Highlights:
- Second-quarter 2012 GAAP earnings per diluted share of $0.49
compared to GAAP earnings per diluted share of $0.06 in the second
quarter of 2011
- Second-quarter 2012 non-GAAP earnings per diluted share of
$0.49 compared to non-GAAP earnings per diluted share of $0.53 in
the second quarter of 2011
- Second-quarter 2012 GAAP operating margin of 6.5% compared to
GAAP operating margin of 4.4% in the second quarter of 2011
- Second-quarter 2012 non-GAAP operating margin of 7.8% compared
to non-GAAP operating margin of 7.3% in the second quarter of
2011
R.R. Donnelley & Sons Company (Nasdaq:RRD)
today reported second-quarter 2012 net earnings attributable to
common shareholders of $88.8 million, or $0.49 per diluted share,
on net sales of $2.5 billion compared to net earnings of $12.2
million, or $0.06 per diluted share, on net sales of $2.6 billion
in the second quarter of 2011. Second-quarter 2012 net earnings
attributable to common shareholders included pre-tax charges for
restructuring ($25.7 million) and impairment ($8.3 million,
non-cash), a pre-tax loss on an investment of $4.1 million
(non-cash), and acquisition-related expenses ($0.5 million), offset
by the recognition of previously unrecognized tax benefits ($26.1
million, non-cash). Second-quarter 2011 net earnings attributable
to common shareholders included pre-tax charges for restructuring
($51.4 million) and impairment ($24.3 million, non-cash), a loss on
debt extinguishment ($68.6 million), and acquisition-related
expenses ($0.9 million), partially offset by a pre-tax gain on an
investment of $9.8 million (non-cash).
The Company believes that certain non-GAAP measures, when
presented in conjunction with comparable GAAP (Generally Accepted
Accounting Principles) measures, are useful because that
information is an appropriate measure for evaluating the Company's
operating performance. Internally, the Company uses this non-GAAP
information as an indicator of business performance, and evaluates
management's effectiveness with specific reference to these
indicators. These measures should be considered in addition to, not
a substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP.
Non-GAAP net earnings attributable to common shareholders
totaled $88.5 million, or $0.49 per diluted share, in the second
quarter of 2012 compared to $105.6 million, or $0.53 per diluted
share, in the second quarter of 2011. Second-quarter non-GAAP net
earnings attributable to common shareholders exclude restructuring
and impairment charges and acquisition-related expenses and gains
and losses on investments for both years as well as the recognition
of previously unrecognized tax benefits in 2012 and the loss on
debt extinguishment in 2011. For non-GAAP comparison purposes, the
effective tax rate increased to 33.9% in the second quarter of 2012
from 19.5% in the second quarter of 2011, primarily due to the
release of reserves related to the resolution of certain state
audits and the release of valuation allowances on certain deferred
tax assets in the second quarter of 2011. A reconciliation of GAAP
net earnings attributable to common shareholders to non-GAAP net
earnings attributable to common shareholders is presented in the
attached schedules.
"While economic headwinds continue to challenge our top line,
the diversity of our product and service offering to a wide range
of vertical markets, coupled with our disciplined cost management,
enables us to reaffirm our non-GAAP earnings per diluted share
guidance in the range of $1.84 to $1.92," said Thomas J. Quinlan
III, RR Donnelley's President and Chief Executive Officer. "In
addition, we remain on track to deliver full-year operating cash
flow less capital expenditures of approximately $500 million, and
expect to end the year within our targeted gross leverage range of
2.5x to 3.0x."
Business Review
The Company reports its results in two reportable segments: 1)
U.S. Print and Related Services and 2) International. The Company
reports as Corporate its unallocated expenses associated with
general and administrative activities.
Summary
Net sales in the quarter were $2.5 billion, down $94.8 million,
or 3.6%, from the second quarter of 2011. Pro forma for
acquisitions, net sales decreased 4.0%, as a 164 basis point
unfavorable impact of changes in foreign exchange rates, volume
declines in certain product offerings, price erosion and a 53 basis
point unfavorable impact due to lower pass-through paper sales more
than offset volume growth in certain product offerings. Gross
margin of 23.5% in the second quarter of 2012 declined from 24.5%
in the second quarter of 2011 as an unfavorable product mix, volume
declines, unfavorable pricing on by-products and pricing pressure
more than offset lower pension expense and productivity
improvements. SG&A expense as a percentage of net sales in the
second quarter of 2012 improved to 10.9% from 11.8% in the second
quarter of 2011 primarily due to lower pension expense and
productivity improvements resulting from focused cost reduction
actions. Operating earnings in the quarter were $163.9 million,
which were impacted by restructuring and impairment charges and
acquisition-related expenses totaling $34.5 million in the second
quarter of 2012, compared to operating earnings in the second
quarter of 2011 of $116.1 million, which included restructuring and
impairment charges and acquisition-related expenses totaling $76.6
million.
Excluding restructuring and impairment charges and
acquisition-related expenses, non-GAAP operating income increased
from $192.7 million to $198.4 million in the second quarter of 2012
and non-GAAP operating margin improved to 7.8% in the second
quarter of 2012 from 7.3% in the second quarter of 2011. Lower
pension expense, productivity improvements and lower depreciation
and amortization more than offset an unfavorable product mix, lower
volume, continued pricing pressure and unfavorable pricing on
by-products.
Segments
Net sales for the U.S. Print and Related Services segment
decreased 3.9% from the second quarter of 2011 to $1.8 billion in
the second quarter of 2012. Pro forma for acquisitions, net sales
in the segment decreased 4.5%, as volume declines across most
product offerings, lower pass-through paper sales of $21.6 million
or 112 basis points, and continued pricing pressure across the
segment more than offset volume increases in office products and
logistics. The segment's operating income of $165.7 million in the
second quarter of 2012, which was negatively impacted by charges
for restructuring and impairment of $26.1 million, increased $32.9
million from operating income of $132.8 million in the second
quarter of 2011, which included charges for restructuring and
impairment of $65.1 million. The segment's non-GAAP operating
margin of 10.4% in the second quarter of 2012 improved 10 basis
points from the second quarter of 2011, as productivity
improvements and lower depreciation and amortization offset volume
declines, an unfavorable product mix, unfavorable pricing on
by-products and pricing pressure.
Net sales for the International segment of $682.6 million
decreased $19.9 million, or 2.8%, from the second quarter of 2011,
inclusive of a $43.3 million (616 basis points) unfavorable impact
from changes in foreign exchange rates. The balance of the change
in net sales was driven by volume growth in business process
outsourcing, global turnkey and Asia and higher pass-through paper
sales in Asia ($7.5 million or 107 basis points), which were only
partially offset by volume declines in Europe, Canada and Latin
America and the impact of continued pricing pressure across certain
offerings within the segment. The segment's operating income of
$42.0 million in the second quarter of 2012, which was negatively
impacted by charges for restructuring of $3.5 million, decreased by
$1.6 million from operating income of $43.6 million in the second
quarter of 2011, which included charges for restructuring and
impairment of $9.8 million. The segment's non-GAAP operating margin
declined to 6.7% in the second quarter of 2012 from 7.6% in the
second quarter of 2011 as an unfavorable product mix, pricing
pressure and wage and other inflationary increases in certain
countries were only partially offset by lower depreciation and
amortization, productivity improvements and a favorable impact from
changes in foreign exchange rates.
Unallocated Corporate operating expenses decreased to $43.8
million in the second quarter of 2012 as compared to $60.3 million
in the second quarter of 2011. Excluding charges for
restructuring and impairment and acquisition-related expenses
totaling $4.9 million in the second quarter of 2012 and $1.7
million in the second quarter of 2011, unallocated Corporate
operating expenses decreased $19.7 million to $38.9 million in the
second quarter of 2012. Lower pension expense, lower LIFO
inventory and bad debt provisions and productivity improvements
were partially offset by higher benefits-related expense and the
reinstatement of the 401(k) match.
Outlook - 2012 Full-Year Guidance
For the full year of 2012, the Company expects revenue of
approximately $10.4 billion to $10.5 billion, which includes an
unfavorable impact of changes in foreign exchange rates and
pass-through paper sales of approximately $160 million. The
Company expects non-GAAP operating margin in the range of 7.2% to
7.3% and continues to project non-GAAP net earnings per diluted
share to be in the range of $1.84 to $1.92. This guidance
assumes no additional shares are repurchased pursuant to the
current authorization from the Company's board of directors.
The non-GAAP effective tax rate for 2012 is expected to be in
the range of 30% to 34%. GAAP net earnings per diluted share in
2012 may include restructuring and impairment charges,
acquisition-related expenses, the resolution of certain tax items
and other items that are not currently determinable, but may be
significant. For that reason, the Company is unable to
provide full-year GAAP net earnings estimates at this time. In
addition, the Company expects to deliver 2012 operating cash flow
less capital expenditures of approximately $500 million.
Conference Call
RR Donnelley will host a conference call and simultaneous
webcast to discuss its second-quarter results today, Wednesday,
August 1, at 10:00 a.m. Eastern Time (9:00 a.m. Central
Time). The live webcast will be accessible on RR Donnelley's
web site: www.rrdonnelley.com. Individuals wishing to
participate can join the conference call by dialing 847.413.9014,
confirmation number 32852191. A webcast replay will be
archived on the Company's web site for 30 days after the
call. In addition, a telephonic replay of the call will be
available for seven days at 630.652.3042, passcode 9850121#.
About RR Donnelley
RR Donnelley (Nasdaq:RRD) is a global provider of integrated
communications. The Company works collaboratively with more
than 60,000 customers worldwide to develop custom communications
solutions that reduce costs, drive top-line growth, enhance ROI and
ensure compliance. Drawing on a range of proprietary and
commercially available digital and conventional technologies
deployed across four continents, the Company employs a suite of
leading Internet-based capabilities and other resources to provide
premedia, printing, logistics and business process outsourcing
services to clients in virtually every private and public
sector.
For more information, and for RR Donnelley's Corporate Social
Responsibility Report, visit the company's web site at
http://www.rrdonnelley.com.
Use of Forward-Looking Statements
This news release contains "forward-looking statements" as
defined in the U.S. Private Securities Litigation Reform Act of
1995. Readers are cautioned not to place undue reliance on
these forward-looking statements and any such forward-looking
statements are qualified in their entirety by reference to the
following cautionary statements. All forward-looking
statements speak only as of the date of this news release and are
based on current expectations and involve a number of assumptions,
risks and uncertainties that could cause the actual results to
differ materially from such forward-looking statements. The
Company does not undertake to 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 statement or to
reflect the occurrence of anticipated or unanticipated
events. The factors that could cause material differences in
the expected results of RR Donnelley include, without limitation,
the following: the successful execution and integration of
acquisitions and the performance of the Company's businesses
following acquisitions; the ability to implement comprehensive
plans for the integration of the sales force, cost containment,
asset rationalization and other key strategies; competitive
pressures in all markets in which the company operates; the
volatility and disruption of the capital and credit markets, and
adverse changes in the global economy; the Company's ability to
access unsecured debt in the capital markets and the reliability of
the participants to the Company's contractual lending and insurance
agreements; factors that affect customer demand, including changes
in postal rates and postal regulations, changes in the capital
markets, changes in advertising markets, the rate of migration from
paper-based forms to digital format, customers' budgetary
constraints and customers' changes in short-range and long-range
plans; customers' financial strength; shortages or changes in
availability, or increases in costs of, key materials (such as ink,
paper and fuel); and other risks and uncertainties described in RR
Donnelley's periodic filings with the Securities and Exchange
Commission (SEC). Readers are strongly encouraged to read the
full cautionary statements contained in RR Donnelley's filings with
the SEC.
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated Balance
Sheets |
As of June 30, 2012 and
December 31, 2011 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
June 30,
2012 |
December 31,
2011 |
Assets |
|
|
|
|
|
Cash and cash equivalents |
$ 369.0 |
$ 449.7 |
Receivables, less allowance for doubtful
accounts |
1,944.9 |
1,844.2 |
Income taxes receivable |
25.9 |
32.4 |
Inventories |
505.0 |
510.9 |
Prepaid expenses and other current
assets |
136.4 |
131.4 |
Total Current Assets |
2,981.2 |
2,968.6 |
Property, plant and equipment - net |
1,718.9 |
1,854.6 |
Goodwill |
2,218.4 |
2,222.1 |
Other intangible assets - net |
542.5 |
590.3 |
Other noncurrent
assets |
638.8 |
646.1 |
Total Assets |
$ 8,099.8 |
$ 8,281.7 |
|
|
|
Liabilities |
|
|
|
|
|
Accounts payable |
$ 946.9 |
$ 1,063.3 |
Accrued liabilities |
765.2 |
817.0 |
Short-term and current portion of
long-term debt |
343.0 |
243.7 |
Total Current Liabilities |
2,055.1 |
2,124.0 |
Long-term debt |
3,418.4 |
3,416.8 |
Pension liabilities |
992.5 |
1,076.3 |
Postretirement benefits |
227.5 |
227.3 |
Other noncurrent
liabilities |
326.6 |
375.1 |
Total Liabilities |
7,020.1 |
7,219.5 |
Equity |
|
|
|
|
|
Common stock, $1.25 par
value |
303.7 |
303.7 |
Authorized shares: 500.0 |
|
|
Issued shares: 243.0 in 2012 and
2011 |
|
|
Additional paid-in capital |
2,828.1 |
2,888.7 |
Retained earnings |
375.3 |
342.4 |
Accumulated other comprehensive
loss |
(881.2) |
(863.3) |
Treasury stock, at cost, 62.6
shares in 2012 (2011 - 64.5 shares) |
(1,565.2) |
(1,628.8) |
Total RR Donnelley shareholders'
equity |
1,060.7 |
1,042.7 |
Noncontrolling
interests |
19.0 |
19.5 |
Total Equity |
1,079.7 |
1,062.2 |
Total Liabilities and
Equity |
$ 8,099.8 |
$ 8,281.7 |
|
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated
Statements of Operations |
For the Three and Six Months
Ended June 30, 2012 and 2011 |
(UNAUDITED) |
(in millions, except per
share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Three Months Ended June 30, |
For the Six
Months Ended June 30, |
|
2 0 1 2
GAAP |
ADJUSTMENTS TO
NON-GAAP |
2 0 1 2
NON-GAAP |
2 0 11
GAAP |
ADJUSTMENTS TO
NON-GAAP |
2 0 1 1
NON-GAAP |
2 0 1 2
GAAP |
ADJUSTMENTS TO
NON-GAAP |
2 0 1 2
NON-GAAP |
2 0 1 1
GAAP |
ADJUSTMENTS TO
NON-GAAP |
2 0 1 1
NON-GAAP |
Products (1) |
$2,189.7 |
$ -- |
$ 2,189.7 |
$ 2,356.9 |
$ -- |
$ 2,356.9 |
$ 4,386.2 |
$ -- |
$ 4,386.2 |
$ 4,623.3 |
$ -- |
$ 4,623.3 |
Services (1) |
338.9 |
-- |
338.9 |
266.5 |
-- |
266.5 |
667.3 |
-- |
667.3 |
583.6 |
-- |
583.6 |
Total net sales |
2,528.6 |
-- |
2,528.6 |
2,623.4 |
-- |
2,623.4 |
5,053.5 |
-- |
5,053.5 |
5,206.9 |
-- |
5,206.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products cost of sales (exclusive of
depreciation and amortization) |
1,689.6 |
-- |
1,689.6 |
1,777.2 |
-- |
1,777.2 |
3,392.5 |
-- |
3,392.5 |
3,504.0 |
-- |
3,504.0 |
Services cost of sales (exclusive of
depreciation and amortization) |
244.3 |
-- |
244.3 |
204.4 |
-- |
204.4 |
486.4 |
-- |
486.4 |
433.8 |
-- |
433.8 |
Selling, general and administrative expenses
(exclusive of depreciation and amortization) |
275.9 |
(0.5) |
275.4 |
309.3 |
(0.9) |
308.4 |
559.4 |
(0.8) |
558.6 |
636.2 |
(1.3) |
634.9 |
Restructuring and impairment charges-net |
34.0 |
(34.0) |
-- |
75.7 |
(75.7) |
-- |
84.0 |
(84.0) |
-- |
126.5 |
(126.5) |
-- |
Depreciation and amortization |
120.9 |
-- |
120.9 |
140.7 |
-- |
140.7 |
245.9 |
-- |
245.9 |
280.9 |
-- |
280.9 |
Total operating expenses |
2,364.7 |
(34.5) |
2,330.2 |
2,507.3 |
(76.6) |
2,430.7 |
4,768.2 |
(84.8) |
4,683.4 |
4,981.4 |
(127.8) |
4,853.6 |
Income from
operations |
163.9 |
34.5 |
198.4 |
116.1 |
76.6 |
192.7 |
285.3 |
84.8 |
370.1 |
225.5 |
127.8 |
353.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense - net |
63.6 |
-- |
63.6 |
61.3 |
-- |
61.3 |
124.3 |
-- |
124.3 |
119.2 |
-- |
119.2 |
Investment and other (income) expense -
net |
4.8 |
(4.1) |
0.7 |
(10.0) |
9.8 |
(0.2) |
3.6 |
(4.1) |
(0.5) |
(9.8) |
9.8 |
-- |
Loss on debt extinguishment |
-- |
-- |
-- |
68.6 |
(68.6) |
-- |
12.1 |
(12.1) |
-- |
68.6 |
(68.6) |
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income
taxes |
95.5 |
38.6 |
134.1 |
(3.8) |
135.4 |
131.6 |
145.3 |
101.0 |
246.3 |
47.5 |
186.6 |
234.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
6.5 |
38.9 |
45.4 |
(16.3) |
42.0 |
25.7 |
18.4 |
59.9 |
78.3 |
0.7 |
58.5 |
59.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
89.0 |
(0.3) |
88.7 |
12.5 |
93.4 |
105.9 |
126.9 |
41.1 |
168.0 |
46.8 |
128.1 |
174.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Income attributable to noncontrolling
interests |
0.2 |
-- |
0.2 |
0.3 |
-- |
0.3 |
0.7 |
-- |
0.7 |
0.7 |
-- |
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to RR
Donnelley common shareholders |
$ 88.8 |
$ (0.3) |
$ 88.5 |
$ 12.2 |
$ 93.4 |
$ 105.6 |
$ 126.2 |
$ 41.1 |
$ 167.3 |
$ 46.1 |
$ 128.1 |
$ 174.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to RR
Donnelley common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per share |
$ 0.49 |
|
$ 0.49 |
$ 0.06 |
|
$ 0.54 |
$ 0.70 |
|
$ 0.93 |
$ 0.23 |
|
$ 0.86 |
Diluted net earnings per share |
$ 0.49 |
|
$ 0.49 |
$ 0.06 |
|
$ 0.53 |
$ 0.69 |
|
$ 0.92 |
$ 0.23 |
|
$ 0.85 |
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
180.7 |
|
180.7 |
196.7 |
|
196.7 |
180.1 |
|
180.1 |
201.9 |
|
201.9 |
Diluted |
181.8 |
|
181.8 |
199.5 |
|
199.5 |
181.9 |
|
181.9 |
204.5 |
|
204.5 |
|
The Company believes that
certain non-GAAP measures, when presented in conjunction with
comparable GAAP measures, are useful because that information is an
appropriate measure for evaluating the Company's operating
performance. Internally, the Company uses this non-GAAP
information as an indicator of business performance, and evaluates
management's effectiveness with specific reference to this
indicator. These measures should be considered in addition to, not
a substitute for, or superior to, measures of financial performance
prepared in accordance with
GAAP. |
(1) Net sales from products and
services include changes in the classification of certain revenues,
primarily in the financial print reporting unit. |
|
|
|
|
R.R. Donnelley &
Sons Company |
|
Reconciliation of GAAP to
Non-GAAP Measures |
|
For the Three Months Ended June
30, 2012 and 2011 |
|
(UNAUDITED) |
|
(in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended June 30, 2012 |
For the Three Months
Ended June 30, 2011 |
|
|
Income from operations |
Operating margin |
Net earnings attributable to common
shareholders |
Net earnings attributable to common
shareholders per diluted share |
Income from operations |
Operating margin |
Net earnings attributable to common
shareholders |
Net earnings attributable to common
shareholders per diluted share |
|
GAAP basis measures |
$ 163.9 |
6.5% |
$ 88.8 |
$ 0.49 |
$ 116.1 |
4.4% |
$ 12.2 |
$ 0.06 |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
Restructuring charges (1) |
25.7 |
1.0% |
17.2 |
0.10 |
51.4 |
2.0% |
39.2 |
0.20 |
|
Impairment charges (2) |
8.3 |
0.3% |
5.5 |
0.03 |
24.3 |
0.9% |
18.6 |
0.09 |
|
Acquisition-related expenses (3) |
0.5 |
-- |
0.5 |
-- |
0.9 |
-- |
0.8 |
0.01 |
|
Net (gain) loss on investments (4) |
-- |
-- |
2.6 |
0.01 |
-- |
-- |
(9.5) |
(0.05) |
|
Loss on debt extinguishment (5) |
-- |
-- |
-- |
-- |
-- |
-- |
44.3 |
0.22 |
|
Recognition of income tax benefits
(6) |
-- |
-- |
(26.1) |
(0.14) |
-- |
-- |
-- |
-- |
|
Total Non-GAAP adjustments |
34.5 |
1.3% |
(0.3) |
-- |
76.6 |
2.9% |
93.4 |
0.47 |
|
Non-GAAP measures |
$ 198.4 |
7.8% |
$ 88.5 |
$ 0.49 |
$ 192.7 |
7.3% |
$ 105.6 |
$ 0.53 |
|
|
|
|
|
|
|
|
|
|
|
(1) Restructuring charges
(pre-tax): Operating results for the three months ended June
30, 2012 and 2011 were affected by the following restructuring
charges: |
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
|
|
|
|
Employee termination costs (a) |
$ 13.8 |
$ 29.2 |
|
|
|
|
|
|
|
Other charges (b) |
11.9 |
22.2 |
|
|
|
|
|
|
|
Total restructuring
charges |
$ 25.7 |
$ 51.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) for the three months
ended June 30, 2012, employee termination costs resulted from the
reorganization of sales and administrative functions across all
segments, the closing of two manufacturing facilities within the
U.S. Print and Related Services segment and the reorganization of
certain operations. For the three months ended June 30, 2011,
employee termination costs resulted from the closing of three
manufacturing facilities within the U.S. Print and Related Services
segment and headcount reductions due to the Bowne acquisition. |
|
|
|
(b) includes lease
termination and other facility costs. In addition, 2011 includes
multi-employer pension plan partial withdrawal charges primarily
attributable to the closing of three manufacturing facilities in
the U.S. Print and Related Services segment. |
|
|
|
(2) Impairment charges
(pre-tax): charges related to the impairment of machinery,
equipment and other long-lived assets. |
|
|
(3) Acquisition-related
expenses: Legal, accounting and other expenses associated with
acquisitions completed or contemplated. |
|
|
|
|
|
|
|
|
|
|
|
(4) Net (gain) loss on
investments: Pre-tax impairment loss on an equity investment of
$4.1 million ($2.6 million after-tax) for the three months ended
June 30, 2012. For the three months ended June 30, 2011, a
pre-tax gain of $9.8 million ($9.5 million after-tax) resulted from
the acquisition of Helium, in which the Company previously held an
equity investment. The pre-tax gain is net of the Company's
portion of the transaction costs incurred by Helium as a result of
the acquisition. |
|
|
|
|
|
|
|
|
|
|
|
(5) Loss on debt
extinguishment: Pre-tax loss of $68.6 million ($44.3 million
after-tax) on the repurchase of $416.2 million of senior notes due
February 1, 2019, January 15, 2017 and May 15, 2015. |
|
|
|
|
|
|
|
|
|
|
|
(6) Recognition of
previously unrecognized tax benefits due to the resolution of
certain U.S. federal uncertain tax positions for the three months
ended June 30, 2012. |
|
|
R.R. Donnelley &
Sons Company |
Reconciliation of GAAP to
Non-GAAP Measures |
For the Six Months Ended June
30, 2012 and 2011 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
June 30, 2012 |
For the Six Months Ended
June 30, 2011 |
|
Income from operations |
Operating margin |
Net earnings attributable to common
shareholders |
Net earnings attributable to common
shareholders per diluted share |
Income from operations |
Operating margin |
Net earnings attributable to common
shareholders |
Net earnings attributable to common
shareholders per diluted share |
GAAP basis measures |
$ 285.3 |
5.6% |
$ 126.2 |
$ 0.69 |
$ 225.5 |
4.3% |
$ 46.1 |
$ 0.23 |
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Restructuring charges (1) |
66.4 |
1.3% |
44.2 |
0.25 |
94.1 |
1.8% |
68.5 |
0.33 |
Impairment charges (2) |
17.6 |
0.4% |
11.7 |
0.06 |
32.4 |
0.6% |
23.6 |
0.11 |
Acquisition-related expenses (3) |
0.8 |
-- |
0.8 |
0.01 |
1.3 |
0.1% |
1.2 |
0.01 |
Net (gain) loss on investments (4) |
-- |
-- |
2.6 |
0.01 |
-- |
-- |
(9.5) |
(0.05) |
Loss on debt extinguishment (5) |
-- |
-- |
7.9 |
0.04 |
-- |
-- |
44.3 |
0.22 |
Recognition of income tax benefits
(6) |
-- |
-- |
(26.1) |
(0.14) |
-- |
-- |
-- |
-- |
Total Non-GAAP adjustments |
84.8 |
1.7% |
41.1 |
0.23 |
127.8 |
2.5% |
128.1 |
0.62 |
Non-GAAP measures |
$ 370.1 |
7.3% |
$ 167.3 |
$ 0.92 |
$ 353.3 |
6.8% |
$ 174.2 |
$ 0.85 |
|
|
|
|
|
|
|
|
|
(1) Restructuring charges
(pre-tax): Operating results for the six months ended June 30,
2012 and 2011 were affected by the following restructuring
charges: |
|
|
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
|
|
|
Employee termination costs (a) |
$ 50.6 |
$ 54.0 |
|
|
|
|
|
|
Other charges (b) |
15.8 |
40.1 |
|
|
|
|
|
|
Total restructuring
charges |
$ 66.4 |
$ 94.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) for the six months ended
June 30, 2012, employee termination costs resulted from the
reorganization of sales and administrative functions across all
segments, the closing of four manufacturing facilities within the
U.S. Print and Related Services segment and one manufacturing
facility within the International segment and the reorganization of
certain operations. For the six months ended June 30, 2011,
employee termination costs resulted from the closing of four
manufacturing facilities within the U.S. Print and Related Services
segment and headcount reductions due to the Bowne acquisition. |
|
(b) includes lease
termination and other facility costs. In addition, 2011 includes
multi-employer pension plan partial withdrawal charges primarily
attributable to the closing of three manufacturing facilities in
the U.S. Print and Related Services segment. |
|
|
|
|
|
|
|
|
|
(2) Impairment charges
(pre-tax): charges related to the impairment of machinery,
equipment and other long-lived assets. |
|
|
|
|
|
|
|
|
|
(3) Acquisition-related
expenses: Legal, accounting and other expenses associated with
acquisitions completed or contemplated. |
|
|
|
|
|
|
|
|
|
(4) Net (gain) loss on
investments: Pre-tax impairment loss on an equity investment of
$4.1 million ($2.6 million after-tax) for the six months ended June
30, 2012. For the six months ended June 30, 2011, a pre-tax
gain of $9.8 million ($9.5 million after-tax) resulted from the
acquisition of Helium, in which the Company previously held an
equity investment. The pre-tax gain is net of the Company's
portion of the transaction costs incurred by Helium as a result of
the acquisition. |
|
|
|
|
|
|
|
|
|
(5) Loss on debt
extinguishment: For the six months ended June 30, 2012, the
pre-tax loss of $12.1 million ($7.9 million after-tax) related to
the repurchase of $341.8 million of 4.95% senior notes due April 1,
2014 and $100.0 million of 5.50% senior notes due May 15, 2015. For
the six months ended June 30, 2011, the pre-tax loss of $68.6
million ($44.3 million after-tax) related to the repurchase of
$416.2 million of senior notes due February 1, 2019, January
15, 2017 and May 15, 2015. |
|
|
|
|
|
|
|
|
|
(6) Recognition of previously
unrecognized tax benefits due to the resolution of certain U.S.
federal uncertain tax positions for the six months ended June 30,
2012. |
|
|
R. R. Donnelley &
Sons Company |
Segment GAAP to Non-GAAP
Operating Income and Margin Reconciliation |
For the Three Months Ended June
30, 2012 and 2011 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
U.S. Print and Related
Services |
International |
Corporate |
Consolidated |
|
|
|
|
|
For the Three Months Ended June 30,
2012 |
|
|
|
|
Net sales |
$ 1,846.0 |
$ 682.6 |
$ -- |
$ 2,528.6 |
Operating expense |
1,680.3 |
640.6 |
43.8 |
2,364.7 |
Income (loss) from operations |
165.7 |
42.0 |
(43.8) |
163.9 |
Operating margin % |
9.0% |
6.2% |
nm |
6.5% |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Restructuring charges |
19.1 |
3.5 |
3.1 |
25.7 |
Impairment charges |
7.0 |
-- |
1.3 |
8.3 |
Acquisition-related expenses |
-- |
-- |
0.5 |
0.5 |
Total Non-GAAP adjustments |
26.1 |
3.5 |
4.9 |
34.5 |
|
|
|
|
|
Non-GAAP income (loss) from operations |
$ 191.8 |
$ 45.5 |
$ (38.9) |
$ 198.4 |
Non-GAAP operating margin % |
10.4% |
6.7% |
nm |
7.8% |
|
|
|
|
|
Depreciation and amortization |
83.3 |
27.1 |
10.5 |
120.9 |
Capital expenditures |
27.3 |
6.9 |
14.2 |
48.4 |
|
|
|
|
|
For the Three Months Ended June 30,
2011 |
|
|
|
|
Net sales |
$ 1,920.9 |
$ 702.5 |
$ -- |
$ 2,623.4 |
Operating expense |
1,788.1 |
658.9 |
60.3 |
2,507.3 |
Income (loss) from operations |
132.8 |
43.6 |
(60.3) |
116.1 |
Operating margin % |
6.9% |
6.2% |
nm |
4.4% |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Restructuring charges |
41.5 |
9.3 |
0.6 |
51.4 |
Impairment charges |
23.6 |
0.5 |
0.2 |
24.3 |
Acquisition-related expenses |
-- |
-- |
0.9 |
0.9 |
Total Non-GAAP adjustments |
65.1 |
9.8 |
1.7 |
76.6 |
|
|
|
|
|
Non-GAAP income (loss) from operations |
$ 197.9 |
$ 53.4 |
$ (58.6) |
$ 192.7 |
Non-GAAP operating margin % |
10.3% |
7.6% |
nm |
7.3% |
|
|
|
|
|
Depreciation and amortization |
98.9 |
31.6 |
10.2 |
140.7 |
Capital expenditures |
38.1 |
21.1 |
21.9 |
81.1 |
|
|
R. R. Donnelley &
Sons Company |
Segment GAAP to Non-GAAP
Operating Income and Margin Reconciliation |
For the Six Months Ended June
30, 2012 and 2011 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
U.S. Print and Related
Services |
International |
Corporate |
Consolidated |
|
|
|
|
|
For the Six Months Ended June 30,
2012 |
|
|
|
|
Net sales |
$ 3,727.4 |
$ 1,326.1 |
$ -- |
$ 5,053.5 |
Operating expense |
3,422.5 |
1,253.5 |
92.2 |
4,768.2 |
Income (loss) from operations |
304.9 |
72.6 |
(92.2) |
285.3 |
Operating margin % |
8.2% |
5.5% |
nm |
5.6% |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Restructuring charges |
50.8 |
7.9 |
7.7 |
66.4 |
Impairment charges |
15.0 |
1.0 |
1.6 |
17.6 |
Acquisition-related expenses |
-- |
-- |
0.8 |
0.8 |
Total Non-GAAP adjustments |
65.8 |
8.9 |
10.1 |
84.8 |
|
|
|
|
|
Non-GAAP income (loss) from operations |
$ 370.7 |
$ 81.5 |
$ (82.1) |
$ 370.1 |
Non-GAAP operating margin % |
9.9% |
6.1% |
nm |
7.3% |
|
|
|
|
|
Depreciation and amortization |
170.9 |
54.6 |
20.4 |
245.9 |
Capital expenditures |
54.4 |
18.0 |
21.3 |
93.7 |
|
|
|
|
|
For the Six Months Ended June 30,
2011 |
|
|
|
|
Net sales |
$ 3,862.0 |
$ 1,344.9 |
$ -- |
$ 5,206.9 |
Operating expense |
3,587.3 |
1,257.2 |
136.9 |
4,981.4 |
Income (loss) from operations |
274.7 |
87.7 |
(136.9) |
225.5 |
Operating margin % |
7.1% |
6.5% |
nm |
4.3% |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Restructuring charges |
72.8 |
18.0 |
3.3 |
94.1 |
Impairment charges |
30.5 |
1.0 |
0.9 |
32.4 |
Acquisition-related expenses |
-- |
-- |
1.3 |
1.3 |
Total Non-GAAP adjustments |
103.3 |
19.0 |
5.5 |
127.8 |
|
|
|
|
|
Non-GAAP income (loss) from operations |
$ 378.0 |
$ 106.7 |
$ (131.4) |
$ 353.3 |
Non-GAAP operating margin % |
9.8% |
7.9% |
nm |
6.8% |
|
|
|
|
|
Depreciation and amortization |
198.8 |
62.0 |
20.1 |
280.9 |
Capital expenditures |
55.4 |
46.9 |
25.9 |
128.2 |
|
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated
Statements of Cash Flows |
For the Six Months Ended June
30, 2012 and 2011 |
(UNAUDITED) |
(in millions) |
|
|
|
2012 |
2011 |
Operating Activities |
|
|
|
|
|
Net earnings |
$ 126.9 |
$ 46.8 |
Adjustment to reconcile net earnings to
net cash provided by operating activities |
279.6 |
410.7 |
Changes in operating assets and
liabilities |
(340.0) |
(254.2) |
Pension and
postretirement benefits contributions |
(56.6) |
(35.2) |
Net cash provided by operating
activities |
$ 9.9 |
$ 168.1 |
|
|
|
Net cash used in investing
activities |
$ (89.9) |
$ (208.4) |
|
|
|
Net cash provided by (used in)
financing activities |
$ 1.6 |
$ (134.4) |
|
|
|
Effect of exchange rate on cash and cash
equivalents |
(2.3) |
18.6 |
|
|
|
Net decrease in cash and cash
equivalents |
$ (80.7) |
$ (156.1) |
|
|
|
Cash and cash equivalents at beginning of
period |
449.7 |
519.1 |
|
|
|
Cash and cash equivalents at
end of period |
$ 369.0 |
$ 363.0 |
|
|
R.R. Donnelley &
Sons Company |
Reconciliation of Reported to
Pro Forma Net Sales |
For the Three Months Ended June
30, 2012 and 2011 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
Reported net sales |
Adjustment for net sales of acquired
businesses |
Pro forma net sales |
For the Three Months Ended June 30,
2012 |
|
|
|
U.S. Print and Related Services |
$ 1,846.0 |
$ -- |
$ 1,846.0 |
International |
682.6 |
-- |
682.6 |
Consolidated |
$ 2,528.6 |
$ -- |
$ 2,528.6 |
|
|
|
|
For the Three Months Ended June 30,
2011 |
|
|
|
U.S. Print and Related Services |
$ 1,920.9 |
$ 11.8 |
$ 1,932.7 |
International |
702.5 |
-- |
702.5 |
Consolidated |
$ 2,623.4 |
$ 11.8 |
$ 2,635.2 |
|
Net sales change |
|
|
|
U.S. Print and Related Services |
(3.9%) |
|
(4.5%) |
International |
(2.8%) |
|
(2.8%) |
Consolidated |
(3.6%) |
|
(4.0%) |
|
|
|
|
Supplementary non-GAAP
information: |
|
|
|
|
|
|
|
Year-over-year impact of changes in
foreign exchange (FX) rates |
|
|
|
U.S. Print and Related Services |
--% |
|
--% |
International |
(6.2%) |
|
(6.2%) |
Consolidated |
(1.7%) |
|
(1.6%) |
|
|
|
|
Approximate year-over-year impact of
changes in pass-through paper sales |
|
|
|
U.S. Print and Related Services |
(1.1%) |
|
(1.1%) |
International |
1.1% |
|
1.1% |
Consolidated |
(0.5%) |
|
(0.5%) |
|
Net sales change, excluding impact of
changes in FX rates and pass-through paper sales |
|
|
|
U.S. Print and Related Services |
(2.8%) |
|
(3.4%) |
International |
2.3% |
|
2.3% |
Consolidated |
(1.4%) |
|
(1.9%) |
|
The reported results of the
Company include the results of acquired businesses from the
acquisition date forward. The Company has provided this
schedule to reconcile reported net sales for the three months ended
June 30, 2012 and 2011 to pro forma net sales as if the
acquisitions took place as of January 1, 2011. |
|
There were no acquisitions during
the three months ended June 30, 2012. |
|
For the three months ended June
30, 2011, the adjustment for net sales of acquired businesses
reflects the net sales of Helium, Inc. (acquired June 21, 2011),
Sequence Personal LLC (acquired August 15, 2011), LibreDigital,
Inc. (acquired August 16, 2011), Genesis Packaging & Design
Inc. (acquired September 6, 2011) and StratusGroup, Inc. (acquired
November 21, 2011). |
|
|
|
R.R. Donnelley &
Sons Company |
Reconciliation of Reported to
Pro Forma Net Sales |
For the Six Months Ended June
30, 2012 and 2011 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
Reported net sales |
Adjustment for net sales of
acquired businesses |
Pro forma net sales |
For the Six Months Ended June 30,
2012 |
|
|
|
U.S. Print and Related Services |
$ 3,727.4 |
$ -- |
$ 3,727.4 |
International |
1,326.1 |
-- |
1,326.1 |
Consolidated |
$ 5,053.5 |
$ -- |
$ 5,053.5 |
|
|
|
|
For the Six Months Ended June 30,
2011 |
|
|
|
U.S. Print and Related Services |
$ 3,862.0 |
$ 23.1 |
$ 3,885.1 |
International |
1,344.9 |
-- |
1,344.9 |
Consolidated |
$ 5,206.9 |
$ 23.1 |
$ 5,230.0 |
|
Net sales change |
|
|
|
U.S. Print and Related Services |
(3.5%) |
|
(4.1%) |
International |
(1.4%) |
|
(1.4%) |
Consolidated |
(2.9%) |
|
(3.4%) |
|
|
|
|
Supplementary non-GAAP
information: |
|
|
|
|
|
|
|
Year-over-year impact of changes in
foreign exchange (FX) rates |
|
|
|
U.S. Print and Related Services |
--% |
|
--% |
International |
(4.7%) |
|
(4.7%) |
Consolidated |
(1.2%) |
|
(1.2%) |
|
|
|
|
Approximate year-over-year impact of
changes in pass-through paper sales |
|
|
|
U.S. Print and Related Services |
(1.0%) |
|
(1.0%) |
International |
1.2% |
|
1.2% |
Consolidated |
(0.4%) |
|
(0.5%) |
|
Net sales change, excluding impact of
changes in FX rates and pass-through paper sales |
|
|
|
U.S. Print and Related Services |
(2.5%) |
|
(3.1%) |
International |
2.1% |
|
2.1% |
Consolidated |
(1.3%) |
|
(1.7%) |
|
The reported results of the
Company include the results of acquired businesses from the
acquisition date forward. The Company has provided this
schedule to reconcile reported net sales for the six months ended
June 30, 2012 and 2011 to pro forma net sales as if the
acquisitions took place as of January 1, 2011. |
|
There were no acquisitions during
the six months ended June 30, 2012. |
|
For the six months ended June 30,
2011, the adjustment for net sales of acquired businesses reflects
the net sales of Journalism Online (acquired March 24, 2011),
Helium, Inc. (acquired June 21, 2011), Sequence Personal LLC
(acquired August 15, 2011), LibreDigital, Inc. (acquired August 16,
2011), Genesis Packaging & Design Inc. (acquired September 6,
2011) and StratusGroup, Inc. (acquired November 21, 2011). |
|
|
|
|
|
R.R. Donnelley &
Sons Company |
|
Liquidity Summary |
|
As of June 30, 2012 and
December 31, 2011 |
|
(UNAUDITED) |
|
(in millions) |
|
|
|
|
|
Total Liquidity (1) |
June 30, 2012 |
December 31, 2011 |
|
Cash (2) |
$ 369.0 |
$ 449.7 |
|
Committed Credit Agreement (3) |
1,326.8 |
1,417.7 |
|
|
1,695.8 |
1,867.4 |
|
Usage |
|
|
|
Borrowings under Credit Agreement |
325.0 |
65.0 |
|
|
|
|
|
Net Available Liquidity |
$ 1,370.8 |
$ 1,802.4 |
|
|
|
|
|
(1) Liquidity does not
include credit facilities of non-U.S. subsidiaries, which are
uncommitted facilities. |
|
|
|
|
|
(2) Approximately 91% of cash
as of June 30, 2012 and 89% of cash as of December 31, 2011 was
located outside the U.S. Cash held by foreign subsidiaries may
be subject to U.S. federal or state income taxes and/or local
country withholding taxes if repatriated to the U.S. In
addition, repatriation of some foreign cash is further restricted
by local laws. |
|
|
(3) $1.75 billion unsecured
and committed credit agreement (the "Credit Agreement") expiring on
December 17, 2013. The Credit Agreement contains a financial
covenant that limits total debt to four times adjusted EBITDA (as
defined in the Credit Agreement) for the last twelve months as
described therein. Based on the results of operations for the three
months ended June 30, 2012 and existing debt at that date, the
current amount available under the Credit Agreement at June 30,
2012 is $1.0 billion. See the table below for a reconciliation of
the stated amount to the current availability. |
|
|
|
June 30, 2012 |
|
|
Stated amount of Credit Agreement |
$ 1,750.0 |
|
|
Less: availability reduction from
covenants |
423.2 |
|
|
Total amount available |
1,326.8 |
|
|
Less: borrowings under Credit
Agreement |
325.0 |
|
|
Current availability at June 30,
2012 |
$ 1,001.8 |
|
|
CONTACT: Media:
Doug Fitzgerald
EVP, Communications
630.322.6830
doug.fitzgerald@rrd.com
Investors:
Dave Gardella
SVP, Investor Relations
312.326.8155
david.a.gardella@rrd.com
Donnelley (R.R.) & Sons Co. (NYSE:RRD.WI)
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From Jun 2024 to Jul 2024
Donnelley (R.R.) & Sons Co. (NYSE:RRD.WI)
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From Jul 2023 to Jul 2024