Highlights:
- Company achieved or exceeded the high end of its previous
guidance on revenue, non-GAAP operating margin and cash flow as
follows:
|
|
Full-year 2012
Guidance |
Full-year 2012
Actual |
Revenue |
$10.1 to $10.2 billion |
$10.2 billion |
Non-GAAP Operating margin |
7.2% to 7.3% |
7.3% |
Free Cash Flow(1) |
Approximately $450 million |
$486.0 million |
|
(1) Defined as Operating
Cash Flow less Capital Expenditures |
- Company reduced total debt by $221.9 million in 2012, ending
the year with gross leverage of 2.8x
Fourth-quarter summary:
- Fourth-quarter 2012 revenue of $2.7 billion declined 2.2% from
the fourth quarter of 2011
- Fourth-quarter 2012 GAAP loss per diluted share of $4.70,
compared to GAAP loss per diluted share of $1.78 in 2011; GAAP
results include non-cash impairment charges of $1.0 billion, or
$5.04 per diluted share, in the fourth quarter of 2012 and $488.5
million, or $2.25 per diluted share, in the fourth quarter of
2011
- Fourth-quarter 2012 non-GAAP earnings per diluted share of
$0.43, compared to non-GAAP earnings per diluted share of $0.46 in
the fourth quarter of 2011
Full-year summary:
- Full-year 2012 revenue of $10.2 billion declined 3.7% from
2011
- Full-year 2012 GAAP loss per diluted share of $3.61, compared
to GAAP loss per diluted share of $0.63 in 2011; GAAP results
include non-cash impairment charges of $1.0 billion, or $5.11 per
diluted share, in 2012 and $531.5 million, or $2.26 per diluted
share, in 2011
- Full-year 2012 non-GAAP earnings per diluted share of $1.86,
compared to non-GAAP earnings per diluted share of $1.82 in
2011
R.R. Donnelley & Sons Company (Nasdaq:RRD)
today reported a 2012 fourth-quarter net loss attributable to
common shareholders of $849.0 million, or $4.70 per diluted share,
on net sales of $2.7 billion compared to a net loss of $326.7
million, or $1.78 per diluted share, on net sales of $2.7 billion
in the fourth quarter of 2011. The fourth-quarter net loss
attributable to common shareholders included pre-tax net charges,
primarily related to non-cash impairment, totaling $1.0 billion in
2012 and $483.9 million in 2011. The non-cash impairment
charges followed our annual impairment test of indefinite-lived
assets. Additional details regarding the nature of these and
other items are included in the attached
schedules.
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 $78.1 million, or $0.43 per diluted share, in the fourth
quarter of 2012 compared to $85.2 million, or $0.46 per diluted
share, in the fourth quarter of 2011. Fourth-quarter non-GAAP
net earnings attributable to common shareholders exclude impairment
and restructuring charges, gains on pension curtailment, losses on
debt extinguishment, acquisition-related expenses and certain
income tax adjustments in both years, as well as contingent
compensation on a prior acquisition in the fourth quarter of
2011. For non-GAAP comparison purposes, the effective tax rate
increased to 33.0% in the fourth quarter of 2012 from 18.8% in the
fourth quarter of 2011, primarily due to certain state tax matters
in the fourth 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.
"Following the challenging conditions we have faced for the last
several quarters, we are pleased with the improvement in revenue
and margin trends we achieved in the fourth quarter.
Full-year results for revenue, non-GAAP operating margin and free
cash flow were at or above the high end of our guidance," said
Thomas J. Quinlan III, RR Donnelley's President and Chief Executive
Officer. "Further, we reduced our total debt by more than $220
million during 2012, ending the year with gross leverage of
2.8x."
Quinlan continued, "We are also encouraged by the results we've
seen in 2013 thus far, and expect another year of strong free cash
flow, in the range of $400 million to $500 million. We expect
to continue to reduce our leverage, and are revising our targeted
gross leverage on a long-term sustainable basis to be in the range
of 2.25x to 2.75x, down from the previous 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 $2.7 billion, down $61.2 million,
or 2.2%, from the fourth quarter of 2011 due to volume declines,
price erosion and a 50 basis point unfavorable impact of lower
pass-through paper sales. Gross margin of 22.0% in the fourth
quarter of 2012 declined from 22.9% in the fourth quarter of 2011
as a smaller gain on pension curtailment in 2012 ($28.9 million
less than in 2011), pricing pressure and unfavorable pricing on
by-products more than offset a favorable product mix and
productivity improvements. SG&A expense as a percent of
net sales in the fourth quarter of 2012 improved to 10.9% from
11.1% in the fourth quarter of 2011, primarily due to contingent
compensation on a prior acquisition incurred in the fourth quarter
of 2011. The operating loss in the fourth quarter of 2012 of
$841.8 million, which was impacted by impairment and restructuring
charges, the pension curtailment gain and acquisition-related
expenses totaling $1.0 billion, compared to an operating loss in
the fourth quarter of 2011 of $317.1 million, which included
impairment and restructuring charges, a pension curtailment gain,
the contingent compensation and acquisition-related expenses
totaling $483.9 million.
Non-GAAP adjusted EBITDA was $292.2 million in the fourth
quarter of 2012 compared to $296.7 million in the fourth quarter of
2011. Adjusted EBITDA margin in the fourth quarter of 2012 was
11.0%, 10 basis points higher than in the fourth quarter of 2011 as
lower pension expense and productivity improvements more than
offset continued pricing pressure and unfavorable pricing on
by-products. Non-GAAP operating income increased $8.7 million
to $175.5 million in the fourth quarter of 2012, and non-GAAP
operating margin improved 50 basis points, from 6.1% in the fourth
quarter of 2011 to 6.6% in the fourth quarter of 2012 due to the
improved adjusted EBITDA margin and lower depreciation and
amortization.
Segments
Net sales for the U.S. Print and Related Services segment in the
fourth quarter of 2012 decreased 3.7% from the fourth quarter of
2011 to $1.9 billion due to volume declines across certain product
offerings, lower pass-through paper sales of $23.4 million, or 110
basis points, and continued pricing pressure across the
segment. The segment's operating loss of $760.4 million in the
fourth quarter of 2012, which was negatively impacted by charges
for impairment and restructuring of $943.5 million, compared to an
operating loss in the fourth quarter of 2011 of $211.1 million,
which included charges for impairment and restructuring and the
contingent compensation of a prior acquisition totaling $389.0
million. The segment's non-GAAP operating margin of 9.5% in
the fourth quarter of 2012 improved by 60 basis points from the
fourth quarter of 2011, as productivity improvements and lower
depreciation and amortization were partially offset by pricing
pressure and volume declines.
Net sales for the International segment of $729.3 million
increased $13.6 million, or 1.9%, from the fourth quarter of 2011,
inclusive of a 150 basis point favorable impact from increased
pass-through paper sales and changes in foreign exchange
rates. The balance of the change in net sales was driven by
volume increases in Asia and Latin America. The segment's
operating loss of $21.0 million in the fourth quarter of 2012,
which was impacted by charges for impairment and restructuring of
$75.9 million as well as a $3.7 million gain on pension
curtailment, compared to an operating loss of $89.0 million in the
fourth quarter of 2011, which included charges for impairment and
restructuring of $133.4 million. The segment's non-GAAP
operating margin improved to 7.0% in the fourth quarter of 2012
from 6.2% in the fourth quarter of 2011 as higher volume and a
favorable product mix were partially offset by pricing pressure and
wage and other inflationary increases in certain
countries.
Unallocated Corporate operating expenses increased to $60.4
million in the fourth quarter of 2012 as compared to $17.0 million
in the fourth quarter of 2011. Excluding net charges for
restructuring and impairment and acquisition-related expenses
totaling $1.6 million in the fourth quarter of 2012 and the gain on
pension curtailment of $38.7 million and acquisition-related
expenses of $0.2 million in the fourth quarter of 2011, unallocated
Corporate operating expenses increased $3.3 million to $58.8
million in the fourth quarter of 2012. Higher benefits-related
expense and increased spending on information technology
initiatives were only partially offset by lower pension
expense.
Conference Call
RR Donnelley will host a conference call and simultaneous
webcast to discuss its fourth-quarter and full-year results today,
Tuesday, February 26, 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 34214491. 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 sales forces, 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 debt and the
capital markets and the reliability of the participants to the
Company's 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 December 31, 2012 and
December 31, 2011 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
December 31,
2012 |
December 31,
2011 |
Assets |
|
|
|
|
|
Cash and cash equivalents |
$ 430.7 |
$ 449.7 |
Receivables, less allowance for doubtful
accounts |
1,878.8 |
1,844.2 |
Inventories |
510.2 |
510.9 |
Prepaid expenses and other current
assets |
157.7 |
163.8 |
Total Current Assets |
2,977.4 |
2,968.6 |
Property, plant and equipment -
net |
1,616.6 |
1,854.6 |
Goodwill |
1,436.4 |
2,222.1 |
Other intangible assets - net |
382.9 |
590.3 |
Deferred income taxes |
445.1 |
273.8 |
Other noncurrent
assets |
404.3 |
372.3 |
Total
Assets |
$ 7,262.7 |
$ 8,281.7 |
|
|
|
Liabilities |
|
|
|
|
|
Accounts payable |
$ 1,210.3 |
$ 1,063.3 |
Accrued liabilities |
825.2 |
817.0 |
Short-term and current portion of
long-term debt |
18.4 |
243.7 |
Total Current Liabilities |
2,053.9 |
2,124.0 |
Long-term debt |
3,420.2 |
3,416.8 |
Pension liabilities |
1,150.5 |
1,076.3 |
Postretirement benefits |
241.7 |
227.3 |
Other noncurrent
liabilities |
327.7 |
375.1 |
Total
Liabilities |
7,194.0 |
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 |
2,839.4 |
2,888.7 |
Retained earnings (accumulated
deficit) |
(496.1) |
342.4 |
Accumulated other comprehensive
loss |
(1,029.2) |
(863.3) |
Treasury stock, at cost, 62.6 shares in
2012 (2011 - 64.5 shares) |
(1,565.0) |
(1,628.8) |
Total RR Donnelley shareholders'
equity |
52.8 |
1,042.7 |
Noncontrolling
interests |
15.9 |
19.5 |
Total
Equity |
68.7 |
1,062.2 |
Total Liabilities and
Equity |
$ 7,262.7 |
$ 8,281.7 |
|
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated
Statements of Operations |
For the Three and Twelve
Months Ended December 31, 2012 and 2011 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
For the
Three Months Ended December 31, |
For the
Twelve Months Ended December 31, |
|
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 11
GAAP |
ADJUSTMENTS TO
NON-GAAP |
2 0 1 1
NON-GAAP |
Products |
$ 2,277.7 |
$ -- |
$ 2,277.7 |
$ 2,386.9 |
$ -- |
$ 2,386.9 |
$ 8,835.1 |
$ -- |
$ 8,835.1 |
$ 9,375.1 |
$ -- |
$ 9,375.1 |
Services |
381.9 |
-- |
381.9 |
333.9 |
-- |
333.9 |
1,386.8 |
-- |
1,386.8 |
1,235.9 |
-- |
1,235.9 |
Total net sales |
2,659.6 |
-- |
2,659.6 |
2,720.8 |
-- |
2,720.8 |
10,221.9 |
-- |
10,221.9 |
10,611.0 |
-- |
10,611.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products cost of sales (exclusive of
depreciation and amortization) |
1,789.8 |
2.8 |
1,792.6 |
1,850.8 |
28.2 |
1,879.0 |
6,874.2 |
2.8 |
6,877.0 |
7,185.2 |
28.2 |
7,213.4 |
Services cost of sales (exclusive of
depreciation and amortization) |
284.5 |
0.1 |
284.6 |
246.9 |
3.6 |
250.5 |
1,014.8 |
0.1 |
1,014.9 |
906.6 |
3.6 |
910.2 |
Selling, general and administrative expenses
(exclusive of depreciation and amortization) |
289.8 |
0.4 |
290.2 |
303.2 |
(8.6) |
294.6 |
1,102.6 |
(1.7) |
1,100.9 |
1,236.3 |
(10.6) |
1,225.7 |
Restructuring and impairment charges -
net |
1,020.6 |
(1,020.6) |
-- |
507.1 |
(507.1) |
-- |
1,118.5 |
(1,118.5) |
-- |
667.8 |
(667.8) |
-- |
Depreciation and
amortization |
116.7 |
-- |
116.7 |
129.9 |
-- |
129.9 |
481.6 |
-- |
481.6 |
549.9 |
-- |
549.9 |
Total operating expenses |
3,501.4 |
(1,017.3) |
2,484.1 |
3,037.9 |
(483.9) |
2,554.0 |
10,591.7 |
(1,117.3) |
9,474.4 |
10,545.8 |
(646.6) |
9,899.2 |
Income (loss) from
operations |
(841.8) |
1,017.3 |
175.5 |
(317.1) |
483.9 |
166.8 |
(369.8) |
1,117.3 |
747.5 |
65.2 |
646.6 |
711.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense - net |
63.8 |
-- |
63.8 |
61.2 |
-- |
61.2 |
251.8 |
-- |
251.8 |
243.3 |
-- |
243.3 |
Investment and other expense (income) -
net |
(0.9) |
-- |
(0.9) |
0.5 |
-- |
0.5 |
2.3 |
(4.1) |
(1.8) |
(10.6) |
9.8 |
(0.8) |
Loss on debt extinguishment |
4.0 |
(4.0) |
-- |
-- |
-- |
-- |
16.1 |
(16.1) |
-- |
69.9 |
(69.9) |
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income
taxes |
(908.7) |
1,021.3 |
112.6 |
(378.8) |
483.9 |
105.1 |
(640.0) |
1,137.5 |
497.5 |
(237.4) |
706.7 |
469.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
(57.0) |
94.2 |
37.2 |
(52.2) |
72.0 |
19.8 |
13.6 |
147.8 |
161.4 |
(116.3) |
226.7 |
110.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss) |
(851.7) |
927.1 |
75.4 |
(326.6) |
411.9 |
85.3 |
(653.6) |
989.7 |
336.1 |
(121.1) |
480.0 |
358.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Income (loss) attributable to
noncontrolling interests |
(2.7) |
-- |
(2.7) |
0.1 |
-- |
0.1 |
(2.2) |
-- |
(2.2) |
1.5 |
-- |
1.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
attributable to RR Donnelley common
shareholders |
$ (849.0) |
$ 927.1 |
$ 78.1 |
$ (326.7) |
$ 411.9 |
$ 85.2 |
$ (651.4) |
$ 989.7 |
$ 338.3 |
$ (122.6) |
$ 480.0 |
$ 357.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share
attributable to RR Donnelley common
shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings (loss) per
share |
$ (4.70) |
|
$ 0.43 |
$ (1.78) |
|
$ 0.46 |
$ (3.61) |
|
$ 1.88 |
$ (0.63) |
|
$ 1.84 |
Diluted net earnings (loss) per
share |
$ (4.70) |
|
$ 0.43 |
$ (1.78) |
|
$ 0.46 |
$ (3.61) |
|
$ 1.86 |
$ (0.63) |
|
$ 1.82 |
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
180.8 |
|
180.8 |
183.6 |
|
183.6 |
180.4 |
|
180.4 |
193.8 |
|
193.8 |
Diluted |
180.8 |
1.8 |
182.6 |
183.6 |
3.0 |
186.6 |
180.4 |
1.8 |
182.2 |
193.8 |
2.6 |
196.4 |
|
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. |
|
|
R.R. Donnelley &
Sons Company |
Reconciliation of GAAP to
Non-GAAP Measures |
For the Three Months Ended
December 31, 2012 and 2011 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended December 31, 2012 |
For the Three Months
Ended December 31, 2011 |
|
Income (loss) from operations |
Operating margin |
Net earnings (loss) attributable to
common shareholders |
Net earnings (loss) attributable to
common shareholders per diluted share |
Income (loss) from operations |
Operating margin |
Net earnings (loss) attributable to
common shareholders |
Net earnings (loss) attributable to
common shareholders per diluted share |
GAAP basis measures |
$ (841.8) |
(31.7%) |
$ (849.0) |
$ (4.70) |
$ (317.1) |
(11.7%) |
$ (326.7) |
$ (1.78) |
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Impairment charges - net (1) |
1,007.4 |
37.9% |
909.4 |
5.04 |
488.5 |
18.0% |
413.0 |
2.25 |
Restructuring charges - net (2) |
13.2 |
0.5% |
7.3 |
0.04 |
18.6 |
0.6% |
11.0 |
0.06 |
Acquisition-related expenses (3) |
0.4 |
0.0% |
0.2 |
0.00 |
0.2 |
0.0% |
0.9 |
0.00 |
Loss on debt extinguishment (4) |
-- |
-- |
2.7 |
0.01 |
-- |
-- |
(1.0) |
(0.01) |
Gain on pension curtailment (5) |
(3.7) |
(0.1%) |
(2.8) |
(0.02) |
(38.7) |
(1.4%) |
(24.3) |
(0.13) |
Acquisition contingent compensation
(6) |
-- |
-- |
-- |
-- |
15.3 |
0.6% |
9.7 |
0.05 |
Income tax adjustments (7) |
-- |
-- |
10.3 |
0.06 |
-- |
-- |
2.6 |
0.02 |
Total Non-GAAP adjustments |
1,017.3 |
38.3% |
927.1 |
5.13 |
483.9 |
17.8% |
411.9 |
2.24 |
Non-GAAP measures |
$ 175.5 |
6.6% |
$ 78.1 |
$ 0.43 |
$ 166.8 |
6.1% |
$ 85.2 |
$ 0.46 |
|
|
|
|
|
|
|
|
|
(1) Impairment charges - net
(pre-tax): Operating results for the three months ended December
31, 2012 and 2011 were affected by the following impairment
charges: |
|
|
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
|
|
|
Total goodwill impairment charges
(a) |
$ 848.4 |
$ 392.3 |
|
|
|
|
|
|
Total intangible asset impairment charges
(b) |
158.0 |
90.7 |
|
|
|
|
|
|
Total goodwill and intangible asset
impairment charges |
1,006.4 |
483.0 |
|
|
|
|
|
|
Other long-lived asset impairment |
1.0 |
5.5 |
|
|
|
|
|
|
Total impairment charges -
net |
$ 1,007.4 |
$ 488.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Non-cash charges related
to the impairment of goodwill of $461.7 million, $318.7 million and
$68.0 million in the magazines, catalogs and retail inserts, books
and directories and Europe reporting units, respectively, for the
three months ended December 31, 2012. Goodwill impairment charges
for the three months ended December 31, 2011 were $170.4 million,
$99.9 million, $62.2 million and $59.8 million in the commercial,
forms and labels, Canada and Latin America reporting units,
respectively. |
(b) Non-cash charges related
to the impairment of acquired customer relationships of $158.0
million in the books and directories, magazines, catalogs and
retail inserts and Latin America reporting units for the three
months ended December 31, 2012. During the three months ended
December 31, 2011, non-cash charges of $90.7 million were recorded
primarily related to the impairment of acquired customer
relationship intangible assets in the forms and labels reporting
unit within the U.S. Print and Related Services segment. |
|
|
|
|
|
|
|
|
|
(2) Restructuring charges -
net (pre-tax): Operating results for the three months ended
December 31, 2012 and 2011 were affected by the following
restructuring charges: |
|
|
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
|
|
|
Employee termination costs (a) |
$ 8.5 |
$ 8.5 |
|
|
|
|
|
|
Other charges (b) |
4.7 |
10.1 |
|
|
|
|
|
|
Total restructuring charges -
net |
$ 13.2 |
$ 18.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) For the three months
ended December 31, 2012 and 2011, employee termination costs
resulted from the reorganization of certain operations. There were
no facility closures during the three months ended December 31,
2012 and 2011. |
(b) Includes lease
termination and other facility costs. |
|
|
|
|
|
|
|
|
|
(3) Acquisition-related
expenses: Legal, accounting and other expenses associated with
acquisitions completed or contemplated. |
|
|
|
|
|
|
|
|
|
(4) Loss on debt
extinguishment: Pre-tax loss of $4.0 million ($2.7 million
after-tax) was recognized for the three months ended December 31,
2012 related to the termination of the Previous Credit Agreement,
as defined herein. |
|
|
|
|
|
|
|
|
|
(5) Gain on pension
curtailment: Pre-tax gain of $3.7 million ($2.8 million after-tax)
was recognized for the three months ended December 31, 2012,
related to the remeasurement of the U.K. pension plan's assets and
obligations required with the announced freeze on further benefit
accruals. For the three months ended December 31, 2011, a pre-tax
gain of $38.7 million ($24.3 million after-tax) was recognized
related to the remeasurement of the plans' assets and obligations
that was required with the announced freeze on further benefit
accruals under all of the Company's U.S. pension plans. |
|
|
|
|
|
|
|
|
|
(6) Acquisition contingent
compensation: Pre-tax expense of $15.3 million ($9.7 million
after-tax) was recognized related to contingent compensation earned
by prior owners, based on achieving certain volume milestones for
the business following its acquisition by the Company. |
|
|
|
|
|
|
|
|
|
(7) Income tax adjustments:
Recognition of a $22.4 million benefit related to the decline in
value and reorganization of certain entities within the
International segment, partially offset by a valuation allowance
provision of $32.7 million on certain deferred tax assets in Latin
America for the three months ended December 31, 2012. |
|
|
R.R. Donnelley &
Sons Company |
Reconciliation of GAAP to
Non-GAAP Measures |
For the Twelve Months Ended
December 31, 2012 and 2011 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
For the Twelve Months
Ended December 31, 2012 |
For the Twelve Months
Ended December 31, 2011 |
|
Income (loss) from operations |
Operating margin |
Net earnings (loss) attributable to
common shareholders |
Net earnings (loss) attributable to
common shareholders per diluted share |
Income from operations |
Operating margin |
Net earnings (loss) attributable to
common shareholders |
Net earnings (loss) attributable to
common shareholders per diluted share |
GAAP basis measures |
$ (369.8) |
(3.6%) |
$ (651.4) |
$ (3.61) |
$ 65.2 |
0.6% |
$ (122.6) |
$ (0.63) |
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Impairment charges - net (1) |
1,026.6 |
10.0% |
922.2 |
5.11 |
531.5 |
5.0% |
442.1 |
2.26 |
Restructuring charges - net (2) |
91.9 |
0.9% |
59.7 |
0.33 |
136.3 |
1.3% |
90.7 |
0.46 |
Acquisition-related expenses (3) |
2.5 |
0.0% |
2.2 |
0.01 |
2.2 |
0.0% |
2.0 |
0.01 |
Net (gain) loss on investments (4) |
-- |
-- |
2.6 |
0.01 |
-- |
-- |
(9.5) |
(0.05) |
Loss on debt extinguishment (5) |
-- |
-- |
10.6 |
0.06 |
-- |
-- |
44.1 |
0.22 |
Gain on pension curtailment (6) |
(3.7) |
0.0% |
(2.8) |
(0.02) |
(38.7) |
(0.3%) |
(24.3) |
(0.12) |
Acquisition contingent compensation
(7) |
-- |
-- |
-- |
-- |
15.3 |
0.1% |
9.7 |
0.05 |
Income tax adjustments (8) |
-- |
-- |
(4.8) |
(0.03) |
-- |
-- |
(74.8) |
(0.38) |
Total Non-GAAP adjustments |
1,117.3 |
10.9% |
989.7 |
5.47 |
646.6 |
6.1% |
480.0 |
2.45 |
Non-GAAP measures |
$ 747.5 |
7.3% |
$ 338.3 |
$ 1.86 |
$ 711.8 |
6.7% |
$ 357.4 |
$ 1.82 |
|
|
|
|
|
|
|
|
|
(1) Impairment charges - net
(pre-tax): Operating results for the year ended December 31, 2012
and 2011 were affected by the following impairment charges: |
|
|
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
|
|
|
Total goodwill impairment charges
(a) |
$ 848.4 |
$ 392.3 |
|
|
|
|
|
|
Total intangible asset impairment charges
(b) |
158.0 |
90.7 |
|
|
|
|
|
|
Total goodwill and intangible asset
impairment charges |
1,006.4 |
483.0 |
|
|
|
|
|
|
Other long-lived asset impairment |
20.2 |
48.5 |
|
|
|
|
|
|
Total impairment charges -
net |
$ 1,026.6 |
$ 531.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Non-cash charges related
to the impairment of goodwill of $461.7 million, $318.7 million and
$68.0 million in the magazines, catalogs and retail inserts, books
and directories and Europe reporting units, respectively, for the
year ended December 31, 2012. Goodwill impairment charges for the
year ended December 31, 2011 were $170.4 million, $99.9 million,
$62.2 million and $59.8 million in the commercial, forms and
labels, Canada and Latin America reporting units,
respectively. |
(b) Non-cash charges related
to the impairment of acquired customer relationships of $158.0
million in the books and directories, magazines, catalogs and
retail inserts and Latin America reporting units for the year ended
December 31, 2012. During the year ended December 31, 2011,
non-cash charges of $90.7 million were recorded primarily related
to the impairment of acquired customer relationship intangible
assets in the forms and labels reporting unit within the U.S. Print
and Related Services segment. |
|
|
|
|
|
|
|
|
|
(2) Restructuring charges -
net (pre-tax): Operating results for the year ended December 31,
2012 and 2011 were affected by the following restructuring
charges: |
|
|
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
|
|
|
Employee termination costs (a) |
$ 66.6 |
$ 76.7 |
|
|
|
|
|
|
Other charges (b) |
25.3 |
59.6 |
|
|
|
|
|
|
Total restructuring charges -
net |
$ 91.9 |
$ 136.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) For the year ended
December 31 2012, employee termination costs resulted from the
reorganization of sales and administrative functions across all
segments, the closing of five 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 year ended December 31, 2011, employee
termination costs resulted from the closing of five 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 complete or partial withdrawal charges
primarily attributable to the closing of three manufacturing
facilities in the U.S. Print and Related Services
segment. |
|
|
|
|
|
|
|
|
|
(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) was recognized for the year
ended December 31, 2012. For the year ended December 31, 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 year ended December 31, 2012, included a
pre-tax loss of $16.1 million ($10.6 million after-tax) due 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 as
well as the termination of the Previous Credit Agreement. For
the year ended December 31, 2011, a pre-tax loss of $69.9 million
($44.1 million after-tax) was recognized on the repurchase of
$427.8 million of senior notes due February 1, 2019, January 15,
2017 and May 15, 2015. |
|
|
|
|
|
|
|
|
|
(6) Gain on pension
curtailment: Pre-tax gain of $3.7 million ($2.8 million after-tax)
was recognized for the year ended December 31, 2012, related to the
remeasurement of the U.K. pension plan's assets and obligations
required with the announced freeze on further benefit accruals. For
the year ended December 31, 2011, a pre-tax gain of $38.7 million
($24.3 million after-tax) was recognized related to the
remeasurement of the plans' assets and obligations that was
required with the announced freeze on further benefit accruals
under all of the Company's U.S. pension plans. |
|
|
|
|
|
|
|
|
|
(7) Acquisition contingent
compensation: Pre-tax expense of $15.3 million ($9.7 million
after-tax) was recognized related to contingent compensation earned
by prior owners, based on achieving certain volume milestones for
the business following its acquisition by the Company. |
|
|
|
|
|
|
|
|
|
(8) Income tax adjustments:
Recognition of $26.1 million of previously unrecognized tax
benefits due to the resolution of certain U.S. federal uncertain
tax positions and a $22.4 million benefit related to the decline in
value and reorganization of certain entities within the
International segment, partially offset by a valuation allowance
provision of $32.7 million on certain deferred tax assets in Latin
America and an $11.0 million provision related to certain foreign
earnings no longer considered to be permanently reinvested for the
year ended December 31, 2012. For the year ended December 31, 2011,
an income tax benefit of $74.8 million was recognized related to
the recognition of previously unrecognized tax benefits due to the
expiration of U.S. federal statutes of limitation for certain
years. |
|
|
R. R. Donnelley &
Sons Company |
Segment GAAP to Non-GAAP
Operating Income and Margin Reconciliation |
For the Three Months Ended
December 31, 2012 and 2011 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
U.S. Print and Related
Services |
International |
Corporate |
Consolidated |
|
|
|
|
|
For the Three Months Ended December
31, 2012 |
|
|
|
|
Net sales |
$ 1,930.3 |
$ 729.3 |
$ -- |
$ 2,659.6 |
Operating expense |
2,690.7 |
750.3 |
60.4 |
3,501.4 |
Loss from operations |
(760.4) |
(21.0) |
(60.4) |
(841.8) |
Operating margin % |
(39.4%) |
(2.9%) |
nm |
(31.7%) |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Impairment charges - net |
934.8 |
73.0 |
(0.4) |
1,007.4 |
Restructuring charges - net |
8.7 |
2.9 |
1.6 |
13.2 |
Acquisition-related expenses |
-- |
-- |
0.4 |
0.4 |
Gain on pension curtailment |
-- |
(3.7) |
-- |
(3.7) |
Total Non-GAAP adjustments |
943.5 |
72.2 |
1.6 |
1,017.3 |
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 183.1 |
$ 51.2 |
$ (58.8) |
$ 175.5 |
Non-GAAP operating margin % |
9.5% |
7.0% |
nm |
6.6% |
|
|
|
|
|
Depreciation and amortization |
77.1 |
27.4 |
12.2 |
116.7 |
Capital expenditures |
19.5 |
12.5 |
14.0 |
46.0 |
|
|
|
|
|
For the Three Months Ended December
31, 2011 |
|
|
|
|
Net sales |
$ 2,005.1 |
$ 715.7 |
$ -- |
$ 2,720.8 |
Operating expense |
2,216.2 |
804.7 |
17.0 |
3,037.9 |
Loss from operations |
(211.1) |
(89.0) |
(17.0) |
(317.1) |
Operating margin % |
(10.5%) |
(12.4%) |
nm |
(11.7%) |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Impairment charges - net |
362.7 |
124.8 |
1.0 |
488.5 |
Restructuring charges - net |
11.0 |
8.6 |
(1.0) |
18.6 |
Acquisition-related expenses |
-- |
-- |
0.2 |
0.2 |
Gain on pension curtailment |
-- |
-- |
(38.7) |
(38.7) |
Acquisition contingent
compensation |
15.3 |
-- |
-- |
15.3 |
Total Non-GAAP adjustments |
389.0 |
133.4 |
(38.5) |
483.9 |
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 177.9 |
$ 44.4 |
$ (55.5) |
$ 166.8 |
Non-GAAP operating margin % |
8.9% |
6.2% |
nm |
6.1% |
|
|
|
|
|
Depreciation and amortization |
94.1 |
27.6 |
8.2 |
129.9 |
Capital expenditures |
20.9 |
17.8 |
18.4 |
57.1 |
|
|
R. R. Donnelley &
Sons Company |
Segment GAAP to Non-GAAP
Operating Income and Margin Reconciliation |
For the Twelve Months Ended
December 31, 2012 and 2011 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
U.S. Print and Related
Services |
International |
Corporate |
Consolidated |
|
|
|
|
|
For the Twelve Months Ended December
31, 2012 |
|
|
|
|
Net sales |
$ 7,511.1 |
$ 2,710.8 |
$ -- |
$ 10,221.9 |
Operating expense |
7,787.9 |
2,631.7 |
172.1 |
10,591.7 |
Income (loss) from operations |
(276.8) |
79.1 |
(172.1) |
(369.8) |
Operating margin % |
(3.7%) |
2.9% |
nm |
(3.6%) |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Impairment charges - net |
951.4 |
74.0 |
1.2 |
1,026.6 |
Restructuring charges - net |
67.3 |
15.2 |
9.4 |
91.9 |
Acquisition-related expenses |
-- |
-- |
2.5 |
2.5 |
Gain on pension curtailment |
-- |
(3.7) |
-- |
(3.7) |
Total Non-GAAP adjustments |
1,018.7 |
85.5 |
13.1 |
1,117.3 |
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 741.9 |
$ 164.6 |
$ (159.0) |
$ 747.5 |
Non-GAAP operating margin % |
9.9% |
6.1% |
nm |
7.3% |
|
|
|
|
|
Depreciation and amortization |
329.3 |
108.5 |
43.8 |
481.6 |
Capital expenditures |
96.9 |
43.0 |
66.0 |
205.9 |
|
|
|
|
|
For the Twelve Months Ended December
31, 2011 |
|
|
|
|
Net sales |
$ 7,846.5 |
$ 2,764.5 |
$ -- |
$ 10,611.0 |
Operating expense |
7,613.6 |
2,729.1 |
203.1 |
10,545.8 |
Income (loss) from operations |
232.9 |
35.4 |
(203.1) |
65.2 |
Operating margin % |
3.0% |
1.3% |
nm |
0.6% |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Impairment charges - net |
403.4 |
125.8 |
2.3 |
531.5 |
Restructuring charges - net |
101.7 |
31.2 |
3.4 |
136.3 |
Acquisition-related expenses |
-- |
-- |
2.2 |
2.2 |
Gain on pension curtailment |
-- |
-- |
(38.7) |
(38.7) |
Acquisition contingent
compensation |
15.3 |
-- |
-- |
15.3 |
Total Non-GAAP adjustments |
520.4 |
157.0 |
(30.8) |
646.6 |
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 753.3 |
$ 192.4 |
$ (233.9) |
$ 711.8 |
Non-GAAP operating margin % |
9.6% |
7.0% |
nm |
6.7% |
|
|
|
|
|
Depreciation and amortization |
389.2 |
120.2 |
40.5 |
549.9 |
Capital expenditures |
104.7 |
90.6 |
55.6 |
250.9 |
|
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated
Statements of Cash Flows |
For the Twelve Months Ended
December 31, 2012 and 2011 |
(UNAUDITED) |
(in millions) |
|
|
|
2012 |
2011 |
Operating
Activities |
|
|
|
|
|
Net loss |
$ (653.6) |
$ (121.1) |
Adjustment to reconcile net loss to net
cash provided by operating activities |
1,475.1 |
1,002.3 |
Changes in operating assets and
liabilities |
19.1 |
119.7 |
Pension and
postretirement benefits contributions |
(148.7) |
(54.6) |
Net cash provided by operating
activities |
$ 691.9 |
$ 946.3 |
|
|
|
Capital expenditures |
(205.9) |
(250.9) |
All other cash used in
investing activities |
(78.9) |
(124.5) |
Net cash used in investing
activities |
$ (284.8) |
$ (375.4) |
|
|
|
Net cash used in financing
activities |
$ (438.0) |
$ (651.0) |
|
|
|
Effect of exchange rate on cash and cash
equivalents |
11.9 |
10.7 |
|
|
|
Net decrease in cash and cash
equivalents |
$ (19.0) |
$ (69.4) |
|
|
|
Cash and cash equivalents at beginning of
period |
449.7 |
519.1 |
|
|
|
Cash and cash equivalents at
end of period |
$ 430.7 |
$ 449.7 |
|
|
R.R. Donnelley &
Sons Company |
Reconciliation of Reported to
Pro Forma Net Sales |
For the Three Months Ended
December 31, 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 December
31, 2012 |
|
|
|
U.S. Print and Related Services |
$ 1,930.3 |
$ 45.8 |
$ 1,976.1 |
International |
729.3 |
-- |
729.3 |
Consolidated |
$ 2,659.6 |
$ 45.8 |
$ 2,705.4 |
|
|
|
|
For the Three Months Ended December
31, 2011 |
|
|
|
U.S. Print and Related Services |
$ 2,005.1 |
$ 54.2 |
$ 2,059.3 |
International |
715.7 |
-- |
715.7 |
Consolidated |
$ 2,720.8 |
$ 54.2 |
$ 2,775.0 |
|
Net sales change |
|
|
|
U.S. Print and Related Services |
(3.7%) |
|
(4.0%) |
International |
1.9% |
|
1.9% |
Consolidated |
(2.2%) |
|
(2.5%) |
|
|
|
|
|
Supplementary non-GAAP
information: |
|
|
|
|
|
|
|
Year-over-year impact of changes in
foreign exchange (FX) rates |
|
|
|
U.S. Print and Related Services |
--% |
|
--% |
International |
0.3% |
|
0.3% |
Consolidated |
0.1% |
|
0.1% |
|
|
|
|
Approximate year-over-year impact of
changes in pass-through paper sales |
|
|
|
U.S. Print and Related Services |
(1.1%) |
|
(1.1%) |
International |
1.2% |
|
1.2% |
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 |
(2.6%) |
|
(2.9%) |
International |
0.4% |
|
0.4% |
Consolidated |
(1.8%) |
|
(2.1%) |
|
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
December 31, 2012 and 2011 to pro forma net sales as if the
acquisitions took place as of January 1 of the year prior to
acquisition. |
|
For the three months ended
December 31, 2012, the adjustment for net sales of acquired
businesses reflects the net sales of Meisel Photographic
Corporation (acquired December 17, 2012) and Presort Solutions
(acquired December 28, 2012). |
|
For the three months ended
December 31, 2011, the adjustment for net sales of acquired
businesses reflects the net sales of StratusGroup, Inc. (acquired
November 21, 2011), EDGAR Online (acquired August 14, 2012),
Express Postal Options International (acquired September 6, 2012),
Meisel Photographic Corporation (acquired December 17, 2012) and
Presort Solutions (acquired December 28, 2012) . |
|
|
|
R.R. Donnelley &
Sons Company |
Reconciliation of Reported to
Pro Forma Net Sales |
For the Twelve Months Ended
December 31, 2012 and 2011 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
Reported net sales |
Adjustment for net sales of
acquired businesses |
Pro forma net sales |
For the Twelve Months Ended December
31, 2012 |
|
|
|
U.S. Print and Related Services |
$ 7,511.1 |
$ 239.2 |
$ 7,750.3 |
International |
2,710.8 |
-- |
2,710.8 |
Consolidated |
$ 10,221.9 |
$ 239.2 |
$ 10,461.1 |
|
|
|
|
For the Twelve Months Ended December
31, 2011 |
|
|
|
U.S. Print and Related Services |
$ 7,846.5 |
$ 226.1 |
$ 8,072.6 |
International |
2,764.5 |
-- |
2,764.5 |
Consolidated |
$ 10,611.0 |
$ 226.1 |
$ 10,837.1 |
|
Net sales change |
|
|
|
U.S. Print and Related Services |
(4.3%) |
|
(4.0%) |
International |
(1.9%) |
|
(1.9%) |
Consolidated |
(3.7%) |
|
(3.5%) |
|
|
|
|
|
Supplementary non-GAAP
information: |
|
|
|
|
|
|
|
Year-over-year impact of changes in
foreign exchange (FX) rates |
|
|
|
U.S. Print and Related Services |
--% |
|
--% |
International |
(3.4%) |
|
(3.4%) |
Consolidated |
(0.9%) |
|
(0.9%) |
|
|
|
|
Approximate year-over-year impact of
changes in pass-through paper sales |
|
|
|
U.S. Print and Related Services |
(1.1%) |
|
(1.0%) |
International |
1.2% |
|
1.2% |
Consolidated |
(0.5%) |
|
(0.4%) |
|
Net sales change, excluding impact of
changes in FX rates and pass-through paper
sales |
|
|
|
U.S. Print and Related Services |
(3.2%) |
|
(3.0%) |
International |
0.3% |
|
0.3% |
Consolidated |
(2.3%) |
|
(2.2%) |
|
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 twelve months
ended December 31, 2012 and 2011 to pro forma net sales as if the
acquisitions took place as of January 1 of the year prior to
acquisition. |
|
For the twelve months ended
December 31, 2012, the adjustment for net sales of acquired
businesses reflects the net sales of EDGAR Online (acquired August
14, 2012), Express Postal Options International (acquired September
6, 2012), Meisel Photographic Corporation (acquired December 17,
2012) and Presort Solutions (acquired December 28, 2012). |
|
For the twelve months ended
December 31, 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), StratusGroup, Inc. (acquired November
21, 2011), EDGAR Online (acquired August 14, 2012), Express Postal
Options International (acquired September 6, 2012), Meisel
Photographic Corporation (acquired December 17, 2012) and Presort
Solutions (acquired December 28, 2012). |
|
|
|
R.R. Donnelley
& Sons Company |
Reconciliation of GAAP
Net Earnings (Loss) to Non-GAAP Adjusted EBITDA |
For the Three Months and
Twelve Months Ended December 31, 2012 and 2011 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
For the Three Months
Ended |
For the Twelve Months
Ended |
|
December 31, 2012 |
December 31, 2011 |
December 31, 2012 |
December 31, 2011 |
|
|
|
|
|
GAAP net loss |
$ (851.7) |
$ (326.6) |
$ (653.6) |
$ (121.1) |
|
|
|
|
|
Adjustments |
|
|
|
|
Income tax expense (benefit) |
(57.0) |
(52.2) |
13.6 |
(116.3) |
Interest expense - net |
63.8 |
61.2 |
251.8 |
243.3 |
Investment and other expense (income) -
net |
(0.9) |
0.5 |
2.3 |
(10.6) |
Loss on debt extinguishment |
4.0 |
-- |
16.1 |
69.9 |
Depreciation and amortization |
116.7 |
129.9 |
481.6 |
549.9 |
Restructuring and impairment charges -
net |
1,020.6 |
507.1 |
1,118.5 |
667.8 |
Acquisition-related expenses |
0.4 |
0.2 |
2.5 |
2.2 |
Gain on pension curtailment |
(3.7) |
(38.7) |
(3.7) |
(38.7) |
Acquisition contingent compensation |
-- |
15.3 |
-- |
15.3 |
Total Non-GAAP adjustments |
1,143.9 |
623.3 |
1,882.7 |
1,382.8 |
|
|
|
|
|
Non-GAAP adjusted
EBITDA |
$ 292.2 |
$ 296.7 |
$ 1,229.1 |
$ 1,261.7 |
Non-GAAP adjusted EBITDA margin % |
11.0% |
10.9% |
12.0% |
11.9% |
|
|
R.R. Donnelley &
Sons Company |
Debt and Liquidity
Summary |
As of December 31, 2012 and
December 31, 2011 |
(UNAUDITED) |
(in millions) |
|
|
|
|
December 31, 2012 |
December 31, 2011 |
Total Liquidity (1) |
Credit Agreement |
Previous Credit Agreement |
Cash (2) |
$ 430.7 |
$ 449.7 |
Committed credit agreement (3) |
1,150.0 |
1,417.7 |
|
1,580.7 |
1,867.4 |
Usage |
|
|
Borrowings under credit agreement (3) |
-- |
65.0 |
Letters of credit outstanding |
38.9 |
-- |
|
|
|
Net Available Liquidity |
$ 1,541.8 |
$ 1,802.4 |
|
|
|
|
Short-term and current portion of long-term
debt |
$ 18.4 |
$ 243.7 |
Long-term debt |
3,420.2 |
3,416.8 |
Total debt |
$ 3,438.6 |
$ 3,660.5 |
|
|
|
Non-GAAP adjusted EBITDA for the twelve
months ended December 31, 2012 |
$ 1,229.1 |
$ 1,261.7 |
|
|
|
Gross Leverage (defined as total debt
divided by non-GAAP adjusted EBITDA) |
2.8x |
2.9x |
|
|
|
|
(1) Liquidity does not include
credit facilities of non-U.S. subsidiaries, which are uncommitted
facilities. |
|
|
|
(2) Approximately 85% of cash as
of December 31, 2012 and 89% of cash as of December 31, 2011 was
located outside the U.S. In 2013, the Company's foreign
subsidiaries are expected to make payments to the U.S. of
approximately $80 million from foreign cash balances as of December
31, 2012. These payments will be made in satisfaction of
intercompany obligations, and additional payments are expected to
be made in future years. The Company expects to use the cash
received in the U.S. to reduce debt, either through repayment of
short-term borrowings or repurchase of senior notes or debentures.
Cash held by foreign subsidiaries may be subject to U.S. or local
income or withholding taxes if repatriated to the U.S. In
addition, repatriation of some foreign cash is further restricted
by local laws. |
|
|
|
(3) On October 15, 2012, the
Company entered into a $1.15 billion senior secured revolving
credit agreement (the "Credit Agreement") which expires October 15,
2017. The Credit Agreement replaced the Company's previous $1.75
billion unsecured and committed revolving credit agreement (the
"Previous Credit Agreement") which was due to expire on December
17, 2013. The Credit Agreement is subject to a number of covenants,
including a minimum Interest Coverage Ratio and a maximum Leverage
Ratio, both as defined and calculated in the Credit Agreement. As
of December 31, 2012, the Company had $71.1 million in outstanding
letters of credit, of which $38.9 million reduced the availability
under the Company's Credit Agreement. There were no borrowings
under the Credit Agreement as of December 31, 2012, leaving
approximately $1.1 billion of availability under the Credit
Agreement. Based on the Company's results of operations for the
year ended December 31, 2012 and existing debt, the Company had the
ability to utilize $1.1 billion of availability under the Credit
Agreement and not be in violation of the terms of the
agreement. |
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
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