R.R. Donnelley & Sons Company (Nasdaq:RRD)
today reported financial results for the first quarter of 2014:
Highlights:
- First-quarter net sales of $2.7 billion grew 5.3% from the
first quarter of 2013; organic sales down 0.1% in the quarter
- First-quarter GAAP net loss attributable to common shareholders
of $29.0 million, or $0.15 per diluted share, compared to GAAP net
earnings attributable to common shareholders in the first quarter
of 2013 of $27.1 million, or $0.15 per diluted share
- First-quarter non-GAAP net earnings attributable to common
shareholders of $59.7 million, or $0.31 per diluted share, compared
to non-GAAP net earnings attributable to common shareholders in the
first quarter of 2013 of $68.1 million, or $0.37 per diluted
share
- Non-GAAP adjusted EBITDA in the quarter of $276.5 million
compared to $277.1 million in the first quarter of 2013
"We are pleased with our first-quarter performance, which was
consistent with our expectations. While the difficult weather
conditions and a lagging macroeconomic environment created
challenges in the quarter, we were able to deliver nearly flat
year-over-year organic revenue by leveraging the broad portfolio of
product and service offerings that we have built to support our
customers' communications requirements," said Thomas J. Quinlan
III, RR Donnelley's President and Chief Executive Officer. "In
addition, we further enhanced our breadth of offerings and
geographic diversity with the acquisitions that closed in the
quarter. While still early in the process, the integration of each
is proceeding very well and we remain excited about the benefits
associated with adding these companies to RR Donnelley."
Net Sales
Net sales in the quarter were $2.7 billion, up $135.3 million,
or 5.3%, from the first quarter of 2013, largely due to the
acquisition of Consolidated Graphics. After adjusting for the
impact of acquisitions and dispositions, a 30 basis point negative
impact from changes in foreign exchange rates and a 40 basis point
negative impact from pass-through paper sales, organic sales
declined 0.1% from the first quarter of 2013, as volume declines in
the variable print and publishing and retail services segments
and price erosion were nearly offset by volume growth in the
strategic services and international segments.
GAAP Earnings
The first-quarter 2014 net loss attributable to common
shareholders was $29.0 million, or $0.15 per diluted share,
compared to net earnings attributable to common shareholders of
$27.1 million, or $0.15 per diluted share, in the first quarter of
2013. The first-quarter net loss attributable to common
shareholders included pre-tax charges, expenses and other
adjustments, detailed on the attached schedules, of $148.1 million
and $62.5 million in 2014 and 2013, respectively, all of which were
excluded from the presentation of non-GAAP net earnings
attributable to common shareholders. Additional details regarding
the amount and nature of these and other items are included in the
attached schedules.
Non-GAAP Earnings
First-quarter 2014 non-GAAP adjusted EBITDA was $276.5 million,
or 10.3% of net sales, compared to non-GAAP adjusted EBITDA of
$277.1 million, or 10.9% of net sales, in the first quarter of
2013. Price pressure and wage and other cost inflation more than
offset higher volume, the benefit of two months of Consolidated
Graphics and a favorable product mix.
Non-GAAP net earnings attributable to common shareholders
totaled $59.7 million, or $0.31 per diluted share, in the first
quarter of 2014 compared to $68.1 million, or $0.37 per diluted
share, in the first quarter of 2013. First-quarter non-GAAP net
earnings attributable to common shareholders exclude pre-tax
charges, expenses and other adjustments of $148.1 million and $62.5
million in 2014 and 2013, respectively. A reconciliation of net
earnings (loss) attributable to common shareholders to non-GAAP
adjusted EBITDA and non-GAAP net earnings attributable to common
shareholders is presented in the attached schedules.
2014 Guidance
The Company provides the following updated full-year
guidance for 2014, which includes the impact of the recently
completed acquisition of Esselte North America:
|
Current
Guidance |
Previous
Guidance |
Net sales |
$11.5 to $11.8 billion |
$11.5 to $11.7 billion |
Non-GAAP adjusted EBITDA margin |
10.5% to 11.0% |
10.5% to 11.0% |
Depreciation and amortization |
$485 to $495 million |
$500 to $510 million |
Interest expense |
$275 to $285 million |
$275 to $285 million |
Non-GAAP effective tax rate |
33% to 35% |
33% to 35% |
Diluted share count |
Approximately 200 million |
Approximately 199 million |
Capital expenditures |
$225 to $250 million |
$225 to $250 million |
Free cash flow(1) |
$400 to $500 million |
$400 to $500 million |
|
|
|
(1) Defined as operating
cash flow less capital expenditures |
|
|
Conference Call
RR Donnelley will host a conference call and simultaneous
webcast to discuss its first-quarter results today, Thursday, May
1, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The live
webcast will be accessible on RR Donnelley's web site:
www.rrdonnelley.com. Individuals wishing to participate
must register in advance at
http://www.meetme.net/rrd. After registering, participants will
receive dial-in numbers, a passcode, and a personal identification
number (PIN) that is used to uniquely identify their presence and
automatically join them into the audio conference. 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) helps organizations communicate more
effectively by working to create, manage, produce, distribute and
process content on behalf of our customers. The company assists
customers in developing and executing multichannel communication
strategies that engage audiences, reduce costs, drive revenues and
increase compliance. RR Donnelley's innovative technologies enhance
digital and print communications to deliver integrated messages
across multiple media to highly targeted audiences at optimal times
for clients in virtually every private and public sector.
Strategically located operations provide local service and
responsiveness while leveraging the economic, geographic and
technological advantages of a global organization.
For more information, and for RR Donnelley's Global Social
Responsibility Report, visit the company's web site
at http://www.rrdonnelley.com.
Use of non-GAAP Information
This news release contains certain non-GAAP measures. The
Company believes that these 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
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.
Use of Forward-Looking Statements
This news release includes certain "forward-looking statements"
within the meaning of, and subject to the safe harbor created by,
Section 21E of the Securities Exchange Act of 1934, as amended,
with respect to the business, strategy and plans of RR Donnelley
and its expectations relating to future financial condition and
performance. These statements include all of the items under the
column labeled "Current Guidance" in the table included under the
"2014 Guidance" section. Statements that are not historical facts,
including statements about RR Donnelley management's beliefs and
expectations, are forward-looking statements. Words such as
"believes," "anticipates," "estimates," "expects," "intends,"
"aims," "potential," "will," "would," "could," "considered,"
"likely," "estimate" and variations of these words and similar
future or conditional expressions are intended to identify
forward-looking statements but are not the exclusive means of
identifying such statements. While RR Donnelley believes these
expectations, assumptions, estimates and projections are
reasonable, such forward-looking statements are only predictions
and involve known and unknown risks and uncertainties, many of
which are beyond RR Donnelley's control. By their nature,
forward-looking statements involve risk and uncertainty because
they relate to events and depend upon future circumstances that may
or may not occur. Actual results may differ materially from RR
Donnelley's current expectations depending upon a number of factors
affecting the business and risks associated with the performance of
the business. These factors include such risks and uncertainties
detailed in RRD's periodic public filings with the SEC, including
but not limited to those discussed under "Risk Factors" in RRD's
Form 10-K for the fiscal year ended December 31, 2013, those
discussed under "Cautionary Statement" in RRD's quarterly Form 10-Q
filings, and other filings with the SEC and in other investor
communications of RRD from time to time. RR Donnelley 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.
|
R. R. Donnelley
& Sons Company |
Condensed Consolidated Balance
Sheets |
As of March 31, 2014 and
December 31, 2013 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
March 31,
2014 |
December 31,
2013 |
Assets |
|
|
|
|
|
Cash and cash
equivalents |
$ 308.4 |
$ 1,028.4 |
Receivables, less allowances
for doubtful accounts |
2,018.9 |
1,832.3 |
Inventories |
581.7 |
501.2 |
Prepaid expenses and other
current assets |
269.3 |
199.7 |
Total Current Assets |
3,178.3 |
3,561.6 |
Property, plant and equipment -
net |
1,699.6 |
1,430.1 |
Goodwill |
1,735.5 |
1,436.3 |
Other intangible assets -
net |
502.3 |
315.9 |
Deferred income
taxes |
87.5 |
118.8 |
Other noncurrent
assets |
391.2 |
375.5 |
Total
Assets |
$ 7,594.4 |
$ 7,238.2 |
|
|
|
Liabilities |
|
|
|
|
|
Accounts payable |
$ 1,104.9 |
$ 1,143.0 |
Accrued liabilities |
815.1 |
814.8 |
Short-term and current portion
of long-term debt |
278.3 |
270.9 |
Total Current
Liabilities |
2,198.3 |
2,228.7 |
Long-term debt |
3,627.2 |
3,587.0 |
Pension liabilities |
233.0 |
245.2 |
Other postretirement benefits
plan liabilities |
171.0 |
174.1 |
Other noncurrent
liabilities |
479.4 |
349.5 |
Total
Liabilities |
6,708.9 |
6,584.5 |
|
|
|
Equity |
|
|
|
|
|
Common stock, $1.25 par
value |
323.7 |
303.7 |
Authorized shares:
500.0 |
|
|
Issued shares: 259.0 in 2014
(2013 - 243.0 shares) |
|
|
Additional paid-in
capital |
3,034.2 |
2,802.4 |
Accumulated deficit |
(549.7) |
(473.4) |
Accumulated other comprehensive
loss |
(496.1) |
(488.1) |
Treasury stock, at cost, 59.4
shares in 2014 (2013 - 61.2 shares) |
(1,446.2) |
(1,512.8) |
Total RR Donnelley
shareholders' equity |
865.9 |
631.8 |
Noncontrolling
interests |
19.6 |
21.9 |
Total
Equity |
885.5 |
653.7 |
Total Liabilities and
Equity |
$ 7,594.4 |
$ 7,238.2 |
|
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated
Statements of Operations |
For the Three Months Ended
March 31, 2014 and 2013 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Three Months Ended March 31, |
|
2 0 1 4
GAAP |
ADJUSTMENTS TO
NON-GAAP |
2 0 1 4
NON-GAAP |
2 0 1 3
GAAP |
ADJUSTMENTS TO
NON-GAAP |
2 0 1 3
NON-GAAP |
Net sales |
$ 2,673.8 |
$ -- |
$ 2,673.8 |
$ 2,538.5 |
$ -- |
$ 2,538.5 |
Cost of sales (1) |
2,100.6 |
(12.1) |
2,088.5 |
1,980.2 |
-- |
1,980.2 |
Gross profit
(1) |
573.2 |
12.1 |
585.3 |
558.3 |
-- |
558.3 |
|
|
|
|
|
|
|
Selling, general and administrative expenses
(SG&A) (1) |
316.5 |
(7.7) |
308.8 |
282.2 |
(1.0) |
281.2 |
Restructuring, impairment and other charges -
net |
45.2 |
(45.2) |
-- |
22.7 |
(22.7) |
-- |
Depreciation and
amortization |
115.5 |
-- |
115.5 |
113.6 |
-- |
113.6 |
Income from
operations |
96.0 |
65.0 |
161.0 |
139.8 |
23.7 |
163.5 |
|
|
|
|
|
|
|
Interest expense - net |
71.0 |
-- |
71.0 |
62.8 |
-- |
62.8 |
Investment and other expense (income) -
net |
4.6 |
(6.0) |
(1.4) |
3.5 |
(3.2) |
0.3 |
Loss on debt extinguishment |
77.1 |
(77.1) |
-- |
35.6 |
(35.6) |
-- |
|
|
|
|
|
|
|
Earnings (loss) before income
taxes |
(56.7) |
148.1 |
91.4 |
37.9 |
62.5 |
100.4 |
|
|
|
|
|
|
|
Income tax expense (benefit) |
(23.5) |
52.3 |
28.8 |
12.6 |
20.5 |
33.1 |
|
|
|
|
|
|
|
Net earnings
(loss) |
(33.2) |
95.8 |
62.6 |
25.3 |
42.0 |
67.3 |
|
|
|
|
|
|
|
Less: Income (loss) attributable to
noncontrolling interests |
(4.2) |
7.1 |
2.9 |
(1.8) |
1.0 |
(0.8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
attributable to RR Donnelley common
shareholders |
$ (29.0) |
$ 88.7 |
$ 59.7 |
$ 27.1 |
$ 41.0 |
$ 68.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per share
attributable to RR Donnelley common
shareholders: |
|
|
|
|
|
|
Basic net earnings (loss) per
share |
$ (0.15) |
|
$ 0.31 |
$ 0.15 |
|
$ 0.38 |
Diluted net earnings (loss) per
share |
$ (0.15) |
|
$ 0.31 |
$ 0.15 |
|
$ 0.37 |
Weighted average common shares
outstanding: |
|
|
|
|
|
|
Basic |
193.1 |
|
193.1 |
181.2 |
|
181.2 |
Diluted |
193.1 |
|
194.9 |
182.9 |
|
182.9 |
|
|
|
|
|
|
|
Additional
information: |
|
|
|
|
|
|
Gross margin (1) |
21.4% |
|
21.9% |
22.0% |
|
22.0% |
SG&A as a % of net sales (1) |
11.8% |
|
11.5% |
11.1% |
|
11.1% |
Operating margin |
3.6% |
|
6.0% |
5.5% |
|
6.4% |
Effective tax rate |
41.4% |
|
31.5% |
33.2% |
|
33.0% |
|
|
|
|
|
|
|
(1) Exclusive of depreciation and
amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
March 31, 2014 and 2013 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended March 31, 2014 |
For the Three
Months Ended March 31, 2013 |
|
Gross profit |
SG&A |
Income from operations |
Operating margin |
Net earnings (loss) attributable to
common shareholders |
Net earnings (loss) attributable to
common shareholders per diluted share |
SG&A |
Income from operations |
Operating margin |
Net earnings attributable to common
shareholders |
Net earnings attributable to common
shareholders per diluted share |
GAAP basis measures |
$ 573.2 |
$ 316.5 |
$ 96.0 |
3.6% |
$ (29.0) |
$ (0.15) |
$ 282.2 |
$ 139.8 |
5.5% |
$ 27.1 |
$ 0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges - net
(1) |
-- |
-- |
18.0 |
0.6% |
13.3 |
0.07 |
-- |
18.6 |
0.7% |
12.0 |
0.06 |
Impairment charges - net
(2) |
-- |
-- |
6.7 |
0.3% |
5.0 |
0.03 |
-- |
4.1 |
0.2% |
2.7 |
0.01 |
Other charges (3) |
-- |
-- |
20.5 |
0.7% |
15.2 |
0.08 |
-- |
-- |
-- |
-- |
-- |
Acquisition-related expenses
(4) |
-- |
(7.7) |
7.7 |
0.3% |
6.2 |
0.03 |
(1.0) |
1.0 |
0.0% |
1.0 |
0.01 |
Purchase accounting inventory
adjustment (5) |
12.1 |
-- |
12.1 |
0.5% |
7.6 |
0.04 |
-- |
-- |
-- |
-- |
-- |
Loss on disposal of business
(6) |
-- |
-- |
-- |
-- |
0.4 |
0.00 |
-- |
-- |
-- |
-- |
-- |
Venezuela currency
remeasurement (7) |
-- |
-- |
-- |
-- |
7.8 |
0.04 |
-- |
-- |
-- |
2.2 |
0.01 |
Loss on debt extinguishment
(8) |
-- |
-- |
-- |
-- |
49.8 |
0.26 |
-- |
-- |
-- |
23.1 |
0.13 |
Gain on bargain purchase
(9) |
-- |
-- |
-- |
-- |
(16.6) |
(0.09) |
-- |
-- |
-- |
-- |
-- |
Total Non-GAAP adjustments |
12.1 |
(7.7) |
65.0 |
2.4% |
88.7 |
0.46 |
(1.0) |
23.7 |
0.9% |
41.0 |
0.22 |
Non-GAAP measures |
$ 585.3 |
$ 308.8 |
$ 161.0 |
6.0% |
$ 59.7 |
$ 0.31 |
$ 281.2 |
$ 163.5 |
6.4% |
$ 68.1 |
$ 0.37 |
|
|
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(1) Restructuring charges -
net: Operating results for the three months ended March 31, 2014
and 2013 were affected by the following pre-tax restructuring
charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
|
|
|
|
Employee termination costs
(a) |
|
|
$ 13.9 |
$ 8.8 |
|
|
|
|
|
|
|
Other restructuring charges
(b) |
|
|
4.1 |
9.8 |
|
|
|
|
|
|
|
Total restructuring
charges - net |
|
|
$ 18.0 |
$ 18.6 |
|
|
|
|
|
|
|
|
|
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|
(a) For the three
months ended March 31, 2014, employee termination costs resulted
from the integration of Consolidated Graphics, including the
closure of three facilities and one additional facility closure
within the Variable Print segment, one facility closure in
the Publishing and Retail Services segment and the
reorganization of certain operations. For the three months ended
March 31, 2013, employee termination costs resulted from the
closing of one manufacturing facility within each of the Publishing
and Retail Services and Variable Print segments and the
reorganization of certain operations. |
(b) Includes lease
termination and other facility costs, including charges related to
multi-employer pension plan withdrawal obligations related to
facility closures. |
|
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|
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|
(2) Impairment
charges - net: Operating results for the three months ended March
31, 2014 and 2013 were affected by other long-lived asset
impairment charges. |
|
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|
(3) Other charges:
Recognition of estimated charges related to the Company's decision
to partially withdraw from certain multi-employer pension
plans. |
|
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(4)
Acquisition-related expenses: Legal, accounting and other expenses
associated with completed or contemplated acquisitions. |
|
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|
(5) Purchase
accounting inventory adjustment: Recognition of a pre-tax charge of
$12.1 million ($7.6 million after-tax) as a result of an inventory
purchase accounting adjustment for the three months ended March 31,
2014. |
|
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|
(6) Loss on
disposal of business: Recognition of the sale of Office Tiger
Global Real Estate Service Inc. in the International segment of
$0.8 million ($0.4 million after-tax) for the three months ended
March 31, 2014. |
|
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|
(7) Venezuela
currency remeasurement: Currency remeasurement in Venezuela
resulted in a pre-tax loss of $21.8 million ($14.9 million
after-tax), of which $7.1 million was included in loss attributable
to noncontrolling interests. During the three months ended
March 31, 2013, the currency devaluation in Venezuela resulted in a
pre-tax loss of $3.2 million ($3.2 million after-tax), of which
$1.0 million was included in loss attributable to noncontrolling
interests. |
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|
(8) Loss on debt
extinguishment: Pre-tax loss of $77.1 million ($49.8 million
after-tax) was recognized for the three months ended March 31, 2014
related to the repurchase of $211.0 million of the 8.25% senior
notes due March 15, 2019, $100.0 million of the 7.25% senior notes
due May 15, 2018 and $50.0 million of the 7.625% senior notes due
June 15, 2020. During the three months ended March 31, 2013, a
pre-tax loss of $35.6 million ($23.1 million after-tax) was
recognized related to the repurchase of $173.5 million of 6.125%
senior notes due January 15, 2017, $130.2 million of the 8.60%
senior notes due August 15, 2016 and $50.0 million of 7.25% senior
notes due May 15, 2018. |
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(9) Gain on
bargain purchase: Acquisition of substantially all of the North
American operations of Esselte Corporation ("Esselte") resulted in
a preliminary pre-tax bargain purchase gain of $16.6 million ($16.6
million after-tax) for the three months ended March 31, 2014. |
|
|
R. R. Donnelley
& Sons Company |
Segment GAAP to Non-GAAP
Operating Income and Non-GAAP Adjusted EBITDA and Margin
Reconciliation |
For the Three Months
Ended March 31, 2014 and 2013 |
(UNAUDITED) |
(in millions) |
|
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|
Publishing and Retail
Services |
Variable Print |
Strategic Services |
International |
Corporate |
Consolidated |
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|
|
For the Three Months Ended
March 31, 2014 |
|
|
|
|
|
|
Net sales |
$ 642.7 |
$ 792.1 |
$ 619.7 |
$ 619.3 |
$ -- |
$ 2,673.8 |
Income (loss) from
operations |
9.9 |
27.7 |
55.4 |
30.2 |
(27.2) |
96.0 |
Operating margin % |
1.5% |
3.5% |
8.9% |
4.9% |
nm |
3.6% |
|
|
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
|
|
Restructuring charges - net |
2.3 |
12.0 |
1.5 |
1.6 |
0.6 |
18.0 |
Impairment charges - net |
2.2 |
4.5 |
-- |
-- |
-- |
6.7 |
Other charges |
16.3 |
4.1 |
0.1 |
-- |
-- |
20.5 |
Acquisition-related expenses |
-- |
-- |
-- |
0.2 |
7.5 |
7.7 |
Purchase accounting inventory
adjustment |
-- |
12.1 |
-- |
-- |
-- |
12.1 |
Total Non-GAAP
adjustments |
20.8 |
32.7 |
1.6 |
1.8 |
8.1 |
65.0 |
|
|
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 30.7 |
$ 60.4 |
$ 57.0 |
$ 32.0 |
$ (19.1) |
$ 161.0 |
Non-GAAP operating margin % |
4.8% |
7.6% |
9.2% |
5.2% |
nm |
6.0% |
|
|
|
|
|
|
|
Depreciation and
amortization |
37.7 |
35.1 |
16.1 |
24.9 |
1.7 |
115.5 |
Non-GAAP Adjusted EBITDA |
$ 68.4 |
$ 95.5 |
$ 73.1 |
$ 56.9 |
$ (17.4) |
$ 276.5 |
Non-GAAP Adjusted EBITDA margin
% |
10.6% |
12.1% |
11.8% |
9.2% |
nm |
10.3% |
|
|
|
|
|
|
|
Capital expenditures |
$ 11.9 |
$ 10.4 |
$ 9.9 |
$ 12.0 |
$ 4.8 |
$ 49.0 |
|
|
|
|
|
|
|
For the Three Months Ended
March 31, 2013 |
|
|
|
|
|
|
Net sales |
$ 664.4 |
$ 648.4 |
$ 592.0 |
$ 633.7 |
$ -- |
$ 2,538.5 |
Income (loss) from
operations |
21.8 |
57.4 |
58.0 |
27.9 |
(25.3) |
139.8 |
Operating margin % |
3.3% |
8.9% |
9.8% |
4.4% |
nm |
5.5% |
|
|
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
|
|
Restructuring charges - net |
10.1 |
2.4 |
0.7 |
2.2 |
3.2 |
18.6 |
Impairment charges - net |
3.2 |
0.3 |
0.4 |
(0.2) |
0.4 |
4.1 |
Acquisition-related expenses |
-- |
-- |
-- |
-- |
1.0 |
1.0 |
Total Non-GAAP
adjustments |
13.3 |
2.7 |
1.1 |
2.0 |
4.6 |
23.7 |
|
|
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 35.1 |
$ 60.1 |
$ 59.1 |
$ 29.9 |
$ (20.7) |
$ 163.5 |
Non-GAAP operating margin % |
5.3% |
9.3% |
10.0% |
4.7% |
nm |
6.4% |
|
|
|
|
|
|
|
Depreciation and
amortization |
43.4 |
27.9 |
14.8 |
25.9 |
1.6 |
113.6 |
Non-GAAP Adjusted EBITDA |
$ 78.5 |
$ 88.0 |
$ 73.9 |
$ 55.8 |
$ (19.1) |
$ 277.1 |
Non-GAAP Adjusted EBITDA margin
% |
11.8% |
13.6% |
12.5% |
8.8% |
nm |
10.9% |
|
|
|
|
|
|
|
Capital expenditures |
$ 12.5 |
$ 10.9 |
$ 0.6 |
$ 11.0 |
$ 2.9 |
$ 37.9 |
|
|
|
|
|
|
|
nm Not meaningful |
|
|
|
|
|
|
|
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated
Statements of Cash Flows |
For the Three Months Ended
March 31, 2014 and 2013 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
|
|
|
Net earnings (loss) |
$ (33.2) |
$ 25.3 |
Adjustment to reconcile net
earnings (loss) to net cash used in operating activities |
198.8 |
155.4 |
Changes in operating assets and
liabilities |
(231.8) |
(268.0) |
Pension and other
postretirement benefits plan contributions |
(14.2) |
(8.5) |
Net cash used in operating
activities |
$ (80.4) |
$ (95.8) |
|
|
|
Capital expenditures |
(49.0) |
(37.9) |
All other cash provided
by (used in) investing activities |
(378.4) |
4.8 |
Net cash used in investing
activities |
$ (427.4) |
$ (33.1) |
|
|
|
Net cash provided by (used in)
financing activities |
$ (196.8) |
$ 3.7 |
|
|
|
Effect of exchange rate on cash and cash
equivalents |
(15.4) |
(2.6) |
|
|
|
Net decrease in cash and cash
equivalents |
$ (720.0) |
$ (127.8) |
|
|
|
Cash and cash equivalents at beginning of
period |
1,028.4 |
430.7 |
|
|
|
Cash and cash equivalents at
end of period |
$ 308.4 |
$ 302.9 |
|
|
|
|
|
|
Additional
Information: |
|
|
|
2014 |
2013 |
For the Three Months Ended March
31: |
|
|
Net cash used in operating
activities |
$ (80.4) |
$ (95.8) |
Less: capital expenditures |
49.0 |
37.9 |
Free cash flow |
$ (129.4) |
$ (133.7) |
|
|
R.R. Donnelley
& Sons Company |
Reconciliation of
Reported to Pro Forma Net Sales |
For the Three Months
Ended March 31, 2014 and 2013 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
|
|
Reported net sales |
Adjustments (1) |
Pro forma net sales |
For the Three Months Ended March 31,
2014 |
|
|
|
Publishing and Retail Services |
$ 642.7 |
$ -- |
$ 642.7 |
Variable Print |
792.1 |
151.7 |
943.8 |
Strategic Services |
619.7 |
1.1 |
620.8 |
International |
619.3 |
-- |
619.3 |
Consolidated |
$ 2,673.8 |
$ 152.8 |
$ 2,826.6 |
|
|
|
|
For the Three Months Ended March 31,
2013 |
|
|
|
Publishing and Retail Services |
$ 664.4 |
$ -- |
$ 664.4 |
Variable Print |
648.4 |
318.7 |
967.1 |
Strategic Services |
592.0 |
1.4 |
593.4 |
International |
633.7 |
-- |
633.7 |
Consolidated |
$ 2,538.5 |
$ 320.1 |
$ 2,858.6 |
|
|
|
|
|
|
|
|
Net sales change |
|
|
|
Publishing and Retail Services |
(3.3%) |
|
(3.3%) |
Variable Print |
22.2% |
|
(2.4%) |
Strategic Services |
4.7% |
|
4.6% |
International |
(2.3%) |
|
(2.3%) |
Consolidated |
5.3% |
|
(1.1%) |
|
|
|
|
Supplementary non-GAAP
information: |
|
|
|
|
|
|
|
Year-over-year impact of changes in
foreign exchange (FX) rates |
|
|
|
Variable Print |
|
|
(0.1%) |
Strategic Services |
|
|
(0.1%) |
International |
|
|
(1.3%) |
Consolidated |
|
|
(0.3%) |
|
|
|
|
Approximate year-over-year impact of
changes in pass-through paper sales |
|
|
|
Publishing and Retail Services |
|
|
(1.5%) |
International |
|
|
(0.1%) |
Consolidated |
|
|
(0.4%) |
|
|
|
|
Year-over-year impact of dispositions
(2) |
|
|
|
International |
|
|
(1.4%) |
Consolidated |
|
|
(0.3%) |
|
|
|
|
|
|
|
|
Net organic sales change
(3) |
|
|
|
Publishing and Retail Services |
|
|
(1.8%) |
Variable Print |
|
|
(2.3%) |
Strategic Services |
|
|
4.7% |
International |
|
|
0.5% |
Consolidated |
|
|
(0.1%) |
|
|
|
|
|
The reported results of the
Company include the results of Consolidated Graphics, Inc. and
MultiCorpora from the acquisition date forward. The Company has
provided this schedule to reconcile reported net sales for the
three months ended March 31, 2014 and 2013 to pro forma net sales
as if the 2014 acquisitions took place as of January 1, 2013 for
the purposes of this schedule. |
|
|
|
|
For the three months ended March
31, 2014, the adjustment for net sales of acquired businesses
reflects the net sales of Consolidated Graphics, Inc. (acquired
January 31, 2014), MultiCorpora (acquired March 10, 2014), and
Esselte (acquired March 25, 2014). |
|
|
|
|
There were no acquisitions
during the three months ended March 31, 2013. |
|
|
|
|
(1) Adjusted for net sales
of acquired businesses: Variable Print included net sales of
Consolidated Graphics, Inc. and Esselte and Strategic Services
included net sales of MultiCorpora |
(2) Adjusted for net sales
of disposed businesses: Office Tiger Global Real Estate Service
Inc. and R.R. Donnelley SAS |
(3) Adjusted for net sales
of acquired and disposed businesses, the impact of changes in FX
rates and pass-through paper sales |
|
|
R.R. Donnelley
& Sons Company |
Reconciliation of GAAP
Net Earnings (Loss) to Non-GAAP Adjusted EBITDA |
For the Three and Twelve
Months Ended March 31, 2014 and 2013 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended |
For the Three Months
Ended |
|
March 31, 2014 |
March 31, 2014 |
December 31,
2013 |
September 30,
2013 |
June 30, 2013 |
|
|
|
|
|
|
GAAP net earnings (loss) attributable
to RR Donnelley common shareholders |
$ 155.1 |
$ (29.0) |
$ 104.0 |
$ 14.7 |
$ 65.4 |
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
Income (loss) attributable to noncontrolling
interests |
4.6 |
(4.2) |
4.4 |
3.3 |
1.1 |
Income tax expense (benefit) |
(45.3) |
(23.5) |
(62.0) |
5.0 |
35.2 |
Interest expense - net |
269.6 |
71.0 |
67.5 |
65.6 |
65.5 |
Investment and other expense (income) -
net |
28.5 |
4.6 |
18.2 |
(0.3) |
6.0 |
Loss on debt extinguishment (1) |
123.4 |
77.1 |
-- |
46.3 |
-- |
Depreciation and amortization |
437.7 |
115.5 |
104.9 |
106.3 |
111.0 |
Restructuring, impairment and other charges -
net (2) |
156.0 |
45.2 |
52.9 |
38.1 |
19.8 |
Acquisition-related expenses (3) |
12.6 |
7.7 |
3.7 |
1.1 |
0.1 |
Purchase accounting inventory adjustment
(4) |
12.1 |
12.1 |
-- |
-- |
-- |
Total Non-GAAP adjustments |
999.2 |
305.5 |
189.6 |
265.4 |
238.7 |
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA |
$ 1,154.3 |
$ 276.5 |
$ 293.6 |
$ 280.1 |
$ 304.1 |
|
|
|
|
|
|
Net sales |
$ 10,615.6 |
$ 2,673.8 |
$ 2,755.3 |
$ 2,614.9 |
$ 2,571.6 |
Non-GAAP adjusted EBITDA margin % |
10.9% |
10.3% |
10.7% |
10.7% |
11.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended |
For the Three Months
Ended |
|
March 31, 2013 |
March 31, 2013 |
December 31,
2012 |
September 30,
2012 |
June 30, 2012 |
|
|
|
|
|
|
GAAP net earnings (loss) attributable
to RR Donnelley common shareholders |
$ (661.7) |
$ 27.1 |
$ (849.0) |
$ 71.4 |
$ 88.8 |
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
Income (loss) attributable to noncontrolling
interests |
(4.5) |
(1.8) |
(2.7) |
(0.2) |
0.2 |
Income tax expense (benefit) |
14.3 |
12.6 |
(57.0) |
52.2 |
6.5 |
Interest expense - net |
253.9 |
62.8 |
63.8 |
63.7 |
63.6 |
Investment and other expense (income) -
net |
7.0 |
3.5 |
(0.9) |
(0.4) |
4.8 |
Loss on debt extinguishment (1) |
39.6 |
35.6 |
4.0 |
-- |
-- |
Depreciation and amortization |
470.2 |
113.6 |
116.7 |
119.0 |
120.9 |
Restructuring, impairment and other charges -
net (2) |
1,091.2 |
22.7 |
1,020.6 |
13.9 |
34.0 |
Acquisition-related expenses (3) |
3.2 |
1.0 |
0.4 |
1.3 |
0.5 |
Gain on pension curtailment (5) |
(3.7) |
-- |
(3.7) |
-- |
-- |
Total Non-GAAP adjustments |
1,871.2 |
250.0 |
1,141.2 |
249.5 |
230.5 |
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA |
$ 1,209.5 |
$ 277.1 |
$ 292.2 |
$ 320.9 |
$ 319.3 |
|
|
|
|
|
|
Net sales |
$ 10,235.5 |
$ 2,538.5 |
$ 2,659.6 |
$ 2,508.8 |
$ 2,528.6 |
Non-GAAP adjusted EBITDA margin % |
11.8% |
10.9% |
11.0% |
12.8% |
12.6% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Loss on debt extinguishment:
Pre-tax losses were recognized related to the repurchases of senior
notes prior to maturity, as well as the costs related to the early
termination of the Company's previous $1.75 billion revolving
credit facility which was terminated on October 15,
2012. |
|
|
|
|
|
|
(2) Restructuring, impairment and
other charges - net: Pre-tax charges for employee termination
costs, lease termination and other costs, including charges related
to multi-employer pension plan withdrawal obligations as a result
of facility closures, and impairment of other long-lived assets.
The three months ended March 31, 2014, December 31, 2013 and
September 30, 2013 included pre-tax charges for the recognition of
estimated charges related to the Company's decision to partially
withdraw from certain multi-employer pension plans. The three
months ended December 31, 2013 and 2012 included pre-tax charges
for the impairment of other intangible assets. The three months
ended December 31, 2012 included pre-tax charges for the impairment
of goodwill. |
|
|
|
|
|
|
(3) Acquisition-related expenses:
Legal, accounting and other expenses associated with completed or
contemplated acquisitions. |
|
|
|
|
|
|
(4) Purchase accounting inventory
adjustment: Recognition of charges as a result of an inventory
purchase accounting adjustment. |
|
|
|
|
|
|
(5) Gain on pension curtailment:
A pre-tax gain on pension curtailment was recognized related to the
remeasurement of the U.K. pension plan's assets and obligations
that was required with the announced freeze on further benefit
accruals as of December 31, 2012. |
|
|
R.R. Donnelley
& Sons Company |
Debt and Liquidity
Summary |
As of March 31, 2014 and
2013 and December 31, 2013 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liquidity (1) |
|
March 31, 2014 |
December 31, 2013 |
March 31, 2013 |
Cash (2) |
|
$ 308.4 |
$ 1,028.4 |
$ 302.9 |
Committed credit agreement (3) |
|
1,044.8 |
387.5 |
1,066.3 |
|
|
1,353.2 |
1,415.9 |
1,369.2 |
Usage |
|
|
|
|
Borrowings under credit agreement (3) |
|
10.0 |
-- |
-- |
Impact on availability related to
outstanding letters of credit |
-- |
-- |
-- |
|
|
|
|
|
Net Available Liquidity |
|
$ 1,343.2 |
$ 1,415.9 |
$ 1,369.2 |
|
|
|
|
|
|
|
|
|
|
|
Short-term and current portion of long-term
debt |
|
$ 278.3 |
$ 270.9 |
$ 21.6 |
Long-term debt |
|
3,627.2 |
3,587.0 |
3,512.2 |
Total debt |
|
$ 3,905.5 |
$ 3,857.9 |
$ 3,533.8 |
|
|
|
|
|
Non-GAAP adjusted EBITDA for the
twelve months ended March 31, 2014 and 2013 and the year ended
December 31, 2013 |
$ 1,154.3 |
$ 1,154.9 |
$ 1,209.5 |
|
|
|
|
|
Non-GAAP Gross
Leverage (defined as total debt divided by non-GAAP adjusted
EBITDA) |
3.4x |
3.3x |
2.9x |
|
|
|
|
|
(1) Liquidity does not include
uncommitted credit facilities, located primarily outside of the
U.S. |
|
|
|
|
|
(2) Approximately 86% of cash as
of March 31, 2014, 39% of cash as of December 31, 2013 and 80% of
cash as of March 31, 2013 was located outside of the U.S. During
2014, the Company's foreign subsidiaries are expected to make
intercompany payments to the U.S. of approximately $40 million from
foreign cash balances available at March 31, 2014. In aggregate,
approximately $250 million in payments is expected to be made in
2014 and in future years in satisfaction of intercompany
obligations. Cash held by foreign subsidiaries may be subject to
U.S. or local country taxes if repatriated to the U.S. In addition,
repatriation of some foreign cash balances is further restricted by
local laws. |
|
|
|
|
|
(3) The Company has a $1.15
billion senior secured revolving credit agreement (the "Credit
Agreement") which expires October 15, 2017. 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. There were $10 million in
borrowings under the Credit Agreement as of March 31, 2014. Based
on the Company's results of operations for the twelve months ended
March 31, 2014 and existing debt, the Company would have had the
ability to utilize $1.0 billion of the $1.15 billion Credit
Agreement and not have been in violation of the terms of the
agreement. |
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014 |
December 31, 2013 |
March 31, 2013 |
|
Stated amount of the credit agreement |
$ 1,150.0 |
$ 1,150.0 |
$ 1,150.0 |
|
Less: availability reduction from
covenants |
105.2 |
762.5 |
83.7 |
|
Total amount available |
1,044.8 |
387.5 |
1,066.3 |
|
|
|
|
|
|
Less: borrowings under the credit
agreement |
10.0 |
-- |
-- |
|
Impact on availability related to outstanding
letters of credit |
-- |
-- |
-- |
|
Availability under the credit agreement |
$ 1,034.8 |
$ 387.5 |
$ 1,066.3 |
|
CONTACT: Media:
Phyllis Burgee
Director, Communications
630.322.6093
phyllis.burgee@rrd.com
Investors:
Dave Gardella
SVP, Investor Relations
312.326.8155
david.a.gardella@rrd.com
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