Donnelley Financial Solutions, Inc. - S-4 filing on 2017-03-10

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Components of Earnings from Operations Before Income Taxes

Income taxes have been based on the following components of earnings from operations before income taxes for the years ended December 31, 2016, 2015 and 2014:

	2016		2015		2014
U.S.	$	84.9	$	156.1	$	74.9
Foreign		9.4		15.6		17.5
Total	$	94.3	$	171.7	$	92.4

Components of Income Tax Expense (Benefit) from Operations

The components of income tax expense (benefit) from operations for the years ended December 31, 2016, 2015 and 2014 were as follows:

	2016			2015			2014
Current:
U.S. Federal	$	28.6		$	41.3		$	34.2
U.S. State and Local		9.0			12.1			10.5
Foreign		3.5			3.8			3.2
Current income tax expense		41.1			57.2			47.9

Deferred:
U.S. Federal		(3.1	)		8.1			(10.6	)
U.S. State and Local		(0.4	)		2.2			(3.0	)
Foreign		(2.4	)		(0.1	)		0.7
Deferred income tax expense (benefit)		(5.9	)		10.2			(12.9	)

Total	$	35.2		$	67.4		$	35.0

Reconciliation of Differences Between Federal Statutory and Effective Income Tax Rate

The following table outlines the reconciliation of differences between the Federal statutory tax rate and the Company’s effective income tax rate:

	2016			2015			2014
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of U.S. federal income tax benefit		5.9			5.4			5.5
Adjustment of uncertain tax positions and interest		0.6			0.1			(0.1	)
Domestic manufacturing deduction		(1.3	)		(0.9	)		(1.3	)
Foreign tax rate differential		(0.7	)		(1.0	)		(3.0	)
Change in valuation allowances		(1.9	)		—			0.1
Other		(0.3	)		0.7			1.7
Effective income tax rate		37.3	%		39.3	%		37.9	%

Significant Deferred Tax Assets and Liabilities

The significant deferred tax assets and liabilities at December 31, 2016 and 2015 were as follows:

	2016			2015
Deferred tax assets:
Pension and other postretirement benefit plans liabilities	$	24.1		$	2.3
Accrued liabilities		18.5			18.1
Net operating losses and other tax carryforwards		14.4			19.4
Allowance for doubtful accounts		3.3			3.3
Share-based compensation		2.2			—
Other		2.4			1.7
Total deferred tax assets		64.9			44.8
Valuation allowances		(1.2	)		(4.9	)
Total deferred tax assets	$	63.7		$	39.9

Deferred tax liabilities:
Other intangible assets	$	(21.0	)	$	(23.2	)
Accelerated depreciation		(3.1	)		(5.1	)
Other		(2.6	)		(2.0	)
Total deferred tax liabilities		(26.7	)		(30.3	)
Net deferred tax assets	$	37.0		$	9.6

Transactions Affecting Valuation Allowance On Deferred Tax Assets

Transactions affecting the valuation allowances on deferred tax assets during the years ended December 31, 2016, 2015 and 2014 were as follows:

	2016			2015			2014
Balance, beginning of year	$	4.9		$	5.3		$	5.6
Current year expense (benefit)-net		(1.5	)		—			0.1
Write-offs		(2.3	)		—			—
Foreign exchange and other		0.1			(0.4	)		(0.4	)
Balance, end of year	$	1.2		$	4.9		$	5.3

Unrecognized Tax Benefits

Changes in the Company’s unrecognized tax benefits at December 31, 2016, 2015 and 2014 were as follows:

	2016		2015		2014
Balance at beginning of year	$	1.0	$	0.7	$	1.3
Additions for tax positions of the current year		—		0.3		—
Additions for tax positions of prior years		0.9		—		—
Settlements during the year		—		—		(0.5	)
Lapses of applicable statutes of limitations		—		—		(0.1	)
Balance at end of year	$	1.9	$	1.0	$	0.7