R.R. Donnelley & Sons Company (Nasdaq:RRD)
today reported financial results for the first quarter of 2015:
Highlights:
- First-quarter net sales of $2.7 billion grew 2.7% from the
first quarter of 2014; organic net sales grew 0.1% from the first
quarter of 2014
- First-quarter GAAP net earnings attributable to common
shareholders of $22.3 million, or $0.11 per diluted share, compared
to GAAP net loss attributable to common shareholders in the first
quarter of 2014 of $29.0 million, or $0.15 per diluted share
- First-quarter non-GAAP net earnings attributable to common
shareholders of $51.9 million, or $0.26 per diluted share, compared
to non-GAAP net earnings attributable to common shareholders in the
first quarter of 2014 of $59.7 million, or $0.31 per diluted
share
- Company reiterates full-year 2015 guidance and commitment to
continue to migrate toward its targeted gross leverage range of
2.25x to 2.75x on a long-term sustainable basis
"Organic revenue in the quarter was flat to the first quarter of
last year, but importantly, we saw improvement in this trend as the
quarter progressed," said Thomas J. Quinlan III, RR Donnelley's
President and Chief Executive Officer. "This performance, in
combination with the success we are having with each of our four
go-to-market strategies, keeps us on track to deliver full-year
results in line with our previous guidance, which we reiterate
today."
Net Sales
Net sales in the quarter were $2.7 billion, up $72.3 million, or
2.7%, from the first quarter of 2014, largely due to the
acquisitions of Consolidated Graphics and the North American
operations of Esselte. After adjusting for the impact of
acquisitions, changes in foreign exchange rates, dispositions and
changes in pass-through paper, organic sales increased 0.1% from
the first quarter of 2014, as increases in the Strategic Services
and Variable Print segments were partially offset by declines in
the Publishing and Retail Services and International segments.
GAAP Earnings
First-quarter 2015 net earnings attributable to common
shareholders was $22.3 million, or $0.11 per diluted share,
compared to net loss attributable to common shareholders of $29.0
million, or $0.15 per diluted share, in the first quarter of 2014.
The first-quarter 2015 diluted share count increased by 9.0 million
shares from the first quarter of 2014, primarily related to shares
issued in connection with the acquisitions of Consolidated Graphics
and the North American operations of Esselte. The first-quarter net
earnings attributable to common shareholders included pre-tax
charges of $60.2 million and $148.1 million in 2015 and 2014,
respectively, all of which are 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 2015 non-GAAP adjusted EBITDA was $259.3 million,
or 9.4% of net sales, compared to non-GAAP adjusted EBITDA of
$276.5 million, or 10.3% of net sales, in the first quarter of
2014. The decrease in non-GAAP adjusted EBITDA was primarily due to
price pressure in all four operating segments and volume
declines in Publishing and Retail Services, both of which also
negatively impacted margin.
Non-GAAP net earnings attributable to common shareholders
totaled $51.9 million, or $0.26 per diluted share, in the first
quarter of 2015 compared to $59.7 million, or $0.31 per diluted
share, in the first quarter of 2014. The first-quarter 2015 diluted
share count increased by 7.2 million shares from the first quarter
of 2014, primarily related to shares issued in connection with the
acquisitions of Consolidated Graphics and the North American
operations of Esselte. Reconciliations of net earnings attributable
to common shareholders to non-GAAP adjusted EBITDA and non-GAAP net
earnings attributable to common shareholders are presented in the
attached schedules.
2015 Guidance
The Company reiterates the following full-year guidance for
2015, which excludes any impact of the previously announced pending
acquisition of Courier Corporation:
|
|
Current
Guidance |
Net sales |
$11.7 to $11.9
billion |
Non-GAAP adjusted EBITDA margin |
10.3% to 10.5% |
Depreciation and amortization |
$455 to $465 million |
Interest expense |
$265 to $275 million |
Non-GAAP effective tax rate |
33% to 34% |
Diluted share count |
Approximately 202
million |
Capital expenditures |
$225 to $250 million |
Free cash flow(1) |
$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
7, 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 8850237#.
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
"2015 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, 2014, 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, 2015 and
December 31, 2014 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
March 31,
2015 |
December
31, 2014 |
Assets |
|
|
|
|
|
Cash and cash
equivalents |
$ 268.7 |
$ 527.9 |
Receivables, less
allowances for doubtful accounts |
1,981.6 |
2,033.8 |
Inventories |
560.2 |
586.2 |
Prepaid expenses and
other current assets |
233.2 |
225.4 |
Total Current
Assets |
3,043.7 |
3,373.3 |
Property, plant and
equipment - net |
1,455.5 |
1,515.5 |
Goodwill |
1,697.9 |
1,706.6 |
Other intangible assets -
net |
402.5 |
423.7 |
Deferred income
taxes |
227.2 |
234.1 |
Other
noncurrent assets |
378.5 |
386.1 |
Total
Assets |
$ 7,205.3 |
$ 7,639.3 |
|
|
|
Liabilities |
|
|
|
|
|
Accounts
payable |
$ 1,100.1 |
$ 1,296.6 |
Accrued
liabilities |
727.5 |
867.3 |
Short-term and current
portion of long-term debt |
203.3 |
203.4 |
Total Current
Liabilities |
2,030.9 |
2,367.3 |
Long-term debt |
3,431.0 |
3,429.1 |
Pension
liabilities |
589.4 |
616.1 |
Other postretirement
benefits plan liabilities |
204.7 |
210.8 |
Other
noncurrent liabilities |
390.7 |
395.6 |
Total
Liabilities |
6,646.7 |
7,018.9 |
|
|
|
Equity |
|
|
|
|
|
Common stock, $1.25 par
value |
323.7 |
323.7 |
Authorized
shares: 500.0 |
|
|
Issued
shares: 259.0 in 2015 and 2014 |
|
|
Additional paid-in
capital |
3,011.0 |
3,041.5 |
Accumulated
deficit |
(588.8) |
(559.1) |
Accumulated other
comprehensive loss |
(794.2) |
(773.6) |
Treasury stock, at cost,
58.4 shares in 2015 (2014 - 59.2 shares) |
(1,408.8) |
(1,438.7) |
Total RR Donnelley
shareholders' equity |
542.9 |
593.8 |
Noncontrolling interests |
15.7 |
26.6 |
Total
Equity |
558.6 |
620.4 |
Total
Liabilities and Equity |
$ 7,205.3 |
$ 7,639.3 |
|
|
|
|
|
|
R. R. Donnelley
& Sons Company |
Condensed Consolidated
Statements of Operations |
For the Three Months Ended
March 31, 2015 and 2014 |
(UNAUDITED) |
(in millions, except per
share data) |
|
|
|
For the Three Months Ended March
31, |
|
2 0 1 5
GAAP |
ADJUSTMENTS
TO NON-GAAP |
2 0 1 5
NON-GAAP |
2 0 1 4
GAAP |
ADJUSTMENTS
TO NON-GAAP |
2 0 1 4
NON-GAAP |
Total net
sales |
$ 2,746.1 |
$ -- |
$ 2,746.1 |
$ 2,673.8 |
$ -- |
$ 2,673.8 |
|
|
|
|
|
|
|
Total cost of sales (1) |
2,166.4 |
-- |
2,166.4 |
2,100.6 |
(12.1) |
2,088.5 |
|
|
|
|
|
|
|
Total gross profit
(1) |
579.7 |
-- |
579.7 |
573.2 |
12.1 |
585.3 |
|
|
|
|
|
|
|
Selling, general and administrative
expenses (SG&A) (1) |
330.9 |
(10.5) |
320.4 |
316.5 |
(7.7) |
308.8 |
Restructuring, impairment and other
charges - net |
19.8 |
(19.8) |
-- |
45.2 |
(45.2) |
-- |
Depreciation and
amortization |
113.4 |
-- |
113.4 |
115.5 |
-- |
115.5 |
Income from
operations |
115.6 |
30.3 |
145.9 |
96.0 |
65.0 |
161.0 |
|
|
|
|
|
|
|
Interest expense - net |
69.0 |
-- |
69.0 |
71.0 |
-- |
71.0 |
Investment and other expense
(income) - net |
28.3 |
(29.9) |
(1.6) |
4.6 |
(6.0) |
(1.4) |
Loss on debt extinguishment |
-- |
-- |
-- |
77.1 |
(77.1) |
-- |
|
|
|
|
|
|
|
Earnings (loss) before
income taxes |
18.3 |
60.2 |
78.5 |
(56.7) |
148.1 |
91.4 |
|
|
|
|
|
|
|
Income tax expense (benefit) |
6.4 |
20.2 |
26.6 |
(23.5) |
52.3 |
28.8 |
|
|
|
|
|
|
|
Net earnings
(loss) |
11.9 |
40.0 |
51.9 |
(33.2) |
95.8 |
62.6 |
|
|
|
|
|
|
|
Less: Income (loss) attributable to
noncontrolling interests |
(10.4) |
10.4 |
-- |
(4.2) |
7.1 |
2.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
attributable to RR Donnelley common
shareholders |
$ 22.3 |
$ 29.6 |
$ 51.9 |
$ (29.0) |
$ 88.7 |
$ 59.7 |
|
|
|
|
|
|
|
Net earnings (loss) per share
attributable to RR Donnelley common
shareholders: |
|
|
|
|
|
|
Basic net earnings (loss) per
share |
$ 0.11 |
|
$ 0.26 |
$ (0.15) |
|
$ 0.31 |
Diluted net earnings (loss) per
share |
$ 0.11 |
|
$ 0.26 |
$ (0.15) |
|
$ 0.31 |
Weighted average common shares
outstanding: |
|
|
|
|
|
|
Basic |
200.6 |
|
200.6 |
193.1 |
|
193.1 |
Diluted |
202.1 |
|
202.1 |
193.1 |
|
194.9 |
|
|
|
|
|
|
|
Additional information: |
|
|
|
|
|
|
Gross margin (1) |
21.1% |
|
21.1% |
21.4% |
|
21.9% |
SG&A as a % of net sales
(1) |
12.0% |
|
11.7% |
11.8% |
|
11.5% |
Operating margin |
4.2% |
|
5.3% |
3.6% |
|
6.0% |
Effective tax rate |
35.0% |
|
33.9% |
41.4% |
|
31.5% |
|
|
|
|
|
|
|
(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, 2015 and 2014 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended March 31, 2015 |
For the Three
Months Ended March 31, 2014 |
|
SG&A |
Income from
operations |
Operating margin |
Net earnings attributable
to common shareholders |
Net earnings attributable
to common shareholders per diluted share |
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 |
GAAP basis measures |
$ 330.9 |
$ 115.6 |
4.2% |
$ 22.3 |
$ 0.11 |
$ 573.2 |
$ 316.5 |
$ 96.0 |
3.6% |
$ (29.0) |
$ (0.15) |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges - net
(1) |
-- |
17.8 |
0.7% |
2.8 |
0.02 |
-- |
-- |
18.0 |
0.6% |
13.3 |
0.07 |
Impairment charges - net
(2) |
-- |
0.7 |
-- |
0.1 |
0.00 |
-- |
-- |
6.7 |
0.3% |
5.0 |
0.03 |
Other charges (3) |
-- |
1.3 |
-- |
0.2 |
0.00 |
-- |
-- |
20.5 |
0.7% |
15.2 |
0.08 |
Acquisition-related expenses
(4) |
(10.5) |
10.5 |
0.4% |
10.5 |
0.05 |
-- |
(7.7) |
7.7 |
0.3% |
6.2 |
0.03 |
Venezuela currency
remeasurement (5) |
-- |
-- |
-- |
16.0 |
0.08 |
-- |
-- |
-- |
-- |
7.8 |
0.04 |
Purchase accounting inventory
adjustment (6) |
-- |
-- |
-- |
-- |
-- |
12.1 |
-- |
12.1 |
0.5% |
7.6 |
0.04 |
Loss on disposal of business
(7) |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
0.4 |
0.00 |
Loss on debt extinguishment
(8) |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
49.8 |
0.26 |
Gain on bargain purchase
(9) |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
(16.6) |
(0.09) |
Total Non-GAAP
adjustments |
(10.5) |
30.3 |
1.1% |
29.6 |
0.15 |
12.1 |
(7.7) |
65.0 |
2.4% |
88.7 |
0.46 |
Non-GAAP measures |
$ 320.4 |
$ 145.9 |
5.3% |
$ 51.9 |
$ 0.26 |
$ 585.3 |
$ 308.8 |
$ 161.0 |
6.0% |
$ 59.7 |
$ 0.31 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Restructuring charges - net:
Operating results for the three months ended March 31, 2015 and
2014 were affected by the following pre-tax restructuring
charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
2014 |
|
|
|
|
|
|
|
|
Employee termination costs
(a) |
|
$ 14.2 |
$ 13.9 |
|
|
|
|
|
|
|
|
Other restructuring charges
(b) |
|
3.6 |
4.1 |
|
|
|
|
|
|
|
|
Total restructuring
charges - net |
|
$ 17.8 |
$ 18.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) For the three
months ended March 31, 2015, employee termination costs resulted
from one facility closure in the International segment, one
facility closure in the Variable Print segment and the
reorganization of certain operations. 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. |
(b) Includes lease
termination and other facility costs. |
|
|
|
|
|
|
|
|
|
|
|
|
(2) Impairment charges - net:
Operating results for the three months ended March 31, 2015 and
2014 were affected by other long-lived asset impairment
charges. |
|
|
|
|
|
|
|
|
|
|
|
|
(3) Other charges: Recognition
of charges related to the Company's multi-employer pension plan
withdrawal obligations. |
|
|
|
|
|
|
|
|
|
|
|
|
(4) Acquisition-related
expenses: Legal, accounting and other expenses associated with
completed or contemplated acquisitions. |
|
|
|
|
|
|
|
|
|
|
|
|
(5) Venezuela currency
remeasurement: Currency remeasurement in Venezuela and the related
impact of the devaluation resulted in a pre-tax loss of $29.9
million ($26.3 million after-tax) for the three months ended March
31, 2015, of which $10.3 million was included in loss attributable
to noncontrolling interests. For the three months ended March 31,
2014, 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. |
|
|
|
|
|
|
|
|
|
|
|
|
(6) Purchase accounting
inventory adjustment: Included pre-tax charges of $12.1 million
($7.6 million after-tax) for the three months ended March 31, 2014
as a result of an inventory purchase accounting adjustment. |
|
|
|
|
|
|
|
|
|
|
|
|
(7) Loss on disposal of
business: Included a pre-tax loss on the disposal 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. |
|
|
|
|
|
|
|
|
|
|
|
|
(8) Loss on debt extinguishment:
Included a pre-tax loss of $77.1 million ($49.8 million after-tax)
for the three months ended March 31, 2014, related to the premiums
paid, unamortized debt issuance costs and other expenses due 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. |
|
|
|
|
|
|
|
|
|
|
|
|
(9) Gain on bargain purchase:
Acquisition of Esselte resulted in a pre-tax gain of $16.6 million
($16.6 million after-tax) for the three months ended March 31,
2014. |
|
|
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|
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, 2015 and 2014 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
|
Publishing and |
|
Strategic |
|
|
|
|
Retail
Services |
Variable
Print |
Services |
International |
Corporate |
Consolidated |
|
|
|
|
|
|
|
For the Three Months Ended March 31,
2015 |
|
|
|
|
|
|
Net sales |
$ 573.8 |
$ 948.8 |
$ 667.3 |
$ 556.2 |
$ -- |
$ 2,746.1 |
Income (loss) from operations |
11.8 |
66.2 |
55.0 |
12.1 |
(29.5) |
115.6 |
Operating margin % |
2.1% |
7.0% |
8.2% |
2.2% |
nm |
4.2% |
|
|
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
|
|
Restructuring charges - net |
3.9 |
3.3 |
2.1 |
7.9 |
0.6 |
17.8 |
Impairment charges - net |
(0.4) |
1.3 |
-- |
(0.2) |
-- |
0.7 |
Other charges |
0.8 |
0.4 |
0.1 |
-- |
-- |
1.3 |
Acquisition-related expenses |
-- |
-- |
-- |
-- |
10.5 |
10.5 |
Total Non-GAAP
adjustments |
4.3 |
5.0 |
2.2 |
7.7 |
11.1 |
30.3 |
|
|
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 16.1 |
$ 71.2 |
$ 57.2 |
$ 19.8 |
$ (18.4) |
$ 145.9 |
Non-GAAP operating margin % |
2.8% |
7.5% |
8.6% |
3.6% |
nm |
5.3% |
|
|
|
|
|
|
|
Depreciation and amortization |
34.3 |
39.0 |
17.4 |
21.7 |
1.0 |
113.4 |
Non-GAAP Adjusted EBITDA |
$ 50.4 |
$ 110.2 |
$ 74.6 |
$ 41.5 |
$ (17.4) |
$ 259.3 |
Non-GAAP Adjusted EBITDA margin % |
8.8% |
11.6% |
11.2% |
7.5% |
nm |
9.4% |
|
|
|
|
|
|
|
Capital expenditures |
$ 12.5 |
$ 9.5 |
$ 11.9 |
$ 12.2 |
$ 2.4 |
$ 48.5 |
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
nm Not meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated
Statements of Cash Flows |
For the Three Months Ended
March 31, 2015 and 2014 |
(UNAUDITED) |
(in millions) |
|
|
|
2015 |
2014 |
|
|
|
|
|
|
Net earnings
(loss) |
$ 11.9 |
$ (33.2) |
Adjustment to reconcile
net earnings (loss) to net cash used in operating
activities |
144.8 |
198.8 |
Changes in operating
assets and liabilities |
(292.7) |
(231.8) |
Pension
and other postretirement benefits plan contributions |
(8.3) |
(14.2) |
Net cash used in operating
activities |
$ (144.3) |
$ (80.4) |
|
|
|
Capital
expenditures |
(48.5) |
(49.0) |
All other
cash provided by (used in) investing activities |
2.8 |
(378.4) |
Net cash used in investing
activities |
$ (45.7) |
$ (427.4) |
|
|
|
Net cash used in financing
activities |
$ (47.6) |
$ (196.8) |
|
|
|
Effect of exchange rate on cash and cash
equivalents |
(21.6) |
(15.4) |
|
|
|
Net decrease in cash and cash
equivalents |
$ (259.2) |
$ (720.0) |
|
|
|
Cash and cash equivalents at beginning of
period |
527.9 |
1,028.4 |
|
|
|
Cash and cash equivalents at
end of period |
$ 268.7 |
$ 308.4 |
|
|
|
|
|
|
Additional Information: |
|
|
2015 |
2014 |
For the Three Months Ended March
31: |
|
|
Net cash used in operating
activities |
$ (144.3) |
$ (80.4) |
Less: capital expenditures |
48.5 |
49.0 |
Free cash flow |
$ (192.8) |
$ (129.4) |
|
|
|
|
|
|
R.R. Donnelley
& Sons Company |
Reconciliation of
Reported to Pro Forma Net Sales |
For the Three Months
Ended March 31, 2015 and 2014 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
|
|
Reported net
sales |
Adjustments
(1) |
Pro forma net
sales |
For the Three Months Ended March 31,
2015 |
|
|
|
Publishing and Retail Services |
$ 573.8 |
$ -- |
$ 573.8 |
Variable Print |
948.8 |
-- |
948.8 |
Strategic Services |
667.3 |
-- |
667.3 |
International |
556.2 |
-- |
556.2 |
Consolidated |
$ 2,746.1 |
$ -- |
$ 2,746.1 |
|
|
|
|
For the Three Months Ended March 31,
2014 |
|
|
|
Publishing and Retail Services |
$ 642.7 |
$ -- |
$ 642.7 |
Variable Print |
792.1 |
149.4 |
941.5 |
Strategic Services |
619.7 |
1.1 |
620.8 |
International |
619.3 |
2.3 |
621.6 |
Consolidated |
$ 2,673.8 |
$ 152.8 |
$ 2,826.6 |
|
Net sales change |
|
|
|
Publishing and Retail Services |
(10.7%) |
|
(10.7%) |
Variable Print |
19.8% |
|
0.8% |
Strategic Services |
7.7% |
|
7.5% |
International |
(10.2%) |
|
(10.5%) |
Consolidated |
2.7% |
|
(2.8%) |
|
|
|
|
Supplementary non-GAAP
information: |
|
|
|
|
|
|
|
Year-over-year impact of changes in
foreign exchange (FX) rates |
|
|
|
Publishing and Retail Services |
|
|
---% |
Variable Print |
|
|
(0.3%) |
Strategic Services |
|
|
(0.6%) |
International |
|
|
(8.1%) |
Consolidated |
|
|
(2.0%) |
|
|
|
|
Approximate year-over-year impact of
changes in pass-through paper sales |
|
|
|
Publishing and Retail Services |
|
|
(2.9%) |
Variable Print |
|
|
0.3% |
Strategic Services |
|
|
---% |
International |
|
|
0.1% |
Consolidated |
|
|
(0.5%) |
|
|
|
|
Year-over-year impact of dispositions
(2) |
|
|
|
Publishing and Retail Services |
|
|
---% |
Variable Print |
|
|
---% |
Strategic Services |
|
|
(0.2%) |
International |
|
|
(1.7%) |
Consolidated |
|
|
(0.4%) |
|
|
|
|
|
Net organic sales change
(3) |
|
|
|
Publishing and Retail Services |
|
|
(7.8%) |
Variable Print |
|
|
0.8% |
Strategic Services |
|
|
8.3% |
International |
|
|
(0.8%) |
Consolidated |
|
|
0.1% |
|
The reported results of the
Company include the results of acquired businesses from the
acquisition date forward. The Company has provided this schedule to
reconcile reported net sales for the three months ended March 31,
2015 and 2014 to pro forma net sales as if the 2014 acquisitions
took place as of January 1, 2014 for the purposes of this
schedule. |
There were no acquisitions during
the three months ended March 31, 2015. |
For the three
months ended March 31, 2014, the adjustment for net sales of
acquired businesses reflects the net sales of Consolidated Graphics
(acquired January 31, 2014), MultiCorpora (acquired March 10,
2014), and Esselte (acquired March 25, 2014). |
|
|
|
|
(1) Adjusted for net sales
of acquired businesses: Consolidated Graphics, MultiCorpora and
Esselte |
(2) Adjusted for net sales
of disposed businesses: Journalism Online, RR Donnelley Argentina
S.A. and Office Tiger Global Real Estate Service Inc. |
(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, 2015 and 2014 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
For the Twelve |
|
|
Months Ended |
For the Three
Months Ended |
|
March 31,
2015 |
March 31,
2015 |
December 31,
2014 |
September 30,
2014 |
June 30,
2014 |
|
|
|
|
|
|
GAAP net earnings attributable to RR
Donnelley common shareholders |
$ 168.7 |
$ 22.3 |
$ 19.5 |
$ 62.2 |
$ 64.7 |
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
Income (loss) attributable to noncontrolling
interests |
(2.8) |
(10.4) |
4.1 |
2.6 |
0.9 |
Income tax expense (benefit) |
56.2 |
6.4 |
(25.4) |
35.7 |
39.5 |
Interest expense - net |
280.1 |
69.0 |
69.1 |
71.2 |
70.8 |
Investment and other expense - net |
33.3 |
28.3 |
0.7 |
2.0 |
2.3 |
Depreciation and amortization |
471.9 |
113.4 |
117.0 |
119.6 |
121.9 |
Restructuring, impairment and other charges -
net (1) |
108.3 |
19.8 |
45.8 |
19.9 |
22.8 |
Acquisition-related expenses (2) |
11.4 |
10.5 |
0.4 |
-- |
0.5 |
Pension settlement charges (3) |
95.7 |
-- |
95.7 |
-- |
-- |
Purchase accounting inventory adjustment
(4) |
2.2 |
-- |
-- |
-- |
2.2 |
Total Non-GAAP adjustments |
1,056.3 |
237.0 |
307.4 |
251.0 |
260.9 |
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA |
$ 1,225.0 |
$ 259.3 |
$ 326.9 |
$ 313.2 |
$ 325.6 |
|
|
|
|
|
|
Net sales |
$ 11,675.7 |
$ 2,746.1 |
$ 3,069.3 |
$ 2,957.8 |
$ 2,902.5 |
Non-GAAP adjusted EBITDA margin % |
10.5% |
9.4% |
10.7% |
10.6% |
11.2% |
|
|
|
|
|
|
|
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 (5) |
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 (1) |
156.0 |
45.2 |
52.9 |
38.1 |
19.8 |
Acquisition-related expenses (2) |
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% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) 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 goodwill, intangible assets
and other long-lived assets. |
|
|
|
|
|
|
(2) Acquisition-related expenses:
Legal, accounting and other expenses associated with completed or
contemplated acquisitions. |
|
|
|
|
|
|
(3) Pension settlement charges:
Pre-tax charges recognized for pension lump-sum settlement
payments. |
|
|
|
|
|
|
(4) Purchase accounting inventory
adjustments: Recognition of charges as a result of inventory
purchase accounting adjustments. |
|
|
|
|
|
|
(5) Loss on debt extinguishment:
Pre-tax losses were recognized related to the repurchases of senior
notes prior to maturity, as well as the termination of the previous
Credit Agreement (as defined below). |
|
|
|
|
|
|
|
|
|
|
|
|
R.R. Donnelley
& Sons Company |
Debt and Liquidity
Summary |
As of March 31, 2015 and
2014 and December 31, 2014 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
|
|
|
Total Liquidity (1) |
|
March 31, 2015 |
December 31, 2014 |
March 31, 2014 |
Cash (2) |
|
$ 268.7 |
$ 527.9 |
$ 308.4 |
Amount available under the Credit Agreement
(3) |
|
991.7 |
1,262.7 |
1,044.8 |
|
|
1,260.4 |
1,790.6 |
1,353.2 |
|
|
|
|
|
Usage |
|
|
|
|
Borrowings under credit agreement (3) |
|
-- |
-- |
10.0 |
Impact on availability related to outstanding
letters of credit |
|
-- |
-- |
-- |
|
|
|
|
|
Net Available Liquidity |
|
$ 1,260.4 |
$ 1,790.6 |
$ 1,343.2 |
|
|
|
|
|
|
|
|
|
|
|
Short-term and current portion of
long-term debt |
|
$ 203.3 |
$ 203.4 |
$ 278.3 |
Long-term debt |
|
3,431.0 |
3,429.1 |
3,627.2 |
Total debt |
|
$ 3,634.3 |
$ 3,632.5 |
$ 3,905.5 |
|
|
|
|
|
Non-GAAP adjusted EBITDA for the twelve
months ended March 31, 2015 and 2014 and the year ended December
31, 2014 |
|
$ 1,225.0 |
$ 1,242.2 |
$ 1,154.3 |
|
|
|
|
|
Non-GAAP Gross Leverage
(defined as total debt divided by non-GAAP adjusted
EBITDA) |
|
3.0x |
2.9x |
3.4x |
|
|
|
|
|
|
|
|
|
|
(1) Liquidity does not include
uncommitted credit facilities, located primarily outside of the
U.S. |
|
|
|
|
|
(2) Approximately 76% of cash as
of March 31, 2015, 88% of cash as of December 31, 2014 and 86% of
cash as of March 31, 2014 was located outside of the U.S. The
Company's foreign subsidiaries are expected to make approximately
$250.0 million in payments in 2015 and future years in satisfaction
of intercompany obligations. Certain other cash balances of 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 $1.5
billion senior secured revolving credit agreement (the "Credit
Agreement") which expires September 9, 2019. The Credit
Agreement is subject to a number of covenants, including a minimum
Interest Coverage Ratio and a maximum Leverage Ratio, as defined
and calculated pursuant to the Credit Agreement. There were no
borrowings under the Credit Agreement as of March 31, 2015. Based
on the Company's results of operations for the twelve months ended
March 31, 2015 and existing debt, the Company would have had the
ability to utilize approximately $1.0 billion of the $1.5 billion
Credit Agreement and not have been in violation of the terms of the
agreement. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015 |
December 31, 2014 |
March 31, 2014 |
|
Stated amount of the Credit Agreement |
$ 1,500.0 |
$ 1,500.0 |
$ 1,150.0 |
|
Less: availability reduction from
covenants |
508.3 |
237.3 |
105.2 |
|
Total amount available |
991.7 |
1,262.7 |
1,044.8 |
|
|
|
|
|
|
Less: borrowings under the Credit
Agreement |
-- |
-- |
10.0 |
|
Impact on availability related to outstanding
letters of credit |
-- |
-- |
-- |
|
Availability under the Credit Agreement |
$ 991.7 |
$ 1,262.7 |
$ 1,034.8 |
|
|
|
|
|
|
CONTACT: Investors:
Dave Gardella
SVP, Investor Relations
312.326.8155
david.a.gardella@rrd.com
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