Net sales in the quarter were $1.88 billion, up $67.0 million or 3.7% from the fourth quarter of 2015. This increase was primarily due to $80.4 million in net sales previously recognized by reporting units that are now part of LSC and Donnelley Financial and $14.0 million from the previously announced acquisition of Precision Dialogue, partially offset by a negative $16.1 million impact from changes in foreign exchange rates, a $6.3 million reduction related to dispositions completed earlier in the year and a consolidated net organic sales decline of 0.4%.
The decline in net organic sales was primarily driven by increased volume in the International and Strategic Services segments which was more than offset by lower postage pass through sales in Strategic Services, price declines across all three segments and lower volume in the Variable Print segment.
“The fourth quarter of 2016 was a pivotal quarter in our history as we completed the previously announced spinoffs of LSC Communications and Donnelley Financial Solutions at the beginning of the quarter and then began operating as a standalone company intensely focused on providing integrated multichannel communications, supply chain and logistics solutions to our customers,” said Dan Knotts, RR Donnelley’s president and CEO.
“We are pleased with our fourth quarter results as we grew both our net sales and non-GAAP income from operations,” Knotts added. “And, although we exited the spin with debt leverage above our long-term target range, we remain on track to utilize the proceeds from disposing of our equity stakes in LSC Communications and Donnelley Financial Solutions, as well as cash generated from ongoing operating activities, to reduce our outstanding debt obligations.”
Gross profit in the fourth quarter of 2016 was $363.7 million or 19.4% of net sales versus $373.6 million or 20.6% of net sales in the 2015 quarter. Continued cost reductions were more than offset by modest price pressure in most product categories, unfavorable product mix and a one-time charge in the logistics reporting unit within the Strategic Services segment.
Net loss from continuing operations of $488.1 million in the fourth quarter increased from a $16.1 million loss reported in the fourth quarter of 2015. The 2016 results included pre-tax charges of $560.0 million for net restructuring, impairment and other charges as compared to $13.0 million in 2015
Variable Print segment net sales in the quarter were $833.6 million, down $6.4 million or 0.8% from the fourth quarter of 2015. Net sales in 2016 benefited from growth in the commercial and digital print and labels reporting units as well as the digital print and inserting operations of Precision Dialogue but was more than offset primarily by softness in direct mail and continued secular declines in forms.
Loss from operations was $493.5 million in the fourth quarter as compared to income from operations of $64.3 million during the prior year fourth quarter. Excluding restructuring, impairment and other charges recorded in both periods, fourth quarter 2016 non-GAAP income from operations for the segment was $64.7 million, up $0.4 million from $64.3 million for the fourth quarter of 2015 as productivity improvements, the Precision Dialogue acquisition and lower depreciation and amortization expense were mostly offset by the impact of price and volume declines.
Strategic Services net sales in the quarter were $497.3 million, up $80.7 million or 19.4% from the fourth quarter of 2015. Net sales in 2016 included $76.7 million related to sales previously recognized by reporting units that are now part of LSC and Donnelley Financial.
International net sales in the quarter were $545.4 million, down $7.3 million or 1.3% from the fourth quarter of 2015. Strong growth in the Asia and Latin America reporting units and net sales previously recognized by a reporting unit that is now part of LSC were more than offset by the impact of unfavorable changes in foreign exchange rates, volume declines in the remaining International reporting units and small dispositions earlier in the year.
Cash flow from operations in the fourth quarter was $117.4 million, which included spinoff-related cash payments of $29.7 million. As of Dec. 31, 2016, cash on hand was $317.5 million and total debt outstanding was $2.39 billion, including $185.0 million drawn against the credit facility.
As previously announced, the company plans to dispose of its 19.25% equity positions in LSC and Donnelley Financial and use the net proceeds to reduce debt during 2017.