UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
(Exact name of registrant as specified in its charter)
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol |
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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 every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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).
Yes ☐ No
As of July 26, 2024,
DONNELLEY FINANCIAL SOLUTIONS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024
TABLE OF CONTENTS
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Page |
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3 |
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Part I |
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Item 1: |
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4 |
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5 |
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Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 |
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6 |
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 |
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8 |
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10 |
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Item 2: |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3: |
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Item 4: |
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Part II |
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Item 1: |
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37 |
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Item 1A: |
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37 |
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Item 2: |
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Item 3: |
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Item 4: |
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Item 5: |
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Item 6: |
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38 |
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39 |
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2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Donnelley Financial Solutions, Inc. and subsidiaries (“DFIN” or the “Company”) has made forward-looking statements in this Quarterly Report on Form 10-Q (the “Quarterly Report”) within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the Company. Generally, forward-looking statements include information concerning possible or assumed future actions, events, or results of operations of the Company. These statements may include words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “continues,” “believes,” “may,” “will,” “goals” and variations of such words and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. These forward-looking statements are subject to a number of important factors, including those factors discussed in detail in Part I, Item 1A. Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 20, 2024 (the “Annual Report”), in addition to those discussed elsewhere in this Quarterly Report, that could cause the Company’s actual results to differ materially from those indicated in any such forward-looking statements. These factors include, but are not limited to:
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 the Quarterly Report should consider these forward-looking statements only as the Company’s current plans, estimates and beliefs. Except to the extent required by law, the Company does not undertake and specifically declines 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 no obligation to update or revise any forward-looking statements in this Quarterly Report to reflect any new events or any change in conditions or circumstances other than to the extent required by law.
3
Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)
Condensed Consolidated Statements of Operations
(in millions, except per share data)
(UNAUDITED)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net sales |
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Tech-enabled services |
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$ |
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$ |
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$ |
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$ |
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Software solutions |
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Print and distribution |
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Total net sales |
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Cost of sales (a) |
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Tech-enabled services |
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Software solutions |
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Print and distribution |
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Total cost of sales |
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Selling, general and administrative expenses (a) |
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Depreciation and amortization |
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Restructuring, impairment and other charges, net |
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( |
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Other operating income, net |
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( |
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Income from operations |
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Interest expense, net |
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Investment and other income, net |
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Earnings before income taxes |
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Income tax expense |
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Net earnings |
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$ |
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$ |
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$ |
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$ |
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Net earnings per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of common shares outstanding: |
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Basic |
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Diluted |
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See Notes to the Unaudited Condensed Consolidated Financial Statements
4
Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(UNAUDITED)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net earnings |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Translation adjustments |
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Adjustment for net periodic pension and other postretirement benefits plans |
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Other comprehensive income (loss), net of tax |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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See Notes to the Unaudited Condensed Consolidated Financial Statements
5
Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)
Condensed Consolidated Balance Sheets
(in millions, except per share data)
(UNAUDITED)
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June 30, 2024 |
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December 31, 2023 |
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ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables, less allowances for expected losses of $ |
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Prepaid expenses and other current assets |
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Assets held for sale |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Software, net |
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Goodwill |
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Deferred income taxes, net |
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Other noncurrent assets |
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Total assets |
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$ |
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$ |
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LIABILITIES |
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Accounts payable |
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$ |
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$ |
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Operating lease liabilities |
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Accrued liabilities |
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Total current liabilities |
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Long-term debt |
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Deferred compensation liabilities |
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Pension and other postretirement benefits plans liabilities |
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Noncurrent operating lease liabilities |
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Other noncurrent liabilities |
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Total liabilities |
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EQUITY |
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Preferred stock, $ |
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Authorized: |
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Common stock, $ |
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Authorized: |
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Issued and outstanding: |
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Treasury stock, at cost: |
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( |
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( |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
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( |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See Notes to the Unaudited Condensed Consolidated Financial Statements
6
Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)
Condensed Consolidated Statements of Cash Flows
(in millions)
(UNAUDITED)
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Six Months Ended June 30, |
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2024 |
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2023 |
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OPERATING ACTIVITIES |
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Net earnings |
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$ |
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$ |
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Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Provision for expected losses on accounts receivable |
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Share-based compensation expense |
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Deferred income taxes |
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( |
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( |
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Net pension plan income |
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( |
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( |
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Gain on sale of long-lived assets |
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( |
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( |
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Gain on sale of investments in equity securities |
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( |
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( |
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Amortization of operating lease right-of-use assets |
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Other |
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Changes in operating assets and liabilities: |
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Receivables, net |
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( |
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( |
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Prepaid expenses and other current assets |
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( |
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( |
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Accounts payable |
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( |
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( |
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Income taxes payable and receivable |
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Accrued liabilities and other |
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( |
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( |
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Operating lease liabilities |
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( |
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( |
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Pension and other postretirement benefits plans contributions |
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( |
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( |
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Net cash provided by (used in) operating activities |
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( |
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INVESTING ACTIVITIES |
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Capital expenditures |
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( |
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( |
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Proceeds from sale of long-lived assets |
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Proceeds from sales of investments in equity securities |
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Net cash used in investing activities |
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( |
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( |
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FINANCING ACTIVITIES |
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Revolving facility borrowings |
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Payments on revolving facility borrowings |
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( |
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( |
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Treasury share repurchases |
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( |
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( |
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Cash received for common stock issuances |
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Finance lease payments |
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( |
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( |
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Net cash provided by financing activities |
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Effect of exchange rate on cash and cash equivalents |
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( |
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Net increase (decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of year |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental cash flow information: |
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Income taxes paid (net of refunds) |
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$ |
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$ |
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Interest paid |
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$ |
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$ |
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Non-cash investing activities: |
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Capitalized software included in accounts payable |
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$ |
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$ |
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Non-cash consideration from sale of investment in an equity security (Note 1) |
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$ |
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$ |
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See Notes to the Unaudited Condensed Consolidated Financial Statements
7
Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the Three Months Ended June 30, 2024 and 2023
(in millions)
(UNAUDITED)
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Common Stock |
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Treasury Stock |
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Additional |
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Retained |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Balance at March 31, 2024 |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
( |
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$ |
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Net earnings |
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Other comprehensive income |
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Share-based compensation expense |
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Common stock repurchases |
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( |
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( |
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Issuance of share-based awards, net of withholdings and other |
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( |
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Balance at June 30, 2024 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock |
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Treasury Stock |
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Additional |
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Retained |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Balance at March 31, 2023 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Net earnings |
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Other comprehensive income |
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Share-based compensation expense |
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Common stock repurchases |
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( |
) |
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( |
) |
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Issuance of share-based awards, net of withholdings and other |
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( |
) |
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( |
) |
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Balance at June 30, 2023 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
( |
) |
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$ |
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8
Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the Six Months Ended June 30, 2024 and 2023
(in millions)
(UNAUDITED)
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Common Stock |
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Treasury Stock |
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Additional |
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Retained |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Balance at December 31, 2023 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Net earnings |
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Other comprehensive loss |
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( |
) |
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( |
) |
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Share-based compensation expense |
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Common stock repurchases |
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( |
) |
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( |
) |
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Issuance of share-based awards, net of withholdings and other |
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( |
) |
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( |
) |
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Balance at June 30, 2024 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
( |
) |
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$ |
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|
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Common Stock |
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Treasury Stock |
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Additional |
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Retained |
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Accumulated |
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Total |
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||||||||||||||
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Shares |
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Amount |
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Shares |
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Amount |
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Balance at December 31, 2022 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
( |
) |
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$ |
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||||||
Net earnings |
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Other comprehensive income |
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Share-based compensation expense |
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||||||||
Common stock repurchases |
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|
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( |
) |
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( |
) |
||||||
Issuance of share-based awards, net of withholdings and other |
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( |
) |
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( |
) |
||||||
Balance at June 30, 2023 |
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$ |
|
|
|
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$ |
( |
) |
|
$ |
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|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
See Notes to the Unaudited Condensed Consolidated Financial Statements
9
Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)
Notes to the Unaudited Condensed Consolidated Financial Statements
(in millions, except per share data, unless otherwise indicated)
Note 1. Overview, Basis of Presentation and Significant Accounting Policies
Description of Business
DFIN is a leading global provider of innovative software and technology-enabled financial regulatory and compliance solutions. The Company provides regulatory filing and deal solutions via its software, technology-enabled services and print and distribution solutions to public and private companies, mutual funds and other regulated investment firms, to serve its clients’ regulatory and compliance needs. DFIN helps its clients comply with applicable regulations where and how they want to work in a digital world, providing numerous solutions tailored to each client’s precise needs. The prevailing trend is toward clients choosing to utilize the Company’s software solutions, in conjunction with its tech-enabled services, to meet their document and filing needs, while at the same time shifting away from physical print and distribution of documents, except for when it is still regulatorily required or requested by investors.
The Company serves its clients’ regulatory and compliance needs throughout their respective life cycles. For its capital markets clients, the Company offers solutions that allow companies to comply with U.S. Securities and Exchange Commission (“SEC”) regulations and support their corporate financial transactions and regulatory/financial reporting through the use of digital document creation and online content management tools; filing agent services, where applicable; solutions to facilitate clients’ communications with their investors; and virtual data rooms and other deal management solutions. For investment companies, including mutual fund, insurance-investment and alternative investment companies, the Company provides solutions for creating, compiling and filing regulatory communications as well as solutions for investors designed to improve the access to and accuracy of their investment information.
Services and Products
The Company separately reports its net sales and related cost of sales for its software solutions, tech-enabled services and print and distribution offerings. The Company’s software solutions consist of ActiveDisclosure® (“ActiveDisclosure”), the Arc Suite® software platform (“Arc Suite”) and Venue® Virtual Data Room (“Venue”). The Company’s tech-enabled services offerings consist of document composition, compliance-related SEC Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) filing services and transactional solutions. The Company’s print and distribution offerings primarily consist of conventional and digital printed products and related shipping.
Basis of Presentation
The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of DFIN and all majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The financial data presented herein should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes included in the Company’s latest Annual Report. In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the results of operations, financial position and cash flows for the interim periods presented. Results of interim periods should not be considered indicative of the results for the full year.
Significant Accounting Policies
Use of Estimates—The preparation of financial statements in conformity with GAAP requires the extensive use of management’s estimates and assumptions that affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. The Company’s significant accounting policies and critical accounting estimates are disclosed in the Annual Report.
Allowances for Expected Losses—
|
|
June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Balance, beginning of year |
|
$ |
|
|
$ |
|
||
Provisions charged to expense |
|
|
|
|
|
|
||
Write-offs, reclassifications and other |
|
|
( |
) |
|
|
( |
) |
Balance, end of period |
|
$ |
|
|
$ |
|
||
10
Donnelley Financial Solutions, Inc. and Subsidiaries (“DFIN”)
Notes to the Unaudited Condensed Consolidated Financial Statements (continued)
(in millions, except per share data, unless otherwise indicated)