Discontinued Operations

3 Months Ended

Mar. 31, 2017

Discontinued Operations And Disposal Groups [Abstract]

Discontinued Operations

2. Discontinued Operations

Immediately following the Distribution, the Company held approximately 6.2 million shares of Donnelley Financial Solutions common stock and approximately 6.2 million shares of LSC common stock. The Company accounts for these investments as available-for-sale equity securities. In March 2017, the Company sold the 6.2 million shares of LSC common stock it retained upon spinoff for net proceeds of $121.4 million, resulting in a realized loss of $51.6 million, which was recorded within investment and other expense (income)-net in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2017. The value of the Company’s investment in Donnelley Financial was $120.4 million as of March 31, 2017.

The following details the financial results of discontinued operations:

	For the three months ended
	March 31,
	2016
Net sales	$	1,047.4
Cost of sales		810.6
Operating expenses (a)		161.1
Interest and other expense (income), net (b)		17.9
Earnings before income taxes		57.8
Income tax expense		21.6
Net earnings from discontinued operations	$	36.2

(a) Includes spinoff transaction costs incurred of $11.9 million during the three month period ended March 31, 2016.  

(b) Includes the related interest expense of the corporate level debt, which was retired in connection with the Separation totaling $18.0 million for the three months ended March 31, 2016.

The significant non-cash items and capital expenditures of discontinued operations were as follows:

	For the three months ended
	March 31,
	2016
Depreciation and amortization	$	54.4
Impairment charges		0.9
Assumption of warehousing equipment related to customer contract		8.8
Purchase of property, plant and equipment		17.7

In connection with the Separation, the Company entered into transition services agreements with Donnelley Financial and LSC, under which the companies will provide one another with certain services to help ensure an orderly transition following the Separation (the “Transition Services Agreement”). The charges for these services are intended to allow the companies, as applicable, to recover the direct and indirect costs incurred in providing such services. The Transition Services Agreement generally provides for a term of services starting at the Separation date and continuing for a period of up to twenty-four months following the Separation. During the three months ended March 31, 2017, the Company recognized $2.8 million as a reduction of costs within selling, general and administrative expenses within the Condensed Consolidated Statements of Operations from the Transition Services Agreement.

The Company also entered into various commercial agreements which govern sales transactions between the companies. Under these commercial agreements, the Company recognized $82.9 million of net sales to Donnelley Financial and LSC during the three months ended March 31, 2017. Additionally, the Company purchased $37.1 million of products and services from Donnelley Financial and LSC during the three months ended March 31, 2017. The Company also recognized $3.8 million of net cash outflow from Donnelley Financial and LSC within operating activities in the Condensed Consolidated Statements of Cash Flows during the three months ended March 31, 2017. As of March 31, 2017 and December 31, 2016, the Company had accounts receivable of $74.5 million and $78.1 million, respectively, recorded within Receivables in the Condensed Consolidated Balance Sheets associated with Donnelley Financial and LSC. As of March 31, 2017 and December 31, 2016, the Company had accounts payable of $57.5 million and $62.6 million, respectively, within Accounts payable in the Condensed Consolidated Balance Sheets associated with Donnelley Financial and LSC. Additionally, included within Accrued liabilities in the Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016 was a total of $78.0 million due to Donnelley Financial and LSC, which was paid in April 2017, as required by a provision in the Separation and Distribution Agreement.