Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ora smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of October ~~27, 2017, 70.1~~26, 2018, 70.4 million shares of common stock were outstanding.

	September 30,			December 31,			September 30,			December 31,
	2017			2016			2018			2017
ASSETS
Cash and cash equivalents	$	225.8		$	317.5		$	247.0		$	273.4
Receivables, less allowances for doubtful accounts of $33.0 in 2017 (2016 - $35.9)		1,382.9			1,331.3
Inventories (Note 4)		457.1			386.8
Receivables, less allowances for doubtful accounts of $32.8 in 2018 (2017 - $32.4)								1,359.5			1,417.6
Inventories (Note 3)								361.8			416.8
Prepaid expenses and other current assets		152.8			136.7			176.9			109.1
Investment in LSC and Donnelley Financial (Note 2)		—			328.7
Total current assets		2,218.6			2,501.0			2,145.2			2,216.9
Property, plant and equipment-net (Note 5)		624.6			650.3
Goodwill (Note 6)		587.6			602.0
Other intangible assets-net (Note 6)		150.5			171.9
Property, plant and equipment-net (Note 4)								545.7			615.1
Goodwill (Note 5)								554.3			588.5
Other intangible assets-net (Note 5)								120.2			143.3
Deferred income taxes		123.2			108.9			66.1			81.7
Other noncurrent assets		252.2			234.7			266.5			259.0
Total assets	$	3,956.7		$	4,268.8		$	3,698.0		$	3,904.5
LIABILITIES
Accounts payable	$	996.5		$	985.3		$	897.6		$	1,094.7
Accrued liabilities		463.9			541.7
Short-term and current portion of long-term debt (Note 15)		17.9			8.2
Accrued liabilities and other								390.5			447.5
Short-term and current portion of long-term debt (Note 14)								222.0			10.8
Total current liabilities		1,478.3			1,535.2			1,510.1			1,553.0
Long-term debt (Note 15)		2,232.2			2,379.2
Long-term debt (Note 14)								1,955.3			2,098.9
Pension liabilities		103.2			119.4			83.1			102.7
Other postretirement benefits plan liabilities		130.2			134.1			97.2			113.2
Long-term income tax liability								69.7			59.4
Other noncurrent liabilities		175.8			193.1			202.1			180.2
Total liabilities		4,119.7			4,361.0			3,917.5			4,107.4
Commitments and Contingencies (Note 14)
EQUITY (Note 10)
Commitments and Contingencies (Note 13)
EQUITY (Note 9)
RRD stockholders' equity
Preferred stock, $1.00 par value
Authorized: 2.0 shares; Issued: None		—			—			—			—
Common stock, $0.01 par value
Authorized: 165.0 shares;
Issued: 89.0 shares in 2017 and 2016		0.9			0.9
Issued: 89.0 shares in 2018 and 2017								0.9			0.9
Additional paid-in-capital		3,450.7			3,468.5			3,412.3			3,444.0
Accumulated deficit		(2,160.6	)		(2,155.4	)		(2,200.8	)		(2,225.7	)
Accumulated other comprehensive loss		(126.5	)		(55.7	)		(150.5	)		(103.7	)
Treasury stock, at cost, 19.0 shares in 2017 (2016 - 19.1 shares)		(1,341.4	)		(1,364.0	)
Treasury stock, at cost, 18.6 shares in 2018 (2017 - 18.9 shares)								(1,295.8	)		(1,333.1	)
Total RRD stockholders' equity		(176.9	)		(105.7	)		(233.9	)		(217.6	)
Noncontrolling interests		13.9			13.5			14.4			14.7
Total equity		(163.0	)		(92.2	)		(219.5	)		(202.9	)
Total liabilities and equity	$	3,956.7		$	4,268.8		$	3,698.0		$	3,904.5

	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Three Months Ended						Nine Months Ended
	2017			2016			2017			2016			September 30,						September 30,
													2018			2017			2018			2017
Products net sales	$	1,322.0		$	1,327.8		$	3,830.9		$	3,772.5		$	1,329.8		$	1,322.0		$	3,881.6		$	3,830.9
Services net sales		412.9			397.8			1,182.9			1,201.6			319.7			412.9			1,155.2			1,182.9
Total net sales		1,734.9			1,725.6			5,013.8			4,974.1			1,649.5			1,734.9			5,036.8			5,013.8

Products cost of sales (exclusive of depreciation and amortization)		1,064.1			1,030.7			3,065.7			2,958.1			1,076.8			1,064.9			3,167.7			3,068.3
Services cost of sales (exclusive of depreciation and amortization)		346.4			330.7			992.8			1,002.9			257.3			346.5			968.4			993.2
Total cost of sales		1,410.5			1,361.4			4,058.5			3,961.0			1,334.1			1,411.4			4,136.1			4,061.5

Products gross profit		257.9			297.1			765.2			814.4			253.0			257.1			713.9			762.6
Services gross profit		66.5			67.1			190.1			198.7			62.4			66.4			186.8			189.7
Total gross profit		324.4			364.2			955.3			1,013.1			315.4			323.5			900.7			952.3
Selling, general and administrative expenses (exclusive of depreciation and amortization)		207.7			218.1			643.6			681.0			203.8			210.9			626.4			653.0
Restructuring, impairment and other charges-net (Note 7)		33.8			10.8			46.7			24.3
Restructuring and other-net (Note 6)														11.0			33.8			22.8			46.7
Depreciation and amortization		47.0			51.0			143.1			153.5			44.2			47.0			137.5			143.1
Other operating expense (income)		—			0.3			—			(12.0	)
Other operating income														(4.5	)		—			(4.6	)		—
Income from operations		35.9			84.0			121.9			166.3			60.9			31.8			118.6			109.5
Interest expense-net		43.5			48.8			137.3			150.6			42.0			43.5			125.7			137.3
Investment and other income -net		(2.8	)		(1.0	)		(47.2	)		(0.4	)
Loss on debt extinguishments		6.5			—			20.1			—
(Loss) earnings before income taxes		(11.3	)		36.2			11.7			16.1
Income tax (benefit) expense		(3.5	)		13.9			(7.4	)		12.9
Net (loss) earnings from continuing operations		(7.8	)		22.3			19.1			3.2
(Loss) income from discontinued operations, net of tax (Note 2)		—			(29.1	)		—			15.8
Net (loss) earnings		(7.8	)		(6.8	)		19.1			19.0
Investment and other income-net														(5.5	)		(6.9	)		(14.7	)		(59.6	)
Loss on debt extinguishment														—			6.5			0.1			20.1
Income (loss) before income taxes														24.4			(11.3	)		7.5			11.7
Income tax benefit														(10.4	)		(3.5	)		(5.4	)		(7.4	)
Net income (loss)														34.8			(7.8	)		12.9			19.1
Less: Income attributable to noncontrolling interests		0.2			0.3			0.7			0.8			0.5			0.2			1.2			0.7
Net (loss) earnings attributable to RRD common stockholders	$	(8.0	)	$	(7.1	)	$	18.4		$	18.2
Net income (loss) attributable to RRD common stockholders													$	34.3		$	(8.0	)	$	11.7		$	18.4

Basic net (loss) earnings per share attributable to RRD common stockholders (Note 11):
Continuing operations	$	(0.11	)	$	0.31		$	0.26		$	0.03
Discontinued operations		—			(0.41	)		—			0.23
Net (loss) earnings attributable to RRD stockholders		(0.11	)		(0.10	)		0.26			0.26

Diluted net (loss) earnings per share attributable to RRD common stockholders (Note 11):
Continuing operations	$	(0.11	)	$	0.31		$	0.26		$	0.03
Discontinued operations		—			(0.41	)		—			0.23
Net (loss) earnings attributable to RRD		(0.11	)		(0.10	)		0.26			0.26
Net income (loss) per share attributable to RRD common stockholders (Note 10):
Basic net income (loss) per share													$	0.49		$	(0.11	)	$	0.17		$	0.26
Diluted net income (loss) per share													$	0.49		$	(0.11	)	$	0.17		$	0.26

Dividends declared per common share	$	0.14		$	0.78		$	0.42		$	2.34		$	0.03		$	0.14		$	0.31		$	0.42

Weighted average number of common shares outstanding:
Basic		70.2			70.0			70.1			70.0			70.6			70.2			70.5			70.1
Diluted		70.2			70.5			70.3			70.5			70.7			70.2			70.8			70.3

Nine Months Ended

September 30,

2017

2016

OPERATING ACTIVITIES

Net earnings

$
19.1

$
19.0

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

Impairment charges - net

21.8

0.8

Depreciation and amortization

143.1

312.5

Provision for doubtful accounts receivable

1.7

20.4

Share-based compensation

6.4

13.4

Deferred income taxes

(10.1
)

(33.5
)
Changes in uncertain tax positions

0.7

(0.4
)
Gain on investments and other assets - net

(2.8
)

(13.0
)
Realized gain on disposition of available-for-sale securities - net

(42.4
)

—

Loss on debt extinguishments

20.1

85.3

Net pension and other postretirement benefits plan income

(11.0
)

(55.1
)
Net loss on pension and other postretirement benefits plan settlements and curtailments (Note 8)

—

78.8

Other

14.7

9.6

Changes in operating assets and liabilities - net of dispositions and acquisitions:

Accounts receivable - net

(26.3
)

(122.4
)
Inventories

(62.5
)

(60.0
)
Prepaid expenses and other current assets

(6.3
)

(9.2
)
Accounts payable

(18.9
)

(160.8
)
Income taxes payable and receivable

(11.4
)

(35.6
)
Accrued liabilities and other

(36.1
)

(23.4
)
Pension and other postretirement benefits plan contributions

(12.4
)

(18.6
)
Net cash (used in) provided by operating activities

(12.6
)

7.8

INVESTING ACTIVITIES

Capital expenditures

(77.2
)

(147.9
)
Acquisitions of businesses, net of cash acquired

—

(47.5
)
Disposition of businesses

—

13.7

Proceeds from sales of investments and other assets

127.6

3.7

Transfers (to) from restricted cash

(2.4
)

13.7

Other investing activities

—

(3.6
)
Net cash provided by (used in) investing activities

48.0

(167.9
)
FINANCING ACTIVITIES

Net change in short-term debt

10.2

5.7

Payments of current maturities and long-term debt

(200.9
)

(786.6
)
Proceeds from issuances of long-term debt

—

1,164.0

Payments on Credit Agreement borrowings

(1,000.0
)

—

Proceeds from Credit Agreement borrowings

1,165.0

—

Proceeds from termination of interest rate swaps

—

2.5

Debt issuance costs

(4.4
)

(37.5
)
Dividends paid

(29.4
)

(163.2
)
Net transfer of cash and cash equivalents to LSC and Donnelley Financial

(78.0
)

—

Other financing activities

(1.6
)

2.5

Net cash (used in) provided by financing activities

(139.1
)

187.4

Effect of exchange rate on cash and cash equivalents

12.0

(5.1
)
Net (decrease) increase in cash and cash equivalents

(91.7
)

22.2

Cash and cash equivalents at beginning of year

317.5

389.6

Cash and cash equivalents at end of period

$
225.8

$
411.8

SUPPLEMENTAL NON-CASH DISCLOSURE:

Assumption of warehousing equipment related to customer contract

$
—

$
8.8

Debt-for-equity exchange

132.9

—

Debt-for-debt exchanges, including debt issuance costs of $5.5 million in 2016

—

300.0

	Nine Months Ended
	September 30,
	2018			2017
OPERATING ACTIVITIES
Net income	$	12.9		$	19.1
Adjustments to reconcile net income to net cash used in operating activities:
Impairment charges and other-net		3.4			21.8
Depreciation and amortization		137.5			143.1
Provision for doubtful accounts receivable		10.6			1.7
Share-based compensation		6.4			6.4
Deferred income taxes		7.3			(10.1	)
Changes in uncertain tax positions		(0.4	)		0.7
Gain on investments and other assets-net		(13.8	)		(2.8	)
Loss on debt extinguishments		0.1			20.1
Net pension and other postretirement benefits plan income		(15.9	)		(11.0	)
Realized gain on disposition of available-for-sale securities-net		—			(42.4	)
Other		4.8			14.7
Changes in operating assets and liabilities:
Accounts receivable-net		(5.7	)		(26.3	)
Inventories		(16.6	)		(62.5	)
Prepaid expenses and other current assets		(5.9	)		(6.3	)
Accounts payable		(150.7	)		(18.9	)
Income taxes payable and receivable		(26.7	)		(11.4	)
Accrued liabilities and other		2.3			(26.7	)
Pension and other postretirement benefits plan contributions		(13.5	)		(12.4	)
Net cash used in operating activities		(63.9	)		(3.2	)
INVESTING ACTIVITIES
Capital expenditures		(72.7	)		(77.2	)
Proceeds from sales of investments and other assets		49.9			127.6
Payments related to company-owned life insurance		(1.8	)		(7.5	)
Proceeds from disposal of business		50.5			—
Net cash provided by investing activities		25.9			42.9
FINANCING ACTIVITIES
Proceeds from other short-term debt		56.5			23.1
Payments on other short-term debt		(12.2	)		(12.9	)
Payments of current maturities and long-term debt		(0.2	)		(200.9	)
Proceeds from credit facility borrowings		975.1			1,165.0
Payments on credit facility borrowings		(949.1	)		(1,000.0	)
Dividends paid		(21.8	)		(29.4	)
Transfer of cash and cash equivalents to LSC and Donnelley Financial		—			(78.0	)
Payments of withholding taxes on share-based compensation		(0.7	)		(1.9	)
Other financing activities		(0.9	)		(6.0	)
Net cash provided by (used in) financing activities		46.7			(141.0	)
Effect of exchange rate on cash, cash equivalents and restricted cash		(14.0	)		13.2
Net decrease in cash, cash equivalents and restricted cash		(5.3	)		(88.1	)
Cash, cash equivalents and restricted cash at beginning of year		301.5			335.9
Cash, cash equivalents and restricted cash at end of period	$	296.2		$	247.8

SUPPLEMENTAL NON-CASH DISCLOSURE:
Debt-for-equity exchange	$	—		$	132.9

The accompanying unaudited condensed consolidated interim financial statements include the accounts of R.R. Donnelley & Sons Company and its subsidiaries ~~(the “Company” or “RRD”~~(“RRD,” the “Company,” “we,” “us,” and “our”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods and should be read in conjunction with the consolidated financial statements and the related notes thereto included in ~~the Company’s~~our latest Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 filed with the SEC on February 28, ~~2017.~~2018. Operating results for the nine months ended September 30, ~~2017~~2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2017.~~2018. All significant intercompany transactions have been eliminated in consolidation. These unaudited condensed consolidated interim financial statements include estimates and assumptions of management that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates.

On October 1, 2016, ~~the Company~~we completed the separation of ~~its~~our financial communications and data services business (“Donnelley Financial Solutions, Inc.” or “Donnelley Financial”) and ~~the~~our publishing and retail-centric print services and office products business (“LSC Communications, Inc.” or “LSC”) into two separate publicly-traded companies (the ~~"Separation"~~“Separation”). ~~The Company~~We completed the tax-free distribution of approximately 26.2 million shares, or 80.75%, of the outstanding common stock of each of Donnelley Financial and LSC, to ~~the Company’s~~RRD stockholders (the “Distribution”). The Distribution was made to RRD stockholders of record as of the close of business on September 23, 2016, who received one share of ~~each~~ Donnelley Financial common stock and one share of LSC common stock for every eight shares of RRD common stock ~~owned~~held as of the record date (the “Distribution”). The Company retained 19.25% of the outstanding common stock of each Donnelley Financial and LSC. The historical financial results of Donnelley Financial and LSC prior to the Separation, are presented as discontinued operations on the Condensed Consolidated Statements of Operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Sales from RRD to Donnelley Financial and LSC previously eliminated in consolidation have been recast and are now shown as external sales within the financial results of continuing operations. These net sales were $72.5 million and $150.4 million for the three and nine months ended September 30, 2016, respectively. Unless indicated otherwise, the information in the Notes to Condensed Consolidated Financial Statements relates to the Company's continuing operations. Prior periods have been recast to reflect the Company's current segment reporting structure. See Note 2, ~~Discontinued Operations, for more information on the Separation.~~

date. Immediately following the Distribution, ~~on October 1, 2016, the Company affected a one-for-three reverse stock split for RRD~~we held approximately 6.2 million shares of Donnelley Financial common stock ~~(the “Reverse Stock Split”). The Reverse Stock Split was approved by the Company’s Board~~and approximately 6.2 million shares of ~~Directors on September 14, 2016 and previously approved by the Company’s stockholders at the annual meeting on May 19, 2016. As a result~~LSC common stock.

In March 2017, we sold all of the ~~Reverse Stock Split, the number of issued and outstanding and treasury~~approximately 6.2 million shares of ~~the Company’s~~LSC common stock ~~was reduced proportionally based on~~retained by us and used the ~~Reverse Stock Split ratio~~proceeds to repay a portion of ~~one share for every three~~the outstanding borrowings under our then-existing credit facility. In June 2017 and August 2017, we exchanged all of the approximately 6.2 million shares of Donnelley Financial common stock ~~held before~~for certain of our outstanding senior indebtedness, which obligations were subsequently cancelled and discharged upon delivery to us.

The following table provides a reconciliation of cash, cash equivalents and restricted cash at September 30, 2018 and December 31, 2017 reported within the ~~Reverse Stock Split~~.Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statement of Cash Flows.

The effective income tax rate was a benefit of ~~Net Sales~~42.6% and ~~Cost~~31.0% for the three months ended September 30, 2018 and 2017, respectively, and a benefit of ~~Sales~~

~~During~~72.0% and 63.2% for the ~~third quarter of~~nine months ended September 30, 2018 and 2017, respectively. The effective income tax rate for the ~~Company identified~~ three and nine months ended September 30, 2018 is primarily driven by an error in the accounting for certain contracts with an inventory buy-back option within the Asia reporting unit, which is in the International segment. As a result, the error, which was determined by management to be immaterialadjustment to the ~~previously issued financial statements, has been corrected herein from~~provisional amounts related to the ~~amounts previously reported. There was no impact~~Tax Act, the inability to ~~net earnings (loss) or net earnings (loss) per share, or~~recognize a tax benefit on certain losses, and the ~~Consolidated Statements~~release of ~~Comprehensive Income or Stockholders’ Equity.~~a portion of our valuation allowance due to the gain on the sale of our Print Logistics business. The ~~following table presents~~effective income tax rate for the nine months ended September 30, 2017 reflects the impact of the ~~revision~~$94.0 million non-taxable gain on ~~net sales~~the exchange of Donnelley Financial retained shares, the $51.6 million realized loss on the sale of LSC retained shares and ~~cost of sales:~~

~~The following table presents~~ the impact of the ~~related balance sheet revision on~~impairment of goodwill in the ~~December 31, 2016 Condensed Consolidated Balance Sheet:~~

Marketing Solutions segment. The sale of the LSC shares generated a capital loss which is being carried forward; however, it was determined at the time of the sale that the benefit of such deferred tax asset would not be fully realized and a valuation allowance was recorded.The effective income tax rate for the three months ended September 30, ~~2016 Consolidated Statement of Cash Flows has also been revised to reflect~~2017 reflects the impact of the ~~above balance sheet revision.~~impairment of goodwill in the Marketing Solutions segment and the inability to recognize a tax benefit on certain losses.

Cash payments for income taxes were $28.4 million and $34.1 million for the nine months ended September 30, 2018 and 2017, respectively. Cash refunds for income taxes were $14.0 million and $20.7 million for the nine months ended September 30, 2018 and 2017, respectively. Included within Prepaid expenses and other current assets is income taxes receivable of $63.8 million and $23.9 million as of September 30, 2018 and December 31, 2017, respectively.

On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (SAB 118) which provides guidance for companies analyzing their accounting for the income tax effects of the Tax Act. SAB 118 provides that a company may report provisional amounts based on reasonable estimates. The provisional estimates are then subject to adjustment during a measurement period up to one year and should be accounted for as a prospective change. At December 31, 2017, we were able to make reasonable provisional estimates of the one-time transition tax and impact to deferred taxes; however, we continue to analyze our data and refine our estimated amounts accordingly, and continue to interpret any guidance or subsequent clarification of the tax law. As a result, we may make adjustments to the provisional amounts recorded, throughout the year, in accordance with the guidance outlined in SAB 118. During the three months ended September 30, 2018, we made an adjustment of $19.6 million to decrease the provisional amounts recorded at December 31, 2017, including a $19.0 million decrease related to the one-time transition tax and a $0.6 million decrease related to the change in Federal income tax rate. During the nine months ended September 30, 2018, our adjustments net to a decrease of $17.3 million to the provisional amounts recorded at December 31, 2017.

Deferred U.S. income taxes and foreign taxes have historically not been provided on the excess of the investment value for financial reporting over the tax basis of investments in those foreign subsidiaries for which such excess is considered to be permanently reinvested in those operations. We continue to analyze the global working capital and cash requirements and the potential tax liabilities attributable to repatriation, but we have yet to determine whether to change the prior assertion and repatriate earnings. We will record the tax effects of any change in the prior assertion in the period the analysis is complete and reasonable estimates are made.

On January 1, 2018, we adopted ASC Topic 606, “Revenue from Contracts with Customers” using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under Topic 605. All revenue recognized in the Condensed Statements of Operations is considered to be revenue from contracts with clients.

We recorded a net increase to opening retained earnings of $12.9 million as of January 1, 2018 due to the cumulative impact of adopting Topic 606, with the impact primarily related to the timing of revenue recognition for certain inventory that has been billed but not yet shipped.

~~Immediately~~The following ~~the Distribution, the Company held approximately 6.2 million shares of Donnelley Financial common stock~~table presents net sales disaggregated by products and approximately 6.2 million shares of LSC common stock. The Company accounted 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 income-net in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2017. In June 2017, the Company completed a non-cash debt-for-equity exchange in which RRD exchanged 6,143,208 of its retained shares of Donnelley Financial common stock for the extinguishment of $111.6 million in aggregate principal amount of RRD indebtedness. In August 2017, the Company disposed of its remaining 99,594 shares of Donnelley Financial common stock in exchange for the extinguishment of $1.9 million in aggregate principal amount of RRD indebtedness. See Note 15, ~~Debt, for additional details of these debt-for-equity transactions. As of September 30, 2017, the Company no longer held any shares of LSC or Donnelley Financial.~~services:

Our products revenue is primarily recognized at a point in time. We generally recognize revenue for products upon the transfer of control of the products to the client which typically occurs upon transfer of title and risk of ownership, which is generally upon shipment to the client. For certain products, we are able to recognize revenue for completed inventory billed but not yet shipped at the client’s direction.

We generate revenue by providing various commercial printing products and offer a full range of branded materials including manuals, publications, brochures, business cards, flyers, post cards, posters and promotional items.

We generate revenue by providing packaging print for clients in consumer electronics, life sciences, cosmetics and consumer packaged goods industries.

We generate revenue by creating critical business communications, including customer billings, financial ~~results of discontinued operations:~~

statements, healthcare communications and insurance documents. Our capabilities include design and composition, variable imaging, email, archival and digital mail interaction, as well as our innovative RRDigital solution set.

We generate revenue by providing print production, including touch mailings, and ~~capital expenditures of discontinued operations were as follows:~~

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 Agreements”). 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 Agreements generally provide 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 and nine months ended September 30, 2017, the Company recognized $1.4 million and $6.4 million, respectively, as a reduction of costs within selling, general and administrative expenses within the Condensed Consolidated Statements of Operations from the Transition Services Agreement.

We generate revenue by producing custom labels for clients across multiple industries including warehouse and distribution, retail, pharmaceutical, manufacturing and consumer packaging. We offer distribution and shipping labels, healthcare and durable goods labels, promotional labels and consumer product goods packaging labels.

We generate revenue by providing various in-store marketing materials, using our digital and offset printing capabilities, including in-store signage and point-of-purchase displays. We also ~~entered into various commercial agreements~~create photobooks.

We generate revenue by providing workflow design to assembly, configuration, kitting and fulfillment for clients in consumer electronics, telecommunications, life sciences, cosmetics, education and industrial industries.

We generate revenue by producing a variety of forms including invoices, order forms and business forms that support both the private and public sectors for clients in financial, government, retail, healthcare and business services industries.

Our services revenue is recognized both at a point in time as well as over time. Our logistics revenue is primarily recognized over time as the performance obligation is completed. Due to the short transit period of logistics performance obligations, the timing of revenue recognition does not require significant judgment. Our business process outsourcing and digital and creative solutions revenue is recognized over time or at a point in time, depending on the nature of the service which ~~govern sales transactions between~~could be either recurring or project-based.

We generate revenue by providing specialized transportation and distribution services. These services are comprised of freight services, including truckload, less-than-truckload, intermodal and international freight forwarding; international mail and parcel distribution; and courier services including same day and next day delivery. As discussed in Note 16, Disposition, we sold our Print Logistics business on July 2, 2018. Print Logistics services included the ~~companies. Under these commercial agreements, the Company recognized the following transactions with LSC~~distribution of retail and ~~Donnelley Financial during the three~~newsstand printed materials.

We generate revenue by providing outsourcing services including creative services, research and ~~nine months ended September 30, 2017:~~

~~The Company also recognized $83.0~~ ~~million of net cash inflow from Donnelley Financial and LSC within operating activities in the Condensed Consolidated Statements of Cash Flows during the nine months ended~~ S~~eptember 30, 2017.~~

O~~n August 4, 2016, the Company acquired Precision Dialogue Holdings, LLC (“Precision Dialogue”), a provider of email marketing, direct mail marketing~~analytics, financial management and other services ~~with operations in~~for legal providers, insurance, telecommunications, utilities, retail and financial services companies.

We generate revenue by creating and managing content designed to speak directly to customers, including print and digital advertising, direct marketing and direct mail design, packaging design, marketing and sales collateral and in-store marketing.

Certain clients may receive volume-based rebates or early payment discounts, which are accounted for as variable consideration. We estimate these amounts based on the ~~United States for a purchase price, net~~expected amount to be earned by our clients and reduce revenue accordingly. We do not expect significant changes to estimates of ~~cash acquired,~~variable consideration. Given the nature of ~~approximately $59.2 million. The acquisition expanded~~our products and the ~~Company’s ability to help its customers measure communications effectiveness and audience engagement.~~ ~~During the three and nine months ended September 30, 2017,~~ ~~Precision Dialogue contributed $17.0 million and $44.5 million, respectively, in net sales and earnings before income taxes~~history of $2.9 million and $4.4 million, respectively. During both the three and nine months ended September 30, 2016, Precision Dialogue contributed $8.4 million in net sales and earnings before income taxes of $0.6 million. Precision Dialogue is ~~included within the operating results of the Variable Print and Strategic Services segments.~~

On January 11, 2016, the Company sold two entities within the business process outsourcing reporting unit for net proceeds of $13.4 million. This resulted in a net gain of $12.3 million during the nine months ended September 30, 2016, which was recorded in other operating income in the Condensed Consolidated Statements of Operations. Additionally, in the third quarter of 2016, the Company sold three immaterial entities in the International segment, which resulted in a net loss of $0.3 million during the three and nine months ended September 30, 2016.

~~The components of the Company’s inventories, net of excess and obsolescence reserves for raw materials and finished goods, at September 30, 2017 and December 31, 2016 were as follows:~~

The ~~components of the Company’s property, plant~~following table provides information about contract assets and ~~equipment at September 30, 2017 and December 31, 2016 were as follows:~~liabilities from contracts with clients:

During the three and nine months ended September 30, 2017, depreciation expense was $34.6 million and $105.2 million, respectively. During the three and nine months ended September 30, 2016, depreciation expense was $37.6 million and $116.2 million, respectively.

Contract liabilities primarily relate to client advances received prior to completion of performance obligations. Reductions in contract liabilities are a result of our completion of performance obligations.

~~The changes in the carrying amount of goodwill for~~Revenue recognized during the nine months ended September 30, ~~2017 were as follows:~~

2018 from amounts included in contract liabilities at the beginning of the period was approximately $22.8 million. During the ~~third quarter of 2017, the Company recorded non-cash charges of $21.3 million to reflect the impairment of goodwill in the Strategic Services segment. See Note 7,~~ ~~Restructuring, Impairment and Other Charges, for further information.~~

~~The components of other intangible assets at September 30, 2017 and December 31, 2016 were as follows:~~

~~Amortization expense for other intangible assets was $7.1 million and $21.6 million for the three and~~ nine months ended September 30, ~~2017, respectively. Amortization expense~~2018, we reclassified $4.0 million of contract assets to receivables as a result of the completion of the performance obligation and the right to the consideration becoming unconditional.

As part of the adoption of Topic 606, we have elected practical expedients and exemptions allowable under the guidance.

We account for ~~other intangible assets was $8.0 million~~shipping and ~~$25.7 million~~handling activities performed after the control of a good has been transferred to the client as a fulfillment cost. We accrue for the ~~three~~costs of shipping and ~~nine months ended~~handling activities if revenue is recognized before contractually agreed shipping and handling activities occur.

We apply Topic 606 to a portfolio of contracts (or performance obligations) with similar characteristics as we reasonably expect that the effects on the financial statements of applying this guidance to the portfolio would not differ significantly from applying this guidance to the individual contracts (or performance obligations) within that portfolio.

When the output method for measure of progress is determined appropriate, we recognize revenue in the amount for which we have the right to invoice for revenue that is recognized over time and for which we can demonstrate that the invoiced amount corresponds directly with the value to the client for the performance completed to date.

We generally expense sales commissions and other costs to obtain a contract when incurred, because the amortization period would have been one year or less. These costs are recorded within Selling, general and administrative expenses.

We exclude sales taxes and other similar taxes from the measurement of the transaction price. We do not disclose the value of unsatisfied performance obligations, nor do we disclose the timing of revenue recognition for contracts with an original expected length of one year or less.

The components of inventories, net of excess and obsolescence reserves for raw materials and finished goods, at September 30, ~~2016, respectively.~~2018 and December 31, 2017 were as follows:

~~7. Restructuring, Impairment~~The components of property, plant and equipment at September 30, 2018 and December 31, 2017 were as follows:

During the three and nine months ended September 30, 2018, depreciation expense was $30.9 million and $96.5 million, respectively. During the three and nine months ended September 30, 2017, depreciation expense was $34.6 million and $105.2 million, respectively.

During the fourth quarter of 2017, we entered into an agreement to sell a building and transfer the related land use rights to a third party for a facility in an international location. During the three months ended December 31, 2017 and nine months ended September 30, 2018, we received non-refundable deposits in accordance with the terms of the agreement of approximately $12.5 million and $32.1 million, respectively, which are recorded in Other noncurrent liabilities on the Condensed Consolidated Balance Sheets. Additional deposits will be paid to us in accordance with the agreement. Gross proceeds, including deposits, from the sale are expected to be approximately $250.0 million and we expect the transaction to close in 2020 following receipt of government approvals and satisfaction of closing conditions. Final cash proceeds are subject to foreign currency changes. As of September 30, 2018, we continue to classify the carrying cost of the building within property, plant and equipment and record depreciation expense. The carrying cost of the land use rights are classified in Other noncurrent assets and we continue to record amortization expense. The combined carrying cost of the building and land use rights is not significant.

~~Restructuring, Impairment and Other Charges Recognized~~The changes in ~~Results~~the carrying amount of ~~Operations~~goodwill for the nine months ended September 30, 2018 were as follows:

During the three months ended September 30, ~~2017 and 2016,~~2018 we reduced goodwill by $32.4 million for the ~~Company recorded the following net restructuring, impairment and other charges:~~ disposition of our Print Logistics business. See Note 16, Disposition, for further discussion.

~~For the nine months ended September 30, 2017 and 2016, the Company recorded the following net restructuring, impairment and other charges:~~

~~Restructuring~~The components of other intangible assets at September 30, 2018 and ~~Impairment Charges~~December 31, 2017 were as follows:

Amortization expense for other intangible assets was $6.8 million and $20.7 million for the three and nine months ended September 30, ~~2017, the Company recorded net restructuring charges of $10.7~~2018, respectively. Amortization expense for other intangible assets was $7.1 million and ~~$19.5~~$21.6 million respectively, for employee termination costs. These charges primarily relate to the reorganization of selling, general and administrative functions primarily within the Corporate, International and Variable Print segments, the termination of the Company’s relationship in a joint venture within the International segment and a facility closure in the Strategic Services segment. For the three and nine months ended September 30, 2017, the Company recorded net impairment charges of $21.5 million and $21.7 million, respectively, primarily related to the $21.3 million impairment of the goodwill for the digital and creative solutions (“DCS”) reporting unit, which is included within the Strategic Services segment. The goodwill impairment charge in the DCS reporting unit was due to the notification from a major customer that they will be transitioning their business away from DCS beginning in the fourth quarter of 2017 as well as declines in sales with other existing customers which resulted in lower expectations of future revenues, profitability and cash flows compared to expectations as of the October 31, 2016 annual goodwill impairment test. As of September 30, 2017, the DCS reporting unit had no remaining goodwill. The goodwill impairment charges were determined using Level 3 inputs, including comparable marketplace fair value data and a ~~discounted cash flow analysis. The remaining impairment charges recorded~~ for the three and nine months ended September 30, 2017, ~~were primarily due to~~respectively.

For the impairment of equipment associated with the facility closure in the Strategic Services segment. Additionally, the Company incurred lease termination and other restructuring charges of $1.1 million and $3.8 million, respectively, for the three ~~and nine~~ months ended September 30, ~~2017.~~

~~For~~2018 and 2017, we recorded the ~~three and nine months ended September 30, 2016, the Company recorded~~following net restructuring charges of $9.7 million and $20.7 million, respectively, for employee termination costs. These charges primarily related to two facility closures in the International segment and the reorganization of certain administrative functions and operations. Additionally, the Company incurred lease termination and other restructuring charges of $0.6 million and $2.9 million for the three and nine months ended September 30, 2016, respectively. For the three and nine months ended September 30, 2016, the Company recognized $0.1 million and $1.0 million, respectively, of net gains on the sale of previously impaired assets, partially offset by impairment charges related to buildings and machinery and equipment associated with facility closures.

For the three and nine months ended September 30, 2017 and 2016, the Company recorded other charges of $0.5 million and $1.7 million and $0.6 million and $1.7 million, respectively, for multi-employer pension plan withdrawal obligations unrelated to facility closures. The total liabilities for the withdrawal obligations associated with the Company’s decision to withdraw from multi-employer pension plans included in accrued liabilities and other noncurrent liabilities are $5.1 million and $32.4 million, respectively, as of September 30, 2017.

The Company’s multi-employer pension plan withdrawal liabilities could be affected by the financial stability of other employers participating in the plans and any decisions by those employers to withdraw from the plans in the future. While it is not possible to quantify the potential impact of future events or circumstances, reductions in other employers’ participation in multi-employer pension plans, including certain plans from which the Company has previously withdrawn, could have a material impact on the Company’s previously estimated withdrawal liabilities, consolidated results of operations, financial position or cash flows.expenses:

~~The restructuring reserve as of December 31, 2016 and September 30, 2017, and changes during~~

For the nine months ended September 30, 2018 and 2017, ~~were as follows:~~we recorded the following net restructuring and other expenses:

The current portion of restructuring reserves of $14.4 million at September 30, 2017 was included in accrued liabilities, while the long-term portion of $13.6 million, primarily related to multi-employer pension plan withdrawal obligations related to facility closures, was included in other noncurrent liabilities at September 30, 2017.

For the three and nine months ended September 30, 2018, we recorded net restructuring charges of $2.8 million and $11.2 million, respectively, for employee termination costs. These charges primarily relate to the reorganization of selling, general and administrative functions across each segment and three announced facility closures in the Business Services segment. We also incurred lease termination and other restructuring charges of $6.6 million and $12.0 million, respectively, for the three and nine months ended September 30, 2018. Additionally, we recorded a $5.4 million net gain on the sale of previously impaired assets in the Business Services segment for the nine months ended September 30, 2018. The ~~Company anticipates~~majority of these assets were previously impaired in 2015. We also recorded impairment charges related to facility closures of $3.3 million for the nine months ended September 30, 2018.

For the three and nine months ended September 30, 2017, we recorded net restructuring charges of $10.7 million and $19.5 million, respectively, for employee termination costs. These charges primarily related to the reorganization of selling, general and administrative functions across each segment, ceasing our relationship in a joint venture within the Business Services segment and a facility closure in the Marketing Solutions segment. We also incurred lease termination and other restructuring charges of $1.1 million and $3.8 million, respectively, for the three and nine months ended September 30, 2017. Additionally, we recorded net impairment charges of $21.5 million and $21.7 million, respectively, for three and nine months ended September 30, 2017, primarily related to the $21.3 million impairment of goodwill in the Marketing Solutions segment. The remaining impairment charges recorded for the three and nine months ended September 30, 2017, were primarily due to the impairment of equipment associated with the facility closure in the Marketing Solutions segment.

For both the three and nine months ended September 30, 2018 and 2017, we recorded charges of $0.5 million and $1.7 million, respectively, for MEPP withdrawal obligations unrelated to facility closures. The total liabilities for the withdrawal obligations associated with our decision to withdraw from all multi-employer pension plans included in Accrued liabilities and other and Other noncurrent liabilities are $5.1 million and $29.6 million, respectively, as of September 30, 2018.

Restructuring reserves as of December 31, 2017 and September 30, 2018, and changes during the nine months ended September 30, 2018, were as follows:

The current portion of restructuring reserves of $10.8 million at September 30, 2018 was included in Accrued liabilities and other, while the long-term portion of $12.5 million, primarily related to MEPP withdrawal obligations related to facility closures, employee terminations in litigation, environmental reserves and lease termination costs, was included in Other noncurrent liabilities at September 30, 2018.

We anticipate that payments associated with the employee terminations reflected in the above table will be substantially completed by September ~~2018.~~2019, excluding employee terminations in litigation.

Payments on all of ~~the Company’s multi-employer pension plan~~our MEPP withdrawal obligations are scheduled to be substantially completed by ~~2036.~~2034. Changes based on uncertainties in these estimated withdrawal obligations could affect the ultimate charges related to ~~multi-employer pension plan~~MEPP withdrawals.

The restructuring liabilities classified as “lease terminations and other” consisted of lease terminations, other facility closing costs and contract termination costs. Payments on certain of the lease obligations are scheduled to continue until 2020. Market conditions and ~~the Company’s~~our ability to sublease these properties could affect the ultimate charges related to the lease obligations. Any potential recoveries or additional charges could affect amounts reported in ~~the Company’s~~our consolidated financial statements.

~~The components~~Components of ~~the estimated~~ net pension and other postretirement benefits plan (“OPEB”) income for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 were as follows:

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Pension (income) expense
Pension expense (income):
Service cost	$	0.1		$	0.3		$	0.5		$	0.8		$	0.1		$	0.1		$	0.5		$	0.5
Interest cost		8.0			37.9			23.7			105.3			7.7			8.0			23.4			23.7
Expected return on plan assets		(12.7	)		(58.2	)		(37.6	)		(171.2	)		(12.4	)		(12.7	)		(37.6	)		(37.6	)
Amortization, net		1.9			7.6			5.4			23.4			2.0			1.9			5.9			5.4
Settlements and curtailments		—			1.6			—			98.0
Less: income (expense) attributable to discontinued operations		—			10.2			—			(43.3	)
Net pension (income) expense - continuing operations	$	(2.7	)	$	(0.6	)	$	(8.0	)	$	13.0
Other postretirement benefits plan income
Settlements														0.2			—			1.5			—
Net pension income													$	(2.4	)	$	(2.7	)	$	(6.3	)	$	(8.0	)

OPEB expense (income):
Service cost	$	0.4		$	1.0		$	1.0		$	3.0		$	(0.3	)	$	0.4		$	0.5		$	1.0
Interest cost		2.7			3.1			8.3			9.2			2.5			2.7			7.7			8.3
Expected return on plan assets		(3.4	)		(3.4	)		(10.1	)		(10.2	)		(3.5	)		(3.4	)		(10.5	)		(10.1	)
Amortization, net		(0.7	)		(4.0	)		(2.2	)		(12.0	)		(0.8	)		(0.7	)		(2.2	)		(2.2	)
Curtailments		—			(19.7	)		—			(19.7	)
Net other postretirement benefit income - continuing operations	$	(1.0	)	$	(23.0	)	$	(3.0	)	$	(29.7	)
Other														(5.1	)		—			(5.1	)		—
Net other postretirement benefit income													$	(7.2	)	$	(1.0	)	$	(9.6	)	$	(3.0	)

~~The Company expects to make cash contributions of approximately $17.0 million to its pension and other postretirement benefit plans in 2017.~~ During the nine months ended September 30, ~~2017, the Company~~2018, we contributed ~~$12.4~~$13.5 million to ~~its benefit~~our retirement plans.

In the fourth quarter of 2015, the Company communicated to certain former employees the option to receive a lump-sum pension payment or annuity with payments computed in accordance with statutory requirements, beginning in the second quarter of 2016. Payments to eligible participants who elected to receive a lump-sum pension payment or annuity were funded from existing pension plan assets and liabilities were remeasured as of the payout date. The discount rates and actuarial assumptions used to calculate the payouts were determined in accordance with federal regulations. The company recorded total non-cash settlement charges of $1.6 million and $98.0 million, of which $0.3 million and $20.7 million is included within selling, general and administrative expenses and $1.3 million and $77.3 million is included withinOther OPEB income from discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016, respectively. These charges resulted from the recognition in earnings of a portion of the actuarial losses recorded in accumulated other comprehensive loss based on the proportion of the obligation settled.

During the third quarter of 2016, the Company announced the discontinuation of retiree medical, prescription drug and life insurance benefits for individuals retiring on or after October 1, 2016. This change was accounted for as a significant plan amendment and the other postemployment benefit plan obligations were remeasured as of September 30, 2016. This remeasurement resulted in a curtailment gain of $16.4 million within cost of sales and $3.3 million in selling, general and administrative expenses during the three and nine months ended September 30, ~~2016.~~ 2018 reflects the change in one of our OPEB liabilities due to a revision to participant demographic data utilized in the actuarial valuations.

We adopted ASU No. 2017-07 “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, with retrospective adoption, during the first quarter of 2018. In accordance with Topic 715, benefit service cost is recorded in cost of sales and selling, general and administrative expenses. The other components, which include interest cost, expected return on plan assets, net amortization and settlements, are recorded in Investment and other income-net within the Condensed Consolidated Statements of Operations. Previously, all pension and postretirement benefits expense (income) was recorded in cost of sales and selling, general and administrative expenses. See Note 17, New Accounting Pronouncements, for further discussion and impact of adoption.

Share-based compensation expense ~~from continuing operations~~ totaled $2.2 million and $2.1 million for ~~both~~ the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and $6.4 million ~~and $7.9 million~~ for both the nine months ended September 30, ~~2017~~2018 and ~~2016, respectively.~~2017.

In March ~~2017, the Company~~2018, we awarded ~~its~~our annual share-based compensation grants, which consisted of ~~569,594~~683,076 restricted stock units with a grant date fair value of ~~$16.30~~$6.10 per unit and ~~304,425~~683,076 performance share units also with a grant date fair value of ~~$16.30~~$6.10 per unit. The restricted stock units are subject to a three year graded vesting ~~period. The~~period and the performance share units are subject to a 34 month cliff vesting period. ~~Additionally,~~Dividends are not paid on restricted stock units.

In addition, during the nine months ended September 30, ~~2017,~~2018, we granted 813,361 cash-settled stock units (“phantom stock units”). Our share price on the date of grant was $7.31. The phantom stock units vest and are payable in three equal installments over a period of three years after the grant date. Phantom stock units are not shares of our common stock and therefore the recipients of these awards do not receive ownership interest in the Company ~~awarded 102,191 restricted~~or stockholder voting rights. Phantom stock ~~units with~~unit awards are subject to forfeiture upon termination of employment prior to vesting, subject in some cases to early vesting upon specified events, including death or permanent disability of the grantee, termination of the grantee’s employment under certain circumstances or a ~~weighted average grant date~~change in control of the Company. All phantom stock unit awards are classified as liability awards due to their expected settlement in cash, and are included in Accrued liabilities and other in the Condensed Consolidated Balance Sheets. Compensation expense for these awards is measured based upon the fair value of ~~$11.77 per share and a weighted average vesting period~~the awards at the end of ~~1.5 years.~~each reporting period. Dividends are not paid on phantom stock units.

~~The Company’s~~Our equity as of December 31, ~~2016~~2017 and September 30, ~~2017,~~2018, and changes during the nine months ended September 30, ~~2017,~~2018, were as follows:

During the nine months ended September 30, 2017, the Company recorded certain spinoff related adjustments within equity primarily resulting from the final pension asset valuation as required by the Separation and Distribution Agreement.

Basic earnings per share is calculated by dividing net earnings attributable to RRD common stockholders by the weighted average number of common shares outstanding for the period. In computing diluted earnings per share, basic earnings per share is adjusted for the assumed issuance of all potentially dilutive share-based awards, including stock options, restricted stock units and performance share units. Performance share units are ~~considered anti-dilutive and~~ excluded if the performance targets upon which the issuance of the shares is contingent have not been achieved and the respective performance period has not been completed as of the end of the current period. Additionally, stock options are considered anti-dilutive when the exercise price exceeds the average market value of ~~the Company’s~~our stock price during the applicable period. In periods when ~~the Company is~~we are in a net loss, ~~from continuing operations,~~ share-based awards are excluded from the calculation of earnings per share as their inclusion would have an anti-dilutive effect.

During the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, no shares of common stock were purchased by ~~the Company;~~us; however, shares were withheld for tax liabilities upon the vesting of equity awards.

The reconciliation of the numerator and denominator of the basic and diluted earnings per share calculation and the anti-dilutive share-based awards for three and nine months ended September 30, 2017 and 2016 was as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Basic net (loss) earnings per share attributable to RRD common stockholders:

Continuing operations

$
(0.11
)

$
0.31

$
0.26

$
0.03

Discontinued operations

—

(0.41
)

—

0.23

Net (loss) earnings attributable to RRD stockholders

$
(0.11
)

$
(0.10
)

$
0.26

$
0.26

Diluted net (loss) earnings per share attributable to RRD common stockholders:

Continuing operations

$
(0.11
)

$
0.31

$
0.26

$
0.03

Discontinued operations

—

(0.41
)

—

0.23

Net (loss) earnings attributable to RRD stockholders

$
(0.11
)

$
(0.10
)

$
0.26

$
0.26

Numerator

Net (loss) earnings attributable to RRD common stockholders - continuing operations

$
(8.0
)

$
22.0

$
18.4

$
2.4

Net (loss) earnings from discontinued operations, net of income taxes

—

(29.1
)

—

15.8

Net (loss) earnings attributable to RRD common stockholders

$
(8.0
)

$
(7.1
)

$
18.4

$
18.2

Denominator:

Weighted average number of common shares outstanding

70.2

70.0

70.1

70.0

Dilutive options and awards

—

0.5

0.2

0.5

Diluted weighted average number of common shares outstanding

70.2

70.5

70.3

70.5

Weighted average number of anti-dilutive share-based awards:

Stock options

1.3

0.8

1.0

0.7

Performance share units

0.3

0.2

0.3

0.2

Restricted stock units

1.1

0.3

0.7

—

Total

2.7

1.3

2.0

0.9

Dividends declared per common share

$
0.14

$
0.78

$
0.42

$
2.34

~~The components of other comprehensive income (loss) and income tax (benefit) expense allocated to each component for the three and nine months ended September 30, 2017 and 2016 were as follows:~~

~~During~~The reconciliation of the numerator and denominator of the basic and diluted earnings per share calculation and the anti-dilutive share-based awards for the three and nine months ended September 30, ~~2016, translation adjustments~~2018 and 2017 were as follows:

The components of other comprehensive (loss) income and income tax expense ~~on pension~~(benefit) allocated to each component for the three and ~~other postretirement benefits plan cost were adjusted to reflect previously recorded deferred taxes at their historical exchange rates.~~

~~Accumulated other comprehensive loss by component as of December 31, 2016 and September 30, 2017, and changes during the~~ nine months ended September 30, 2018 and 2017 were as follows:

~~Accumulated other comprehensive loss by component as of December 31, 2015 and September 30, 2016, and changes during the nine months ended September 30, 2016, were as follows:~~

Accumulated other comprehensive loss by component as of December 31, 2017 and September 30, 2018, and changes during the nine months ended September 30, 2018, were as follows:

Accumulated other comprehensive loss by component as of December 31, 2016 and September 30, 2017, and changes during the nine months ended September 30, 2017, were as follows:

Reclassifications from accumulated other comprehensive loss for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,						Classification in the Condensed Consolidated	Three Months Ended September 30,						Nine Months Ended September 30,						Classification in the Condensed
	2017			2016			2017			2016			Statements of Operations	2018			2017			2018			2017			Consolidated Statements of Operations
Translation Adjustments:	Translation Adjustments:
Net realized loss	$	2.8			—		$	2.8			—		Selling, general and administrative expenses
Net realized loss, before tax														$	—		$	2.8		$	—		$	2.8		Selling, general and administrative expenses
Reclassification, net of tax														$	—		$	2.8		$	—		$	2.8

Amortization of pension and OPEB cost:
Net actuarial loss														$	2.0		$	1.9		$	5.9		$	5.4		Investment and other income-net
Net prior service credit															(0.8	)		(0.7	)		(2.2	)		(2.2	)	Investment and other income-net
Settlements															0.2			—			1.5			—		Investment and other income-net
Reclassifications before tax		2.8			—			2.8			—				1.4			1.2			5.2			3.2
Income tax benefit		—			—			—			—				0.4			0.5			1.1			1.1
Reclassification, net of tax	$	2.8		$	—		$	2.8		$	—			$	1.0		$	0.7		$	4.1		$	2.1
Amortization of pension and other postretirement benefits plan cost:
Net actuarial loss	$	1.9		$	7.8		$	5.4		$	23.5		Cost of sales; Selling, general and administrative expenses
Net prior service credit		(0.7	)		(4.0	)		(2.2	)		(12.0	)	Cost of sales; Selling, general and administrative expenses
Settlements		—			1.6			—			98.5		Cost of sales; Selling, general and administrative expenses
Curtailments		—			(19.7	)		—			(19.7	)	Cost of sales; Selling, general and administrative expenses
Reclassifications before tax		1.2			(14.3	)		3.2			90.3
Income tax expense (benefit)		0.5			(7.9	)		1.1			35.1
Reclassification, net of tax	$	0.7		$	(6.4	)	$	2.1		$	55.2

Available-for-sale securities:	Available-for-sale securities:
Net realized gain on equity securities		(1.8	)		—			(52.8	)		—		Investment and other income-net
Reclassifications before tax		(1.8	)		—			(52.8	)		—
Net realized gain on equity securities, before tax														$	—		$	(1.8	)	$	—		$	(52.8	)	Investment and other income-net
Income tax benefit		—			—			18.0			—				—			—			—			18.0
Reclassification, net of tax		(1.8	)		—			(70.8	)		—				—			(1.8	)		—			(70.8	)
Total reclassifications, net of tax	$	1.7		$	(6.4	)	$	(65.9	)	$	55.2			$	1.0		$	1.7		$	4.1		$	(65.9	)

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

This segment includes the Company’s U.S. short-run and transactional printing operations. This segment’s primary product offerings include commercial and digital print, direct mail, labels, statement printing, forms and packaging.

~~This segment includes the Company’s logistics services, print management offerings and digital and creative solutions.~~

This segment includes the Company’s non-U.S. printing operations in Asia, Latin America, Canada and Europe. This segment’s primary product and service offerings include packaging, books, catalogs, magazines, retail inserts, statement printing, commercial and digital print, forms, labels, logistics services, directories, digital and creative solutions, and direct mail. Additionally, this segment includes the Company’s business process outsourcing and Global Turnkey Solutions operations. Business process outsourcing provides transactional print and outsourcing services, statement printing, direct mail and print management offerings through its operations in Europe, Asia and North America. Global Turnkey Solutions provides outsourcing capabilities, including product configuration, customized kitting and order fulfillment for technology, medical device and other companies around the world through its operations in Europe, North America and Asia.

During the first quarter of 2018, we realigned our reportable segments to reflect changes in our global operating structure and the manner in which the chief operating decision maker assesses information for decision-making purposes. All prior year amounts have been reclassified to conform to our current reporting structure.

Business Services provides customized solutions at scale to help clients inform, service and transact with their customers. The segment’s primary product and service offerings include commercial print, logistics, statement printing, labels, packaging, supply chain management, forms and business process outsourcing. This segment also includes all of our operations in Asia, Europe, Canada and Latin America.

Corporate consists of unallocated selling, general and administrative activities and associated expenses including, in part, executive, legal, finance, communications, certain facility costs and ~~LIFO~~last-in-first-out inventory provisions. In addition, certain costs and earnings of employee benefit plans, such as pension and ~~other postretirement benefits plan~~OPEB expense (income) and share-based compensation, are included in Corporate and not allocated to the operating segments. Corporate also manages ~~the Company’s~~our cash pooling structures, which ~~enable~~enables participating international locations to draw on ~~the Company’s overseas~~our international cash resources to meet local liquidity needs.

~~The Company has~~We have disclosed income (loss) from operations as the primary measure of segment earnings (loss). This is the measure of profitability used by ~~the Company’s~~our chief operating decision-maker and is most consistent with the presentation of profitability reported within the Condensed Consolidated Financial Statements.

Income (Loss)

Depreciation

Total

Intersegment

Net

from

and

Capital

Sales

Sales

Sales

Operations

Amortization

Expenditures

Nine Months Ended September 30, 2017

Variable Print

$
2,291.9

$
(12.3
)

$
2,279.6

$
114.2

$
86.2

$
21.8

Strategic Services

1,394.4

(120.1
)

1,274.3

(7.0
)

12.6

6.0

International

1,488.1

(28.2
)

1,459.9

53.8

41.1

34.3

Total operating segments

5,174.4

(160.6
)

5,013.8

161.0

139.9

62.1

Corporate

—

—

—

(39.1
)

3.2

15.1

Total operations

$
5,174.4

$
(160.6
)

$
5,013.8

$
121.9

$
143.1

$
77.2

	Three Months Ended
	September 30, 2018
															Assets of
								Income (Loss)			Depreciation				Operations
	Total		Intersegment			Net		from			and		Capital		As of
	Sales		Sales			Sales		Operations			Amortization		Expenditures		September 30, 2018
Business Services	$	1,385.7	$	(22.5	)	$	1,363.2	$	74.8		$	31.5	$	14.6	$	2,784.3
Marketing Solutions		295.6		(9.3	)		286.3		11.8			11.7		2.7		678.1
Total operating segments		1,681.3		(31.8	)		1,649.5		86.6			43.2		17.3		3,462.4
Corporate		—		—			—		(25.7	)		1.0		7.4		235.6
Total operations	$	1,681.3	$	(31.8	)	$	1,649.5	$	60.9		$	44.2	$	24.7	$	3,698.0

Income (Loss)

Depreciation

Total

Intersegment

Net

from

and

Capital

Sales

Sales

Sales

Operations

Amortization

Expenditures

Nine Months Ended September 30, 2016

Variable Print

$
2,326.3

$
(14.5
)

$
2,311.8

$
144.0

$
90.5

$
45.5

Strategic Services

1,343.9

(114.3
)

1,229.6

25.3

14.0

13.1

International

1,465.7

(33.0
)

1,432.7

101.8

46.7

23.8

Total operating segments

5,135.9

(161.8
)

4,974.1

271.1

151.2

82.4

Corporate

—

—

—

(104.8
)

2.3

16.5

Total operations

$
5,135.9

$
(161.8
)

$
4,974.1

$
166.3

$
153.5

$
98.9

	Three Months Ended
	September 30, 2017
															Assets of
								Income (Loss)			Depreciation				Operations
	Total		Intersegment			Net		from			and		Capital		As of
	Sales		Sales			Sales		Operations			Amortization		Expenditures		December 31, 2017
Business Services	$	1,471.5	$	(30.9	)	$	1,440.6	$	51.0		$	35.0	$	16.3	$	2,989.5
Marketing Solutions		303.7		(9.4	)		294.3		(6.9	)		11.0		1.7		717.0
Total operating segments		1,775.2		(40.3	)		1,734.9		44.1			46.0		18.0		3,706.5
Corporate		—		—			—		(12.3	)		1.0		5.0		198.0
Total operations	$	1,775.2	$	(40.3	)	$	1,734.9	$	31.8		$	47.0	$	23.0	$	3,904.5

Restructuring ~~impairment~~ and other ~~charges~~expenses by segment are described in Note 7,6, Restructuring ~~Impairment~~ and Other ~~Charges~~.

~~The Company is~~We are subject to laws and regulations relating to the protection of the environment. ~~The Company provides~~We provide for expenses associated with environmental remediation obligations when such amounts are probable and can be reasonably estimated. Such accruals are adjusted as new information develops or circumstances change and are generally not discounted. ~~The Company has~~We have been designated as a potentially responsible party or ~~has~~have received claims in ~~three~~two active federal and state Superfund and other multiparty remediation sites. In addition to these sites, ~~the Company~~we may also have the obligation to remediate ~~seven~~six other previously and currently owned facilities. At the Superfund sites, the Comprehensive Environmental Response, Compensation and Liability Act provides that ~~the Company’s~~our liability could be joint and several, meaning that ~~the Company~~we could be required to pay an amount in excess of ~~its~~our proportionate share of the remediation costs.

~~The Company’s~~Our understanding of the financial strength of other potentially responsible parties at the multiparty sites and of other liable parties at the previously owned facilities has been considered, where appropriate, in the determination of ~~the Company’s~~our estimated liability. ~~The Company established~~We believe that our recorded reserves, recorded in ~~accrued~~Accrued liabilities and other and Other noncurrent liabilities, ~~that it believes~~ are adequate to cover ~~its~~our share of the potential costs of remediation at each of the multiparty sites and the previously and currently owned facilities. 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~~we may undertake in the future. However, in ~~the~~our opinion, ~~of management,~~ compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material effect on ~~the Company’s~~our consolidated results of operations, financial position or cash flows.

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 may be 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.

~~15.~~From time to time, our clients and others file voluntary petitions for reorganization under United States bankruptcy laws. In such cases, certain pre-petition payments received by us from these parties could be considered preference items and subject to return. In addition, we may be party to certain litigation arising in the ordinary course of business. We believe that the final resolution of these preference items and litigation will not have a material effect on our consolidated results of operations, financial position or cash flows.

~~The Company’s debt~~Debt at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following:

The fair values of the senior notes and debentures, which were determined using the market approach based upon interest rates available to ~~the Company~~us for borrowings with similar terms and maturities, were determined to be Level 2 under the fair value hierarchy. The fair value of ~~the Company’s~~our total debt was greater than its book value by approximately ~~$38.9~~$52.6 million and ~~$4.3~~$18.8 million at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

On October 15, 2018, we entered into a $550.0 million senior secured Term Loan B credit facility pursuant to a credit agreement (the “Term Loan Credit Agreement”). Proceeds from the Term Loan Credit Agreement, net of a $5.5 million discount, were used to repurchase certain senior notes, pay transaction fees and repay a portion of borrowings under the Credit Agreement.

Our obligations under the Term Loan Credit Agreement are guaranteed by certain of our domestic subsidiaries (the “Guarantors”) and are secured by a security interest in substantially all of our assets and certain of our domestic subsidiaries (the “Collateral”). Collateral consisting of accounts receivable, inventory, equipment, money, deposit accounts, securities accounts, investment property, and, to the extent related to the foregoing, general intangibles, documents, instruments and chattel paper, as well as 65% of the equity interests of their first-tier foreign subsidiaries secures our obligations and of the Guarantors under the Term Loan Credit Agreement and related guarantees on a second-priority basis (collectively the “ABL Priority Collateral”), and all other Collateral other than the ABL Priority Collateral secures our obligations and of the Guarantors under the Term Loan Credit Agreement and related guarantees on a first-priority basis, in each case, subject to permitted liens.

The Term Loan Credit Agreement contains customary affirmative and negative covenants including negative covenants restricting, among other things, our ability to incur debt, make investments, make certain restricted payments (including payments on certain other debt), incur liens securing other debt, consummate certain fundamental transactions, enter into transactions with affiliates and consummate asset sales. The Term Loan Credit Agreement requires that the net cash proceeds of significant asset sales be used to prepay borrowings under the Term Loan Credit Agreement, except in certain circumstances, including the reinvestment of net cash proceeds in assets useful to our business, repayment of borrowings under our Credit Agreement or the funding of debt tenders, in each case, subject to certain restrictions and limitations set forth in the Term Loan Credit Agreement.

The Term Loan Credit Agreement is scheduled to mature on January 15, 2024, at which time all amounts outstanding under the Term Loan Credit Agreement will be due and payable. Principal payments of $1.4 million are due quarterly. Borrowings will bear interest at a Eurocurrency rate plus a margin of 5% or a base rate plus a margin of 4%.

On October 15, 2018, we repurchased $172.6 million and $257.4 million in aggregate principal amount of the 7.625% senior notes due 2020 and 7.875% senior notes due 2021, respectively, pursuant to a tender offer. We expect to record a loss on debt extinguishment of approximately $31.6 million in the fourth quarter of 2018 on the repurchase of the bonds, representing tender premiums paid of $29.0 million, write-off of unamortized debt issuance costs of $1.5 million and fees and expenses of $1.1 million.

On September 29, 2017, twe~~he Company~~ entered into an asset-based revolving credit facility ~~pursuant to the second amended and restated credit agreement~~ (the “Credit Agreement”) which amended and restated ~~the Company’s~~our prior $800.0 million senior secured revolving credit facility dated September 30, 2016. The Credit Agreement provides for a senior secured asset-based revolving credit facility of up to $800.0 million subject to a borrowing base. The amount available to be borrowed under the Credit Agreement is equal to the lesser of (a) $800.0 million and (b) the aggregate amount of accounts receivable, inventory, machinery and equipment and fee-owned real estate of ~~the Company~~ours and certain of ~~its~~our domestic subsidiaries (the “Guarantors”) (collectively, the “Borrowing Base”), subject to certain eligibility criteria and advance rates. The aggregate amount of real estate, machinery and equipment that can be included in the Borrowing Base cannot exceed $200.0 million.As a result of the amendment, the Company recognized a $6.2 million loss related to unamortized debt issuance costs and other expenses within loss on debt extinguishments in the Condensed Consolidated Statements of Operations for the three and nine months ended ~~September 30, 2017. Additionally, the Company had approximately $0.6 million of accrued financing fees as of~~ ~~September 30, 2017~~ ~~related to this transaction.~~

~~The Credit Agreement is scheduled~~On October 15, 2018, we entered into Amendment No. 1 to ~~mature on September 29, 2022, at which time all outstanding amounts under~~ the Credit Agreement, ~~will be due and payable.~~ ~~The proceeds of the loans under~~which amends the Credit Agreement ~~may be used for working capital and general corporate purposes.~~

~~Any borrowings under~~to, among other things, permit (i) the ~~Credit Agreement will bear interest at a rate dependent on~~incurrence of the ~~average quarterly availability under~~debt pursuant to the Term Loan Credit Agreement and ~~will be calculated according to~~(ii) the incurrence of a base rate or a Eurocurrency rate plus an applicable margin. The applicable margin for base rate loans ranges from 0.25% to 0.50% and the applicable margin for Eurocurrency loans ranges from 1.25% to 1.50%. In addition, an unused line fee is payable quarterlylien on the ~~unused portion of the amount available~~ABL Priority Collateral to ~~be borrowed~~secure our obligations under the Term Loan Credit ~~Agreement. The unused line fee accrues at~~Agreement and related guarantees on a ~~rate of either 0.250% or 0.375% depending upon the average usage of the facility.~~second-priority basis.

~~The Company’s~~Our obligations under the Credit Agreement are guaranteed by the Guarantors and are secured by a security interest in certain assets of ~~the Company~~ours and ~~its~~our domestic subsidiaries, including accounts receivable, inventory, deposit accounts, securities

accounts, investment property, machinery, ~~and~~ equipment and, to the extent related to the foregoing, general intangibles, documents ~~instruments~~ and ~~chattel paper,~~instruments, as well as 65% of the equity interests of ~~their~~our first-tier foreign subsidiaries.

The Credit Agreement contains customary restrictive covenants, including a covenant which requires ~~the Company~~us to maintain a minimum fixed charge coverage ratio under certain circumstances. In addition, ~~the Company’s~~our ability to undertake certain actions, including, among other things, prepay certain junior debt, incur additional unsecured indebtedness and make certain restricted payments depends on satisfaction of certain conditions, including, among other things, meeting minimum availability thresholds under the Credit Agreement.

The ~~weighted average interest rate on borrowings under the credit facilities was 3.7% and 2.2% during the nine months ended September 30, 2017 and 2016, respectively.~~

~~On June 7, 2017, the Company repurchased $41.7 million~~Credit Agreement generally allows annual dividend payments of the 6.625% debentures due April 15, 2029, $59.4 million of the 6.50% senior notes due November 15, 2023 and $101.7 million of the 6.00% senior notes due April 1, 2024 using borrowings under the prior credit agreement. The repurchases resulted in a net gain of $0.8 million which was recognized within loss on debt extinguishments ~~in the Condensed Consolidated Statements of Operations~~ ~~for the nine months ended September 30, 2017 related~~up to ~~the difference between the fair value of the debt repurchased and the principal outstanding, partially offset by the premiums paid, unamortized debt issuance costs and other expenses~~.

Borrowings under the Credit Agreement bear interest at a rate dependent on the average quarterly availability under the Credit Agreement and is calculated according to a base rate (prime rate) or a Eurocurrency rate (London Inter-bank Offered Rate or “LIBOR”) plus an applicable margin. The applicable margin for base rate loans ranges from 0.25% to 0.50% and the applicable margin for Eurocurrency loans ranges from 1.25% to 1.50%. In addition, a fee is payable quarterly on the unused portion of the ~~7.625% senior notes due June 15, 2020 (the “Third Party Purchase Notes”). On June 21, 2017,~~amount available to be borrowed under the ~~Company exchanged 6,143,208~~Credit Agreement. The fee accrues at a rate of ~~its retained shares of Donnelley Financial for~~either 0.25% or 0.375% depending upon the ~~Third Party Purchase Notes. The Company cancelled the Third Party Purchase Notes on June 21, 2017. As a result, the Company recognized a $14.4 million loss on debt extinguishment~~ ~~in the Condensed Consolidated Statements of Operations~~ ~~during the nine months ended~~ ~~September 30, 2017~~ related to premiums paid, unamortized debt issuance costs and other expenses. In addition, the Company recognized a net realized gain of $92.4 million resulting from the disposition of these retained shares of Donnelley Financial common stock within investment and other income-net ~~in the Condensed Consolidated Statements of Operations~~ ~~during the nine months ended~~ ~~September 30, 2017.~~

~~On August 4, 2017, the Company disposed of its remaining 99,594 shares of Donnelley Financial common stock in exchange for $1.9 million in aggregate principal~~average usage of the Company’s 7.875% senior notes due March 15, 2021 which were cancelled. As a result, the Company recognized a $0.3 million loss on debt extinguishments in the Condensed Consolidated Statements of Operations during the three and nine months ended September 30, 2017, related to premiums paid, unamortized debt issuance costs and other expenses. In addition, the Company recognized a net realized gain of $1.6 million resulting from the disposition of these retained shares of Donnelley Financial common stock within investment and other income-net in the Condensed Consolidated Statements of Operations during the three and nine months ended September 30, 2017.

Interest income was $0.8 million and $2.3 million for the three and nine months ended September 30, 2017, respectively, and $1.9 million and $3.8 million for the three and nine months ended September 30, 2016, respectively.

The ~~Company’s effective income tax rate was 31.0% and 38.4% for~~Credit Agreement is scheduled to mature on September 29, 2022, at which time all outstanding amounts under the three months ended September 30, 2017 and 2016, respectively and (63.2%) and 80.1% for the nine months ended September 30, 2017 and 2016, respectively. The effective income tax rate for the nine months ended September 30, 2017 reflects the impact of the disposition of the Donnelley Financial and LSC retained shares. The retained shares of Donnelley Financial were disposed in non-taxable debt-for-equity exchanges during the three and nine months ended September 30, 2017. See Note 15, ~~Debt, for additional details regarding the dispositions of the Donnelley Financial retained shares of common stock. The sale of LSC shares generated a capital loss which~~Credit Agreement will be ~~carried forward; however, it is more likely than not that~~due and payable. Borrowings under the ~~benefit of such deferred tax asset will not~~Credit Agreement may be ~~realized~~used for working capital and ~~a valuation allowance was recorded. See Note 2,~~ ~~Discontinued Operations~~, for additional information regarding the sale of the LSC retained shares. The effective income tax rate for the three months ended September 30, 2017 reflects the impact of the impairment of goodwill in the DCS reporting unit and the inability to recognize a tax benefit on certain losses. The effective income tax rate for the three and nine months ended September 30, 2016 reflects the impact of income generated in higher taxing jurisdictions and the inability to recognize a tax benefit on certain losses.general corporate purposes.

~~17.~~Based on our borrowing base as of September 30, 2018 and existing borrowings, we had approximately $445.2 million borrowing capacity available under the Credit Agreement.

The weighted average interest rate on borrowings under our current and prior credit facilities was 3.4% and 3.7% during the nine months ended September 30, 2018 and 2017, respectively.

Interest paid, net of interest capitalized, was $38.2 million and $120.0 million for the three and nine months ended September 30, 2018, respectively, and $39.3 million and $133.8 million for the three and nine months ended September 30, 2017, respectively.

Interest income was $0.8 million and $2.0 million for the three and nine months ended September 30, 2018, respectively, and $0.8 million and $2.3 million for the three and nine months ended September 30, 2017, respectively.

All derivatives are recorded as other current or noncurrent assets or other current or noncurrent liabilities in the Condensed Consolidated Balance Sheets at their respective fair values. Unrealized gains and losses related to derivatives are recorded in the Condensed Consolidated Statements of Operations, or in other comprehensive income (loss), net of applicable income taxes, ~~or in the Condensed Consolidated Statements of Operations,~~ depending on the purpose for which the derivative is held. For derivatives designated and that qualify as cash flow hedges, the effective portion of the unrealized gain or loss related to the derivatives are generally recorded in other comprehensive income (loss) until the transaction affects earnings. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in the Condensed Consolidated Statements of Operations. Changes in the fair value of derivatives that do not meet the criteria for designation as a hedge at inception, or fail to meet the criteria thereafter, are recognized currently in the Condensed Consolidated Statements of Operations. At the inception of a hedge transaction, ~~the Company~~we formally ~~documents~~document the hedge relationship and the risk management objective for undertaking the hedge. In addition, ~~the Company assesses~~we assess both at inception of the hedge and on an ongoing basis, whether the derivative in the hedging transaction has been highly effective in offsetting changes in fair value or cash flows of the hedged item and whether the derivative is expected to continue to be highly effective. The impact of any ineffectiveness is also recognized ~~currently~~ in the Condensed Consolidated Statements of Operations.

~~The Company is~~We are exposed to the impact of foreign currency fluctuations in certain countries in which ~~it operates.~~we operate. The exposure to foreign currency movements is limited in many countries because the operating revenues and expenses of ~~its~~our various subsidiaries and business units are substantially in the local currency of the country in which they operate. To the extent borrowings, sales, purchases, revenues, expenses or other transactions are not in the local currency of the subsidiary or operating unit, ~~the Company is~~we are exposed to currency risk. Periodically, ~~the Company uses~~we use foreign exchange spot ~~forward~~ and ~~swap~~forward contracts to hedge exposures resulting from foreign exchange fluctuations. Accordingly, the gains and losses associated with the fair values of foreign currency exchange contracts are recognized ~~currently~~ in the Condensed Consolidated Statements of Operations and are generally offset by gains and losses on underlying payables, receivables ~~borrowings~~ and net investments in foreign subsidiaries. ~~The Company does~~We do not use derivative financial instruments for trading or speculative purposes. The aggregate notional value of the ~~foreign currency~~forward contracts at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 was ~~$136.7~~$124.2 million and ~~$172.2~~$215.9 million, respectively. The fair values of foreign currency contracts were determined to be Level 2 under the fair value hierarchy and are valued using market exchange rates.

On March 13, 2012, the Company entered into interest rate swap agreements to manage interest rate risk exposure, effectively changing the interest rate on $400.0 million of its fixed-rate senior notes to a floating-rate based on LIBOR plus a basis point spread. The interest rate swaps, with a notional value of $400.0 million at inception, were designated as fair value hedges against changes in the value of the Company’s $450.0 million 8.25% senior notes due March 15, 2019, which were attributable to changes in the benchmark interest rate. During 2014, the Company repurchased $211.1 million of the 8.25% senior notes due March 15, 2019, and related interest rate swaps with a notional amount of $210.0 million were terminated, resulting in payments of $4.2 million for thetotal fair value of our foreign currency contracts, which were the ~~interest rate swaps. During~~only derivatives not designated as hedges, included in Prepaid expenses and other current assets at September 30, 2018 and December 31, 2017, was $2.1 million and $2.2 million, respectively. In addition, there was $1.0 million of these derivatives included in Accrued liabilities and other at September 30, 2018.

On July 2, 2018, we completed the sale of our Print Logistics business for $60.0 million cash, of which we received $55.1 million after transaction costs and preliminary working capital adjustments in the third quarter of 2018. In addition, $4.9 million of cash was included in the disposition. A final working capital adjustment of approximately $6.9 million is expected to be paid by us in the fourth quarter of 2018. Proceeds from the sale were used to reduce borrowings outstanding on our credit facility. The disposition resulted in a pre-tax gain of $4.5 million during the three and nine months ended September 30, ~~2016,~~2018, which was recorded in connection with the tender of the Company’s 8.25% senior notes due March 15, 2019, the Company terminated the remaining $190.0 million notional value of the interest rate swap agreements which resulted in cash received of $2.5 million for the fair value of the interest rate swaps.

The fair values of interest rate swaps were determined to be Level 2 under the fair value hierarchy and were developed using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates derived from observed market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk. On at least a quarterly basis, the Company evaluates the credit value adjustments of the interest rate swap agreements, which take into account the possibility of counterparty and the Company’s own default.

The Company’s foreign currency contracts and interest rate swaps are subject to enforceable master netting agreements that allow the Company to settle positive and negative positions with the respective counterparties. The Company settles foreign currency contracts on a net basis when possible. Foreign currency contracts that can be settled on a net basis are presented netOther operating income in the Condensed Consolidated ~~Balance Sheets. Interest rate swaps~~Statements of Operations. We paid minimal income taxes as a result of the sale due to the utilization of capital loss carryforwards to offset the taxable gain. Prior to the sale, operating results for the Print Logistics business were ~~settled on a gross basis and presented gross in~~reported as services within the ~~Condensed Consolidated Balance Sheets.~~Business Services segment.

~~The Company manages credit risk for its derivative positions on~~17. New Accounting Pronouncements

In February 2018, the FASB issued ASU No. 2018-02 “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which permits the reclassification of tax effects stranded in accumulated other comprehensive income to retained earnings as a counterparty-by-counterparty basis, considering the net portfolio exposure with each counterparty, consistent with its risk management strategy for such transactions. The Company’s agreements with each of its counterparties contain a provision where the Company could be declared in default on its derivative obligations if it either defaults or, in certain cases, is capable of being declared in default of any of its indebtedness greater than specified thresholds. These agreements also contain a provision whereby the Company could be declared in default subsequent to a merger or restructuring type event if the creditworthinessresult of the ~~resulting entity~~Tax Act. The standard also requires entities to disclose whether or not they elected to reclassify the tax effects related to the Tax Act from accumulated other comprehensive income. The standard allows the option of applying either a retrospective adoption, meaning the standard is ~~materially weakened.~~

At September 30, 2017 and December 31, 2016, the total fair value of the Company’s foreign currency contracts, which were the only derivatives not designated as hedges along with the accounts in the Condensed Consolidated Balance Sheetsapplied to all periods in which the ~~fair value amounts were included, was as follows:~~

~~The pre-tax losses related to derivatives not designated as hedges~~effect of the Tax Act is recognized, or applying the amendments in the ~~Condensed Consolidated Statements~~period of ~~Operations for~~adoption, meaning an adjustment is made to stockholders’ equity as of the ~~three and nine months ended September 30, 2017 and 2016 were as follows:~~

~~For derivatives designated as fair value hedges,~~beginning of the ~~pre-tax (gains) losses related to the hedged items attributable to changes~~reporting period. ASU 2018-02 will be effective in the ~~hedged benchmark interest rate~~first quarter of 2019; however, early adoption is permitted for interim and annual periods, including the ~~offsetting (gain) loss on~~reporting period in which the ~~related interest rate swaps for the three and nine months ended September 30, 2017 and 2016 were as follows:~~

The Company also recognized a net reduction to interest expense of $0.2 million and $1.0 million for the three and nine months ended September 30, 2016, respectively, related to the Company’s fair value hedges, which included interest accruals on the derivatives and amortization of the basis in the hedged items.

Certain assets and liabilities are required to be recorded at fair value on a recurring basis. The following tables summarize the bases used to measure financial assets and liabilities that are carried at fair value on a recurring basis in the Condensed Consolidated Balance Sheets:

Tax Act was enacted. As of ~~September 30, 2017,~~July 1, 2018, we adopted the ~~Company no longer held investments~~provisions of ASU 2018-02, which resulted in ~~LSC or Donnelley Financial common stock. As~~a decrease to Accumulated deficit and increase to Accumulated other comprehensive loss of December 31, 2016, the Company’s investment in LSC and Donnelley Financial common stock were categorized as Level 2 securities as these shares were not registered and were valued based upon the closing stock price on the balance sheet date as they represented an identical equity instrument registered under the Securities Act of 1933, as amended.

In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-07 “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which ~~changes~~changed the presentation of net periodic pension and postretirement benefit cost (net benefit cost) within the Statement of Operations. Under the ~~current~~previous guidance, net benefit cost iswas reported as an employee cost within ~~operating income.~~income from operations. The amendment ~~requires~~required the bifurcation of net benefit cost, with the service cost component ~~to be~~ presented with other employee compensation costs in ~~operating~~ income from operations while the other components ~~will be reported~~are presented separately outside of income from operations. ~~ASU No. 2017-07 will be effective in the first quarter of 2018 and is required to be~~We retrospectively adopted. Had this guidance been adopted as of January 1, 2017, income from operations within the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 would have been lower by $4.2 million and $12.5 million, respectively, and other non-operating income would have increased $4.2 million and $12.5 million, respectively.

~~In January 2017, the FASB issued~~ ~~ASU No. 2017-04 “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,”~~ ~~which~~ eliminates Step 2 from the current goodwill impairment test, including determining the implied fair value of goodwill and comparing it with the carrying amount of that goodwill. The standard requires entities to record impairment charges based on the excess of a reporting unit’s carrying amount over its fair value. ~~ASU No. 2017-04 will be effective in the first quarter of 2020; however early adoption is permitted for interim and annual goodwill impairment tests performed after January 1, 2017~~. The adoption of ASU 2017-04 may impact the results of future goodwill impairment tests and therefore could impact the Company’s consolidated financial position and results of operations. The Company has elected to early adopt this guidance and will apply this guidance to all impairment analyses performed after January 1, 2017.

In November 2016, the FASB issued ASU No. 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash.” This update requires that restricted cash and cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. ASU No. 2016-18 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and a retrospective transition method is required. Early adoption is permitted, including adoption in an interim period. The Company currently presents changes in restricted cash and cash equivalents in the investing section of its Condensed Consolidated Statement of Cash Flows. The new guidance will not impact financial results, but will result in a change in the presentation of restricted cash and restricted cash equivalents within the ~~Condensed~~ ~~Consolidated Statements of Cash Flows~~.

In August 2016, the FASB issued ASU No. 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This update addresses whether to present certain specific cash flow items as operating, investing or financing activities. The amendments in this update are effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 and are required to be retroactively adopted. Early adoption is permitted, including adoption in an interim period. ~~The Company is currently evaluating the impact of ASU No. 2016-15~~ ~~on its~~ ~~Condensed~~ ~~Consolidated Statements of Cash Flows.~~

~~In March 2016, the FASB issued~~ ~~ASU~~ ~~No. 2016-09 “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.”~~ Under the new guidance, when awards vest or are settled, the excess tax benefits and tax deficiencies are recorded as income tax expense or benefit in the income statement instead of within additional paid-in capital. This guidance will be applied prospectively. Furthermore, the guidance requires excess tax benefits to be presented as an operating activity on the statement of cash flows rather than as a financing activity, which can be applied retrospectively or prospectively. Under the new guidance, an election can be made regarding whether to account for forfeitures of share-based payments by recognizing forfeitures of awards as they occur or estimate the number of awards expected to be forfeited, as is currently required. This guidance is to be applied using a modified retrospective transition method, with a cumulative adjustment to retained earnings. T~~he Company has~~ adopted this guidance as of January 1, ~~2017. The adoption had an immaterial impact on the Company’s Condensed Consolidated financial statements.~~ 2018. See Note 7, Employee Benefits, for further discussion.

~~In February 2016, the FASB issued~~ ~~ASU No.~~ 2016-02 “Leases (Topic 842)” which requires lessees to put most leases on the balance sheet but recognize expense on the income statement in a manner similar to current accounting. For lessors, ASU 2016-02 also modifies the classification criteria and the accounting for sales-type and direct financing leases. The standard requires a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements and is effective in the first quarter of 2019. Early adoption of ASU 2016-02 is permitted; however the Company plans to adopt the standard in the first quarter of 2019. The Company is currently evaluating the impact of ~~ASU 2016-02.~~adoption was a $0.9 million increase in Total cost of sales, $3.2 million increase in Selling, general and administrative expenses and $4.1 million increase in Investment and other income-net for the three months ended September 30, 2017 to the amounts previously reported. The impact of adoption for the nine months ended September 30, 2017 was a $3.0 million increase in Total cost of sales, $9.4 million increase in Selling, general and administrative expenses and $12.4 million increase in Investment and other income-net to the amounts previously reported.

In May 2014, the FASB issued ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606),” which ~~outlines~~outlined a single comprehensive model for entities to use in accounting for revenue using a five-step process that ~~supersedes~~superseded virtually all existing revenue guidance. ASU 2014-09 also ~~requires~~required additional quantitative and qualitative disclosures. During 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU 2016-10 “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” and ASU 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,” which ~~clarify~~clarified the revenue recognition implementation guidance on principal versus agent considerations, identifying performance obligations, determining whether an entity's promise to grant a license provides a customer with either a right to use or a right to access the entity's intellectual property, assessing the collectability criteria, presentation of sales and similar taxes, noncash consideration and various other items. ~~The amendments in these ASUs affect the guidance in ASU 2014-09, and the effective date and transition requirements are the same as those for ASU 2014-09 which, as amended by ASU~~ ~~2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” will be effective for the Company on January 1, 2018.~~ The standard ~~allows~~allowed the option of either a full retrospective adoption, meaning the standard is applied to all periods presented, or a modified retrospective adoption, meaning the standard is applied only to the most current period. We adopted the guidance as of January 1, 2018 using the modified retrospective approach. See Note 2, Revenue Recognition, for further discussion.

In accordance with Topic 606, the impact of adoption as compared to the prior guidance on our Condensed Consolidated Statements of Operations was an increase of $3.7 million in Total net sales and an increase of $1.8 million in Total gross profit for the three months ended September 30, 2018. The impact of adoption as compared to the prior guidance for the nine months ended September 30, 2018 was increases of $9.6 million in Total net sales and $2.7 million in Total gross profit. Additionally, the impact of adoption as compared to the prior guidance was a decrease of $71.9 million in Inventories, decrease of $87.9 million in Accrued liabilities and other and increase of $15.6 million in stockholders' equity at September 30, 2018. No other financial statement line item was materially impacted.

~~Based upon preliminary results of management’s evaluation,~~Accounting Pronouncements Issued and Not Yet Adopted

In August 2018, the ~~most impactful aspects~~FASB issued ASU No. 2018-14 “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”), which removes certain disclosures that are no longer cost beneficial and also includes additional disclosures to improve the overall usefulness of the disclosure requirements to financial statement users. ASU 2018-14 will be effective for us in 2020, however early adoption is permitted. We are currently evaluating the impact of ASU 2018-14 on the consolidated financial statements.

In January 2018, the FASB released guidance ~~relate~~on the accounting for tax on the global intangible low-taxed income ("GILTI") provisions in the Tax Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or treating any taxes on GILTI inclusions as period costs are both acceptable methods subject to an accounting policy election. We will complete our assessment in the ~~timing~~fourth quarter of ~~recognition for the revenue from customized products over time versus at a point in time, as well as inventory billed but~~2018 and therefore have not yet ~~shipped.~~elected an accounting policy.

In February 2016, the FASB issued ASU No. 2016-02 “Leases (Topic 842)” which requires lessees to record most leases on the balance sheet but recognize expense on the income statement in a manner similar to current accounting. The ~~Company has amounts of customized products~~new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. For lessors, ASU 2016-02 also modifies the classification criteria and the accounting for sales-type and direct financing leases. Topic 842 was subsequently amended by ASU No. 2018-01 “Land Easement Practical Expedient for Transition to Topic 842” (“ASU 2018-01”); ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”); and ASU No. 2018-11 “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”). The amendments in ASU 2018-10 address the rate implicit in the ~~Variable Print~~lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and ~~International segments which are currently recognized when~~purchase options, variable payments that depend on an index or rate and certain transition adjustments. The amendments in ASU 2018-11 clarify details on comparative reporting required at the ~~products are completed~~adoption of the standard and ~~shipped to the customer. Currently, the Company defers revenue for inventory billed but not yet shipped which under~~provide clarity on separating components of a lease contract. Topic 842 requires a modified retrospective approach, applying the new ~~revenue~~ standard to all leases existing at the Company may be able to recognize revenue for certain inventory billed but not yet shipped. The actual revenue recognition treatment required under this new standard will be dependent on contract specific terms. The Company is stilldate of initial application using either (1) its effective date or (2) the beginning of the earliest comparative period presented in the ~~process~~financial statements. Early adoption of ~~evaluating and designing~~ the ~~necessary changes~~standard is permitted; however, we plan to ~~its business processes, systems and controls to support recognition and disclosure under the new standard.The Company will~~ adopt the standard in the first quarter of ~~2018~~2019 and use the effective date as our date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019.

We are evaluating and planning for adoption and implementation of this ASU, including implementing a new global lease accounting system, evaluating practical expedient and accounting policy elections and assessing the overall financial statement impact.

The new standard provides a number of optional practical expedients in transition. We expect to elect the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We do not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us.

The new standard also provides practical expedients for an entity’s ongoing accounting. We currently ~~anticipates applying~~expect to elect the ~~modified retrospective approach.~~short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also currently expect to elect the practical expedient to not separate lease and non-lease components for certain classes of assets, including leased buildings.

While we continue to assess all of the effects of adoption, we currently believe the most significant effects relate to (1) the recognition of new ROU assets and lease liabilities on our balance sheet for our real estate operating leases; and (2) providing significant new disclosures about our leasing arrangements.

I~~tem~~Item 2. Management’s ~~Discussion~~Discussion and Analysis of Financial Condition and Results of Operations

R.R. Donnelley & Sons Company (“RRD,” the “Company,” “we,” “us,” and “our”), a Delaware corporation, helps organizations communicate more effectively by working to create, manage, produce, distribute and process content on behalf of our ~~customers.~~clients. We assist ~~customers~~clients in developing and executing multichannel communication strategies that engage audiences, reduce costs, drive revenues and increase compliance. Our innovative content management offering, production platform, logistics services, supply chain management, outsourcing capabilities and customized consultative expertise assists our ~~customers~~clients in the delivery of integrated messages across multiple media to highly targeted audiences at optimal times ~~for~~to their customers in virtually every private and public sector. We have strategically located operations that provide local service and responsiveness while leveraging the economic, geographic and technological advantages of a global organization.

On October 1, 2016, we completed the previously announced separation of our financial communications and data services business (“Donnelley Financial Solutions, Inc.” or “Donnelley Financial”) and our publishing and retail-centric print services and office products business (“LSC Communications, Inc.” or “LSC”) into two separate publicly-traded companies (the "Separation"). We completed the tax free distribution of approximately 26.2 million shares, or 80.75%, of the outstanding common stock of Donnelley Financial and 26.2 million shares, or 80.75%, of the outstanding common stock of LSC, to RRD stockholders (the “Distribution”). The Distribution was made to RRD stockholders of record as of the close of business on September 23, 2016, who received one share of Donnelley Financial common stock and one share of LSC common stock for every eight shares of RRD common stock held as of the record date. As a result of the Distribution, Donnelley Financial and LSC are now independent public companies trading under the symbols “DFIN” and “LKSD”, respectively, on the New York Stock Exchange. Immediately following the Distribution, we held 6.2 million shares of Donnelley Financial common stock and 6.2 million shares of LSC common stock. As of September 30, 2017, we no longer held any shares of LSC or Donnelley Financial common stock.

~~The financial results of Donnelley Financial and LSC for periods prior to the Distribution have been reflected within the disclosures of this~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ ~~as discontinued operations. Additionally, sales from RRD to Donnelley Financial and LSC previously eliminated in consolidation have been recast and are now shown as external sales of RRD within the financial results of continuing operations.~~ ~~The Company’s cash flows for all periods prior to the October 1, 2016 Distribution include the impact of LSC and Donnelley Financial. See Note 1,~~ ~~Basis of Presentation, and Note 2,~~ ~~Discontinued Operations, to these Condensed Consolidated Financial Statements for additional information.~~

Immediately following the Distribution on October 1, 2016, we affected a one-for-three reverse stock split for RRD common stock (the “Reverse Stock Split”). The Reverse Stock Split was approved by our Board of Directors on September 14, 2016 and previously approved by our stockholders at the annual meeting on May 19, 2016. As a result of the Reverse Stock Split, the number of issued and outstanding and treasury shares of our common stock was reduced proportionally based on the Reverse Stock Split ratio of one share for every three shares of common stock held before the Reverse Stock Split. Refer to Note 1, ~~Basis of Presentation, to the Condensed Consolidated Financial Statements for additional information regarding the Reverse Stock Split.~~

During the ~~third~~first quarter of ~~2017,~~2018, we realigned our reportable segments to reflect changes in our global operating structure and the ~~Company identified an error~~manner in which the ~~accounting~~chief operating decision maker assesses information for ~~certain contracts with an inventory buy-back option within the Asia~~decision-making purposes. All prior year amounts have been reclassified to conform to our current reporting unit, which is in the International segment. As a result, the error, which was determined by management to be immaterial to the previously issued financial statements, has been corrected herein from the amounts previously reported. Refer to Note 1, ~~Basis of Presentation, to the Condensed Consolidated Financial Statements for additional information regarding the revision.~~

Our segments and their ~~respective~~ product and service offerings are summarized below:

This segment includes our U.S. short-run and transactional printing operations. This segment’s primary product offerings include commercial and digital print, direct mail, labels, statement printing, forms and packaging.

~~This segment includes our logistics services, print management offerings~~Business Services provides customized solutions at scale to help clients inform, service and ~~digital and creative solutions.~~

~~This segment includes our non-U.S. printing operations in Asia, Latin America, Canada and Europe. This~~transact with their customers. The segment’s primary product and service offerings include ~~packaging, books, catalogs, magazines, retail inserts,~~commercial print, logistics, statement printing, ~~commercial~~labels, packaging, supply chain management, forms and business process outsourcing. This segment also includes all of our operations in Asia, Europe, Canada and Latin America.

Marketing Solutions leverages an integrated portfolio of data analytics, creative services and multichannel execution to deliver comprehensive, end-to-end solutions. The segment’s primary product and service offerings include direct mail, in-store marketing, digital print, ~~forms, labels, logistics services, directories,~~kitting, fulfillment, digital and creative solutions and direct mail. Additionally, this segment includes our business process outsourcing business and Global Turnkey Solutions operations. Business process outsourcing provides transactional print and outsourcing services, statement printing, direct mail and print management offerings through its operations in Europe, Asia and North America. Global Turnkey Solutions provides outsourcing capabilities, including product configuration, customized kitting and order fulfillment for technology, medical device and other companies around the world through its operations in Europe, North America and Asia.list services.

Corporate consists of unallocated selling, general and administrative activities and associated expenses including, in part, executive, legal, finance, communications, certain facility costs and ~~LIFO~~last-in-first-out inventory ~~provisions.~~reserve adjustments. In addition, certain costs and earnings of employee benefit plans, such as pension and other postretirement benefits plan (“OPEB”) expense (income) and share-based compensation, are included in Corporate and not allocated to the operating segments. Corporate also manages ~~the~~our cash pooling structures, which enables participating international locations to draw on our ~~overseas~~international cash resources to meet local liquidity needs.

We separately report our net sales, related costs of sales and gross profit for our product and service offerings. Our product offerings primarily consist of commercial ~~and~~print, statements, direct mail, labels, in-store marketing, digital print, ~~statement printing, direct mail,~~ packaging, ~~labels,~~supply chain management, forms ~~magazines, catalogs, retail inserts, books, directories, manuals~~ and other related products procured through our print management offering. Our service offerings primarily consist of logistics, ~~certain~~ business process outsourcing services and digital and creative solutions.

~~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 January 11, 2016, the Company sold two entities within the business process outsourcing reporting unit.~~

~~For further information on the above acquisitions and dispositions, see Note 3,~~ ~~Acquisitions and Dispositions, to the Condensed Consolidated Financial Statements.~~

Net sales ~~increased~~decreased by ~~$9.3~~$85.4 million, or ~~0.5%~~4.9%, for the ~~third quarter of 2017~~three months ended September 30, 2018 compared to the same period in 2017. Net sales decreased $106.4 million due to the ~~prior year. There was a $5.3~~disposition of our Print Logistics business and $10.2 million ~~or 0.3%, increase~~ due to changes in foreign exchange rates. ~~After including the impact of changes in foreign exchange rates, the increase in net sales was due to increased~~These decreases were partially offset by higher volume in the ~~International segment driven by the Asia reporting unit, partially offset by lower volume in the Variable Print segment, lower postage pass-through sales in the Strategic~~Business Services ~~segment and price pressures across the segments.~~segment.

~~The Company continues~~We continue to ~~strategically~~ assess opportunities to reduce ~~its~~our cost structure and enhance productivity throughout the business. During the ~~nine~~three months ended September 30, ~~2017, the Company~~2018, we realized cost savings from previous restructuring activities including the reorganization of administrative and support functions across all segments, as well as facility consolidations.

Net cash used in operating activities for the nine months ended September 30, ~~2017~~2018 was ~~$12.6~~$63.9 million as compared to ~~cash provided by operating activities of $7.8~~$3.2 million for the nine months ended September 30, ~~2016.~~2017. The decrease in net cash flow from operating activities ~~was driven by lower cash earnings,~~ ~~partially offset by the timing of supplier and customer payments and lower interest, spinoff-related transaction and tax payments~~.

~~The~~related primarily to net unfavorable changes in the Company’s income from operations, operating margin, net earnings (loss) attributable to RRD common stockholders and net earnings (loss) attributable to RRD common stockholders per diluted share for the three months ended September 30, 2017, from the three months ended September 30, 2016, were due to the following:

~~2017 restructuring, impairment and other charges - net:~~working capital ~~included pre-tax charges of $21.3 million for the impairment of goodwill~~, principally a reduction in the digital and creative solutions reporting unit within the Strategic Services segment; $10.7 million for employee termination costs; $1.1 million of lease termination and other restructuring costs; $0.5 million for multi-employer pension plan withdrawal obligations unrelated to facility closures; and $0.2 million impairment charges of other long-lived assets related to facility closures. See Note 7,~~Restructuring, Impairment and Other Charges~~, ~~to the Condensed Consolidated Financial Statements for additional details.~~accounts payable.

~~2016 restructuring, impairment and other charges - net:~~ included pre-tax charges of $9.7 million for employee termination costs; $0.1 million for a net gain on the sale of previously impaired other long-lived assets; $0.6 million of lease termination and other restructuring costs; and $0.6 million of other charges for multi-employer pension plan withdrawal obligations unrelated to facility closures. See Note 7,~~Restructuring, Impairment and Other Charges~~, ~~to the Condensed Consolidated Financial Statements for additional details.~~

~~Other postretirement benefit plan obligation (OPEB) curtailment gains:~~ ~~included a pretax gain of $19.7 million ($12.2 million after-tax) as a result of curtailments of the Company’s OPEB plans during the three months ended September 30, 2016.~~

~~Pension settlement charges:~~ ~~included pre-tax charges of $0.3 million ($0.3 million after-tax) for the three months ended September 30, 2016, related to lump-sum pension settlement payments.~~

~~Acquisition-related expenses:~~ included pre-tax charges of $0.7 million ($0.4 million after-tax) related to legal, accounting and other expenses for the three months ended September 30, 2016 associated with contemplated or completed acquisitions.

~~Loss on dispositions of businesses:~~ ~~included a pre-tax loss on the sale of entities of $0.3 million ($0.1 million after-tax) for the three months ended September 30, 2016.~~

~~Loss on debt extinguishments:~~ included a pre-tax net loss of $6.5 million ($4.3 million after-tax) for the three months ended September 30, 2017 related to unamortized debt issuance costs, tender premiums and other expenses associated with the amendment and restatement of the credit agreement and the debt-for-equity exchange of senior notes during the three months ended September 30, 2017. See Note 15, ~~Debt,~~ ~~to the Condensed Consolidated Financial Statements for additional details.~~

~~Net gain on investments:~~ included a pre-tax non-cash net realized gain of $1.6 million ($1.7 million after-tax) for the three months ended September 30, 2017, resulting from the debt-for-equity exchange of the remaining portion of the Company’s retained shares of Donnelley Financial for certain outstanding senior notes. See Note 15, ~~Debt,~~ ~~to the Condensed Consolidated Financial Statements for additional details of the debt-for-equity exchange.~~

~~Operations:~~ reflected lower volume in certain reporting units within the International and Variable Print segments, price pressures, start-up costs within the Asia reporting unit and higher transactional foreign currency expense, partially offset by lower corporate and other overhead costs related to our operations prior to the Separation, higher volume in the Asia reporting unit, lower healthcare and depreciation and amortization expense and cost control initiatives. See further details in the review of operating results by segment that follows below.

The changes in the Company’s income from operations, operating margin, net earnings (loss) attributable to RRD common stockholders and net earnings (loss) attributable to RRD common stockholders per diluted share for the nine months ended September 30, 2017, from the nine months ended September 30, 2016, were due to the following:

~~2017 restructuring, impairment and other charges - net:~~ included pre-tax charges of $21.3 million for the impairment of goodwill in the digital and creative solutions reporting unit within the Strategic Services segment; $19.5 million for employee termination costs; $3.8 million of lease termination and other restructuring costs; $1.7 million for multi-employer pension plan withdrawal obligations unrelated to facility closures; and $0.4 million of net impairment charges of long-lived assets. See Note 7,~~Restructuring, Impairment and Other Charges~~, ~~to the Condensed Consolidated Financial Statements for additional details.~~

~~2016 restructuring, impairment and other charges - net:~~ included pre-tax charges of $20.7 million for employee termination costs; $1.0 million for a net gain on the sale of previously impaired other long-lived assets, partially offset by impairment charges related to buildings and machinery and equipment associated with facility closures; $2.9 million of lease termination and other restructuring costs; and $1.7 million of other charges for multi-employer pension plan withdrawal obligations unrelated to facility closures. See Note 7,~~Restructuring, Impairment and Other Charges~~, ~~to the Condensed Consolidated Financial Statements for additional details.~~

~~Spinoff-related transaction expenses:~~ included pre-tax charges of $3.3 million ($2.1 million after-tax) related to consulting and other expenses for the nine months ended September 30, 2017 associated with the Separation and Distribution.

~~Other postretirement benefit plan obligation (OPEB) curtailment gains:~~ ~~included a pre-tax gain of $19.7 million ($12.2 million after-tax) as a result of curtailments of the Company’s OPEB plans during the nine months ended September 30, 2016.~~

~~Pension settlement charges:~~ ~~included pre-tax charges of $20.7 million ($12.3 million after-tax) for the nine months ended September 30, 2016 related to lump-sum pension settlement payments.~~

~~Acquisition-related expenses:~~ included pre-tax charges of $2.7 million ($1.8 million after-tax) related to legal, accounting and other expenses for the nine months ended September 30, 2016 associated with contemplated or completed acquisitions.

~~Net gain on disposal of businesses:~~ ~~included a pre-tax gain on the sale of entities in the International segment of $12.0 million ($12.2 million after-tax) for the nine months ended September 30, 2016.~~

~~Loss on debt extinguishments:~~ included a pre-tax net loss of $20.1 million ($12.8 million after-tax) related to the premiums paid in connection with the tenders, unamortized debt issuance costs and other expenses due to the debt-for-equity exchange of senior notes, the repurchase of debentures and senior notes and the amendment and restatement of the credit agreement during the nine months ended September 30, 2017. See Note 15, ~~Debt,~~ ~~to the Condensed Consolidated Financial Statements for additional details.~~

~~Net gain on investments:~~ included a pre-tax non-cash net realized gain of $94.0 million ($96.1 million after-tax) resulting from the debt-for-equity exchange of the Company’s retained shares of Donnelley Financial for certain outstanding senior notes and a pre-tax gain of $1.3 million ($0.7 million after-tax) resulting from the sale of certain of the Company’s affordable housing investments, partially offset by a pre-tax loss of $51.6 million ($51.6 million after-tax) resulting from the sale of the Company’s retained shares in LSC during the nine months ended September 30, 2017. The nine months ended September 30, 2016 included pre-tax gain of $0.1 million ($0.1 million after-tax) resulting from the sale of certain of the Company’s affordable housing investments.

~~Operations:~~ reflected lower volume in certain reporting units within the International and Variable Print segments, price pressures and higher transactional foreign currency expense, partially offset by lower corporate and other overhead costs related to our operations prior to the Separation, higher volume in the Asia reporting unit, reduced bad debt, legal and depreciation and amortization expenses and cost control initiatives.

Our customers are in an 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 customers include regulatory changes, sensitivity to economic conditions, raw material pricing volatility and USPS actions. In addition, 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 our products and services, such as statement printing and forms.

We work with our 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 our competitive strengths is that we offer a wide array of communications products and services, including print and content management, which provide differentiated solutions for our customers. We are also able to manage the storage and distribution of products for our customers by offering warehousing and inventory management solutions that allow customers to store printed materials and to efficiently ship them using our platform. Our logistics business offers our customers access to our proprietary technology that is designed to determine the most efficient and cost-effective method of shipping depending on our customers’ needs. We believe our breadth of offerings provides us with a distinct competitive advantage. We have and will continue to develop and expand our creative and design, content management, digital and print production, supply chain management and distribution services to address our customers’ evolving needs while supporting the strategic objective of becoming a leading global provider of integrated communication products and services.

~~The print and related services industry, in general, continues to have excess capacity and remains highly competitive and fragmented.~~

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 our 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.

Advertising and consumer spending trends affect demand in several of the end-markets we serve. As such, we have some seasonality in the second half of the year in our business, despite the breadth of our product and services offerings.

The primary raw materials we use in our print businesses are paper and ink. We negotiate with leading suppliers to maximize our purchasing efficiencies. Some of the paper we use is supplied directly by customers. 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 the first nine months of 2017 and volatility in the future is expected. Generally, customers directly absorb the impact of changing prices on customer-supplied paper. With respect to paper we purchase, we have historically passed most changes in price through to our customers. We believe contractual arrangements and industry practice will support our continued ability to pass on any future paper price increases, but there is no assurance that market conditions will continue to enable us to successfully do so. We believe 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. We resell waste paper and other print-related by-products. We also have undertaken various strategic initiatives to mitigate any foreseeable supply disruptions with respect to our ink requirements. We may be impacted by changes in prices for these by-products in the future.

We continue to monitor the impact of changes in the price of crude oil and other energy costs, which impact our ink suppliers, logistics operations and manufacturing costs. Crude oil, energy prices and market cost of transportation continue to be volatile. We believe our logistics operations will continue to be able to pass a substantial portion of any increases in fuel prices directly to our customers in order to offset the impact of related cost increases. Decreases in fuel prices are also passed on to customers which negatively impact sales and income from operations. However, our logistics operations is restricted in its ability to pass on increased cost of transportation costs to some customers in the short term. Therefore, increases in the market cost of transportation will negatively impact income from operations. We generally cannot pass on to customers the impact of higher energy prices on our manufacturing costs. 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 or the related impact either will have on our consolidated annual results of operations, financial position or cash flows.

Our products are distributed to end-users through U.S. and foreign postal services, through retail channels, electronically or by direct shipment to customer facilities. Through our logistics operations, we manage the distribution of most customer products we print in the U.S. and Canada 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., we work closely with our customers and the USPS to offer innovative products and mail preparation services to minimize postage costs. While we do not directly absorb the impact of higher postal rates on our 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 (“PAEA”), it had been anticipated that postage for market dominant mail categories would increase annually by an amount equal to or slightly less than the Consumer Price Index (the “CPI”). 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 implemented a CPI postage increase on January 22, 2017 of approximately 1.0%. In addition, there is a pending bi-partisan legislative proposal that seeks to stabilize the financial condition of the USPS, which among other things calls for restoring a 2.15% increase (approximately half of the exigent surcharge) on market-dominant mail products. Absent such legislative changes, the USPS filed with the Postal Regulatory Commission on October 6, 2017 for a price increase of 1.905% for First-Class Mail, 1.908% for Marketing Mail (aka Standard Mail), 1.924% for Periodicals Mail, 1.960% for Package Services Mail and 1.986% for Special Services to become effective January 21, 2018.

Additionally, as required by PAEA, the Postal Regulatory Commission began a comprehensive review of the law on December 20, 2016, its 10 year anniversary, to determine if the current system for regulating rates and classes for market-dominant products is achieving the original objectives of the law. The study still in process and their recommendations are due by the end of 2017. The impact of these actions cannot currently be estimated.

~~Mail transportation services to the USPS facilities across the country accounted for approximately 31% of the Company’s logistics revenues during the nine months ended September 30, 2017.~~

We perform our goodwill impairment tests annually as of October 31, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. As part of its interim review for indicators of impairment, management analyzed potential changes in the value of individual reporting units with goodwill based on each reporting unit’s operating results for the nine months ended September 30, 2017 compared to expected results. In addition, management considered how other key assumptions, including discount rates and expected long-term growth rates, used in the last fiscal year’s impairment analysis, could be impacted by changes in market conditions and economic events.

Management considered trends in these factors when performing its assessment of whether an interim impairment review was required for any reporting unit. During the third quarter of 2017, the Company recognized a non-cash charge of $21.3 million for the impairment of goodwill in the digital and creative solutions reporting unit which is included within the Strategic Services segment. The goodwill impairment charge in the digital and creative solutions reporting unit was due to the notification from a major customer that they will be transitioning their business away from digital and creative solutions beginning in the fourth quarter of 2017, as well as declines in sales with other existing customers which resulted in lower expectations of future revenues, profitability and cash flows as compared to the expectations as of the October 31, 2016 annual goodwill impairment test. As of September 30, 2017, the digital and creative solutions reporting unit had no remaining goodwill. Based on the September 30, 2017 interim assessment, management concluded that other than the goodwill impairment recognized in the digital and creative solutions reporting unit, no events or changes in circumstances indicated that it was more likely than not that the fair value for any reporting unit had declined below its carrying value. Nevertheless, significant changes in economic and market conditions could result in changes to expectations of future financial results and key valuation assumptions. Such changes could result in revisions of management’s estimates of the fair value of the Company’s reporting units and could result in a material impairment of goodwill as of October 31, 2017, the Company’s next annual measurement date.

The funded status of our pension and other postretirement benefits plans is dependent upon many factors, including returns on invested assets and the level of certain market interest rates. Market conditions may lead to changes in the discount rates (used to value the year-end benefit obligations of the plans) and the market value of the securities held by the plans, which could significantly increase or decrease the funded status of the plans. We review the actuarial assumptions on an annual basis as of December 31. Based on current estimates, we expect to make cash contributions of approximately $17.0 million to our pension and other postretirement benefits plans for the full year 2017, of which $12.4 million has been contributed during the nine months ended September 30, 2017.

As of December 31, 2016 the Company had approximately $70.0 million of U.S. deferred tax assets which at this time, we believe is more likely than not that we will realize these deferred tax assets. However, in the next twelve months we may be required to establish a valuation allowance to reduce the carrying value of certain U.S. deferred tax assets.

In the financial review that follows, we discuss our consolidated results of operations, financial position, cash flows and certain other information. This discussion should be read in conjunction with our Condensed Consolidated Financial Statements and related notes.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, ~~2017~~2018 AS COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, ~~2016~~2017

The following table shows the results of ~~continuing~~ operations for the three months ended September 30, ~~2017~~2018 and ~~2016, which reflects the results of acquired businesses from the relevant acquisition dates:~~2017:

	Three Months Ended September 30,										Three Months Ended
	2017		2016		$ Change			% Change			September 30,
	(in millions, except percentages)										2018			2017		$ Change			% Change
											(in millions, except percentages)
Products net sales	$	1,322.0	$	1,327.8	$	(5.8	)		(0.4	%)	$	1,329.8		$	1,322.0	$	7.8			0.6	%
Services net sales		412.9		397.8		15.1			3.8	%		319.7			412.9		(93.2	)		(22.6	%)
Total net sales		1,734.9		1,725.6		9.3			0.5	%		1,649.5			1,734.9		(85.4	)		(4.9	%)
Products cost of sales (exclusive of depreciation and amortization)		1,064.1		1,030.7		33.4			3.2	%		1,076.8			1,064.9		11.9			1.1	%
Services cost of sales (exclusive of depreciation and amortization)		346.4		330.7		15.7			4.7	%		257.3			346.5		(89.2	)		(25.7	%)
Total cost of sales		1,410.5		1,361.4		49.1			3.6	%		1,334.1			1,411.4		(77.3	)		(5.5	%)
Products gross profit		257.9		297.1		(39.2	)		(13.2	%)		253.0			257.1		(4.1	)		(1.6	%)
Services gross profit		66.5		67.1		(0.6	)		(0.9	%)		62.4			66.4		(4.0	)		(6.0	%)
Total gross profit		324.4		364.2		(39.8	)		(10.9	%)		315.4			323.5		(8.1	)		(2.5	%)
Selling, general and administrative expenses (exclusive of depreciation and amortization)		207.7		218.1		(10.4	)		(4.8	%)		203.8			210.9		(7.1	)		(3.4	%)
Restructuring, impairment and other charges-net		33.8		10.8		23.0		nm
Restructuring and other-net												11.0			33.8		(22.8	)		(67.5	%)
Depreciation and amortization		47.0		51.0		(4.0	)		(7.8	%)		44.2			47.0		(2.8	)		(6.0	%)
Other operating expense		—		0.3		(0.3	)	nm
Other operating income												(4.5	)		—		(4.5	)	nm
Income from operations	$	35.9	$	84.0	$	(48.1	)		(57.3	%)	$	60.9		$	31.8	$	29.1			91.5	%

Net sales of products for the three months ended September 30, ~~2017 decreased $5.8~~2018 increased $7.8 million, or ~~0.4%~~0.6%, to ~~$1,322.0~~$1,329.8 million versus the same period in ~~2016, including~~2017. The third quarter of 2018 included a ~~$5.1~~$9.8 million, or ~~0.4%~~0.7%, ~~increase~~decrease due to changes in foreign exchange rates. Net sales of products ~~decreased~~increased due to higher volume ~~within the Asia reporting unit,~~in packaging, partially offset by lower volume in ~~the Variable Print~~commercial print due to ongoing secular pressure and ~~Strategic Services segments and certain other reporting units within the International segment,~~lower specialty card sales, as well as lower volume in statements and price ~~pressures.~~pressure.

Net sales from services for the three months ended September 30, ~~2017 increased $15.1~~2018 decreased $93.2 million, or ~~3.8%~~22.6%, to ~~$412.9~~$319.7 million versus the same period in ~~2016, including a $0.2~~2017. Net sales from services decreased $106.4 million due to the disposition of our Print Logistics business and lower volume in digital and creative solutions as we continue our shift away from traditional pre-media services for non-core market segments, partially offset by higher volume in the remaining logistics business and business process outsourcing.

Products cost of sales for the three months ended September 30, 2018 increased $11.9 million, or ~~0.1%~~1.1%, ~~increase due~~ to ~~changes~~$1,076.8 million versus the same period in ~~foreign exchange rates. Net~~2017. Products cost of sales increased primarily due to higher volume ~~as well as increased fuel surcharges~~ in ~~logistics,~~packaging and cost inflation, including higher paper costs in Asia, partially offset by ~~lower postage pass-through sales within logistics,~~higher OPEB income, the favorable impact from changes in foreign exchange rates, lower volume in ~~business process outsourcing~~statements and ~~price pressures.~~

Products cost of sales increased $33.4 million, or 3.2%, for the three months ended September 30, 2017 versus the same period in the prior year, primarily due to higher volume and start-up costs within the Asia reporting unitcommercial print, as well as ~~cost inflation, partially offset by lower volume in the Variable Print segment and certain reporting units within the International segment, along with~~ cost control initiatives across the organization. As a percentage of net sales, products cost of sales increased ~~2.9~~0.4 percentage points for the three months ended September 30, ~~2017~~2018 versus the same period in ~~2016, primarily due to an unfavorable mix across the segments.~~2017.

Services cost of sales ~~increased $15.7~~decreased $89.2 million, or ~~4.7%~~25.7%, for the three months ended September 30, ~~2017~~2018 versus the same period in ~~the prior year. Services cost of sales increased~~2017, primarily due to the disposition of our Print Logistics business and cost control initiatives, partially offset by higher volume in ~~freight brokerage~~business process outsourcing and higher costs of transportation in ~~the logistics reporting unit, partially offset by lower postage pass-through sales within logistics and reduced business process outsourcing volume.~~logistics. As a percentage of net sales, services cost of sales ~~increased 0.8~~decreased 3.4 percentage points for the three months ended September 30, ~~2017~~2018 versus the same period in ~~2016, primarily due to unfavorable revenue mix in business process outsourcing.~~2017.

Products gross profit decreased ~~$39.2~~$4.1 million to ~~$257.9~~$253.0 million for the three months ended September 30, ~~2017~~2018 versus the same period in ~~2016~~2017, primarily due to price pressures on sales, cost inflation, lower volume in statements and an ~~unfavorable mix~~inventory reserve benefit recorded in ~~the Variable Print and International segments,~~2017, partially offset by the favorable impact from changes in foreign exchange rates and cost control initiatives. Products gross margin decreased from ~~22.4%~~19.4% to ~~19.5%, driven by price pressures and an unfavorable revenue mix within the International and Variable Print segment, partially offset by cost control initiatives.~~19.0%.

Services gross profit decreased ~~$0.6~~$4.0 million to ~~$66.5~~$62.4 million for the three months ended September 30, ~~2017~~2018 versus the same period in ~~2016~~2017, primarily due to ~~decreased volume in the business processing outsourcing reporting unit, an unfavorable revenue mix and~~ higher

costs of transportation in ~~the logistics reporting unit and price pressures, partially offset by increased fuel surcharges in the logistics reporting unit.~~logistics. Services gross margin ~~decreased~~increased from ~~16.9%~~16.1% in 2017 to ~~16.1%, reflecting an unfavorable revenue mix and price pressures.~~19.5% in 2018 primarily due to the favorable impact from selling our Print Logistics business.

Selling, general and administrative expenses decreased ~~$10.4~~$7.1 million to ~~$207.7~~$203.8 million for the three months ended September 30, ~~2017~~2018 versus the same period in ~~2016~~2017 reflecting ~~lower corporate and other overhead costs related to our operations prior to the Separation, lower healthcare costs and~~ cost control initiatives and a favorable impact from changes in foreign exchange rates, partially offset by higher ~~transactional foreign currency expense~~healthcare and ~~higher variable incentive compensation.~~performance-based compensation expenses and a favorable legal settlement in 2017. As a percentage of net sales, selling, general and administrative expenses ~~decreased~~increased from ~~12.6%~~12.2% to ~~12.0%~~12.4% for the three months ended September 30, ~~2017~~2018 versus the same period in ~~2016, due to the impact of the aforementioned expenses.~~2017.

For the three months ended September 30, ~~2017, the Company recorded~~2018, net restructuring ~~impairment~~ and other ~~charges~~expenses of ~~$33.8 million.~~$11.0 million decreased $22.8 million versus the same period in 2017. These ~~charges~~expenses included ~~a non-cash charge of $21.3 million for the impairment of goodwill in the digital and creative solutions reporting unit within the Strategic Services segment. The charges also included $10.7~~$2.8 million for employee termination costs ~~which were related to the reorganization~~ ~~of selling, general~~ and ~~administrative functions primarily within the~~ ~~Corporate and International segments. The Company also incurred~~$6.6 million for lease termination and other restructuring ~~costs of $1.1 million and net impairment~~ charges for ~~other long-lived assets of $0.2 million primarily related to the impairment of equipment in the Variable Print segment during~~ the three months ended September 30, ~~2017. Additionally, the Company~~2018. We also recorded $0.5 million of other charges for multi-employer pension plan withdrawal obligations unrelated to facility closures. ~~Refer~~The remainder is related to impairment charges of $1.1 million. See Note 7,6, Restructuring ~~Impairment~~ and Other ~~Charges~~, within the Notes to the Condensed Consolidated Financial Statements for ~~additional information.~~

For the three months ended September 30, 2016, the Company recorded net restructuring, impairment and other charges of $10.8 million. The Company recorded $9.7 million of employee termination costs, primarily related to the reorganization of certain administrative functions and operations. The Company also recorded lease termination and other restructuring charges of $0.6 million and $0.6 million of other charges related to multi-employer pension plan withdrawal obligations unrelated to facility closures for the three months ended September 30, 2016. Additionally, the Company recorded $0.1 million of net gains related to buildings and machinery and equipment associated with facility closures. Refer to Note 7, ~~Restructuring, Impairment and Other Charges, within the Notes to the Condensed Consolidated Financial Statements for additional information.~~further discussion.

Depreciation and amortization decreased ~~$4.0~~$2.8 million to ~~$47.0~~$44.2 million for the three months ended September 30, ~~2017~~2018 compared to the same period in ~~2016~~2017 primarily due to lower capital spending in recent years compared to historical ~~levels and certain International customer relationship intangible assets becoming fully amortized since the prior year.~~levels. Depreciation and amortization included ~~$7.1~~$6.8 million and ~~$8.0~~$7.1 million of amortization of other intangible assets related to ~~customer~~client relationships, trade names, trademarks, licenses and agreements for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

~~For~~During the three months ended September 30, ~~2016, other operating expense was $0.3 million, which consisted of a net loss on~~2018, we completed the sale of ~~entities~~our Print Logistics business and recorded a pre-tax gain of $4.5 million, which is reflected in ~~the International segment.~~Other operating income.

Income from operations for the three months ended September 30, ~~2017~~2018 was ~~$35.9~~$60.9 million, ~~a decrease~~an increase of ~~$48.1~~$29.1 million, or ~~57.3%~~91.5%, compared to the three months ended September 30, 2016. The decrease was due to higher restructuring, impairment and other charges, the prior year OPEB curtailment gains, lower volume in certain reporting units within the International and Variable Print segments, price pressures, start-up costs within the Asia reporting unit and higher transactional foreign currency expense, partially offset by lower corporate and other overhead costs related to our operations prior to the Separation, higher volume in the Asia reporting unit, lower healthcare costs and depreciation and amortization expense and cost control initiatives.2017.

Net interest expense decreased by ~~$5.3~~$1.5 million for the three months ended September 30, ~~2017~~2018 versus the same period in ~~2016,~~2017, primarily due to ~~a decrease in~~lower average ~~senior notes outstanding.~~borrowings and average interest rates during three months ended September 30, 2018.

~~Investment~~Net investment and other ~~income-net~~income for the three months ended September 30, 2018 and 2017 ~~and 2016~~ was ~~$2.8~~$5.5 million and ~~$1.0~~$6.9 million, ~~respectively. During~~respectively, and principally comprised of net OPEB and pension income. In addition, the three months ended September 30, 2017 ~~the Company recognized~~included a non-cash net realized gain of $1.6 million on the retained shares of Donnelley Financial exchanged for certain of ~~the Company’s~~our senior notes outstanding. ~~See Note 15,~~ ~~Debt,~~ ~~to the Condensed Consolidated Financial Statements for additional details of the debt-for-equity exchange.~~

Loss on debt extinguishments for the three months ended September 30, 2017 was $6.5 million which related to unamortized debt issuance costs, premiums paid and other expenses associated with the amendment and restatement of the credit agreement, as well as the debt-for-equity exchange of certain of our senior ~~notes during the three months ended September 30, 2017. Refer to Note 15,~~ ~~Debt,~~ ~~to the Condensed Consolidated Financial Statements for additional details.~~notes.

The effective income tax rate for the three months ended September 30, ~~2017~~2018 was ~~31.0% compared~~a benefit of 42.6% and is primarily driven by adjustments to ~~38.4% in~~ the ~~same period in 2016.~~ provisional amounts related to the Tax Act, the inability to recognize a tax benefit on certain losses, and the release of a valuation allowance utilized due to the gain on the sale of our Print Logistics business. The effective income tax rate for the ~~period~~three months ended September 30, 2017 was a benefit of 31.0% and reflects the impact of the impairment of goodwill in the ~~digital and creative solutions~~ ~~reporting unit~~Marketing Solutions segment and the inability to recognize a tax benefit on certain ~~losses. The~~ losses~~income tax provision for the period ended September 30, 2016 reflects the impact of income generated in higher taxing jurisdictions and the inability to recognize a tax benefit on certain losses.~~.

Income attributable to noncontrolling interests was ~~$0.2~~$0.5 million and ~~$0.3~~$0.2 million for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

~~The net loss from continuing operations,~~Net income attributable to RRD common stockholders, excluding the impact from non-controlling interests, ~~attributable to RRD common stockholders~~ for the three months ended September 30, ~~2017~~2018 was ~~$8.0~~$34.3 million, or ~~$0.11~~$0.49 per diluted share, compared to net ~~earnings~~loss attributable to RRD common stockholders of ~~$22.0~~$8.0 million, or ~~$0.31~~$0.11 per diluted share, for the three months ended September 30, ~~2016.~~2017.

The following tables summarize net sales, income (loss) from operations and certain items impacting comparability within each of the operating segments and Corporate. The descriptions of the reporting units generally reflect the primary products or services provided by each reporting unit. Included in these net sales amounts are sales of other products or services that may be produced within a reporting unit to meet customer needs and improve operating efficiency.

Net sales for the Variable Print segment for the three months ended September 30, 2017 were $767.5 million, a decrease of $22.8 million, or 2.9%, compared to 2016, including a $0.3 million increase due to changes in foreign exchange rates. Net sales

decreased due to lower volume primarily in commercial and digital print, direct mail and forms and price pressures, partially offset by higher volume in statement printing and labels. An analysis of net sales by reporting unit follows:

Variable Print segment income from operations decreased $10.8 million for the three months ended September 30, 2017, primarily due to lower volume and unfavorable mix within commercial and digital print and price pressures, partially offset by a favorable mix within statement printing. Operating margins decreased from 6.3% for the three months ended September 30, 2016 to 5.1% for the three months ended September 30, 2017 due to an unfavorable mix within commercial and digital print and price pressures, partially offset by cost control initiatives and a favorable mix within statement printing. Higher restructuring, impairment and other charges unfavorably impacted operating margins by 0.3 percentage points.

~~Net sales for the Strategic~~Business Services segment for the three months ended September 30, ~~2017~~2018 were ~~$443.7~~$1,363.2 million, a decrease of ~~$1.3~~$77.4 million, or ~~0.3%~~5.4%, compared to ~~2016.~~2017. Net sales decreased ~~primarily~~$106.4 million due to ~~lower postage pass-through sales~~the disposition of our Print Logistics business and $10.2 million due to changes in ~~logistics, lower volume~~foreign exchange rates. The remaining increase in ~~sourcing and digital and creative solutions and price pressures, partially offset by higher volume in freight brokerage and increased fuel surcharges in logistics. An analysis of~~ net sales ~~by reporting unit follows:~~

~~Digital~~pressures across the segment. The following table summarizes net sales by products and ~~creative solutions: Sales increased slightly due to incremental revenue from~~services in the ~~acquisition of Precision Dialogue in August 2016, partially offset by lower photo and prepress volume.~~Business Services segment:

	Three Months Ended
	September 30,
Products and Services	2018		2017		$ Change			% Change
	(in millions, except percentages)
Commercial print	$	496.4	$	510.5	$	(14.1	)		(2.8	%)
Logistics		229.1		314.2		(85.1	)		(27.1	%)
Packaging		179.7		150.9		28.8			19.1	%
Statements		133.5		142.1		(8.6	)		(6.1	%)
Labels		118.8		118.3		0.5			0.4	%
Supply chain management		81.5		76.8		4.7			6.1	%
Forms		63.7		68.7		(5.0	)		(7.3	%)
Business process outsourcing		60.5		59.1		1.4			2.4	%
Total Business Services	$	1,363.2	$	1,440.6	$	(77.4	)		(5.4	%)

~~Strategic~~Business Services segment income from operations ~~decreased $28.1~~increased $23.8 million for the three months ended September 30, ~~2017, mainly~~2018, primarily due to the ~~$21.3 million impairment~~favorable impact of ~~goodwill~~changes in ~~the digital~~foreign exchange rates, an increase in OPEB income and ~~creation solutions reporting unit, an unfavorable revenue mix, higher~~ cost ~~of transportation and price pressures within logistics and~~control initiatives, partially offset by lower volume in digital and creative solutions, partially offset by increased fuel surcharges. Operating margins decreased from 3.0% to (3.3%), primarily due to higher restructuring, impairment and other charges, an unfavorable revenue mix within the segment andstatements, price pressures ~~partially offset by favorable fuel surcharges in logistics, productivity~~ and cost ~~control initiatives. Higher restructuring, impairment and other charges favorably impacted operating margins by 4.7 percentage points.~~inflation.

~~International~~29

Three Months Ended

September 30,

2017

2016

(in millions, except percentages)

Net sales

$
523.7

$
490.3

Income from operations

20.6

36.0

Operating margin

3.9
%

7.3
%
Gain on sale of businesses

—

(0.3
)
OPEB curtailment gain

—

(0.1
)
Restructuring, impairment and other charges-net

2.2

1.1

Marketing Solutions

Net Sales for the Three Months Ended

September 30,

Reporting unit

2017

2016

$ Change

% Change

(in millions, except percentages)

Asia

$
228.2

$
183.1

$
45.1

24.6
%
Global Turnkey Solutions

119.7

128.1

(8.4
)

(6.6
%)
Business process outsourcing

96.1

99.8

(3.7
)

(3.7
%)
Canada

45.2

46.2

(1.0
)

(2.2
%)
Latin America

34.5

33.1

1.4

4.2
%
Total International

$
523.7

$
490.3

$
33.4

6.8
%

	Three Months Ended
	September 30,
	2018			2017
	(in millions, except percentages)
Net sales	$	286.3		$	294.3
Income (loss) from operations		11.8			(6.9	)
Operating margin		4.1	%		-2.3	%
Restructuring and other-net		0.2			22.8

Net sales infor the ~~International~~Marketing Solutions segment for the three months ended September 30, ~~2017~~2018 were ~~$523.7~~$286.3 million, ~~an increase~~a decrease of ~~$33.4~~$8.0 million, or ~~6.8%~~2.7%, compared to ~~the same period in 2016, inclusive of a $5.0 million, or 1.0%, increase due to changes in foreign exchange rates.~~2017. Net sales increased due to higher volume in Asia, partially offset by lower volume in Global Turnkey Solutions, business process outsourcing and Canada, as well as price pressures. An analysis of net sales by reporting unit follows:

~~Asia: Sales increased due to higher volume primarily in packaging and book products, partially offset by price pressures.~~

~~Global Turnkey Solutions: Sales~~ decreased primarily due to lower volume in ~~supply chain, books~~digital and ~~packaging,~~creative solutions as we continue our shift away from traditional pre-media services for non-core market segments, partially offset by ~~favorable changes in foreign exchange rates.~~

~~Business process outsourcing: Sales decreased due to lower volume and price pressures.~~

~~Canada: Sales decreased due to lower~~higher volume in ~~commercial print~~direct mail. The following table summarizes net sales by products and ~~statement printing, partially offset by favorable changes~~services in ~~foreign exchange rates.~~

~~Latin America: Sales increased primarily due to favorable changes in foreign exchange rates across~~ the ~~region and higher volume.~~Marketing Solutions segment:

	Three Months Ended
	September 30,
Products and Services	2018		2017		$ Change			% Change
	(in millions, except percentages)
Direct mail	$	143.4	$	141.4	$	2.0			1.4	%
Digital print and fulfillment		113.5		115.2		(1.7	)		(1.5	%)
Digital and creative solutions		29.4		37.7		(8.3	)		(22.0	%)
Total Marketing Solutions	$	286.3	$	294.3	$	(8.0	)		(2.7	%)

~~International~~Marketing Solutions segment income from operations ~~decreased $15.4~~increased $18.7 million ~~primarily due~~ to lower volume in Global Turnkey Solutions and business process outsourcing, cost inflation, higher transactional foreign currency expense, price pressures and start-up costs in Asia, partially offset by increased volume in Asia. Operating margins decreased from 7.3% to 3.9%, driven by lower volume in Global Turnkey Solutions and business process outsourcing, higher transactional foreign currency expense, price pressures, start-up costs in Asia and higher restructuring, impairment and other charges, partially offset by increased volume in Asia. Higher restructuring, impairment and other charges unfavorably impacted operating margins by 0.2 percentage points.

~~Corporate~~

Three Months Ended

September 30,

2017

2016

(in millions)

Operating expenses

$
(9.2
)

$
(15.4
)
Pension settlement

—

0.3

Restructuring, impairment and other charges-net

5.3

6.5

OPEB curtailment gain

—

(19.6
)
Loss on the sale of businesses

—

0.6

Acquisition-related expenses

—

0.7

~~Corporate operating expenses in~~$11.8 million for the three months ended September 30, ~~2017~~2018, primarily due to lower restructuring and impairment charges and cost control initiatives, partially offset by lower volume in digital and creative solutions and digital and fulfillment print.

Corporate

Corporate operating expenses during the three months ended September 30, 2018 were ~~$9.2~~$25.7 million, ~~a decrease~~an increase of ~~$6.2~~$13.4 million compared to the same period in ~~2016.~~2017. The ~~decrease~~increase was primarily driven by lower ~~corporate~~allocation recoveries, higher healthcare costs and ~~other overhead costs related to the pre-Separation combined entity, cost control initiatives and lower healthcare costs,~~a favorable legal settlement in 2017, partially offset by cost control initiatives. The following table summarizes unallocated operating expenses and certain items impacting comparability within the ~~prior year OPEB curtailment gains and lower pension and postretirement plan income.~~activities presented as Corporate:

	Three Months Ended
	September 30,
	2018		2017
	(in millions)
Operating expenses	$	25.7	$	12.3
Restructuring and other-net		3.7		5.3

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ~~2017~~2018 AS COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, ~~2016~~2017

The following table shows the results of operations for the nine months ended September 30, ~~2017~~2018 and ~~2016, which reflects the results of acquired businesses from the relevant acquisition dates:~~2017:

	Nine Months Ended September 30,											Nine Months Ended
	2017		2016			$ Change			% Change			September 30,
	(in millions, except percentages)											2018			2017		$ Change			% Change
												(in millions, except percentages)
Products net sales	$	3,830.9	$	3,772.5		$	58.4			1.5	%	$	3,881.6		$	3,830.9	$	50.7			1.3	%
Services net sales		1,182.9		1,201.6			(18.7	)		(1.6	%)		1,155.2			1,182.9		(27.7	)		(2.3	%)
Total net sales		5,013.8		4,974.1			39.7			0.8	%		5,036.8			5,013.8		23.0			0.5	%
Products cost of sales (exclusive of depreciation and amortization)		3,065.7		2,958.1			107.6			3.6	%		3,167.7			3,068.3		99.4			3.2	%
Services cost of sales (exclusive of depreciation and amortization)		992.8		1,002.9			(10.1	)		(1.0	%)		968.4			993.2		(24.8	)		(2.5	%)
Total cost of sales		4,058.5		3,961.0			97.5			2.5	%		4,136.1			4,061.5		74.6			1.8	%
Products gross profit		765.2		814.4			(49.2	)		(6.0	%)		713.9			762.6		(48.7	)		(6.4	%)
Services gross profit		190.1		198.7			(8.6	)		(4.3	%)		186.8			189.7		(2.9	)		(1.5	%)
Total gross profit		955.3		1,013.1			(57.8	)		(5.7	%)		900.7			952.3		(51.6	)		(5.4	%)
Selling, general and administrative expenses (exclusive of depreciation and amortization)		643.6		681.0			(37.4	)		(5.5	%)		626.4			653.0		(26.6	)		(4.1	%)
Restructuring, impairment and other charges-net		46.7		24.3			22.4			92.2	%
Restructuring and other-net													22.8			46.7		(23.9	)		(51.2	%)
Depreciation and amortization		143.1		153.5			(10.4	)		(6.8	%)		137.5			143.1		(5.6	)		(3.9	%)
Other operating income		—		(12.0	)		12.0		nm				(4.6	)		—		(4.6	)	nm
Income from operations	$	121.9	$	166.3		$	(44.4	)		(26.7	%)	$	118.6		$	109.5	$	9.1			8.3	%

Consolidated

Net sales of products for the nine months ended September 30, ~~2017~~2018 increased ~~$58.4~~$50.7 million, or ~~1.5%~~1.3%, to ~~$3,830.9~~$3,881.6 million versus the ~~prior year~~same period ~~including~~in 2017. The nine months ended September 30, 2018 included a ~~$7.9~~$28.8 million, or ~~0.2%~~0.8%, ~~decrease~~increase due to changes in foreign exchange rates. Net sales of products also increased due to higher volume ~~within the Asia~~in packaging and ~~sourcing reporting units,~~direct mail, partially offset by lower volume in ~~the Variable Print segment~~commercial print due to ongoing secular pressure and ~~certain other reporting units within the International segment,~~lower specialty card sales, as well as price ~~pressures.~~ pressure.

Net sales from services for the nine months ended September 30, ~~2017~~2018 decreased ~~$18.7~~$27.7 million, or 2.3%, to ~~$1,182.9~~$1,155.2 million versus the same period in ~~2016, including an $8.2~~2017. Net sales from services decreased $106.4 million ~~or 0.7%, decrease~~ due to ~~change in foreign exchange rates. Net sales decreased primarily due to lower postage pass-through sales within logistics,~~the disposition of our Print Logistics business, lower volume in ~~business process outsourcing~~digital and ~~price pressures,~~creative solutions as we continue our shift away from traditional pre-media services for non-core market segments, partially offset by higher volume in ~~freight brokerage~~the remaining logistics business and ~~courier services as well as increased fuel surcharges within the logistics reporting unit.~~ business process outsourcing.

Products cost of sales ~~increased $107.6 million, or 3.6%,~~ for the nine months ended September 30, ~~2017~~2018 increased $99.4 million, or 3.2%, to $3,167.7 million versus the same period in ~~the prior year,~~2017. Products cost of sales increased primarily due to higher volume ~~within~~in packaging, the unfavorable impact from changes in foreign exchange rates, cost inflation, including higher paper costs in Asia and ~~sourcing reporting units as well as cost inflation,~~operational inefficiencies due to volume reductions from two clients, partially offset by lower volume in ~~the Variable Print segment and certain reporting units within the International segment and~~commercial print, along with cost control initiatives across the organization. As a percentage of net sales, products cost of sales increased ~~1.6%~~1.5 percentage points for the nine months ended September 30, ~~2017~~2018 versus the same period in ~~the prior year, primarily due to an unfavorable mix across the segments.~~ 2017.

Services cost of sales decreased ~~$10.1~~$24.8 million, or ~~1.0%~~2.5%, for the nine months ended September 30, ~~2017~~2018 versus the same period in ~~the prior year. Services cost of sales decreased~~2017, primarily due to ~~lower postage pass-through sales within logistics~~the disposition of our Print Logistics business and ~~reduced business process outsourcing volume,~~cost control initiatives, partially offset by higher volume in ~~freight brokerage~~the remaining logistics business and ~~courier services and~~business process outsourcing, as well as higher costs of transportation in ~~the logistics reporting unit.~~logistics. As a percentage of net sales, services cost of sales ~~increased 0.4%~~decreased 0.2 percentage points for the nine months ended September 30, ~~2017~~2018 versus the same period in ~~the prior year driven by an unfavorable revenue mix in business process outsourcing and the logistics reporting unit.~~2017.

Products gross profit decreased ~~$49.2~~$48.7 million to ~~$765.2~~$713.9 million for the nine months ended September 30, ~~2017~~2018 versus the same period in ~~2016~~2017, primarily due to price pressures, the unfavorable impact from changes in foreign exchange rates and ~~lower volume in certain International reporting units and the Variable Print segment,~~cost inflation, including higher paper costs, partially offset by ~~higher volume in the Asia reporting unit and~~ cost control initiatives. Products gross margin decreased from ~~21.6%~~19.9% to 20.0%, driven by price pressures and an unfavorable revenue mix within much of the International and Variable Print segments and the sourcing reporting unit, partially offset by cost control initiatives. 18.4%.

Services gross profit decreased ~~$8.6~~$2.9 million to ~~$190.1~~$186.8 million for the nine months ended September 30, ~~2017~~2018 versus the same period in ~~2016~~2017, primarily due to ~~lower business process outsourcing volume~~higher costs of transportation in logistics and price ~~pressures, partially offset by increased fuel surcharges within the logistics reporting unit.~~pressures. Services gross margin ~~decreased~~increased from ~~16.5%~~16.0% to ~~16.1%, primarily reflecting an unfavorable revenue mix.~~16.2%.

Selling, general and administrative expenses decreased ~~$37.4~~$26.6 million to ~~$643.6~~$626.4 million for the nine months ended September 30, ~~2017~~2018 versus the same period in ~~2016, due to the pension settlement charge in the prior year period, lower corporate and other overhead costs related to our operations prior to the Separation, lower bad debt and legal expenses and~~2017 reflecting cost control initiatives, partially offset by higher ~~transactional foreign currency~~bad debt expense in 2018, which included an $8.3 million charge due to a client-related bankruptcy and higher ~~variable incentive~~performance-based compensation ~~expense and lower pension and other post-retirement benefits income.~~expense. As a percentage of net sales, selling, general and administrative expenses decreased from ~~13.7%~~13.0% to ~~12.8%~~12.4% for the nine months ended September 30, ~~2017~~2018 versus the same period in ~~2016, due to the impact of the aforementioned expenses.~~ 2017.

For the nine months ended September 30, ~~2017, the Company recorded~~2018, net restructuring ~~impairment~~ and other ~~charges~~expenses of ~~$46.7 million.~~$22.8 million decreased $23.9 million versus the same period in 2017. These ~~charges~~expenses included ~~a non-cash charge of $21.3~~$11.2 million for ~~the impairment of goodwill in the digital and creative solutions reporting unit within the Strategic Services segment as well as $19.5 million of~~ employee termination costs ~~which were related to~~ ~~the reorganization of selling, general~~ and administrative functions primarily within the Corporate, International and Variable Print segments, ceasing the Company’s relationship in a joint venture within the International segment and one facility closure in the Strategic Services segment. ~~The Company also incurred~~$12.0 million for lease termination and other restructuring charges ~~of $3.8 million and net impairment charges~~ for other long-lived assets of $0.4 million for impairment of equipment primarily related to a facility closure in the Strategic Services segment, partially offset by a net gain recognized on the sale of previously impaired equipment during the nine months ended September 30, ~~2017. Additionally, the Company~~2018. We also recorded $1.7 million of other charges for multi-employer pension plan withdrawal obligations unrelated to facility closures. ~~Refer to Note 7,~~ ~~Restructuring, Impairment and Other~~ ~~Charges, within the Notes to the Condensed Consolidated Financial Statements for additional information.~~

~~For the nine months ended September 30, 2016, the Company recorded net restructuring, impairment and other charges of $24.3 million.~~ The Company recorded $20.7 million of employee termination costs, primarily due to two facility closures in the International segment and the reorganization of certain administrative functions and operations. The Company also recorded lease termination and other restructuring charges of $2.9 million and $1.7 million of other chargesremainder is related to ~~multi-employer pension plan withdrawal obligations unrelated to facility closures for the nine months ended September 30, 2016. Additionally, the Company recorded $1.0~~a $5.4 million ~~of net gains~~gain on the sale of previously impaired assets, ~~partially~~ offset by $3.3 million of impairment charges related to ~~buildings and machinery and equipment associated with~~ facility closures. ~~Refer to~~See Note 7,6, Restructuring ~~Impairment~~ and Other ~~Charges~~, within the Notes to the Condensed Consolidated Financial Statements for ~~additional information.~~ further discussion.

Depreciation and amortization decreased ~~$10.4~~$5.6 million to ~~$143.1~~$137.5 million for the nine months ended September 30, ~~2017~~2018 compared to the same period in ~~2016~~2017 primarily due to lower capital spending in recent years compared to historical ~~levels and certain International customer relationship intangible assets becoming fully amortized since the prior year quarter.~~levels. Depreciation and amortization included ~~$21.6~~$20.7 million and ~~$25.7~~$21.6 million of amortization of other intangible assets related to ~~customer~~client relationships, trade names, trademarks, licenses and agreements for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

~~For~~During the nine months ended September 30, ~~2016, other operating income was $12.0 million, which consisted of a net gain on~~2018, we completed the sale of ~~entities~~our Print Logistics business and recorded a pre-tax gain of $4.5 million, which is reflected in ~~the International segment.~~Other operating income.

Income from operations for the nine months ended September 30, ~~2017~~2018 was ~~$121.9~~$118.6 million, ~~a decrease~~an increase of ~~$44.4~~$9.1 million, or ~~26.7%~~8.3%, compared to the nine months ended September 30, 2016. The decrease was due to lower volume in certain reporting units within the International and Variable Print segments, price pressures, higher restructuring, impairment and other charges, the prior year OPEB curtailment gains, the prior year net gain on the sale of entities in the International segment and higher transactional foreign currency expense, partially offset by the prior year pension settlement charge, lower corporate and other overhead costs related to our operations prior to the Separation, higher volume in the Asia reporting unit, reduced bad debt, legal and depreciation and amortization expenses and cost control initiatives.2017.

													Nine Months Ended
	Nine Months Ended September 30,												September 30,
	2017			2016			$ Change			% Change			2018			2017			$ Change			% Change
	(in millions, except percentages)												(in millions, except percentages)
Interest expense-net	$	137.3		$	150.6		$	(13.3	)		(8.8	%)	$	125.7		$	137.3		$	(11.6	)		(8.4	%)
Investment and other income-net		(47.2	)		(0.4	)		46.8		nm				(14.7	)		(59.6	)		(44.9	)		(75.3	%)
Loss on debt extinguishments		20.1			—			20.1		nm				0.1			20.1			(20.0	)		(99.5	%)

Net interest expense decreased by ~~$13.3~~$11.6 million for the nine months ended September 30, ~~2017~~2018 versus the same period in ~~2016,~~2017, primarily due to lower average borrowings and ~~a lower weighted average~~ interest ~~rate~~rates during nine months ended September 30, 2018.

Net investment and other income for the nine months ended September 30, ~~2017.~~

2018 was $14.7 million and principally comprised of net pension and OPEB income. Net investment and other ~~income-net~~income for the nine months ended September 30, 2017 ~~and 2016 of $47.2~~was $59.6 million and ~~$0.4 million, respectively. For the nine months ended September 30, 2017, the Company recorded~~included a non-cash net realized gain of $94.0 million on the retained shares of Donnelley Financial exchanged for certain of ~~the Company’s~~our senior notes outstanding, ~~and~~ a gain of $1.3 million resulting from the sale of certain of ~~the Company’s~~our affordable housing investments and net pension and OPEB income, partially offset by a net realized loss of $51.6 million resulting from the sale of ~~the Company’s~~our retained shares of LSC.

Loss on debt extinguishments for the nine months ended September 30, 2017 was $20.1 million which related to premiums paid in connection with the tenders, unamortized debt issuance costs and other expenses associated with the debt-for-equity exchange of senior notes, the repurchase of debentures and senior notes and the amendment and restatement of the credit agreement. ~~Refer to~~ See Note ~~15,~~1, ~~Debt,~~Basis of Presentation, within the Notes to the Condensed Consolidated Financial Statements for ~~additional details.~~further discussion on the debt-for-equity exchange.

The effective income tax rate for the nine months ended September 30, ~~2017~~2018 was ~~(63.2%) compared~~a benefit of 72.0% and is primarily driven by adjustments to ~~80.1% in~~ the ~~same period in 2016.~~provisional amounts related to the Tax Act, the inability to recognize a tax benefit on certain losses, and the release of a valuation allowance utilized due to the gain on the sale of our Print Logistics business. The effective income tax rate for the ~~period ended~~ nine months ended September 30, 2017 was a benefit of 63.2% and reflects the impact of impairment of goodwill in the ~~digital and creative solutions reporting unit,~~Marketing Solutions segment, the inability to recognize a tax benefit on certain losses and the impact of the net gain on ~~the~~ disposition of investments. The Donnelley Financial retained shares were disposed in a non-taxable debt-for-equity exchange. The sale of the LSC retained shares generated a capital loss which will be carried forward; however, it ~~is more likely than not~~was determined at the time of the sale that the benefit of such deferred tax asset ~~will~~would not be fully realized and a valuation allowance was recorded. The income tax provision for the nine months ended September 30, 2016 reflects the impact of income generated in higher taxing jurisdictions and the inability to recognize a tax benefit on certain losses.

Income attributable to noncontrolling interests was ~~$0.7~~$1.2 million and ~~$0.8~~$0.7 million for the nine months ended September 30, 2018 and 2017, ~~and 2016,~~ respectively.

Net ~~earnings from continuing operations,~~income attributable to RRD common stockholders, excluding the impact from non-controlling interests, ~~attributable to RRD common stockholders~~ for the nine months ended September 30, ~~2017~~2018 was ~~$18.4~~$11.7 million, or ~~$0.26~~$0.17 per diluted share, compared to ~~$2.4~~$18.4 million, or ~~$0.03~~$0.26 per diluted share, for the nine months ended September 30, ~~2016.~~2017.

Net sales for the Variable Print segment for the nine months ended September 30, 2017 were $2,279.6 million, a decrease of $32.2 million, or 1.4%, compared to 2016, including a $0.2 million increase due to changes in foreign exchange rates. Net sales decreased due to lower volume primarily in commercial and digital print, direct mail, forms and price pressures, partially offset by the incremental sales from the Precision Dialogue acquisition. An analysis of net sales by reporting unit follows:

Variable Print segment income from operations decreased $29.8 million for the nine months ended September 30, 2017 primarily due to lower volume within commercial and digital print and direct mail, price pressures and higher variable incentive compensation, partially offset by a favorable mix within statement printing, labels and forms. Operating margins decreased from 6.2% for the nine months ended September 30, 2016 to 5.0% for the nine months ended September 30, 2017 due to lower volume and an unfavorable mix within commercial and digital print and direct mail and price pressures, partially offset by cost control initiatives and a favorable mix within statement printing, labels and forms. Higher restructuring, impairment and other charges unfavorably impacted operating margins by 0.1 percentage points.

~~Net sales for the Strategic~~Business Services segment for the nine months ended September 30, ~~2017~~2018 were ~~$1,274.3~~$4,188.3 million, an increase of ~~$44.7~~$22.6 million, or ~~3.6%~~0.5%, compared to ~~2016.~~2017. Net sales decreased $106.4 million due to the disposition of our Print Logistics business. The increase in net sales was due to higher volume in packaging and the remaining logistics business and $32.6 million of favorable changes in foreign exchange rates, partially offset by lower volume in commercial print due to ongoing secular pressure, lower specialty card sales and price pressures across the segment. The following table summarizes net sales by products and services in the Business Services segment:

Business Services segment income from operations increased $0.1 million for the nine months ended September 30, 2018, primarily due to cost control initiatives and an increase in OPEB income, partially offset by price pressures, the unfavorable impact from changes in foreign exchange rates, an unfavorable mix in sales, higher cost of transportation in logistics, cost inflation, including higher paper costs in our products in Asia and operational inefficiencies due to volume reductions from two clients.

Net sales for the Marketing Solutions segment for the nine months ended September 30, 2018 were $848.5 million, an increase of $0.4 million compared to 2017. Net sales increased primarily due to higher volume in sourcing, freight brokerage and courier services and increased fuel surcharges in logistics, partially offset by lower postage pass-through sales in logistics. An analysis of net sales by reporting unit follows:

~~Digital~~digital and creative ~~solutions: Sales increased due to incremental revenue~~solutions as we continue our shift away from traditional pre-media services for non-core market segments and lower volume in digital print and fulfillment. The following table summarizes net sales by products and services in the ~~2016 acquisition of Precision Dialogue, partially offset by lower prepress and photo volume.~~ Marketing Solutions segment:

	Nine Months Ended
	September 30,
Products and Services	2018		2017		$ Change			% Change
	(in millions, except percentages)
Direct mail	$	427.5	$	397.2	$	30.3			7.6	%
Digital print and fulfillment		332.6		342.7		(10.1	)		(2.9	%)
Digital and creative solutions		88.4		108.2		(19.8	)		(18.3	%)
Total Marketing Solutions	$	848.5	$	848.1	$	0.4			-

~~Strategic Services~~Marketing Solutions segment income from operations ~~decreased $32.3~~increased $27.3 million to $32.7 million for the nine months ended September 30, ~~2017, mainly~~2018, primarily due to ~~the~~lower restructuring and impairment ~~of goodwill~~charges and cost control initiatives, partially offset by lower volume in digital and creative solutions, lower volume in print logistics and digital and creative solutions, price pressures, higher costs of transportation in logistics and higher variable incentive compensation, partially offset by increased fuel surcharges within logistics and productivity and cost control initiatives. Operating margins decreased from 2.1% forsolutions.

Corporate

Corporate operating expenses during the nine months ended September 30, 2016 to (0.5%) for the nine months ended September 30, 2017 primarily due to higher restructuring, impairment and other charges, unfavorable mix within the segment, price pressures and higher variable incentive compensation, partially offset by favorable fuel surcharges in logistics, increased productivity and cost control initiatives. Higher restructuring, impairment and other charges negatively impacted operating margins by 1.7 percentage points.

~~International~~

Nine Months Ended

September 30,

2017

2016

(in millions, except percentages)

Net sales

$
1,459.9

$
1,432.7

Income from operations

53.8

101.8

Operating margin

3.7
%

7.1
%
Restructuring, impairment and other charges-net

8.6

6.2

OPEB curtailment gain

—

(0.1
)
Gain on sale of businesses

—

(12.6
)

Net Sales for the Nine Months Ended

September 30,

Reporting unit

2017

2016

$ Change

% Change

(in millions, except percentages)

Asia

$
586.7

$
479.3

$
107.4

22.4
%
Global Turnkey Solutions

340.7

377.3

(36.6
)

(9.7
%)
Business process outsourcing

284.9

323.5

(38.6
)

(11.9
%)
Canada

148.3

160.4

(12.1
)

(7.5
%)
Latin America

99.3

92.2

7.1

7.7
%
Total International

$
1,459.9

$
1,432.7

$
27.2

1.9
%

~~Net sales in the International segment for the nine months ended September 30, 2017~~2018 were ~~$1,459.9~~$67.0 million, an increase of $27.2 million, or 1.9%, compared to the same period in 2016, inclusive of a $16.3 million, or 1.1%, decrease due to changes in foreign exchange rates. Net sales increased due to higher volume in Asia, partially offset by lower volume in Global Turnkey Solutions, business process outsourcing and Canada, as well as price pressures. An analysis of net sales by reporting unit follows:

~~Asia: Sales increased due to higher volume primarily in packaging and books products, partially offset by an unfavorable change in foreign exchange rates and price pressures.~~

~~Global Turnkey Solutions: Sales decreased primarily due to lower volume in books and packaging, partially offset by favorable price changes.~~

~~Business process outsourcing: Sales decreased due to lower volume, changes in foreign exchange rates and price pressures.~~

~~Canada: Sales decreased due to lower volume in commercial print, statement printing, forms and labels, partially offset by favorable changes in foreign exchange rates across the region.~~

~~Latin America: Sales increased primarily due to favorable changes in foreign exchange rates across the region.~~

International segment income from operations decreased $48.0 million primarily due to lower volume in Global Turnkey Solutions, Canada and business process outsourcing, the prior year $12.6 million gain recognized on the sale of businesses, higher costs of transactional foreign exchange expense, as well as price pressures, higher restructuring, impairment and other charges and higher variable incentive compensation, partially offset by increased volume in Asia and lower bad debt expense. Operating margins decreased from 7.1% for the nine months ended September 30, 2016 to 3.7% for the nine months ended September 30, 2017, driven by the prior year $12.6 million gain recognized on the sale of businesses, lower volume in Global Turnkey Solutions, Canada and business process outsourcing, higher transactional foreign exchange expense, price pressures, higher restructuring, impairment and other charges and higher variable incentive compensation, partially offset by increased packaging volume in Asia and lower bad debt expense. The prior year gain on the sale of businesses and higher restructuring, impairment and other charges negatively impacted operating margins by 0.9 and 0.2 percentage points, respectively.

~~Corporate~~

Nine Months Ended

September 30,

2017

2016

(in millions)

Operating expenses

$
(39.1
)

$
(104.8
)
Pension settlement

—

20.7

Spinoff-related transaction expenses

3.3

—

Restructuring, impairment and other charges-net

7.7

11.4

OPEB curtailment gain

—

(19.6
)
Loss on the sale of businesses

—

0.6

Acquisition-related expenses

—

2.7

~~Corporate operating expenses in the nine months ended September 30, 2017 were $39.1 million, a decrease of $65.7~~$18.3 million compared to the same period in ~~2016.~~2017. The ~~decrease~~increase was primarily driven by ~~the prior year pension settlement charge, lower corporate~~higher healthcare costs and ~~other overhead costs related to the pre-Separation combined entity, lower legal and~~higher bad debt ~~expenses, cost control initiatives~~expense in 2018 due to a client-related bankruptcy, lower allocation recoveries and ~~lower restructuring, impairment and other charges-net,~~a favorable legal settlement in 2017, partially offset by cost control initiatives. The following table summarizes unallocated operating expenses and certain items impacting comparability within the ~~prior year OPEB curtailment gain, lower pension and postretirement plan income, higher variable incentive compensation and spinoff-related transaction expenses.~~activities presented as Corporate:

	Nine Months Ended
	September 30,
	2018		2017
	(in millions)
Operating expenses	$	67.0	$	48.7
Spinoff-related transaction expenses		—		3.3
Restructuring and other-net		7.5		7.7

LIQUIDITY AND CAPITAL RESOURCES

~~The Company believes it has~~We believe that we have sufficient liquidity to support ~~its~~our ongoing operations and to invest in future growth to create value for ~~its~~our stockholders. Operating cash flows and available capacity under ~~the Company’s $800.0 million~~our asset-based senior secured revolving credit facility ~~(the “Credit Agreement”)~~ are ~~the Company’s~~our primary sources of liquidity and are expected to be used for, among other things, capital expenditures necessary to support productivity improvement and growth, completion of restructuring programs, acquisitions, payment of interest and principal on ~~the Company’s~~our long-term debt obligations, and distributions to stockholders that may be approved by the Board of ~~Directors, acquisitions, capital expenditures necessary to support productivity improvement and growth and completion of restructuring programs.~~Directors.

The following describes ~~the Company’s~~our cash flows for the nine months ended September 30, ~~2017~~2018 and ~~2016. The Company’s cash flows for all periods prior to the October 1, 2016 Distribution include the impact of LSC and Donnelley Financial. Refer to Note 2,~~ ~~Discontinued Operations~~2017.~~, to the Condensed Consolidated Financial Statements for information on the significant non-cash items, capital expenditures and depreciation and amortization related to LSC and Donnelley Financial.~~

~~Cash Flows From Operating Activities~~

	Nine Months Ended
	September 30,
	2018			2017			$ Change
	(in millions)
Net cash used in operating activities	$	(63.9	)	$	(3.2	)	$	(60.7	)
Net cash provided by investing activities		25.9			42.9			(17.0	)
Net cash provided by (used in) financing activities		46.7			(141.0	)		187.7
Effect of exchange rates on cash, cash equivalents and restricted cash		(14.0	)		13.2			(27.2	)
Net decrease in cash, cash equivalents and restricted cash	$	(5.3	)	$	(88.1	)	$	82.8

Operating cash inflows are largely attributable to sales of ~~the Company’s~~our products and services. Operating cash outflows are largely attributable to recurring expenditures for raw materials, labor, rent, interest, taxes and other operating activities.

Net cash used in operating activities was ~~$12.6~~$63.9 million for the nine months ended September 30, ~~2017,~~2018 compared to ~~net cash provided by operating activities of $7.8~~$3.2 million during the same period in ~~2016.~~2017. The ~~decrease~~increase in net cash ~~provided by~~used in operating activities ~~was driven by lower~~related primarily to net unfavorable changes in working capital, principally a reduction in accounts payable.

Included in net cash ~~earnings,~~ ~~partially offset by~~ used in operating activities were the ~~timing of supplier and customer payments and lower interest, spinoff-related transaction and tax payments~~.following operating cash outflows:

~~Cash Flows From Investing Activities~~

	Nine Months Ended
	September 30,
	2018		2017		$ Change
	(in millions)
Income tax payments, net of tax refunds	$	14.4	$	13.4	$	1.0
Interest payments, net of interest income		118.0		131.5		(13.5	)

Net cash provided by investing activities for the nine months ended September 30, ~~2017~~2018 was ~~$48.0~~$25.9 million compared to ~~net cash used~~$42.9 million during the same period in ~~investing activities of $167.9 million for the nine months ended September 30, 2016.~~2017. Capital expenditures were ~~$77.2~~$72.7 million during the first nine months of ~~2017,~~2018, a decrease of ~~$70.7~~$4.5 million as compared to the same period of ~~2016 primarily driven~~2017. For the nine months ended September 30, 2018, cash provided by ~~LSC and Donnelley Financial capital expenditures~~investing activities included $55.1 million cash proceeds from the sale of our Print Logistics business, net of $4.9 million cash included in the ~~prior year period~~disposition, $32.1 million cash received as a non-refundable deposit for the expected sale of ~~$49.0~~a facility and cash proceeds from the sale of investments and other assets of $17.8 million. For the nine months ended September 30, 2017, cash provided by investing activities included net proceeds of $121.4 million from the sale of ~~the Company’s~~our retained interest in LSC. For the nine months ended September 30, 2016, the Company paid $47.5 million to acquire Precision Dialogue. Additionally, for the nine months ended September 30, 2016, cash used in investing activities included $13.7 million of proceeds primarily from business dispositions in the International segment.

~~Cash Flows From Financing Activities~~

Net cash ~~used in~~provided by financing activities for the nine months ended September 30, ~~2017~~2018 was ~~$139.1~~$46.7 million compared to net cash ~~provided by~~used in financing activities of ~~$187.4~~$141.0 million in the same period in ~~2016.~~2017. During the nine months ended September 30, 2018, we increased our borrowings under credit facilities by $26.0 million compared to $165.0 million during the nine months ended September 30, 2017. During the nine months ended September 30, 2017, ~~the~~

Company had $1,000.0 million and $1,165.0 million of payments and borrowings, respectively, under the Company’s credit facilities, compared to none in the prior year period. During the nine months ended September 30, 2017, the Companywe paid approximately $200.4 million to repurchase certain senior notes and debentures outstanding through borrowings under ~~the Company’s~~our credit facilities. ~~During the nine months ended September 30, 2016, the Company repurchased $503.6 million of aggregate principal of senior notes using the proceeds from the issuance of senior notes~~Dividends paid were $21.8 and senior secured term loan B facilities of $450.0 million and $725.0 million, respectively, issued by its formerly, wholly-owned subsidiaries LSC and Donnelley Financial, which proceeds were received as distributions by the Company immediately prior to the Separation. Additionally, during the nine months ended September 30, 2016, cash on hand and the borrowings under the prior credit agreement were used to pay $219.8 million of the 8.60% senior notes that matured on August 15, 2016.

~~Additionally, dividends paid decreased $133.8 million from $163.2 million during the nine months ended September 30, 2016 to~~ $29.4 million during the nine months ended September 30, ~~2017. During~~2018 and 2017, respectively. Additionally, during the nine months ended September 30, 2017, ~~the Company~~we paid the final ~~spinoff cash settlement~~spinoff-related obligations of $78.0 million to LSC and Donnelley Financial as required by the Separation and Distribution agreement.

LIQUIDITY

Cash and cash equivalents of ~~$225.8~~$247.0 million as of September 30, ~~2017~~2018 included ~~$41.2~~$33.1 million in the U.S. and ~~$184.6~~$213.9 million at international locations. ~~The Company’s foreign subsidiaries are expected to make payments of approximately $17.9 million during the remainder of 2017 in satisfaction of intercompany obligations. The Company has~~We have recognized deferred tax liabilities of $5.7 million as of September 30, ~~2017~~2018 related to local taxes on certain foreign earnings that are not considered to be permanently reinvested. Certain other cash balances of foreign subsidiaries, ~~may be subject to U.S. or local country taxes~~ if repatriated to the U.S., may be subject to additional tax which would depend on income tax laws and circumstances at the time of distribution. In addition, repatriation of some foreign cash balances is further restricted by local laws. ~~Management~~We regularly ~~evaluates~~evaluate whether foreign earnings are expected to be permanently reinvested. This evaluation requires judgment about ~~the~~our future operating and liquidity needs of the Company and ~~its~~our foreign subsidiaries. Changes in economic and business conditions, foreign or U.S. tax laws, or ~~the Company’s~~our financial situation could result in changes to these judgments and the need to record additional tax ~~liabilities.~~liabilities.

Included in ~~cash~~Cash and cash equivalents at September 30, ~~2017~~2018 were ~~$23.8~~$64.4 million of short-term investments, which primarily consisted of short-term deposits and money market funds. These investments are held at institutions with sound credit ratings and are expected to be highly liquid.

In March 2017, ~~the Company~~we sold the 6,242,802 common shares itwe retained upon the spinoff of LSC for net proceeds of $121.4 million. The proceeds of this sale were used to repay a portion of the outstanding borrowings under ~~the Company’s~~our credit facility. In June 2017, ~~the Company~~we exchanged 6,143,208 of the 6,242,802 common shares of Donnelley Financial retained upon the spinoff for $111.6 million of aggregate principal of certain outstanding senior notes. In August 2017, ~~the Company~~we disposed of ~~its~~our remaining retained shares in Donnelley Financial via a second debt-for-equity exchange, pursuant to which ~~the Company~~we exchanged 99,594 shares of Donnelley Financial’s common stock for $1.9 million of aggregate principal of certain outstanding senior notes. Such debt obligations were cancelled and discharged upon delivery to ~~the Company. As of September 30, 2017, the Company no longer held any shares of LSC or Donnelley Financial common stock.~~

~~The Company’s debt maturities as of September 30, 2017 are shown in the following table:~~

Debt Maturity Schedule

Total

2017

2018

2019

2020

2021

Thereafter

(in millions)

Senior notes and debentures and borrowings
under the Credit Agreement _(a)
$
2,245.8

$
—

$
—

$
172.2

$
238.4

$
529.1

$
1,306.1

Miscellaneous debt obligations

17.9

17.9

—

—

—

—

—

Total
$
2,263.7

$
17.9

$
—

$
172.2

$
238.4

$
529.1

$
1,306.1

~~(a)~~

~~Excludes unamortized debt issuance costs of $12.2 million and a discount of $1.4 million which do not represent contractual commitments with a fixed amount or maturity date.~~

On June 7, 2017, the Company repurchased $41.7 million of the 6.625% debentures due April 15, 2029, $59.4 million of the 6.50% senior notes due November 15, 2023 and $101.7 million of the 6.00% senior notes due April 1, 2024 using borrowings under the prior credit agreement. The repurchases resulted in a net gain of $0.8 million which was recognized within loss on debt extinguishments in the Condensed Consolidated Statements of Operations during the nine months ended September 30, 2017 related to the difference between the fair value of the debt repurchased and the principal outstanding, partially offset by premiums paid, unamortized debt issuance costs and other expenses.

On May 22, 2017, certain third party financial institutions (such financial institutions collectively, the “Third Party Purchasers”), launched cash tender offers for certain of the Company’s outstanding debt securities, including the Company’s 7.625% senior notes due June 15, 2020 and 7.875% senior notes due March 15, 2021. On June 7, 2017, the Third Party Purchasers purchased $111.6 million in aggregate principal amount of the 7.625% senior notes due June 15, 2020 (the “Third Party Purchase Notes”). On June 21, 2017, the Company exchanged 6,143,208 of its retained shares of Donnelley Financial for the Third Party Purchase Notes. The Company cancelled the Third Party Purchase Notes on June 21, 2017. As a result, the Company recognized a ~~$14.4 million~~ loss on debt extinguishment in the Condensed Consolidated Statements of Operations during the nine months ended September 30, 2017 related to premiums paid, unamortized debt issuance costs and other expenses. In addition, the Company recognized a net realized gain of ~~$92.4 million~~ resulting from the disposition of the retained shares of Donnelley Financial common stock within investment and other income-net in the Condensed Consolidated Statements of Operations during the nine months ended September 30, 2017.

As described above, on August 4, 2017, the Company disposed of its remaining 99,594 shares of Donnelley Financial common stock in exchange for the extinguishment of $1.9 million in aggregate principal of the Company’s 7.875% senior notes due March 15, 2021. As a result, the Company recognized a $0.3 million loss on debt extinguishments in the Condensed Consolidated Statements of Operations during the three and nine months ended September 30, 2017, related to premiums paid, unamortized debt issuance costs and other expenses. In addition, the Company recognized a net realized gain of $1.6 million resulting from the disposition of these retained shares of Donnelley Financial common stock within investment and other income-net in the Condensed Consolidated Statements of Operations during the ~~three and nine months ended~~ ~~September 30, 2017~~.us.

On September 29, 2017, ~~the Company~~we entered into an asset-based revolving credit facility ~~pursuant to the second amended and restated credit agreement~~ (the “Credit Agreement”) which amended and restated ~~the Company’s~~our prior $800.0 million senior secured revolving credit facility dated September 30, 2016. The Credit Agreement provides for a senior secured asset-based revolving credit facility of up to $800.0 million subject to a borrowing base. The amount available to be borrowed under the Credit Agreement is equal to the lesser of (a) $800.0 million and (b) the aggregate amount of accounts receivable, inventory, machinery, ~~and~~ equipment and fee-owned real estate of ~~the Company~~ours and certain of ~~its~~our domestic subsidiaries (the “Guarantors”) (collectively, the “Borrowing Base”), subject to certain eligibility criteria and advance rates. The aggregate amount of real estate, machinery and equipment that can be included in the Borrowing Base cannot exceed $200.0 million. As a result of entering into the Credit Agreement, the Company recognized a $6.2 million loss related to unamortized debt issuance costs and other expenses within loss on debt extinguishments in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017.

~~Borrowings under the Credit Agreement~~ bear interest at a rate dependent on the average quarterly availability under the Credit Agreement and will be calculated according to a base rate or a Eurocurrency rate plus an applicable margin. The applicable margin for base rate loans ranges from 0.25% to 0.50% and the applicable margin for Eurocurrency loans ranges from 1.25% to 1.50%. In addition, an unused line fee is payable quarterly on the unused portion of the amount available to be borrowed under the Credit Agreement. The unused line fee accrues at a rate of either 0.250% or 0.375% depending upon the average usage of the facility.

~~Proceeds of the loans under the Credit Agreement may be used for working capital and general corporate purposes. The Company’s~~Our obligations under the Credit Agreement are guaranteed by ~~its material and certain domestic subsidiaries~~the Guarantors and are secured by a security interest in certain assets of ~~the Company~~ours and ~~its~~our domestic subsidiaries, including accounts receivable, inventory, deposit accounts, securities accounts, investment property, machinery and equipment and, to the extent related to the foregoing, general intangibles, documents and instruments, as well as 65% of the equity interests of ~~its~~our first-tier foreign ~~subsidiaries~~.subsidiaries.

The Credit Agreement ~~is subject to~~ contains customary restrictive covenants, including a covenant which requires ~~the Company~~us to maintain a minimum fixed charge coverage ratio under certain circumstances. In addition, ~~the Company’s~~our ability to undertake certain actions, including, among other things, prepay certain junior debt, incur additional unsecured indebtedness and make certain restricted payments depends on satisfaction of certain conditions, including, among other things, meeting minimum availability thresholds under the Credit Agreement.

The Credit Agreement is scheduled to mature on September 29, 2022, at which time all outstanding amounts under the Credit Agreement will be due and payable. Borrowings under the Credit Agreement may be used for working capital and general corporate purposes.

There were ~~$350.0~~$242.0 million of borrowings under the Credit Agreement as of September 30, 2017. Based on the Company’s borrowing base as of September 30, 2017 and existing borrowings, the Company had the ability to utilize approximately $384.9 million of the $800.0 million Credit Agreement.2018.

The current availability under the Credit Agreement as of September 30, ~~2017~~2018 is shown in the table below:

	September 30, 2017		September 30, 2018
Availability	(in millions)		(in millions)
Committed Credit Agreement	$	800.0
Credit Agreement			$	800.0
Availability reduction due to available borrowing base		35.4		78.6
	$	764.6	$	721.4
Usage
Borrowings under the Credit Agreement		350.0	$	242.0
Outstanding letters of credit		29.7		34.2
		379.7	$	276.2
Current availability at September 30, 2017	$	384.9

Current availability at September 30, 2018			$	445.2
Cash and cash equivalents				247.0
Total available liquidity ^(a)			$	692.2

As of September 30, ~~2017, the Company was~~2018, we were in compliance with the debt covenants under the Credit Agreement and ~~expects~~expect to remain in compliance based on ~~management’s~~our estimates of operating and financial results for ~~2017~~2018 and the foreseeable future. However, declines in market and economic conditions or demand for certain of the Company’s products and services could impact the Company’s ability to remain in compliance with its debt covenants in future periods. As of September 30, ~~2017, the Company~~2018, we met all the conditions required to borrow under the Credit Agreement and ~~management expects the Company~~we expect to continue to meet the borrowing conditions.

The failure of a financial institution supporting the Credit Agreement would reduce the size of ~~the Company’s~~our committed facility unless a replacement institution was added. Currently, the Credit Agreement is supported by eight U.S. financial institutions.

As of September 30, ~~2017, the Company~~2018, we had ~~$176.7~~$201.7 million in other uncommitted credit facilities, primarily outside the U.S. (the “Other Facilities”). There were ~~$103.3~~$122.4 million in outstanding letters of credit, bank guarantees and bank acceptance drafts which reduced availability, of which ~~$29.7~~$34.2 million were issued under the Credit Agreement. Total borrowings under the Credit Agreement and the Other Facilities (the “Combined Facilities”) were ~~$367.6~~$291.5 million as of September 30, ~~2017.~~2018.

~~The Company’s~~Our liquidity may be affected by ~~its~~our credit ratings. During the first quarter of 2018, Moody’s Investors Service, Inc. (“Moody’s”) downgraded our long-term corporate credit rating from B1 to B2 and downgraded the senior unsecured debt credit rating from B2 to B3. The ~~Company’s Standard & Poor Rating Services~~outlook remained stable. During the third quarter of 2018, S&P Global Ratings (“S&P”) affirmed our long-term credit rating but revised the outlook from stable to negative and lowered the credit ratings on the senior unsecured debt from B to B-. Our S&P and Moody’s credit ratings as of September 30, ~~2017~~2018 are shown in the table below:

On October 15, 2018, we entered into Amendment No. 1 to the Credit Agreement, which amends the Credit Agreement to, among other things, permit (i) the incurrence of the debt pursuant to the Term Loan Credit Agreement and (ii) the incurrence of a lien on the ABL Priority Collateral to secure our obligations under the Term Loan Credit Agreement and related guarantees on a second-priority basis.

During the nine months ended September 30, ~~2017, the Company~~2018, we paid cash dividends of ~~$29.4~~$21.8 million. On October ~~25, 2017,~~23, 2018, the Board of Directors of the Company declared a quarterly cash dividend of ~~$0.14~~$0.03 per common share, payable on December ~~1, 2017~~3, 2018 to ~~RRD~~ stockholders of record on November 15, ~~2017.~~2018.

During the nine months ended September 30, 2016, the Company paid $47.5 million, net of cash acquired, to acquire Precision Dialogue. Additionally, during the nine months ended September 30, 2016, the Company sold immaterial entities within the International segment for net proceeds of $13.7 million.

On September 30, 2016, the Company’s then wholly-owned subsidiary Donnelley Financial issued senior notes and incurred a senior secured term loan B facility with total aggregate principals of $300.0 million and $350.0 million, respectively. Additionally on September 30, 2016, the Company’s then wholly-owned subsidiary LSC issued senior notes and incurred a senior secured term loan B facility with total aggregate principal of $450.0 million and $375.0 million, respectively. All of the related net proceeds were distributed to the Company or exchanged for debt in connection with the Separation. After the Separation, RR Donnelley has no obligations as it relates to these senior notes, senior secured term loan B facilities or any other LSC or Donnelley Financial indebtedness.

~~The Company is~~We are exposed to interest rate risk on ~~its~~our variable debt and price risk on ~~its~~our fixed-rate debt. At September 30, ~~2017, the Company’s~~2018, our variable-interest borrowings were ~~$367.6~~$291.5 million. Approximately ~~83.8%~~86.7% of ~~the Company’s~~our outstanding debt was comprised of fixed-rate debt as of September 30, ~~2017.~~2018.

~~The Company assesses~~We regularly assess market risk based on changes in interest rates utilizing a sensitivity analysis that measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change in interest rates. Using this sensitivity analysis, such changes would not have a material effect on interest income or expense and cash flows and would change the fair values of fixed-rate debt at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 by approximately ~~$50.2~~$39.0 million and ~~$69.6~~$48.9 million, respectively.

~~The Company is~~We are exposed to the impact of foreign currency fluctuations in certain countries in which ~~it operates.~~we operate. The exposure to foreign currency movements is limited in many countries because the operating revenues and expenses of ~~its~~our various subsidiaries and business units are substantially in the local currency of the country in which they operate. To the extent that borrowings, sales, purchases, revenues, expenses or other transactions are not in the local currency of the subsidiary, ~~the Company is~~we are exposed to currency risk and may enter into foreign ~~currency~~exchange spot and forward contracts to hedge the currency risk. As of September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the aggregate notional amount of outstanding foreign currency contracts was approximately ~~$136.7~~$124.2 million and ~~$172.2~~$215.9 million, respectively (see Note ~~17,~~15, Derivatives, to the Condensed Consolidated Financial Statements). Net unrealized (losses) gains from these foreign currency contracts were ~~$0.5~~gains of $1.1 million at September 30, ~~2017~~2018 and ~~$0.2~~$2.2 million at December 31, ~~2016. The Company does~~2017. We do not use derivative financial instruments for trading or speculative purposes.

For a discussion of certain litigation, ~~involving the Company,~~ see Note ~~14,~~13, Commitments and Contingencies, to the Condensed Consolidated Financial Statements.

Recently issued accounting standards and their estimated effect on ~~the Company’s~~our consolidated financial statements are described in Note ~~19,~~17, New Accounting Pronouncements, to the Condensed Consolidated Financial Statements.

~~The Company has made forward-looking statements in this~~This Quarterly Report on Form 10-Q ~~that~~and any documents incorporated by reference contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and ~~uncertainties. These statements~~uncertainties and are based on ~~the~~our beliefs and ~~assumptions of the Company.~~assumptions. Generally, forward-looking statements include information concerning possible or assumed future actions, events, or results of operations of ~~the Company.~~

ours. These statements may include, or be preceded or followed by, the words “may,” “will,” “should,” “might,” “could,” “would,” “potential,” “possible,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “hope” or similar expressions. ~~The Company claims~~We claim the protection of the ~~Safe Harbor~~safe harbor for ~~Forward-Looking Statements~~forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements.

Forward-looking statements are not guarantees of performance. The factors identified below are believed to be significant factors, but not necessarily all of the significant factors, that could cause actual results to differ materially from those expressed in any forward-looking statement. Unpredictable or unknown factors could also have material effects on us.

The following important factors, in addition to those discussed elsewhere in this Quarterly Report on Form 10-Q, could affect ~~the~~our future results ~~of the Company~~ and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

Because forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Undue reliance should not be placed on such statements, which speak only as of the date of this document or the date of any document that may be incorporated by reference into this document.

Consequently, readers of this Quarterly Report on Form 10-Q should consider these forward-looking statements only as ~~the Company’s~~our current plans, estimates and beliefs. ~~The Company does~~We do not undertake and specifically ~~declines~~disclaims any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. ~~The Company undertakes~~We undertake no obligation to update or revise any forward-looking statements in this Quarterly Report on Form 10-Q to reflect any new events or any change in conditions or circumstances.

See Item 2 of Part I under “Management of Market Risk.” There have been no significant changes to ~~the Company’s~~our market risk since December 31, ~~2016.~~2017. For a discussion of exposure to market risk, refer to Part II, Item 7A – Quantitative and Qualitative Disclosures about Market Risk, set forth in ~~the Company’s 2016~~our 2017 Form 10-K.

As required by Rule 13a-15(b) and Rule 15d-15(e) of the Securities Exchange Act of 1934, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of September 30, ~~2017,~~2018, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures as of September 30, ~~2017~~2018 were effective in ensuring information required to be disclosed in our SEC reports was recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in ~~the Company’s~~our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the quarter ended September 30, ~~2017~~2018 that had materially affected, or were reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

For a discussion of certain litigation, ~~involving the Company,~~ see Note ~~14,~~13, Commitments and Contingencies, to the Condensed Consolidated Financial Statements.

The Credit Agreement generally allows annual dividend payments of up to $60.0 million in aggregate, though additional dividends may be allowed subject to certain conditions. ~~For more detail refer to the Credit Agreement and its amendments filed as exhibits to this Quarterly Report on Form 10-Q.~~

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

Delaware		36-1004130
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

35 West Wacker Drive, Chicago, Illinois		60601
(Address of principal executive offices)		(Zip code)

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~~Emerging growth company~~	☐		Emerging growth company	☐

		Page
	PART I
~~FINANCIAL INFORMATION~~

Item 1:	~~Condensed Consolidated Financial Statements (unaudited)~~	3

1.	Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017	3

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017	5

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2018 and ~~2016~~2017	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2:2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
		26
Item 3:3.	Quantitative and Qualitative Disclosures About Market Risk	52
		40
Item 4:4.	Controls and Procedures	5240

	PART II

~~OTHER INFORMATION~~

Item 1:1.	Legal Proceedings	53
		41
Item 2:2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
		41
Item 4:4.	Mine Safety Disclosures	53
		41
Item 6:6.	Exhibits	5442

Signatures		5543

	As Reported		Adjustments		As Revised
Three months ended March 31, 2016
Products net sales	$	1,242.7	$	13.1	$	1,229.6
Total net sales		1,645.6		13.1		1,632.5
Products cost of sales		971.9		13.1		958.8
Total cost of sales		1,313.1		13.1		1,300.0
Three months ended June 30, 2016
Products net sales	$	1,231.7	$	16.6	$	1,215.1
Total net sales		1,632.6		16.6		1,616.0
Products cost of sales		985.2		16.6		968.6
Total cost of sales		1,316.2		16.6		1,299.6
Three months ended September 30, 2016
Products net sales	$	1,343.4	$	15.6	$	1,327.8
Total net sales		1,741.2		15.6		1,725.6
Products cost of sales		1,046.3		15.6		1,030.7
Total cost of sales		1,377.0		15.6		1,361.4
Three months ended December 31, 2016
Products net sales	$	1,470.3	$	17.4	$	1,452.9
Total net sales		1,876.3		17.4		1,858.9
Products cost of sales		1,161.0		17.4		1,143.6
Total cost of sales		1,512.6		17.4		1,495.2
Three months ended March 31, 2017
Products net sales	$	1,288.9	$	17.4	$	1,271.5
Total net sales		1,676.3		17.4		1,658.9
Products cost of sales		1,024.3		17.4		1,006.9
Total cost of sales		1,348.5		17.4		1,331.1
Three months ended June 30, 2017
Products net sales	$	1,263.4	$	26.0	$	1,237.4
Total net sales		1,646.0		26.0		1,620.0
Products cost of sales		1,020.7		26.0		994.7
Total cost of sales		1,342.9		26.0		1,316.9

	Three Months Ended			Nine Months Ended
	September 30, 2016			September 30, 2016
Net sales	$	1,122.6		$	3,303.4
Cost of sales		879.1			2,534.7
Operating expenses ^(a)		170.0			592.0
Interest and other expense net^(b)		104.0			139.5
(Loss) earnings before income taxes		(30.5	)		37.2
Income tax (benefit) expense		(1.4	)		21.4
Net (loss) earnings from discontinued operations	$	(29.1	)	$	15.8

	Contract Assets		Contract Liabilities
	Short-Term		Short-Term		Long-Term
Balance at January 1, 2018	$	4.0	$	30.3	$	1.4
Balance at September 30, 2018		3.9		26.2		0.8

	Variable			Strategic
	Print			Services			International			Total
Net book value as of December 31, 2016
Goodwill	$	1,823.0		$	365.2		$	1,017.9		$	3,206.1
Accumulated impairment losses		(1,550.5	)		(148.7	)		(904.9	)		(2,604.1	)
Total		272.5			216.5			113.0			602.0
Foreign exchange and other adjustments		—			—			6.9			6.9
Impairment charges		—			(21.3	)		—			(21.3	)
Net book value as of September 30, 2017
Goodwill		1,824.1			365.2			1,090.3			3,279.6
Accumulated impairment losses		(1,551.6	)		(170.0	)		(970.4	)		(2,692.0	)
Total	$	272.5		$	195.2		$	119.9		$	587.6

	September 30, 2017							December 31, 2016
	Gross							Gross
	Carrying		Accumulated			Net Book		Carrying		Accumulated			Net Book
	Amount		Amortization			Value		Amount		Amortization			Value

Customer relationships	$	532.9	$	(404.8	)	$	128.1	$	517.9	$	(370.7	)	$	147.2
Patents		2.0		(2.0	)		—		2.0		(2.0	)		—
Trademarks, licenses and agreements		26.2		(24.9	)		1.3		26.2		(24.4	)		1.8
Trade names		36.8		(15.7	)		21.1		36.8		(13.9	)		22.9
Total other intangible assets	$	597.9	$	(447.4	)	$	150.5	$	582.9	$	(411.0	)	$	171.9

	September 30, 2018			December 31, 2017
Raw materials and manufacturing supplies	$	156.0		$	161.1
Work in process		102.0			75.0
Finished goods		120.4			198.2
LIFO reserve		(16.6	)		(17.5	)
Total inventories	$	361.8		$	416.8

	September 30, 2018			December 31, 2017
Land	$	53.0		$	56.1
Buildings		399.1			417.3
Machinery and equipment		1,832.3			1,885.2
		2,284.4			2,358.6
Less: Accumulated depreciation		(1,738.7	)		(1,743.5	)
Total property, plant and equipment-net	$	545.7		$	615.1

Three Months Ended	Employee		Other Restructuring		Total Restructuring				Other
September 30, 2017	Terminations		Charges		Charges		Impairment		Charges		Total
Variable Print	$	3.0	$	0.6	$	3.6	$	0.2	$	0.4	$	4.2
Strategic Services		0.7		—		0.7		21.3		0.1		22.1
International		1.9		0.3		2.2		—		—		2.2
Corporate		5.1		0.2		5.3		—		—		5.3
Total	$	10.7	$	1.1	$	11.8	$	21.5	$	0.5	$	33.8

					Foreign
	December 31,		Restructuring		Exchange and			Cash			September 30,
	2016		Charges		Other			Paid			2017
Employee terminations	$	7.6	$	19.5	$	—		$	(13.5	)	$	13.6
Multi-employer pension withdrawal obligations		11.8		0.6		(0.1	)		(1.1	)		11.2
Lease terminations and other		1.6		3.2		1.2			(2.8	)		3.2
Total	$	21.0	$	23.3	$	1.1		$	(17.4	)	$	28.0

	RRD
	Stockholders'			Noncontrolling
	Equity			Interest			Total Equity
Balance at December 31, 2016	$	(105.7	)	$	13.5		$	(92.2	)
Net earnings		18.4			0.7			19.1
Other comprehensive (loss) income		(70.8	)		0.4			(70.4	)
Share-based compensation		6.4			—			6.4
Spinoff adjustments		5.9			—			5.9
Issuance of share-based awards, net of withholdings and other		(1.7	)		—			(1.7	)
Cash dividends paid		(29.4	)		—			(29.4	)
Distributions to noncontrolling interests		—			(0.7	)		(0.7	)
Balance at September 30, 2017	$	(176.9	)	$	13.9		$	(163.0	)

	Changes in the Fair Value of Available-for-Sale Securities			Pension and Other Postretirement Benefits Plan Cost			Translation Adjustments			Total
Balance at December 31, 2016	$	119.3		$	(159.5	)	$	(15.5	)	$	(55.7	)
Other comprehensive (loss) income before reclassifications		(48.5	)		—			43.6			(4.9	)
Amounts reclassified from accumulated other comprehensive loss		(70.8	)		2.1			2.8			(65.9	)
Net change in accumulated other comprehensive loss		(119.3	)		2.1			46.4			(70.8	)
Balance at September 30, 2017	$	—		$	(157.4	)	$	30.9		$	(126.5	)

	Pension and OPEB Cost			Translation Adjustments			Total
Balance at December 31, 2017	$	(144.6	)	$	40.9		$	(103.7	)
Other comprehensive income (loss) before reclassifications		1.2			(30.6	)		(29.4	)
Amounts reclassified from accumulated other comprehensive loss		4.1			—			4.1
Impact of adopting ASU 2018-02		(22.1	)		—			(22.1	)
Other		0.6			—			0.6
Net change in accumulated other comprehensive loss		(16.2	)		(30.6	)		(46.8	)
Balance at September 30, 2018	$	(160.8	)	$	10.3		$	(150.5	)

	September 30, 2017		December 31, 2016
Derivatives not designated as hedges
Prepaid expenses and other current assets	$	1.5	$	1.7
Accrued liabilities		1.0		1.5

		Three Months Ended				Nine Months Ended
	Classification of (Gain) Loss Recognized in the	September 30,				September 30,
	Condensed Consolidated Statements of Operations	2017		2016		2017		2016
Derivatives not designated as hedges
Foreign currency contracts	Selling, general and administrative expenses	$	0.5	$	0.8	$	1.1	$	3.4

			Basis of Fair Value Measurement
	Balance as of September 30, 2017		Significant Other Observable Inputs (Level 2)
Assets
Foreign currency contracts	$	1.5	$	1.5
Total assets	$	1.5	$	1.5
Liabilities
Foreign currency contracts		1.0		1.0
Total liabilities	$	1.0	$	1.0

			Basis of Fair Value Measurement
	Balance as of December 31, 2016		Significant Other Observable Inputs (Level 2)
Assets
Foreign currency contracts	$	1.7	$	1.7
Available-for-sale securities	328.7		328.7
Total assets	$	330.4	$	330.4
Liabilities
Foreign currency contracts	1.5		1.5
Total liabilities	$	1.5	$	1.5

	Income from Operations			Operating Margin			Net Earnings (Loss) From Continuing Operations Attributable to RRD Common Stockholders			Net Earnings (Loss) Attributable to RRD Stockholders Per Diluted Share
	(in millions, except margin and per share data)
For the Three Months Ended September 30, 2016	$	84.0			4.9	%	$	22.0		$	0.31
2017 restructuring, impairment and other charges - net		(33.8	)		(1.9	%)		(26.5	)		(0.37	)
2016 restructuring, impairment and other charges - net		10.8			0.6	%		2.2			0.03
OPEB curtailment gains		(19.7	)		(1.1	%)		(12.2	)		(0.17	)
Pension settlement charges		0.3			—			0.3			—
Acquisition-related expenses		0.7			—			0.4			0.01
Loss on disposition of businesses		0.3			—			0.1			—
Loss on debt extinguishments		—			—			(4.3	)		(0.06	)
Net gain on investments		—			—			1.7			0.02
Operations, including the impact of foreign exchange		(6.7	)		(0.4	%)		8.3			0.12
For the Three Months Ended September 30, 2017	$	35.9			2.1	%	$	(8.0	)	$	(0.11	)

	Net Sales for the Three Months Ended
	September 30,
Reporting unit	2017		2016		$ Change			% Change
	(in millions, except percentages)
Commercial and digital print	$	395.9	$	414.9	$	(19.0	)		(4.6	%)
Direct mail		139.5		144.5		(5.0	)		(3.5	%)
Statement printing		90.2		85.9		4.3			5.0	%
Labels		101.2		98.7		2.5			2.5	%
Forms		40.7		46.3		(5.6	)		(12.1	%)
Total Variable Print	$	767.5	$	790.3	$	(22.8	)		(2.9	%)

	Net Sales for the Nine Months Ended
	September 30,
Reporting unit	2017		2016		$ Change			% Change
	(in millions, except percentages)
Commercial and digital print	$	1,178.8	$	1,201.8	$	(23.0	)		(1.9	%)
Direct mail		392.0		395.8		(3.8	)		(1.0	%)
Statement printing		286.1		283.6		2.5			0.9	%
Labels		293.4		293.8		(0.4	)		(0.1	%)
Forms		129.3		136.8		(7.5	)		(5.5	%)
Total Variable Print	$	2,279.6	$	2,311.8	$	(32.2	)		(1.4	%)

	Debt Maturity Schedule
	Total		2017		2018		2019		2020		2021		Thereafter
	(in millions)
Senior notes and debentures and borrowings under the Credit Agreement _(a)	$	2,245.8	$	—	$	—	$	172.2	$	238.4	$	529.1	$	1,306.1
Miscellaneous debt obligations		17.9		17.9	—		—		—		—		—
Total	$	2,263.7	$	17.9	$	—	$	172.2	$	238.4	$	529.1	$	1,306.1

	S&P	Moody's
Long-term corporate credit rating	~~B+, Stable~~B, Neg	~~B1,~~B2, Stable
Senior unsecured debt	B-	B3
Term Loan Credit Agreement	B+	B2
~~Credit Agreement~~	BB	~~Ba1~~B1

ISSUER PURCHASES OF EQUITY SECURITIES	ISSUER PURCHASES OF EQUITY SECURITIES								ISSUER PURCHASES OF EQUITY SECURITIES

Period		Total Number of Shares Purchased (a)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs			Total Number of Shares Purchased (a)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
July 1, 2017 - July 30, 2017			102	$	11.97	—	$	—
August 1, 2017 - August 31, 2017		—		—		—	$	—
September 1, 2017 - September 30, 2017			—	—		—	$	—
July 1, 2018 - July 31, 2018											2,671	$	5.76	—	$	—
August 1, 2018 - August 31, 2018										—		—		—	$	—
September 1, 2018 - September 30, 2018											—		—	—	$	—
Total			102	$	11.97	—					2,671	$	5.76	—

10.1		~~Second Amended and Restated~~ Credit Agreement, dated as of ~~September 29, 2017,~~October 15, 2018, among ~~R.R.~~R. R. Donnelley and Sons Company, ~~the guarantors party thereto,~~ the lenders party thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October ~~3, 2017)~~15, 2018)

10.2		~~Employment Offer Letter~~Amendment No. 1 to Credit Agreement, dated as of October ~~25, 2017 between R.R.~~15, 2018, among R. R. Donnelley &and Sons Company, the guarantors party thereto, the lenders party thereto and ~~Michael J. Sharp~~Bank of America, N.A., as administrative agent (incorporated by reference to ~~Exhibit10.1~~Exhibit 10.2 to the Company’s Current Report on Form 8-K filed October ~~30, 2017)~~15, 2018)
31.1*
31.1*		Certification by Daniel L. Knotts, President and Chief Executive Officer, required by Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934

31.2*		Certification by Terry D. Peterson, Executive Vice President and Chief Financial Officer, required by Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934

32.1**		Certification by Daniel L. Knotts, President and Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code

32.2**		Certification by Terry D. Peterson, Executive Vice President and Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

R.R. DONNELLEY & SONS COMPANY

By:		/s/ TERRY D. PETERSON
		Terry D. Peterson
		Executive Vice President and Chief Financial Officer