial. The Company has a flexible and comprehensive portfolio of integrated communications solutions that allows its customers to engage audiences, reduce costs and drive revenues. RR Donnelley’s innovative content management offering, production platform, logistics services, supply chain management and outsourcing capabilities and customized consultative expertise assist its customers in the delivery of integrated messages across multiple media to highly targeted audiences at optimal times for customers in virtually every private and public sector.

Competitive Strategy

Following completion of the spin-off transactions, we plan to leverage our long-standing customer relationships, comprehensive portfolio of capabilities and we expect to focus on the following key strategies:

• Drive Profitable Growth: We intend to drive profitable growth in each of our core businesses.

• Extend our Capabilities: We intend to extend the range of our capabilities, products and service offerings to fuel organic growth from our global customer base.

• Continue Expansion of Print and Digital Technology Platforms: We intend to continue expanding our print and digital technology platforms, with innovative content management, data analytics, and multichannel capabilities for targeted markets.

• Optimize Business Performance: We intend to optimize our business performance by focusing on service quality and operational excellence and maintaining a disciplined approach to capital allocation.

Segment Descriptions

The Company’s operating segments and their solutions and product and service offerings are summarized below:

Variable Print

The Variable Print segment currently includes the Company’s U.S. short-run and transactional printing operations. The product and service offerings by reporting unit in our Variable Print Segment include:

Commercial and Digital Print

We provide various commercial printing and print-related services. As a result of the acquisition of Consolidated Graphics on January 31, 2014, a broader range of capabilities and services are offered in an expanded geographic footprint. These services consist of traditional print services, including electronic prepress, digital and offset printing, finishing, storage and delivery of high-quality printed documents which are custom manufactured to our customers’ design specifications. Our Print Fulfillment and Distribution solution allows us to combine Just-In-Time and Digital Print-On-Demand product with off-the-shelf inventory through a national platform of networked facilities in quantities and timeframes desired by the end user, packaged and delivered in the manner requested. Additionally, our product offerings include packaging, as well as in-store marketing including in-store signage and

point-of-purchase displays. We partner with our customers to help them re-imagine their in-store experience through providing creative and design services, as well as structural engineering for packaging and prototyping services, in order to present innovative, new ideas for complete store design or individual merchandising materials. The scope and extent of services provided to our customers typically vary for each individual order we receive, depending on customer specific factors, including the intended uses for the printed materials. Commercial and digital print accounted for 52.3% and 51.7% of the Variable Print segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

Direct Mail

We are an industry leader in creating and implementing fully integrated direct mail communications programs. We provide integrated solutions ranging from guidance in overall copyrighting, design, print production and postal optimization strategies. We have a diverse and comprehensive mail production platform with significant digital production capabilities. Our proprietary ProteusJet^SM imaging systems, customized software and marketing strategies enable our customers to communicate to an audience of any size. We believe we are well positioned to meet our direct mail customers’ specific needs by offering cadenced, multiple touch mailings and multi-media communications such as websites, email and mobile contact. Through advanced data analytics, we assist our customers in targeting their customers to deliver the right message at the right time and through the right channel to their intended audience. We believe providing expertise and insight as to a variety of multichannel solutions allows for a well-rounded campaign that touches our customers’ customers in the ways they are most comfortable receiving communications. Direct mail accounted for 16.2% and 16.5% of the Variable Print segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

Labels

We produce a variety of custom labels for customers across multiple industries including warehouse and distribution, retail, pharmaceutical, manufacturing and consumer packaging. Our manufacturing capabilities provide a diverse product offering, including distribution and shipping labels, healthcare and durable goods labels, promotional labels and consumer product goods packaging labels. We have a network of production facilities enabling the optimal combination of regional or national distribution. Labels accounted for 13.0% and 12.8% of the Variable Print segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

Statement Printing

We assist our customers by enabling enhanced relationships utilizing our multichannel capabilities to create and manage multichannel experiences with their customers for their critical business communications. These essential business communications include consumer billing, financial statements, healthcare communications and insurance documents. We support these communications according to customer preferences. This enables customers to benefit from our offering, managed either internally via a hosted managed services offering, or with a fully outsourced solution. The breadth of our capabilities includes design and composition, variable imaging, email, archival, digital mail interaction, and payment services, as well as our innovative RRDigital solution set, which we expect to launch by the end of 2016. Our platform, scale and breadth of offering combined with our technology and innovation provide our customers with low cost solutions that assist them in servicing their clients. Statement printing accounted for 12.3% and 13.0 % of the Variable Print segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

Forms

We produce a variety of forms including invoices, order and business forms that support both the private and public sectors. The primary industries we serve are financial, government, retail, healthcare and business services. Forms accounted for 6.2% and 6.0% of the Variable Print segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

International

The International segment currently includes the Company’s operations in Asia, Latin America, Europe and Canada, as well as the Company’s Global Turnkey Solutions operations and its Business Process Outsourcing business. The product and service offerings in our International Segment include:

Asia

Our Asia reporting unit consists of a strategically integrated network of nine locations, and provides in-box materials, packaging, labels, and export and domestic book production to our major international customers. The Asia reporting unit accounted for 34.6% and 33.2% of the International segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

Canada

Our Canada reporting unit provides commercial printing, statement printing, labels, forms, in-store marketing, sourcing and print fulfillment to major companies in the financial, insurance, transportation, retail, education and restaurant verticals across nine integrated locations. The Canada reporting unit accounted for 9.2% and 11.6% of the International segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

Latin America

Our Latin America reporting unit has operations in Brazil, Chile, Central America and the Caribbean. We provide highly secure educational testing materials, inserts, books, statements, forms, labels and fulfillment to local and regional customers. The Latin America reporting unit accounted for 8.4% and 6.0% of the International segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

Global Turnkey Solutions

Global Turnkey Solutions provides complex supply chain management and outsourcing capabilities, including product configuration, packaging, customized kitting and order fulfillment for technology, medical device and other companies around the world through its operations in Europe, North America, Mexico and Asia. The Global Turnkey Solutions reporting unit accounted for 25.2% and 26.4% of the International segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

Business Process Outsourcing (BPO)

Business Process Outsourcing provides transactional print and outsourcing services including inbound and outbound document processing, creative services, research and analytics, financial management and other services for legal providers, insurance, telecommunications, utilities, retail and financial services companies. The Business Process Outsourcing reporting unit accounted for 22.6% and 22.8% of the International segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

Strategic Services

The service and product offerings in our Strategic Services Segment include:

Logistics

RR Donnelley logistics services consists of a portfolio of specialized transportation and distribution services targeting a number of unique industry verticals. Our worldwide business is a leading third party logistics provider that, through our DLS Worldwide services, utilizes a leveraged platform and a nationwide agent sales network to offer customers in all industries a full suite of freight services, including truckload, less-than-truckload, intermodal and international freight forwarding. Our RR Donnelley International Services business is a leading international mail and parcel distributor with an extensive 200 country network of postal and foreign distribution partners that we manage to meet the unique requirements of international mailers. We are a leading provider of print logistics services in the U.S., with the scale, technology and USPS® rules and regulations expertise to maximize distribution savings for our mail customers. We combine print transportation with unique commingle and co-palletization capabilities to provide optimal savings for letter mail customers. We are also a leading distributor of retail and newsstand print materials, utilizing a nationwide network of consolidation facilities to provide unique

distribution solutions for a number of customers, including LSC Communications. We offer our print and mail clients access to proprietary technology that is designed to determine the most efficient and cost-effective method of shipping depending on their needs. Our RRD Presort Services offer our clients freight and postage optimization services for letter mail customers that combine mail list processing, commingling, co-palletization and print transportation solutions. Our integrated distribution management business, Last Mile, is an extensive nationwide courier network that offers customized same day and next day delivery solutions with optimized route planning and web-based tracking. We continue to leverage our unique courier capabilities to build a position in the growing last-mile delivery sector. Logistics accounted for 75.7% and 77.7% of the Strategic Services segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

Sourcing

Our sourcing solutions utilize ISO certified platforms to provide print management solutions including consulting and systems solutions to allow our customers to more efficiently and cost-effectively manage their print needs. We allow our customers to use our proprietary CustomBuy software for increased visibility, control and rationalization of expenditures, and consult our customers on supplier management, vendor consolidation and offshore production, as well as advising on paper management solutions and other cost optimization opportunities. We guide and support our customers with the development and fulfillment of promotional product strategies that meet their desired objectives within budgetary constraints. Sourcing accounted for 14.6% and 13.4% of the Strategic Services segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

Digital and Creative Solutions

The Company’s digital and creative solutions (DSG) include teams of photographers, videographers, web designers, writers, editors, designers and various digital experience experts who assist brands in creating, augmenting and managing content designed to speak directly to their targeted audiences. With our breadth of capabilities, we provide cost effective solutions to bring the creative concepts of our customers and their agencies to life. We assist our customers in facilitating a common creative approach to all of their communications needs, including print and digital advertising, direct marketing and direct mail design, packaging design, marketing and sales collateral and in-store marketing, along with corporate communications and interactive experiences and services. Digital and creative solutions accounted for 9.7% and 8.9% of the Strategic Services segment’s net sales for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

Corporate

Corporate consists of unallocated selling, general and administrative activities and associated expenses within “Corporate,” including, in part, executive, legal, finance, communications, certain facility costs and last in, first out, or LIFO, inventory provisions. In addition, certain costs and earnings of employee benefit plans, such as pension and other postretirement benefits plan expense and share-based compensation, are included in Corporate and are not allocated to the operating segments.

Business Acquisitions and Dispositions

On August 4, 2016, the Company acquired Precision Dialogue, a provider of email marketing, direct mail marketing and other services with operations in the United States.

On April 29, 2015, the Company sold its 50.1% interest in its Venezuelan operating entity.

On August 11, 2014, the Company’s subsidiary, RR Donnelley Argentina S.A., filed for bankruptcy liquidation in bankruptcy court in Argentina.

On January 31, 2014, the Company acquired Consolidated Graphics, Inc., a provider of digital and commercial printing, fulfillment services, print management and proprietary Internet-based technology solutions, with operations in North America, Europe and Asia.

Competitive Environment

The Company’s customers are in a large and evolving market. While the market is large and fragmented, there are tremendous changes occurring in how organizations need to create, manage, deliver and measure their communications. Key factors facing our customer’ include regulatory changes, sensitivity to economic conditions, raw material pricing volatility and USPS actions. However, technological changes, including the electronic distribution of documents and data, online distribution and hosting of media content, and advances in digital printing, print-on-demand and internet technologies, continue to impact the market for some of the Company’s products and services. The Company works with its customers to create, manage, deliver and optimize their multichannel communications strategies by providing innovative solutions to meet increasing customer demands in light of the large and evolving marketplace. One of the Company’s competitive strengths is that it offers a wide array of communications products and services, including print and content management, which provide differentiated solutions for its customers. The Company is also able to manage the storage and distribution of products for its customers by offering warehousing and inventory management solutions that allow customers to store printed materials and to efficiently ship them using our platform. The Company’s logistics business also offers its customers access to the Company’s proprietary technology that is designed to determine the most efficient and cost-effective method of shipping depending on customer’s needs. The Company believes its breadth of offerings provides it with a distinct competitive advantage. As a leading provider of integrated communication products and services, the Company has developed, and will continue to develop and expand, its creative and design, content management, digital and print production, supply chain management and distribution services to address its customers’ evolving needs.

The print and related services industry, in general, continues to have excess capacity and remains highly competitive and fragmented. According to the December 2015 IBISWorld industry report “Printing in the U.S.,” estimated total printing industry revenue was approximately $83 billion in 2015, and the industry was comprised of approximately 48,000 establishments.

We believe that, across our range of products and services, competition is based primarily on quality and the ability to service the special needs of customers at a competitive price. Therefore, we believe we need to continue to differentiate its product and service offerings and aggressively manage our cost structure to remain competitive.

We also operate in a highly competitive and fragmented market for commercial freight transportation and third-party logistics services. Primary competitors to our services include other national non-asset based third-party logistics companies, as well as regional or niche freight brokerages, asset-based carriers offering brokerage and/or logistics services, wholesale intermodal transportation service providers and rail carriers. In addition, we may from time to time compete against carriers’ internal sales forces or shippers’ internal transportation departments.

We have made targeted acquisitions and investments in our existing business to offer customers innovative services and solutions. Such acquisitions and investments include the acquisition of Consolidated Graphics, Inc. This and other targeted acquisitions and investments further secure our position as a technology leader in the industry.

Seasonality

Advertising and consumer spending trends affect demand in several of the end-markets which we serve. However, due to the breadth of our product and services offerings, we generally have not experienced significant seasonality in our businesses.

Raw Materials

The primary raw materials the Company uses in its print businesses are paper and ink. The Company negotiates with leading suppliers to maximize its purchasing efficiencies and uses a wide variety of paper grades, formats, ink formulations and colors. Variations in the cost and supply of certain paper grades and ink formulations used in the manufacturing process may affect the Company’s consolidated financial results. Paper prices fluctuated during 2015, and volatility in the future is expected. The Company has historically passed most changes in paper price through to its customers. Contractual arrangements and industry practice should support the Company’s continued ability to pass on any future paper price increases, but there is no assurance that market conditions will continue to enable the Company to successfully do so. Management believes that the paper supply is consolidating, and there may be shortfalls in the future in supplies necessary to meet the demands of the entire marketplace. Higher

paper prices and tight paper supplies may have an impact on customers’ demand for printed products. The Company has undertaken various strategic initiatives to mitigate any foreseeable supply disruptions with respect to the Company’s ink requirements. The Company also resells waste paper and other print-related by-products and may be impacted by changes in prices for these by-products.

Changes in the price of crude oil and other energy costs impact our ink suppliers and manufacturing costs. Crude oil and energy prices continue to be volatile and have fallen significantly over the last two years. Should prices increase, we generally cannot pass on to customers the impact of higher energy prices on our manufacturing costs. We do enter into fixed price contracts for a portion of our natural gas purchases to mitigate the impact of changes in energy prices and we may continue to do so after the completion of the spinoff transactions. We cannot predict sudden changes in energy prices and the impact that possible future changes in energy prices might have upon either future operating costs or customer demand and the related impact either will have on our consolidated annual results of operations, financial position or cash flows.

Distribution

The Company’s products are distributed to end-users through the U.S. or foreign postal services, through retail channels, electronically or by direct shipment to customer facilities. The Company manages the distribution of most customer products printed by the Company to maximize efficiency and reduce costs for customers.

As a leading provider of print logistics and among the largest mailers of standard mail in the U.S., the Company works closely with its customers and the United States Postal Service (“USPS”) to offer innovative products and mail preparation services to minimize postage costs. While the Company does not directly absorb the impact of higher postal rates on its customers’ mailings, demand for products distributed through the U.S. or foreign postal services has been negatively impacted by increases in postal rates as postal costs are a significant component of many customers’ cost structures. Under the 2006 Postal Accountability and Enhancement Act, it had been anticipated that postage would increase annually by an amount equal to or slightly less than the Consumer Price Index (the “CPI”). On January 15, 2015, the USPS filed for a CPI rate increase of approximately 2.0%, which was approved by the Postal Regulatory Commission on May 7, 2015, and became effective on May 31, 2015. On April 10, 2016, the USPS removed the exigent surcharge, which was approved in December 2013, resulting in a 4.3% decrease in postage rates for all significant mail categories. The USPS has temporarily suspended its previously announced plans to restructure its mail delivery network, including the closure of many post office facilities. These restructuring plans may resume in late 2016. The impact to the Company of the USPS’s restructuring plans, many of which require legislative action, cannot currently be estimated. Mail delivery services through the USPS accounted for approximately 40% and 37% of the Company’s logistics revenues for the year ended December 31, 2015 and the six months ended June 30, 2016, respectively.

In addition to postal costs, shipping costs incurred through our use of third party carriers to timely deliver our product shipments can also influence the number of pieces that the Company’s customers are willing to print and mail. Changes in shipping terms, or the inability of third party shippers to perform effectively, could lead to an increase in shipping costs passed on to our customers. This could lead to a decrease in demand. Additionally, the cost of fuel is a key commodity within our logistics operations and thus fluctuations in future fuel costs could have an adverse impact on our operations. Delivery services through third party carriers accounted for approximately 74% of the Company’s logistics revenues for both the year ended December 31, 2015 and the six months ended June 30, 2016.

Customers

We have more than 50,000 customers worldwide, including 97% of the Fortune 100, 94% of the Fortune 500 and 90% of the Fortune 1000. We believe our services enable the world’s largest customers to create, manage and deliver comprehensive and cost-effective multichannel communications around the world. In connection with the spinoff transactions, we intend to enter into a number of agreements with LSC Communications and Donnelley Financial with respect to our ongoing commercial relationships. For the year ended December 31, 2015, LSC Communications would have accounted for more than 10% of net sales in our Strategic Services segment, and we expect that LSC will account for more than 10% of our net sales in the Strategic Services segment for the year ended December 31, 2016 as well. For the year ended December 31, 2015, no customer accounted for 10% or more of the Company’s consolidated net sales.

Technology, Research and Development

The Company invests in technology, research and development as a key strategy for its business. The Company believes that investing in new technologies to remain on the forefront of content management and data analytics, while also allowing it to support its customers’ growing utilization of digital and print technologies while expanding its capabilities to provide additional services to customers as customers’ needs evolve. The Company has a research facility in Grand Island, New York that supports the development and implementation of new technologies to meet customer needs and improve operating efficiencies. We believe that proprietary technology is required where it will provide a competitive advantage or where the desired technology is not readily available in the marketplace, and, as such, our proprietary technology portfolio contains an array of applications and technological capabilities which are developed to perform different functions, including digital ink jet printing. The Company’s cost for research and development activities is not material to the Company’s consolidated annual results of operations, financial position or cash flows.

Cybersecurity

The Company’s cybersecurity program is designed to meet the needs and expectations of its customers who entrust it with certain highly sensitive business information. Furthermore, our healthcare and insurance printing businesses are subject to industry-specific data regulations, including the Health Care Insurance Portability and Accountability Act of 1996, which could subject us and our customers to liability should sensitive customer or patient information be publicly disclosed. The Company’s infrastructure and technology, expansive and highly trained global workforce and comprehensive security and compliance program make it qualified to safely process, store and protect this customer information to ensure compliance with relevant regulations.

The Company’s infrastructure and technology security capabilities are bolstered by its relationship with a leading data center services provider. Furthermore, the Company’s networks are monitored by intrusion detection services around the clock, and its systems and applications are routinely tested for vulnerabilities and are operated under a strict patch management program.

The Company employs a highly skilled IT workforce to implement its cybersecurity programs and to handle specific security responsibilities. As a result of annual mandatory security awareness training, the Company’s IT workforce is qualified to address security and compliance-related issues as they arise. Additionally, all of the Company’s IT employees are carefully screened, undergo a thorough background check and are bound by a nondisclosure agreement that details such employee’s security and legal responsibilities with regards to information handling.

The Company believes its security and compliance team also diminishes the risk of system compromise and data exposure by rapidly and effectively addressing security incidents as they arise.

Environmental Compliance

It is our policy to conduct our global operations in accordance with all applicable laws, regulations and other requirements. It is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Company may undertake in the future. However, in the opinion of management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect on the Company’s consolidated annual results of operations, financial position or cash flows.

Employees

As of August 31, 2016, we had 44,780 employees in our Company.

The table below summarizes the number of our U.S. and international employees as of the end of the periods indicated.

	2015		2014		2013		2012		2011
U.S. employees		17,768		20,086		22,000		22,581		24,116
International employees		25,216		26,272		26,433		26,805		25,842
Total employees		42,984		46,358		48,433		49,386		49,958

As of August 31, 2016, and December 31, 2015, approximately 432 and 420 of our U.S. employees were covered by collective bargaining agreements at twelve of our U.S. facilities, respectively, representing approximately 2.3% and 2.4%, respectively, of our U.S. workforce as of each of those dates. Additionally, we have collective bargaining agreements with unionized employees in China, Canada, Mexico and Europe. We have not experienced a work stoppage during the past five years. Management believes that our relationships with our employees and collective bargaining groups are good.

Properties

The Company’s corporate office is located in leased office space in Chicago, Illinois. As of June 30, 2016, the Company leased or owned 293 U.S. facilities, some of which had multiple buildings and warehouses, and these U.S. facilities encompassed approximately 17.8 million square feet. The Company leased or owned 107 international facilities, some of which had multiple buildings and warehouses, encompassing approximately 6.8 million square feet in Canada, Latin America, Europe and Asia. Of the Company’s U.S. and international facilities, approximately 9.5 million square feet of space was owned, while the remaining 15.1 million square feet of space was leased.

Legal Proceedings

From time to time, the Company’s customers and others file voluntary petitions for reorganization under United States bankruptcy laws. In such cases, certain pre-petition payments received by the Company from these parties could be considered preference items and subject to return. In addition, the Company is party to certain litigation arising in the ordinary course of business. Management believes that the final resolution of these preference items and litigation will not have a material effect on the Company’s consolidated results of operations, financial position or cash flows.