Highlights:
- Full-year operating cash flow less capital expenditures of
$695.4 million at high end of updated guidance range of $650
million to $700 million
- Year-end debt of $3.7 billion decreased by $278.7 million from
the third quarter of 2011
- Fourth-quarter 2011 GAAP loss per diluted share of $1.78,
compared to GAAP earnings per diluted share of $0.13 in the fourth
quarter of 2010; GAAP results include non-cash impairment charges
of $488.5 million, or $2.25 per diluted share, in the fourth
quarter of 2011 and $61.5 million, or $0.29 per diluted share, in
the fourth quarter of 2010
- Fourth-quarter 2011 non-GAAP earnings per diluted share of
$0.46, compared to non-GAAP earnings per diluted share of $0.51 in
the fourth quarter of 2010
- Full-year 2011 GAAP loss per diluted share of $0.63, compared
to GAAP earnings per diluted share of $1.06 in 2010; GAAP results
include non-cash impairment charges of $531.5 million, or $2.26 per
diluted share, in 2011 and $92.5 million, or $0.40 per diluted
share, in 2010
- Full-year 2011 non-GAAP earnings per diluted share of $1.82,
compared to non-GAAP earnings per diluted share of $1.76 in
2010
- Company expects 2012 full-year non-GAAP earnings per diluted
share in the range of $1.84 to $1.92
R.R. Donnelley & Sons Company (Nasdaq:RRD)
today reported a fourth-quarter net loss attributable to common
shareholders of $326.7 million, or $1.78 per diluted share, on net
sales of $2.7 billion compared to net earnings of $27.0 million, or
$0.13 per diluted share, on net sales of $2.7 billion in the fourth
quarter of 2010. The fourth-quarter net loss attributable to common
shareholders included pre-tax net charges totaling $483.9 million,
primarily related to non-cash impairment, compared to pre-tax
charges totaling $88.6 million, primarily related to restructuring
and non-cash impairment in the fourth quarter of 2010. 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 $85.2 million, or $0.46 per diluted share, in the fourth
quarter of 2011 compared to $107.2 million, or $0.51 per diluted
share, in the fourth quarter of 2010. Fourth-quarter non-GAAP
net earnings attributable to common shareholders exclude
restructuring and impairment charges and acquisition expenses in
the fourth quarters of 2011 and 2010; the gain on pension
curtailment, contingent compensation on a prior acquisition,
certain income tax adjustments and losses related to debt
extinguishment in the fourth quarter of 2011 and the write-down of
affordable housing investments in the fourth quarter of
2010. For non-GAAP comparison purposes, the effective tax rate
increased to 18.8% in the fourth quarter of 2011 from 10.0% in the
fourth quarter of 2010. Included in the effective tax rate in
the fourth quarter of 2010 was a significant release of valuation
allowances on deferred tax assets. A reconciliation of GAAP
net earnings (loss) attributable to common shareholders to non-GAAP
net earnings attributable to common shareholders is presented in
the attached schedules.
"Although demand softened during the last few months of the
year, we are pleased with the $695 million of operating cash flow
less capital expenditures that we generated in 2011," said
Thomas J. Quinlan III, RR Donnelley's President and Chief Executive
Officer. "We've paid down over $400 million of debt in the
second half of 2011, ending the year with gross leverage of 2.9x,
within our targeted leverage range of 2.5x to 3.0x."
Quinlan continued, "While I am pleased with the customer wins we
have added to the platform, we begin this year managing our cost
structure even more aggressively. Our expectation is that the
customer wins, coupled with our aggressive cost management, will
result in non-GAAP earnings per diluted share in the range of $1.84
to $1.92 for 2012. Looking forward, we expect to continue to
generate strong cash flow, allowing us to invest in the platform,
pay our $1.04 per share annual dividend and remain within our
targeted 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 $2.7 billion, up $13.7 million, or
0.5%, from the fourth quarter of 2010. Pro forma for
acquisitions, net sales decreased 3.7%, due to volume declines in
certain product offerings, price erosion and a 76 basis point
unfavorable impact of changes in foreign exchange
rates. Gross margin of 22.9% in the fourth quarter of
2011 declined from 23.1% in the fourth quarter of 2010 as an
unfavorable product mix and pricing pressure more than offset the
impact of productivity actions, the pension curtailment gain and
lower variable compensation expense. SG&A expense as a
percentage of net sales in the fourth quarter of 2011 improved to
11.1% from 11.8% in the fourth quarter of 2010 primarily due to
productivity actions as well as lower variable compensation
expense, partially offset by the contingent compensation on a prior
acquisition and higher pension and other benefits-related
expenses. The operating loss of $317.1 million, which was
impacted by restructuring and impairment charges, the pension
curtailment gain, the contingent compensation and acquisition
expenses totaling $483.9 million in the fourth quarter of 2011,
compared to operating income of $85.7 million in the fourth quarter
of 2010, which included restructuring and impairment charges and
acquisition expenses totaling $88.6 million.
Excluding restructuring and impairment charges, the pension
curtailment gain, contingent compensation on a prior acquisition
and acquisition expenses, non-GAAP operating margin declined to
6.1% in the fourth quarter of 2011 from 6.4% in the fourth quarter
of 2010. An unfavorable product mix, pricing pressure and
higher benefits-related expense more than offset continued
productivity actions and lower variable compensation expense.
Segments
Net sales for the U.S. Print and Related Services segment
decreased 1.0% from the fourth quarter of 2010 to $2.0
billion. Pro forma for acquisitions, net sales in the segment
decreased 5.1%, as volume declines in books and directories and
financial print and continued pricing pressure across the segment
more than offset volume increases in logistics and office
products. The segment's operating loss of $211.1 million in
the fourth quarter of 2011, which was negatively impacted by
charges for restructuring and impairment of $373.7 million and the
contingent compensation on a prior acquisition of $15.3 million,
decreased $338.4 million from operating income of $127.3 million in
the fourth quarter of 2010, which included charges for
restructuring and impairment of $66.1 million. The segment's
non-GAAP operating margin of 8.9% in the fourth quarter of 2011
declined from 9.6% in the fourth quarter of 2010, as volume
declines and pricing pressure more than offset productivity and
lower variable compensation expense.
Net sales for the International segment increased 4.9% from the
fourth quarter of 2010 to $715.7 million. Pro forma for
acquisitions, net sales grew by 0.5%, as increased volume in
business process outsourcing and Asia and higher pass-through paper
sales more than offset the impact of continued pricing pressure and
a $20.6 million (302 basis point) unfavorable impact of changes in
foreign exchange rates. The segment's operating loss of $89.0
million in the fourth quarter of 2011, which was negatively
impacted by charges for restructuring and impairment of $133.4
million, decreased $138.6 million from the operating income of
$49.6 million in the fourth quarter of 2010, which included charges
for restructuring and impairment of $5.0 million. The
segment's non-GAAP operating margin declined to 6.2% in the fourth
quarter of 2011 from 8.0% in the fourth quarter of 2010 as an
unfavorable product mix and pricing pressure were only partially
offset by lower variable compensation expense.
Unallocated Corporate operating expenses decreased to $17.0
million in the fourth quarter of 2011 as compared to $91.2 million
in the fourth quarter of 2010. Excluding the gain on pension
curtailment of $38.7 million and acquisition-related expenses of
$0.2 million in the fourth quarter of 2011 and restructuring
charges of $11.9 million and acquisition expenses of $5.6 million
in the fourth quarter of 2010, unallocated Corporate operating
expenses decreased $18.2 million to $55.5 million in the fourth
quarter of 2011. A lower provision for bad debt (fourth
quarter of 2010 was unfavorably impacted by a customer bankruptcy
filing) and a reduction in variable compensation expense were
partially offset by higher benefits-related expense.
Outlook - 2012 Full-Year Non-GAAP EPS
For the full year of 2012, RR Donnelley is projecting 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
under the authorization available to the company. The non-GAAP
effective tax rate for 2012 is expected to be in the range of 28%
to 32%. GAAP net earnings per diluted share in 2012 may include
restructuring and impairment charges, acquisition costs, 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.
Conference Call
RR Donnelley will host a conference call and simultaneous
webcast to discuss its fourth-quarter and full-year results today,
Wednesday, February 22, 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 31610164. 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, 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 December 31, 2011 and
December 31, 2010 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
December 31,
2011 |
December 31,
2010 |
Assets |
|
|
|
|
|
Cash and cash
equivalents |
$ 449.7 |
$ 519.1 |
Receivables, less
allowance for doubtful accounts |
1,844.2 |
1,922.9 |
Income taxes
receivable |
32.4 |
49.3 |
Inventories |
510.9 |
560.6 |
Prepaid expenses and
other current assets |
131.4 |
115.4 |
Total Current
Assets |
2,968.6 |
3,167.3 |
Property, plant and
equipment - net |
1,854.6 |
2,138.7 |
Goodwill |
2,222.1 |
2,526.8 |
Other intangible assets -
net |
590.3 |
775.0 |
Other noncurrent
assets |
646.1 |
475.4 |
Total
Assets |
$ 8,281.7 |
$ 9,083.2 |
|
|
|
Liabilities |
|
|
Current
Liabilities |
|
|
Accounts
payable |
$ 1,063.3 |
$ 939.8 |
Accrued
liabilities |
817.0 |
902.2 |
Short-term and current
portion of long-term debt |
243.7 |
131.4 |
Total Current
Liabilities |
2,124.0 |
1,973.4 |
Long-term debt |
3,416.8 |
3,398.6 |
Pension
liability |
1,076.3 |
533.0 |
Postretirement
benefits |
227.3 |
287.4 |
Deferred income
taxes |
20.6 |
174.5 |
Other noncurrent
liabilities |
354.5 |
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 |
2,888.7 |
2,907.0 |
Retained
earnings |
342.4 |
670.2 |
Accumulated other
comprehensive loss |
(863.3) |
(490.4) |
Treasury stock, at cost,
64.5 shares in 2011 (2010 - 36.4 shares) |
(1,628.8) |
(1,166.2) |
Total RR Donnelley
shareholders' equity |
1,042.7 |
2,224.3 |
Noncontrolling
interests |
19.5 |
21.1 |
Total
Equity |
1,062.2 |
2,245.4 |
Total Liabilities and
Equity |
$ 8,281.7 |
$ 9,083.2 |
|
R. R. Donnelley
& Sons Company |
Condensed Consolidated
Statements of Operations |
Three and Twelve Months Ended
December 31, 2011 and 2010 |
(UNAUDITED) |
(in millions, except per
share data) |
|
|
|
|
Three
Months Ended December 31, |
Twelve
Months Ended December 31, |
|
|
ADJUSTMENTS |
2011 |
|
ADJUSTMENTS |
2010 |
|
ADJUSTMENTS |
2011 |
|
ADJUSTMENTS |
2010 |
|
2011 GAAP |
TO NON-
GAAP |
NON-GAAP |
2010
GAAP |
TO NON-
GAAP |
NON-GAAP |
2011 GAAP |
TO NON-
GAAP |
NON-GAAP |
2010 GAAP |
TO NON-
GAAP |
NON-GAAP |
Products |
$ 2,386.9 |
$ -- |
$ 2,386.9 |
$ 2,414.3 |
$ -- |
$ 2,414.3 |
$ 9,375.1 |
$ -- |
$ 9,375.1 |
$ 8,956.4 |
$ -- |
$ 8,956.4 |
Services |
333.9 |
-- |
333.9 |
292.8 |
-- |
292.8 |
1,235.9 |
-- |
1,235.9 |
1,062.5 |
-- |
1,062.5 |
Total net sales |
2,720.8 |
-- |
2,720.8 |
2,707.1 |
-- |
2,707.1 |
10,611.0 |
-- |
10,611.0 |
10,018.9 |
-- |
10,018.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products cost of sales (exclusive of
depreciation and amortization) |
1,850.8 |
28.2 |
1,879.0 |
1,866.8 |
-- |
1,866.8 |
7,185.2 |
28.2 |
7,213.4 |
6,857.8 |
-- |
6,857.8 |
Services cost of sales (exclusive of
depreciation and amortization) |
246.9 |
3.6 |
250.5 |
216.1 |
-- |
216.1 |
906.6 |
3.6 |
910.2 |
785.1 |
-- |
785.1 |
Selling, general and administrative expenses
(exclusive of depreciation and amortization) |
303.2 |
(8.6) |
294.6 |
320.0 |
(5.6) |
314.4 |
1,236.3 |
(10.6) |
1,225.7 |
1,123.4 |
(13.5) |
1,109.9 |
Restructuring and impairment
charges |
507.1 |
(507.1) |
-- |
83.0 |
(83.0) |
-- |
667.8 |
(667.8) |
-- |
157.9 |
(157.9) |
-- |
Depreciation and
amortization |
129.9 |
-- |
129.9 |
135.5 |
-- |
135.5 |
549.9 |
-- |
549.9 |
539.2 |
-- |
539.2 |
Total operating expenses |
3,037.9 |
(483.9) |
2,554.0 |
2,621.4 |
(88.6) |
2,532.8 |
10,545.8 |
(646.6) |
9,899.2 |
9,463.4 |
(171.4) |
9,292.0 |
Income (loss) from
operations |
(317.1) |
483.9 |
166.8 |
85.7 |
88.6 |
174.3 |
65.2 |
646.6 |
711.8 |
555.5 |
171.4 |
726.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense - net |
61.2 |
-- |
61.2 |
56.5 |
-- |
56.5 |
243.3 |
-- |
243.3 |
222.6 |
-- |
222.6 |
Investment and other income (expense) -
net |
(0.5) |
-- |
(0.5) |
(0.8) |
1.1 |
0.3 |
10.6 |
(9.8) |
0.8 |
(9.9) |
10.0 |
0.1 |
Loss on debt extinguishment |
-- |
-- |
-- |
-- |
-- |
-- |
(69.9) |
69.9 |
-- |
-- |
-- |
-- |
|
|
Earnings (loss) before income
taxes |
(378.8) |
483.9 |
105.1 |
28.4 |
89.7 |
118.1 |
(237.4) |
706.7 |
469.3 |
323.0 |
181.4 |
504.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
(52.2) |
72.0 |
19.8 |
2.3 |
9.5 |
11.8 |
(116.3) |
226.7 |
110.4 |
105.9 |
30.8 |
136.7 |
|
|
Net earnings
(loss) |
(326.6) |
411.9 |
85.3 |
26.1 |
80.2 |
106.3 |
(121.1) |
480.0 |
358.9 |
217.1 |
150.6 |
367.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Income (loss) attributable to
noncontrolling interests |
0.1 |
-- |
0.1 |
(0.9) |
-- |
(0.9) |
1.5 |
-- |
1.5 |
(4.6) |
3.6 |
(1.0) |
|
|
Net earnings (loss) attributable to
RR Donnelley |
|
|
|
|
|
|
|
|
|
|
|
|
common
shareholders |
$ (326.7) |
$ 411.9 |
$ 85.2 |
$ 27.0 |
$ 80.2 |
$ 107.2 |
$ (122.6) |
$ 480.0 |
$ 357.4 |
$ 221.7 |
$ 147.0 |
$ 368.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share
attributable to RR Donnelley common
shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per share |
$ (1.78) |
|
$ 0.46 |
$ 0.13 |
|
$ 0.52 |
$ (0.63) |
|
$ 1.84 |
$ 1.07 |
|
$ 1.79 |
Diluted net earnings per share |
$ (1.78) |
|
$ 0.46 |
$ 0.13 |
|
$ 0.51 |
$ (0.63) |
|
$ 1.82 |
$ 1.06 |
|
$ 1.76 |
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
183.6 |
|
183.6 |
206.7 |
|
206.7 |
193.8 |
|
193.8 |
206.4 |
|
206.4 |
Diluted |
183.6 |
3.0 |
186.6 |
210.2 |
|
210.2 |
193.8 |
2.6 |
196.4 |
209.7 |
|
209.7 |
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 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, 2011 |
Three Months Ended
December 31, 2010 |
|
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 attributable
to common shareholders |
Net earnings attributable to
common shareholders per diluted share |
GAAP basis measures |
$ (317.1) |
(11.7%) |
$ (326.7) |
$ (1.78) |
$ 85.7 |
3.2% |
$ 27.0 |
$ 0.13 |
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Impairment charges (1) |
488.5 |
18.0% |
413.0 |
2.25 |
61.5 |
2.3% |
60.7 |
0.29 |
Restructuring charges (2) |
18.6 |
0.6% |
11.0 |
0.06 |
21.5 |
0.7% |
14.3 |
0.07 |
Acquisition-related expenses
(3) |
0.2 |
-- |
0.9 |
-- |
5.6 |
0.2% |
4.5 |
0.02 |
Losses related to debt
extinguishment (4) |
-- |
-- |
(1.0) |
(0.01) |
-- |
-- |
-- |
-- |
Gain on pension curtailment
(5) |
(38.7) |
(1.4%) |
(24.3) |
(0.13) |
-- |
-- |
-- |
-- |
Journalism Online contingent
compensation (6) |
15.3 |
0.6% |
9.7 |
0.05 |
-- |
-- |
-- |
-- |
Write-down of affordable
housing investments (7) |
-- |
-- |
-- |
-- |
-- |
-- |
0.7 |
-- |
Other tax adjustments |
-- |
-- |
2.6 |
0.02 |
-- |
-- |
-- |
-- |
Total Non-GAAP adjustments |
483.9 |
17.8% |
411.9 |
2.24 |
88.6 |
3.2% |
80.2 |
0.38 |
Non-GAAP measures |
$ 166.8 |
6.1% |
$ 85.2 |
$ 0.46 |
$ 174.3 |
6.4% |
$ 107.2 |
$ 0.51 |
|
|
|
|
|
|
|
|
|
(1) Impairment
charges (pre-tax): Operating results for the three months
ended December 31, 2011 and 2010 were affected by the following
impairment charges: |
|
|
|
|
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
|
Commercial (a) |
$ 170.4 |
$ -- |
|
|
|
|
|
|
Forms and labels (a) |
99.9 |
61.0 |
|
|
|
|
|
|
Canada (a) |
62.2 |
-- |
|
|
|
|
|
|
Latin America (a) |
59.8 |
-- |
|
|
|
|
|
|
Total goodwill
impairment charges |
392.3 |
61.0 |
|
|
|
|
|
|
Forms and labels (b) |
89.3 |
-- |
|
|
|
|
|
|
Other (b) |
1.4 |
-- |
|
|
|
|
|
|
Total intangible asset
impairment charges |
90.7 |
-- |
|
|
|
|
|
|
Total goodwill and
intangible asset impairment charges |
483.0 |
61.0 |
|
|
|
|
|
|
Other long-lived asset
impairment |
5.5 |
0.5 |
|
|
|
|
|
|
Total impairment
charges |
$ 488.5 |
$ 61.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) non-cash
charges related to the impairment of goodwill. |
(b) non-cash
charges related to the impairment of acquired customer
relationships and other intangible assets. |
|
|
|
|
|
|
|
|
|
(2) Restructuring
charges (pre-tax): Operating results for the three months
ended December 31, 2011 and 2010 were affected by the following
restructuring charges: |
|
|
|
|
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
|
Employee termination costs
(a) |
$ 8.5 |
$ 17.4 |
|
|
|
|
|
|
Other charges (b) |
10.1 |
4.1 |
|
|
|
|
|
|
Total restructuring
charges |
$ 18.6 |
$ 21.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) employee
termination costs resulted from the reorganization of certain
operations and the exiting of certain business
activities. |
(b) includes
multi-employer pension plan partial withdrawal charges, lease
termination and other facility costs. |
|
|
|
|
|
|
|
|
|
(3)
Acquisition-related expenses: Legal, accounting and other expenses
associated with acquisitions completed or contemplated. |
|
|
|
|
|
|
|
|
|
(4) Losses related
to debt extinguishment: Adjustment to the pre-tax loss of
$69.9 million on the repurchase of $427.8 million of senior notes
due February 1, 2019, January 15, 2017 and May 15, 2015. |
|
|
|
|
|
|
|
|
|
(5) Gain on pension
curtailment: Pre-tax gain of $38.7 million 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) Journalism
Online contingent compensation: Pre-tax expense of $15.3
million related to contingent compensation earned by the prior
owners, based on achieving certain volume milestones for Journalism
Online's business following its acquisition by the Company. |
|
|
|
|
|
|
|
|
|
(7) Write-down of
affordable housing investments: Reflected the loss on the
write-down of the Company's affordable housing investments for the
three months ended December 31, 2010. |
|
R.R. Donnelley &
Sons Company |
Reconciliation of GAAP
to Non-GAAP Measures |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
December 31, 2011 |
Twelve Months Ended
December 31, 2010 |
|
Income 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 attributable to common
shareholders |
Net earnings attributable to common
shareholders per diluted share |
GAAP basis measures |
$ 65.2 |
0.6% |
$ (122.6) |
$ (0.63) |
$ 555.5 |
5.5% |
$ 221.7 |
$ 1.06 |
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
Impairment charges (1) |
531.5 |
5.0% |
442.1 |
2.26 |
92.5 |
0.9% |
83.5 |
0.40 |
Restructuring charges (2) |
136.3 |
1.3% |
90.7 |
0.46 |
65.4 |
0.7% |
46.5 |
0.22 |
Acquisition-related expenses
(3) |
2.2 |
-- |
2.0 |
0.01 |
13.5 |
0.2% |
11.8 |
0.06 |
Gain on Helium investment
(4) |
-- |
-- |
(9.5) |
(0.05) |
-- |
-- |
-- |
-- |
Losses related to debt
extinguishment (5) |
-- |
-- |
44.1 |
0.22 |
-- |
-- |
-- |
-- |
Gain on pension curtailment
(6) |
(38.7) |
(0.3%) |
(24.3) |
(0.12) |
-- |
-- |
-- |
-- |
Journalism Online contingent
compensation (7) |
15.3 |
0.1% |
9.7 |
0.05 |
-- |
-- |
-- |
-- |
Write-down of affordable
housing investments (8) |
-- |
-- |
-- |
-- |
-- |
-- |
0.7 |
-- |
Venezuela devaluation (9) |
-- |
-- |
-- |
-- |
-- |
-- |
4.5 |
0.02 |
Recognition of income tax
benefits (10) |
-- |
-- |
(74.8) |
(0.38) |
-- |
-- |
-- |
-- |
Total Non-GAAP adjustments |
646.6 |
6.1% |
480.0 |
2.45 |
171.4 |
1.8% |
147.0 |
0.70 |
Non-GAAP measures |
$ 711.8 |
6.7% |
$ 357.4 |
$ 1.82 |
$ 726.9 |
7.3% |
$ 368.7 |
$ 1.76 |
|
|
|
|
|
|
|
|
|
(1) Impairment
charges (pre-tax): Operating results for the twelve months
ended December 31, 2011 and 2010 were affected by the following
impairment charges: |
|
|
|
|
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
|
Commercial (a) |
$ 170.4 |
$ -- |
|
|
|
|
|
|
Forms and labels (a) |
99.9 |
61.0 |
|
|
|
|
|
|
Canada (a) |
62.2 |
-- |
|
|
|
|
|
|
Latin America (a) |
59.8 |
-- |
|
|
|
|
|
|
Total goodwill
impairment charges |
392.3 |
61.0 |
|
|
|
|
|
|
Forms and labels (b) |
89.3 |
-- |
|
|
|
|
|
|
Global Turnkey Solutions
(b) |
-- |
26.9 |
|
|
|
|
|
|
Other (b) |
1.4 |
-- |
|
|
|
|
|
|
Total intangible asset
impairment charges |
90.7 |
26.9 |
|
|
|
|
|
|
Total goodwill and
intangible asset impairment charges |
483.0 |
87.9 |
|
|
|
|
|
|
Other long-lived asset
impairment |
48.5 |
4.6 |
|
|
|
|
|
|
Total impairment
charges |
$ 531.5 |
$ 92.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) non-cash
charges related to the impairment of goodwill. |
(b) non-cash
charges related to the impairment of acquired customer
relationships and other intangible assets. |
|
|
|
|
|
|
|
|
|
(2) Restructuring
charges (pre-tax): Operating results for the twelve months
ended December 31, 2011 and 2010 were affected by the following
restructuring charges: |
|
|
|
|
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
|
Employee termination costs
(a) |
$ 76.7 |
$ 35.9 |
|
|
|
|
|
|
Other charges (b) |
59.6 |
29.5 |
|
|
|
|
|
|
Total restructuring
charges |
$ 136.3 |
$ 65.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) employee
termination costs resulted from the reorganization of certain
operations and the exiting of certain business
activities. |
(b) includes
multi-employer pension plan partial withdrawal charges, lease
termination and other facility costs. |
|
|
|
|
|
|
|
|
|
(3)
Acquisition-related expenses: Legal, accounting and other expenses
associated with acquisitions completed or contemplated. |
|
|
|
|
|
|
|
|
|
(4) 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. |
|
|
|
|
|
|
|
|
|
(5) Losses related
to debt extinguishment: Pre-tax loss of $69.9 million 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 $38.7 million 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) Journalism
Online contingent compensation: Pre-tax expense of $15.3
million related to contingent compensation earned by the prior
owners, based on achieving certain volume milestones for Journalism
Online's business following its acquisition by the Company. |
|
|
|
|
|
|
|
|
|
(8) Write-down of
affordable housing investments: Reflected the loss on the
write-down of the Company's affordable housing investments for the
twelve months ended December 31, 2010. |
|
(9) 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. |
|
|
|
|
|
|
|
|
|
(10) Recognition of
income tax benefits: Recognition of previously unrecognized
income tax benefits due to the expiration of U.S. federal statutes
of limitations 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, 2011 and 2010 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
U.S. Print and Related
Services |
International |
Corporate |
Consolidated |
|
|
|
|
|
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 |
Operating income (loss) |
(211.1) |
(89.0) |
(17.0) |
(317.1) |
Operating margin % |
(10.5)% |
(12.4)% |
nm |
(11.7)% |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Impairment charges |
362.7 |
124.8 |
1.0 |
488.5 |
Restructuring charges |
11.0 |
8.6 |
(1.0) |
18.6 |
Acquisition-related expenses |
-- |
-- |
0.2 |
0.2 |
Gain on pension curtailment |
-- |
-- |
(38.7) |
(38.7) |
Journalism Online 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 |
|
|
|
|
|
Three Months Ended
December 31, 2010 |
|
|
|
|
Net sales |
$ 2,024.7 |
$ 682.4 |
$ -- |
$ 2,707.1 |
Operating expense |
1,897.4 |
632.8 |
91.2 |
2,621.4 |
Operating income (loss) |
127.3 |
49.6 |
(91.2) |
85.7 |
Operating margin % |
6.3% |
7.3% |
nm |
3.2% |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Impairment charges |
61.2 |
0.3 |
-- |
61.5 |
Restructuring charges |
4.9 |
4.7 |
11.9 |
21.5 |
Acquisition-related expenses |
-- |
-- |
5.6 |
5.6 |
Total Non-GAAP
adjustments |
66.1 |
5.0 |
17.5 |
88.6 |
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 193.4 |
$ 54.6 |
$ (73.7) |
$ 174.3 |
Non-GAAP operating margin % |
9.6% |
8.0% |
nm |
6.4% |
|
|
|
|
|
Depreciation and
amortization |
97.5 |
29.2 |
8.8 |
135.5 |
Capital expenditures |
29.9 |
39.2 |
15.4 |
84.5 |
|
R. R. Donnelley
& Sons Company |
Segment GAAP to Non-GAAP
Operating Income and Margin Reconciliation |
For the Twelve Months
Ended December 31, 2011 and 2010 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
U.S. Print and Related
Services |
International |
Corporate |
Consolidated |
|
|
|
|
|
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 |
Operating income (loss) |
232.9 |
35.4 |
(203.1) |
65.2 |
Operating margin % |
3.0% |
1.3% |
nm |
0.6% |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Impairment charges |
403.4 |
125.8 |
2.3 |
531.5 |
Restructuring charges |
101.7 |
31.2 |
3.4 |
136.3 |
Acquisition-related expenses |
-- |
-- |
2.2 |
2.2 |
Gain on pension curtailment |
-- |
-- |
(38.7) |
(38.7) |
Journalism Online 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 |
|
|
|
|
|
Twelve Months Ended
December 31, 2010 |
|
|
|
|
Net sales |
$ 7,532.2 |
$ 2,486.7 |
$ -- |
$ 10,018.9 |
Operating expense |
6,893.3 |
2,337.2 |
232.9 |
9,463.4 |
Operating income (loss) |
638.9 |
149.5 |
(232.9) |
555.5 |
Operating margin % |
8.5% |
6.0% |
nm |
5.5% |
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
Impairment charges |
64.1 |
28.2 |
0.2 |
92.5 |
Restructuring charges |
29.9 |
22.4 |
13.1 |
65.4 |
Acquisition-related expenses |
-- |
-- |
13.5 |
13.5 |
Total Non-GAAP
adjustments |
94.0 |
50.6 |
26.8 |
171.4 |
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 732.9 |
$ 200.1 |
$ (206.1) |
$ 726.9 |
Non-GAAP operating margin % |
9.7% |
8.0% |
nm |
7.3% |
|
|
|
|
|
Depreciation and
amortization |
391.8 |
115.2 |
32.2 |
539.2 |
Capital expenditures |
99.2 |
88.4 |
41.8 |
229.4 |
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated
Statements of Cash Flows |
For the Twelve Months Ended
December 31, 2011 and 2010 |
(UNAUDITED) |
(in millions) |
|
|
|
2011 |
2010 |
Operating
Activities |
|
|
|
|
|
Net earnings
(loss) |
$ (121.1) |
$ 217.1 |
Adjustment to reconcile
net earnings to cash provided by operating activities |
940.7 |
660.1 |
Changes in
operating assets and liabilities |
126.7 |
(124.7) |
Net cash provided by
operating activities |
$ 946.3 |
$ 752.5 |
|
Net cash used in
investing activities |
$ (375.4) |
$ (674.5) |
|
Net cash used in
financing activities |
$ (651.0) |
$ (58.0) |
|
|
|
Effect of exchange rate on cash and
cash equivalents |
10.7 |
(0.1) |
|
Net (decrease) increase
in cash and cash equivalents |
$ (69.4) |
$ 19.9 |
|
|
|
Cash and cash equivalents at beginning
of period |
519.1 |
499.2 |
|
Cash and cash equivalents
at end of period |
$ 449.7 |
$ 519.1 |
|
R.R. Donnelley
& Sons Company |
Revenue Reconciliation
Reported to Pro Forma |
For the Three Months
Ended December 31, 2011 and 2010 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
Reported net sales |
Adjustment for net sales of
acquired businesses |
Pro forma net sales |
Three Months Ended
December 31, 2011 |
|
|
|
U.S. Print and Related
Services |
$ 2,005.1 |
$ 3.2 |
$ 2,008.3 |
International |
715.7 |
-- |
715.7 |
Consolidated |
$ 2,720.8 |
$ 3.2 |
$ 2,724.0 |
|
|
|
|
Three Months Ended
December 31, 2010 |
|
|
|
U.S. Print and Related
Services |
$ 2,024.7 |
$ 90.8 |
$ 2,115.5 |
International |
682.4 |
30.0 |
712.4 |
Consolidated |
$ 2,707.1 |
$ 120.8 |
$ 2,827.9 |
|
|
|
|
Net sales
change |
|
|
|
U.S. Print and Related
Services |
(1.0%) |
|
(5.1%) |
International |
4.9% |
|
0.5% |
Consolidated |
0.5% |
|
(3.7%) |
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 quarters ended December 31, 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 December 31, 2011, the adjustment for net
sales of acquired businesses reflects the net sales
of StratusGroup, Inc. (acquired November 21, 2011).
For the quarter ended December 31, 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), 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 |
Revenue Reconciliation
Reported to Pro Forma |
For the Twelve Months
Ended December 31, 2011 and 2010 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
Reported net sales |
Adjustment for net sales of
acquired businesses |
Pro forma net sales |
Twelve Months Ended
December 31, 2011 |
|
|
|
U.S. Print and Related
Services |
$ 7,846.5 |
$ 35.5 |
$ 7,882.0 |
International |
2,764.5 |
-- |
2,764.5 |
Consolidated |
$ 10,611.0 |
$ 35.5 |
$ 10,646.5 |
|
|
|
|
Twelve Months Ended
December 31, 2010 |
|
|
|
U.S. Print and Related
Services |
$ 7,532.2 |
$ 553.4 |
$ 8,085.6 |
International |
2,486.7 |
139.2 |
2,625.9 |
Consolidated |
$ 10,018.9 |
$ 692.6 |
$ 10,711.5 |
|
|
|
|
Net sales
change |
|
|
|
U.S. Print and Related
Services |
4.2% |
|
(2.5%) |
International |
11.2% |
|
5.3% |
Consolidated |
5.9% |
|
(0.6%) |
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 year ended December 31, 2011 and 2010 to pro forma net
sales as if the acquisitions took place as of January 1,
2010.
For the year 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) and
StratusGroup, Inc. (acquired November 21, 2011).
For the year ended December 31, 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), 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 December 31, 2011
and 2010 |
(UNAUDITED) |
(in millions) |
|
|
|
Total Liquidity (1) |
December 31, 2011 |
December 31, 2010 |
Cash (2) |
$ 449.7 |
$ 519.1 |
Committed Credit Agreement (3) |
1,417.7 |
1,503.0 |
|
1,867.4 |
2,022.1 |
Usage |
|
|
Borrowings under Facility |
65.0 |
120.0 |
|
|
|
Net Available Liquidity |
$ 1,802.4 |
$ 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 December 31, 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 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 December 31, 2011
and existing debt at that date, the incremental amount available
under the Credit Agreement at December 31, 2011 is $1.4
billion. See the table below for a reconciliation of the
stated amount to the incremental availability. |
|
|
|
|
December 31, 2011 |
|
Stated amount of Credit Agreement |
$ 1,750.0 |
|
Less: availability reduction from
covenant |
332.3 |
|
Total amount available |
1,417.7 |
|
Less: borrowings under Credit Agreement |
65.0 |
|
Incremental amount available at December 31,
2011 |
$ 1,352.7 |
|
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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