Highlights:
- Second-quarter 2011 net sales of $2.6 billion increased 8.9%
compared to the second quarter of 2010
- Second-quarter 2011 GAAP earnings per diluted share of $0.06
compared to $0.42 in the second quarter of 2010
- Second-quarter 2011 non-GAAP earnings per diluted share of
$0.53 increased nearly 13% from $0.47 in the second quarter of
2010
- Reaffirms projected full-year operating cash flow less capital
expenditures of approximately $600 million
R.R. Donnelley & Sons Company (Nasdaq:RRD)
today reported second-quarter net earnings attributable to common
shareholders of $12.2 million, or $0.06 per diluted share, on net
sales of $2.6 billion compared to $88.8 million, or $0.42 per
diluted share, on net sales of $2.4 billion in the second quarter
of 2010. The second-quarter 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 related to the tender offers on the 2015, 2017 and
2019 Notes ($68.6 million),and acquisition-related costs ($0.9
million) totaling $145.2 million, partially offset by a pre-tax
gain on an investment of $9.8 million in 2011, compared to charges
for restructuring ($9.2 million) and impairment ($1.5 million,
non-cash) and acquisition-related costs ($3.3 million) totaling
$14.0 million in 2010. Additional details regarding the nature of
these charges 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 $105.6 million, or $0.53 per diluted share, in the second
quarter of 2011 compared to $99.5 million, or $0.47 per diluted
share, in the second quarter of 2010. Second-quarter non-GAAP net
earnings attributable to common shareholders exclude restructuring
and impairment charges and acquisition expenses for both years. In
addition, second-quarter 2011 non-GAAP net earnings attributable to
common shareholders exclude the loss on debt extinguishment and the
investment gain. For non-GAAP comparison purposes, the effective
tax rate decreased to 19.5% in the second quarter of 2011 from
26.2% in the second quarter of 2010, 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.
A reconciliation of GAAP net earnings attributable to common
shareholders to non-GAAP net earnings attributable to common
shareholders is presented in the attached tables.
"Our platform, like our customers, felt the economic challenges
during the second quarter," said Thomas J. Quinlan III, RR
Donnelley's President and Chief Executive Officer. "Over the
past month or so, customer demand in a variety of our offerings
appears to be firming up, so we begin the second half of the year
with renewed optimism."
Quinlan continued, "The share repurchase program and successful
bond offering that we launched in the second quarter demonstrate
the confidence that management and investors alike have in our
ability to continue to drive strong cash flow. We remain on
track to deliver approximately $600 million of operating cash flow
less capital expenditures for the full year."
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 $2.6 billion, up 8.9% from the
second quarter of 2010, including increased sales related to the
acquisition of Bowne. Pro forma for acquisitions, net sales
grew by 0.3%. Changes in foreign exchange rates accounted for
$46.0 million of the increase from the second quarter of 2010.
Gross margin of 24.5% in the second quarter of 2011 was flat
to the second quarter of 2010 as productivity efforts, the
acquisition of Bowne, lower variable compensation expense and a
higher recovery on print-related by-products were offset by lower
volume, primarily in books and directories, and pricing pressure.
SG&A expense as a percentage of net sales in the second quarter
of 2011 increased to 11.8% from 11.1% in the second quarter of 2010
primarily due to the acquisition of Bowne and higher pension and
other benefits-related expenses. Operating earnings were
negatively impacted by restructuring and impairment charges and
acquisition expenses of $76.6 million in the second quarter of 2011
and $14.0 million in the second quarter of 2010, resulting in
operating income of $116.1 million in 2011 and $175.3 million in
2010. Operating margin was 4.4% in 2011 and 7.3% in 2010.
Excluding restructuring and impairment charges and acquisition
expenses, non-GAAP operating margin declined to 7.3% in the second
quarter of 2011 from 7.9% in the second quarter of
2010. Changes in foreign exchange rates, primarily due to
export sales from certain international operations, and higher
pass-through paper sales unfavorably impacted non-GAAP operating
margin by approximately 29 basis points. The remainder of the
margin decline was primarily due to lower volume, continued pricing
pressure and higher unallocated Corporate costs for pension and
other benefits-related expenses, which more than offset the impact
of productivity initiatives and lower variable compensation
expense.
Segments
Net sales for the U.S. Print and Related Services segment in the
quarter increased 6.2% from the second quarter of 2010 to $1.9
billion primarily due to the acquisition of Bowne and volume
increases in commercial, logistics and financial print, partially
offset by volume declines in books and directories and continued
pricing pressure across the segment. Pro forma for
acquisitions, net sales in the US Print and Related Services
segment decreased by $50.7 million, or 2.6%, primarily due to
volume declines in books and directories and continued pricing
pressure across the segment. The segment's operating income,
which was negatively impacted by charges for restructuring and
impairment of $65.1 million in the second quarter of 2011 and $3.5
million in the second quarter of 2010, decreased to $132.8 million
in the second quarter of 2011 from $179.5 million in the second
quarter of 2010. Excluding the restructuring and impairment
charges, the segment's non-GAAP operating margin improved to 10.3%
in the second quarter of 2011 from 10.1% in the second quarter of
2010, due to productivity initiatives, lower variable compensation
expense and a higher recovery on print-related by-products, which
more than offset the impact of volume declines and continued
pricing pressure.
Net sales for the International segment in the quarter increased
17.2% from the second quarter of 2010 to $702.5 million, including
increased sales related to the acquisition of Bowne. Pro forma for
acquisitions, net sales grew by $58.5 million, or 9.1% as changes
in foreign exchange rates and increased volume offset the impact of
continued pricing pressure. The segment's operating income, which
was negatively impacted by charges for restructuring and impairment
of $9.8 million in the second quarter of 2011 and $6.5 million in
the second quarter of 2010, improved to $43.6 million in the second
quarter of 2011 from $42.7 million in the second quarter of
2010. Excluding the restructuring and impairment charges, the
segment's non-GAAP operating margin declined to 7.6% in the second
quarter of 2011 from 8.2% in the second quarter of 2010 as the 99
basis point impact from changes in foreign exchange rates,
primarily due to export sales from certain operations, as well as
pricing pressure more than offset the benefits of increased volume
and productivity efforts.
Unallocated Corporate operating expenses increased to $60.3
million in the second quarter of 2011 as compared to $46.9 million
in the second quarter of 2010. Excluding restructuring and
impairment charges of $0.8 million and acquisition expenses of $0.9
million in the second quarter of 2011 and restructuring and
impairment charges of $0.7 million and acquisition expenses of $3.3
million in the second quarter of 2010, unallocated Corporate
operating expenses increased $15.7 million to $58.6 million in the
second quarter of 2011. Higher pension and other
benefits-related expenses and the acquisition of Bowne were the
primary factors contributing to the increase.
Conference Call
RR Donnelley will host a conference call and simultaneous
webcast to discuss its second-quarter results today, Wednesday,
August 3, 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 30234679. 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. Founded more than 146 years ago, the Company
works collaboratively with more than 60,000 customers worldwide to
develop custom communications solutions that reduce costs, 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
products and services to leading 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; our ability to access
unsecured debt in the capital markets and the reliability of the
participants to our 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, 2011 and
December 31, 2010 |
(UNAUDITED) |
(In millions, except per share
data) |
|
|
|
|
|
June 30,
2011 |
December 31,
2010 |
Assets |
|
|
Current Assets |
|
|
Cash and cash equivalents |
$ 363.0 |
$ 519.1 |
Receivables, less allowance for doubtful
accounts |
2,011.0 |
1,922.9 |
Income taxes receivable |
68.0 |
49.3 |
Inventories |
580.0 |
560.6 |
Prepaid expenses and other current
assets |
145.7 |
115.4 |
Total Current Assets |
3,167.7 |
3,167.3 |
Property, plant and equipment -
net |
2,031.5 |
2,138.7 |
Goodwill |
2,619.5 |
2,526.8 |
Other intangible assets - net |
727.3 |
775.0 |
Other noncurrent
assets |
480.2 |
475.4 |
Total
Assets |
$ 9,026.2 |
$ 9,083.2 |
|
|
|
Liabilities |
|
|
Current Liabilities |
|
|
Accounts payable |
$ 924.7 |
$ 939.8 |
Accrued liabilities |
815.8 |
902.2 |
Short-term and current portion of
long-term debt |
649.6 |
131.4 |
Total Current Liabilities |
2,390.1 |
1,973.4 |
Long-term debt |
3,427.7 |
3,398.6 |
Pension liability |
530.0 |
533.0 |
Postretirement benefit
obligations |
220.9 |
287.4 |
Deferred income taxes |
190.7 |
174.5 |
Other noncurrent
liabilities |
460.1 |
470.9 |
Total
Liabilities |
7,219.5 |
6,837.8 |
Equity |
|
|
|
|
|
Common stock, $1.25 par value |
303.7 |
303.7 |
Authorized shares: 500.0 |
|
|
Issued shares: 243.0 in 2011 and
2010 |
|
|
Additional paid-in capital |
2,779.6 |
2,907.0 |
Retained earnings |
608.7 |
670.2 |
Accumulated other comprehensive
loss |
(375.7) |
(490.4) |
Treasury stock, at cost, 55.2 shares in
2011 (2010 - 36.4 shares) |
(1,528.9) |
(1,166.2) |
Total shareholders' equity |
1,787.4 |
2,224.3 |
Noncontrolling
interests |
19.3 |
21.1 |
Total
Equity |
1,806.7 |
2,245.4 |
Total Liabilities and
Equity |
$ 9,026.2 |
$ 9,083.2 |
|
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated
Statements of Operations |
Three and Six Months Ended June
30, 2011 and 2010 |
(In millions, except per share
data) |
(UNAUDITED) |
|
|
|
Three
Months Ended June 30, |
|
2 0 1 1
GAAP |
ADJUSTMENTS TO
NON-GAAP |
2 0 1 1
NON-GAAP |
2 0 1 0
GAAP |
ADJUSTMENTS TO
NON-GAAP |
2 0 1 0
NON-GAAP |
Net sales |
|
|
|
|
|
|
Products |
$ 2,356.9 |
$ -- |
$ 2,356.9 |
$ 2,157.4 |
$ -- |
$ 2,157.4 |
Services |
266.5 |
-- |
266.5 |
251.2 |
-- |
251.2 |
Total net sales |
2,623.4 |
-- |
2,623.4 |
2,408.6 |
-- |
2,408.6 |
|
|
|
|
|
|
|
Products cost of sales (exclusive of
depreciation and amortization shown below) |
1,777.2 |
-- |
1,777.2 |
1,636.1 |
-- |
1,636.1 |
Services cost of sales (exclusive of
depreciation and amortization shown below) |
204.4 |
-- |
204.4 |
183.5 |
-- |
183.5 |
Selling, general and administrative expenses
(exclusive of depreciation and amortization shown below) |
309.3 |
(0.9) |
308.4 |
268.2 |
(3.3) |
264.9 |
Restructuring and impairment
charges |
75.7 |
(75.7) |
-- |
10.7 |
(10.7) |
-- |
Depreciation and
amortization |
140.7 |
-- |
140.7 |
134.8 |
-- |
134.8 |
Total operating expenses |
2,507.3 |
(76.6) |
2,430.7 |
2,233.3 |
(14.0) |
2,219.3 |
Income from
operations |
116.1 |
76.6 |
192.7 |
175.3 |
14.0 |
189.3 |
|
|
|
|
|
|
|
Interest expense - net |
61.3 |
-- |
61.3 |
52.8 |
-- |
52.8 |
Investment and other income (expense) -
net |
10.0 |
(9.8) |
0.2 |
(0.8) |
-- |
(0.8) |
Loss on debt extinguishment |
(68.6) |
68.6 |
-- |
-- |
-- |
-- |
|
|
|
|
|
|
|
Earnings (loss) before income
taxes |
(3.8) |
135.4 |
131.6 |
121.7 |
14.0 |
135.7 |
|
|
|
|
|
|
|
Income tax expense (benefit) |
(16.3) |
42.0 |
25.7 |
32.2 |
3.3 |
35.5 |
|
|
|
|
|
|
|
Net
earnings |
12.5 |
93.4 |
105.9 |
89.5 |
10.7 |
100.2 |
|
|
|
|
|
|
|
Less: Income (loss) attributable to
noncontrolling interests |
0.3 |
-- |
0.3 |
0.7 |
-- |
0.7 |
|
|
|
|
|
|
|
Net earnings attributable to
common |
|
|
|
|
|
|
shareholders |
$ 12.2 |
$ 93.4 |
$ 105.6 |
$ 88.8 |
$ 10.7 |
$ 99.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to
common shareholders: |
|
|
|
|
|
|
Basic net earnings per share |
$ 0.06 |
|
$ 0.54 |
$ 0.43 |
|
$ 0.48 |
Diluted net earnings per share |
$ 0.06 |
|
$ 0.53 |
$ 0.42 |
|
$ 0.47 |
Weighted average common shares
outstanding: |
|
|
|
|
|
|
Basic |
196.7 |
|
196.7 |
206.3 |
|
206.3 |
Diluted |
199.5 |
|
199.5 |
209.9 |
|
209.9 |
|
|
|
|
|
|
|
Six Months
Ended June 30, |
|
2 0 1 1
GAAP |
ADJUSTMENTS TO
NON-GAAP |
2 0 1 1
NON-GAAP |
2 0 1 0
GAAP |
ADJUSTMENTS TO
NON-GAAP |
2 0 1 0
NON-GAAP |
Net sales |
|
|
|
|
|
|
Products |
$ 4,623.3 |
$ -- |
$ 4,623.3 |
$ 4,328.3 |
$ -- |
$ 4,328.3 |
Services |
583.6 |
-- |
583.6 |
495.4 |
-- |
495.4 |
Total net sales |
5,206.9 |
-- |
5,206.9 |
4,823.7 |
-- |
4,823.7 |
|
|
|
|
|
|
|
Products cost of sales (exclusive of
depreciation and amortization shown below) |
3,504.0 |
-- |
3,504.0 |
3,296.9 |
-- |
3,296.9 |
Services cost of sales (exclusive of
depreciation and amortization shown below) |
433.8 |
-- |
433.8 |
364.4 |
-- |
364.4 |
Selling, general and administrative expenses
(exclusive of depreciation and amortization shown below) |
636.2 |
(1.3) |
634.9 |
541.7 |
(5.3) |
536.4 |
Restructuring and impairment
charges |
126.5 |
(126.5) |
-- |
26.2 |
(26.2) |
-- |
Depreciation and
amortization |
280.9 |
-- |
280.9 |
273.4 |
-- |
273.4 |
Total operating expenses |
4,981.4 |
(127.8) |
4,853.6 |
4,502.6 |
(31.5) |
4,471.1 |
Income from
operations |
225.5 |
127.8 |
353.3 |
321.1 |
31.5 |
352.6 |
|
|
|
|
|
|
|
Interest expense - net |
119.2 |
-- |
119.2 |
108.5 |
-- |
108.5 |
Investment and other income (expense) -
net |
9.8 |
(9.8) |
-- |
(9.8) |
8.9 |
(0.9) |
Loss on debt extinguishment |
(68.6) |
68.6 |
-- |
-- |
-- |
-- |
|
|
|
|
|
|
|
Earnings (loss) before income
taxes |
47.5 |
186.6 |
234.1 |
202.8 |
40.4 |
243.2 |
|
|
|
|
|
|
|
Income tax expense (benefit) |
0.7 |
58.5 |
59.2 |
64.6 |
9.2 |
73.8 |
|
|
|
|
|
|
|
Net
earnings |
46.8 |
128.1 |
174.9 |
138.2 |
31.2 |
169.4 |
|
|
|
|
|
|
|
Less: Income (loss) attributable to
noncontrolling interests |
0.7 |
-- |
0.7 |
(3.2) |
3.6 |
0.4 |
|
|
|
|
|
|
|
Net earnings attributable to
common |
|
|
|
|
|
|
shareholders |
$ 46.1 |
$ 128.1 |
$ 174.2 |
$ 141.4 |
$ 27.6 |
$ 169.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to
common shareholders: |
|
|
|
|
|
|
Basic net earnings per share |
$ 0.23 |
|
$ 0.86 |
$ 0.69 |
|
$ 0.82 |
Diluted net earnings per share |
$ 0.23 |
|
$ 0.85 |
$ 0.68 |
|
$ 0.81 |
Weighted average common shares
outstanding: |
|
|
|
|
|
|
Basic |
201.9 |
|
201.9 |
206.0 |
|
206.0 |
Diluted |
204.5 |
|
204.5 |
209.4 |
|
209.4 |
|
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 |
IN MILLIONS, EXCEPT PER SHARE
AND MARGIN DATA |
(UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended June
30, 2011 |
Three Months Ended June
30, 2010 |
|
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 |
$ 116.1 |
4.4% |
$ 12.2 |
$ 0.06 |
$ 175.3 |
7.3% |
$ 88.8 |
$ 0.42 |
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Restructuring and impairment charges
(1) |
75.7 |
2.9% |
57.8 |
0.29 |
10.7 |
0.5% |
7.6 |
0.04 |
Acquisition-related expenses (2) |
0.9 |
-- |
0.8 |
0.01 |
3.3 |
0.1% |
3.1 |
0.01 |
Gain on Helium investment (3) |
-- |
-- |
(9.5) |
(0.05) |
-- |
-- |
-- |
-- |
Losses related to debt extinguishment
(4) |
-- |
-- |
44.3 |
0.22 |
-- |
-- |
-- |
-- |
Total Non-GAAP adjustments |
76.6 |
2.9% |
93.4 |
0.47 |
14.0 |
0.6% |
10.7 |
0.05 |
Non-GAAP measures |
$ 192.7 |
7.3% |
$ 105.6 |
$ 0.53 |
$ 189.3 |
7.9% |
$ 99.5 |
$ 0.47 |
|
|
|
|
|
|
|
|
|
(1) Restructuring and
impairment charges (pre-tax): Operating results for the three
months ended June 30, 2011 and 2010 were affected by the following
restructuring and impairment charges: |
|
|
|
|
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
|
Employee termination costs (a) |
$ 29.2 |
$ 6.1 |
|
|
|
|
|
|
Other charges (b) |
22.2 |
3.1 |
|
|
|
|
|
|
Total restructuring
expense |
51.4 |
9.2 |
|
|
|
|
|
|
Total impairment charges
(c) |
24.3 |
1.5 |
|
|
|
|
|
|
Total restructuring and
impairment charges |
$ 75.7 |
$ 10.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) employee termination
costs resulted from the reorganization of certain operations and
the exiting of certain business activities. |
(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. |
(c) impairment charges
related to the impairment of other long-lived assets. |
|
|
|
|
|
|
|
|
|
(2) Acquisition-related
expenses: Legal, accounting and other expenses associated with
acquisitions completed or contemplated. |
|
|
|
|
|
|
|
|
|
(3) Gain on Helium
investment: A pre-tax gain of $9.8 million 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. |
|
|
|
|
|
|
|
|
|
(4) Losses related to debt
extinguishment: Pre-tax loss of $68.6 million on the
repurchase of $416.2 million of senior notes due February 1, 2019,
January 15, 2017 and May 15, 2015. |
|
|
R.R. Donnelley &
Sons Company |
Reconciliation of GAAP
to Non-GAAP Measures |
IN MILLIONS, EXCEPT PER SHARE
AND MARGIN DATA |
(UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
2011 |
Six Months Ended June 30,
2010 |
|
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 |
$ 225.5 |
4.3% |
$ 46.1 |
$ 0.23 |
$ 321.1 |
6.7% |
$ 141.4 |
$ 0.68 |
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Restructuring and impairment charges
(1) |
126.5 |
2.4% |
92.1 |
0.44 |
26.2 |
0.5% |
18.2 |
0.09 |
Acquisition-related expenses (2) |
1.3 |
0.1% |
1.2 |
0.01 |
5.3 |
0.1% |
4.9 |
0.02 |
Gain on Helium investment (3) |
-- |
-- |
(9.5) |
(0.05) |
-- |
-- |
-- |
-- |
Losses related to debt extinguishment
(4) |
-- |
-- |
44.3 |
0.22 |
-- |
-- |
-- |
-- |
Venezuela devaluation (5) |
-- |
-- |
-- |
-- |
-- |
-- |
4.5 |
0.02 |
Total Non-GAAP adjustments |
127.8 |
2.5% |
128.1 |
0.62 |
31.5 |
0.6% |
27.6 |
0.13 |
Non-GAAP measures |
$ 353.3 |
6.8% |
$ 174.2 |
$ 0.85 |
$ 352.6 |
7.3% |
$ 169.0 |
$ 0.81 |
|
|
|
|
|
|
|
|
|
(1) Restructuring and
impairment charges (pre-tax): Operating results for the six
months ended June 30, 2011 and 2010 were affected by the following
restructuring and impairment charges: |
|
|
|
|
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
|
Employee termination costs (a) |
$ 54.0 |
$ 15.3 |
|
|
|
|
|
|
Other charges (b) |
40.1 |
8.4 |
|
|
|
|
|
|
Total restructuring
expense |
94.1 |
23.7 |
|
|
|
|
|
|
Total impairment charges
(c) |
32.4 |
2.5 |
|
|
|
|
|
|
Total restructuring and
impairment charges |
$ 126.5 |
$ 26.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) employee termination
costs resulted from the reorganization of certain operations and
the exiting of certain business activities. |
(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. |
(c) impairment charges
related to the impairment of other long-lived assets. |
|
|
|
|
|
|
|
|
|
(2) Acquisition-related
expenses: Legal, accounting and other expenses associated with
acquisitions completed or contemplated. |
|
|
|
|
|
|
|
|
|
(3) Gain on Helium
investment: A pre-tax gain of $9.8 million 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. |
|
|
|
|
|
|
|
|
|
(4) Losses related to debt
extinguishment: Pre-tax loss of $68.6 million on the
repurchase of $416.2 million of senior notes due February 1, 2019,
January 15, 2017 and May 15, 2015. |
|
|
|
|
|
|
|
|
|
(5) Venezuela devaluation:
Currency devaluation in Venezuela resulted in a pre-tax loss of
$8.9 million ($8.1 million after-tax) and an increase in loss
attributable to noncontrolling interests of $3.6 million. |
|
|
R. R. Donnelley &
Sons Company |
Segment GAAP to Non-GAAP
Operating Income and Margin Reconciliation |
For the Three Months Ended June
30, 2011 and 2010 |
$ IN MILLIONS |
(UNAUDITED) |
|
|
|
|
|
|
U.S. Print and Related
Services |
International |
Corporate |
Consolidated |
|
|
|
|
|
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 |
Operating income (loss) |
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 |
|
|
|
|
|
Three Months Ended June 30,
2010 |
|
|
|
|
Net sales |
$ 1,809.3 |
$ 599.3 |
$ -- |
$ 2,408.6 |
Operating expense |
1,629.8 |
556.6 |
46.9 |
2,233.3 |
Operating income (loss) |
179.5 |
42.7 |
(46.9) |
175.3 |
Operating margin % |
9.9% |
7.1% |
nm |
7.3% |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Restructuring charges |
2.5 |
6.2 |
0.5 |
9.2 |
Impairment charges |
1.0 |
0.3 |
0.2 |
1.5 |
Acquisition-related expenses |
-- |
-- |
3.3 |
3.3 |
Total Non-GAAP adjustments |
3.5 |
6.5 |
4.0 |
14.0 |
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 183.0 |
$ 49.2 |
$ (42.9) |
$ 189.3 |
Non-GAAP operating margin % |
10.1% |
8.2% |
nm |
7.9% |
|
|
|
|
|
Depreciation and amortization |
98.7 |
28.1 |
8.0 |
134.8 |
Capital expenditures |
18.5 |
17.7 |
18.4 |
54.6 |
|
|
R. R. Donnelley &
Sons Company |
Segment GAAP to Non-GAAP
Operating Income and Margin Reconciliation |
For the Six Months Ended June
30, 2011 and 2010 |
$ IN MILLIONS |
(UNAUDITED) |
|
|
|
|
|
|
U.S. Print and Related
Services |
International |
Corporate |
Consolidated |
|
|
|
|
|
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 |
Operating income (loss) |
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 |
|
|
|
|
|
Six Months Ended June 30,
2010 |
|
|
|
|
Net sales |
$ 3,646.1 |
$ 1,177.6 |
$ -- |
$ 4,823.7 |
Operating expense |
3,302.8 |
1,101.2 |
98.6 |
4,502.6 |
Operating income (loss) |
343.3 |
76.4 |
(98.6) |
321.1 |
Operating margin % |
9.4% |
6.5% |
nm |
6.7% |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Restructuring charges |
7.4 |
15.7 |
0.6 |
23.7 |
Impairment charges |
2.0 |
0.3 |
0.2 |
2.5 |
Acquisition-related expenses |
-- |
-- |
5.3 |
5.3 |
Total Non-GAAP adjustments |
9.4 |
16.0 |
6.1 |
31.5 |
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 352.7 |
$ 92.4 |
$ (92.5) |
$ 352.6 |
Non-GAAP operating margin % |
9.7% |
7.8% |
nm |
7.3% |
|
|
|
|
|
Depreciation and amortization |
199.7 |
57.8 |
15.9 |
273.4 |
Capital expenditures |
44.6 |
30.1 |
19.8 |
94.5 |
|
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated
Statements of Cash Flows |
For the Six Months Ended June
30, 2011 and 2010 |
IN MILLIONS |
(UNAUDITED) |
|
|
|
|
|
|
|
2011 |
2010 |
Operating
Activities |
|
|
|
|
|
Net earnings |
$ 46.8 |
$ 138.2 |
Adjustment to reconcile net earnings to
cash provided by operating activities |
373.5 |
285.6 |
Changes in operating
assets and liabilities |
(252.2) |
(154.7) |
Net cash provided by operating
activities |
$ 168.1 |
$ 269.1 |
|
|
|
Net cash used in investing
activities |
$ (208.4) |
$ (102.0) |
|
|
|
Net cash used in financing
activities |
$ (134.4) |
$ (35.3) |
|
|
|
Effect of exchange rate on cash and cash
equivalents |
18.6 |
(15.2) |
|
|
|
Net (decrease) increase in cash
and cash equivalents |
$ (156.1) |
$ 116.6 |
|
|
|
Cash and cash equivalents at beginning of
period |
519.1 |
499.2 |
|
|
|
Cash and cash equivalents at
end of period |
$ 363.0 |
$ 615.8 |
|
|
R.R. Donnelley
& Sons Company |
Revenue Reconciliation
Reported to Pro Forma |
For the Three Months
Ended June 30, 2011 and 2010 |
$ IN MILLIONS |
(UNAUDITED) |
|
|
|
|
|
Reported net sales |
Adjustment for net sales of
acquired businesses |
Pro forma net sales |
Three Months Ended June
30, 2011 |
|
|
|
U.S. Print and Related
Services |
$ 1,920.9 |
$ 0.8 |
$ 1,921.7 |
International |
702.5 |
-- |
702.5 |
Consolidated |
$ 2,623.4 |
$ 0.8 |
$ 2,624.2 |
|
|
|
|
Three Months Ended June
30, 2010 |
|
|
|
U.S. Print and Related
Services |
$ 1,809.3 |
$ 163.1 |
$ 1,972.4 |
International |
599.3 |
44.7 |
644.0 |
Consolidated |
$ 2,408.6 |
$ 207.8 |
$ 2,616.4 |
|
|
|
|
Net sales
change |
|
|
|
U.S. Print and Related
Services |
6.2% |
|
(2.6%) |
International |
17.2% |
|
9.1% |
Consolidated |
8.9% |
|
0.3% |
|
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 quarter ended June
30, 2011 and 2010 to pro forma net sales as if the acquisitions
took place at the beginning of the respective periods. |
|
|
|
|
For the quarter ended June 30,
2011, the adjustment for net sales of acquired businesses reflects
the net sales of Journalism Online (acquired March 24, 2011) and
Helium, Inc. (acquired June 21, 2011) . |
|
|
|
|
For the quarter ended June 30,
2010, the adjustment for net sales of acquired businesses reflects
the net sales of Bowne & Co., Inc. (acquired November 24,
2010), Nimblefish Technologies (acquired December 14, 2010),
8touches (acquired December 31, 2010), Journalism Online (acquired
March 24, 2011) and Helium, Inc. (acquired June 21, 2011). |
|
|
|
R.R. Donnelley &
Sons Company |
Revenue Reconciliation Reported
to Pro Forma |
For the Six Months Ended June
30, 2011 and 2010 |
$ IN MILLIONS |
(UNAUDITED) |
|
|
|
|
|
Reported net sales |
Adjustment for net sales of
acquired businesses |
Pro forma net sales |
Six Months Ended June 30,
2011 |
|
|
|
U.S. Print and Related Services |
$ 3,862.0 |
$ 1.7 |
$ 3,863.7 |
International |
1,344.9 |
-- |
1,344.9 |
Consolidated |
$ 5,206.9 |
$ 1.7 |
$ 5,208.6 |
|
|
|
|
Six Months Ended June 30,
2010 |
|
|
|
U.S. Print and Related Services |
$ 3,646.1 |
$ 305.6 |
$ 3,951.7 |
International |
1,177.6 |
81.2 |
1,258.8 |
Consolidated |
$ 4,823.7 |
$ 386.8 |
$ 5,210.5 |
|
|
|
|
Net sales
change |
|
|
|
U.S. Print and Related Services |
5.9% |
|
(2.2%) |
International |
14.2% |
|
6.8% |
Consolidated |
7.9% |
|
---% |
|
|
|
|
|
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 six months ended
June 30, 2011 and 2010 to pro forma net sales as if the
acquisitions took place at the beginning of the respective
periods. |
|
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)
and Helium, Inc. (acquired June 21, 2011). |
|
For the six months ended June 30,
2010, the adjustment for net sales of acquired businesses reflects
the net sales of Bowne & Co., Inc. (acquired November 24,
2010), Nimblefish Technologies (acquired December 14, 2010),
8touches (acquired December 31, 2010), Journalism Online (acquired
March 24, 2011) and Helium, Inc. (acquired June 21, 2011). |
|
|
|
R.R. Donnelley &
Sons Company |
Liquidity Summary |
As of June 30, 2011 and
December 31, 2010 |
$ IN MILLIONS |
(UNAUDITED) |
|
|
|
|
|
|
Total Liquidity (1) |
June 30, 2011 |
December 31, 2010 |
Cash (2) |
$ 363.0 |
$ 519.1 |
Committed Credit Agreement (3) |
1,396.5 |
1,503.0 |
|
1,759.5 |
2,022.1 |
Usage |
|
|
Borrowings under Facility |
475.0 |
120.0 |
|
|
|
Net Available Liquidity |
$ 1,284.5 |
$ 1,902.1 |
|
|
|
|
|
|
(1) Liquidity does not include
credit facilities of non-U.S. subsidiaries, which are uncommitted
facilities. |
|
|
|
(2) Approximately 89% of the cash
as of June 30, 2011 and 85% as of December 31, 2010 was located
outside the U.S., most of which is subject to U.S. federal income
taxes and some of which is subject to local country 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 for
the last twelve months as described therein. Based on the
results of operations for the twelve months ended June 30, 2011 and
existing term debt at that date, the total amount available under
the Credit Agreement is $1,396.5 million ($353.5 million less than
the $1.75 billion stated amount), including the $475 million
borrowed under it at June 30, 2011. Thus, the Company could
have incurred up to $921.5 million of additional debt under the
Credit Agreement or otherwise in aggregate and not be in violation
of its financial covenant. |
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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