(Source: Business Wire)
Highlights:
Third-quarter 2009 GAAP net earnings from continuing operations
attributable to common shareholders of $13.1 million or $0.06 per
diluted share vs. $168.2 million or $0.80 per diluted share in the
third quarter of 2008
Third-quarter 2009 non-GAAP net earnings attributable to common
shareholders of $111.9 million or $0.54 per diluted share compared to
$183.2 million or $0.87 per diluted share in the third quarter of 2008
Year-to-date operating cash flow of $1.1 billion, an increase of
$406.8 million from the first nine months of 2008
R.R. Donnelley & Sons Company (NASDAQ: RRD) today reported
third-quarter net earnings from continuing operations attributable to
common shareholders of $13.1 million or $0.06 per diluted share on net
sales of $2.5 billion compared to net earnings from continuing
operations attributable to common shareholders of $168.2 million or
$0.80 per diluted share on net sales of $2.9 billion in the third
quarter of 2008. The third-quarter net earnings from continuing
operations attributable to common shareholders included pre-tax charges
for restructuring ($129.7 million) and impairment ($2.0 million)
totaling $131.7 million and acquisition expenses of $0.1 million in 2009
and for restructuring ($22.9 million) and impairment ($0.5 million)
totaling $23.4 million in 2008. Substantially all of the restructuring
and impairment charges in the third quarter of 2009 were associated with
the previously reported termination of a significant long-term customer
contract in the business process outsourcing reporting unit within the
International segment. In the third quarter of 2008, substantially all
of the restructuring and impairment charges were related to the
reorganization of certain operations and the exiting of certain business
activities.
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 $111.9
million or $0.54 per diluted share in the third quarter of 2009 compared
to $183.2 million or $0.87 per diluted share in the third quarter of
2008. Third-quarter non-GAAP net earnings attributable to common
shareholders exclude restructuring and impairment charges for both
years, as well as losses related to debt extinguishment and
acquisition-related expenses in 2009. For non-GAAP comparison purposes,
the effective tax rate decreased to 31.3% in the third quarter of 2009
from 32.3% in the third quarter of 2008, primarily due to a change in
the mix of earnings across tax jurisdictions. A reconciliation of GAAP
net earnings attributable to common shareholders to non-GAAP net
earnings attributable to common shareholders is presented in the
attached tables.
"Although demand in most of the end-markets we serve remains challenged
by economic conditions, we saw continued stabilization and achieved
modest sequential revenue growth over the second quarter, in line with
our expectations," said Thomas J. Quinlan III, RR Donnelley's President
and Chief Executive Officer. "We expect a sequential revenue growth rate
in the low single digits in the fourth quarter."
Quinlan added, "Our strong cash flow has enabled us to reduce our debt
by nearly $1 billion over the past twelve months. As the credit markets
improved, we enhanced our already strong maturity profile through our
recent issuance of debt maturing in 2016 and successful tenders for debt
maturities in 2010 and 2012."
Business Review (Continuing Operations)
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 $2.5 billion, down 14.0% from the third
quarter of 2008, including a 1.8% negative impact from changes in
foreign exchange rates. The remaining decrease was caused by volume
declines and continued price pressures across most products and
services. Gross margin decreased to 25.2% in the third quarter of 2009
from 27.0% in the third quarter of 2008 due to volume and price
declines, higher variable compensation expense and lower pricing on
by-products recoveries, offset in part by the benefits of our continued
productivity efforts, a lower LIFO inventory provision and fees received
for the transition of a customer contract. SG&A expense as a percentage
of net sales in the third quarter of 2009 increased to 10.2% from 9.8%
in the third quarter of 2008 due to higher variable compensation expense
that more than offset the benefits of productivity efforts. Operating
margin, which was negatively impacted by charges for restructuring and
impairment of $131.7 million in the third quarter of 2009 and $23.4
million in the third quarter of 2008, decreased to 3.8% in the third
quarter of 2009 from 10.7% in the third quarter of 2008.
Excluding charges for restructuring and impairment and acquisition
expenses, our non-GAAP operating margin in the third quarter of 2009
decreased to 9.1% from 11.5% in the third quarter of 2008, as the
benefits from our productivity efforts and fees received for the
transition of a customer contract, unrelated to the previously reported
termination of a significant long-term customer contract, were more than
offset by volume and price declines and a $77.3 million increase in
variable compensation expense. This increase in variable compensation, a
$39.9 million expense in the third quarter of 2009, compared to an
expense reversal of $37.4 million in the third quarter of 2008, accounts
for approximately 300 basis points of the decline in our non-GAAP
operating margin.
Segments
Net sales for the U.S. Print and Related Services segment in the quarter
decreased 14.9% to $1.8 billion from the third quarter of 2008 due to
volume and price declines across all products and services. The
segment's operating margin, which was negatively impacted by charges for
restructuring and impairment of $3.6 million in the third quarter of
2009 and $16.7 million in the third quarter of 2008, decreased to 9.0%
in the third quarter of 2009 from 13.4% in the third quarter of 2008.
Excluding restructuring and impairment charges, the segment's non-GAAP
operating margin decreased to 9.2% in the third quarter of 2009 from
14.2% in the third quarter of 2008, as the impact of volume and price
declines, higher variable compensation expense and lower by-products
recoveries was only partially offset by the benefits of continued
productivity efforts.
Net sales for the International segment in the quarter decreased 11.5%
to $638.3 million from the third quarter of 2008, including a 7.0%
negative impact from changes in foreign exchange rates. The remaining
decrease was caused by volume and price declines across most product
lines, partially offset by fees received for the transition of a
customer contract. The segment's operating margin, which was negatively
impacted by charges for restructuring and impairment of $127.3 million
in the third quarter of 2009 and $5.0 million in the third quarter of
2008, decreased to a loss of 11.3% in the third quarter of 2009 from
8.4% in the third quarter of 2008. Excluding restructuring and
impairment charges, the segment's non-GAAP operating margin decreased to
8.6% in the third quarter of 2009 from 9.1% in the third quarter of 2008
due to the impact of price and volume declines, as well as higher
variable compensation expense, partially offset by the benefits of
continued productivity efforts, fees related to the transition of a
customer contract and lower intangible amortization expense.
Unallocated Corporate operating income increased to $0.8 million in the
third quarter of 2009 as compared to operating expense of $42.4 million
in the third quarter of 2008. Excluding restructuring charges of $0.8
million and acquisition expenses of $0.1 million in the third quarter of
2009 and restructuring charges of $1.7 million in the second quarter of
2008, Corporate operating income increased $42.4 million to $1.7 million
in the third quarter of 2009. Approximately 70% of the increase in
operating income was due to favorability in certain unallocated
corporate expenses, primarily related to a lower LIFO inventory
provision and lower employee benefits-related costs, partially offset by
higher variable compensation expense. The remainder of the increase in
operating income was due to lower costs across most of the corporate
functional areas.
Conference Call
RR Donnelley will host a conference call and simultaneous webcast to
discuss its third-quarter results today, Wednesday, November 4, 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 706.634.1139. 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 706.645.9291, passcode
34550178.
About RR Donnelley
RR Donnelley (NASDAQ: RRD) is a global provider of integrated
communications. Founded more than 145 years ago, the company works
collaboratively with more than 60,000 customers worldwide to develop
custom communications solutions that reduce costs, enhance ROI and
ensure compliance. Drawing on a range of proprietary and commercially
available digital and conventional technologies deployed across four
continents, the company employs a suite of leading Internet-based
capabilities and other resources to provide premedia, printing,
logistics and business process outsourcing 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 September 30, 2009 and December 31, 2008
(UNAUDITED)
(In millions, except per share data)
September 30, 2009 December 31, 2008
Assets
Current Assets
Cash and cash equivalents $ 414.9 $ 324.0
Restricted cash equivalents - 7.9
Receivables, less allowance for doubtful accounts 1,772.4 1,903.2
Income taxes receivable 51.6 189.4
Inventories 563.1 695.7
Prepaid expenses and other current assets 104.7 104.6
Deferred income taxes 59.7 56.2
Total Current Assets 2,966.4 3,281.0
Property, plant and equipment - net 2,332.7 2,564.0
Goodwill 2,457.9 2,425.9
Other intangible assets - net 773.0 831.1
Other noncurrent assets 390.8 392.3
Total Assets $ 8,920.8 $ 9,494.3
Liabilities
Current Liabilities
Accounts payable $ 863.4 $ 767.6
Accrued liabilities 843.6 795.7
Short-term and current portion of long-term debt 431.9 923.5
Total Current Liabilities 2,138.9 2,486.8
Long-term debt 2,982.4 3,203.3
Pension liability 461.7 491.5
Postretirement benefit obligations 298.3 291.9
Deferred income taxes 242.8 260.9
Other noncurrent liabilities 468.3 418.0
Total Liabilities 6,592.4 7,152.4
Equity
Shareholders' equity
Common stock, $1.25 par value 303.7 303.7
Authorized shares: 500.0
Issued shares: 243.0 in 2009 and 2008
Additional paid-in capital 2,905.1 2,885.7
Retained earnings 795.9 903.8
Accumulated other comprehensive loss (506.8 ) (580.7 )
Treasury stock, at cost, 37.3 shares in 2009 (2008 - 37.2 shares) (1,195.7 ) (1,194.0 )
Total shareholders' equity 2,302.2 2,318.5
Noncontrolling Interests 26.2 23.4
Total Equity 2,328.4 2,341.9
Total Liabilities and Equity $ 8,920.8 $ 9,494.3
-------------------------------------------------------------------------------
R. R. Donnelley & Sons Company
Condensed Consolidated Statements of Operations
Three and Nine Months Ended September 30, 2009 and 2008
(In millions, except per share data)
(UNAUDITED)
Three Months Ended September 30, Nine Months Ended September 30,
2 0 0 9 GAAP ADJUSTMENTS TO NON-GAAP 2 0 0 9 NON-GAAP 2 0 0 8 GAAP ADJUSTMENTS TO NON-GAAP 2 0 0 8 NON-GAAP 2 0 0 9 GAAP ADJUSTMENTS TO NON-GAAP 2 0 0 9 NON-GAAP 2 0 0 8 GAAP ADJUSTMENTS TO NON-GAAP 2 0 0 8 NON-GAAP
Net sales $ 2,463.1 $ - $ 2,463.1 $ 2,864.6 $ - $ 2,864.6 $ 7,274.3 $ - $ 7,274.3 $ 8,785.3 $ - $ 8,785.3
Cost of sales (exclusive of depreciation and amortization shown below) 1,841.4 - 1,841.4 2,090.3 - 2,090.3 5,480.5 - 5,480.5 6,452.0 - 6,452.0
Selling, general and administrative expenses (exclusive of depreciation and amortization shown below) 251.6 (0.1 ) 251.5 279.8 - 279.8 807.2 (1.5 ) 805.7 947.9 - 947.9
Restructuring and impairment charges 131.7 (131.7 ) - 23.4 (23.4 ) - 234.1 (234.1 ) - 46.5 (46.5 ) -
Depreciation and amortization 145.0 - 145.0 164.7 - 164.7 436.7 - 436.7 486.5 - 486.5
Total operating expenses 2,369.7 (131.8 ) 2,237.9 2,558.2 (23.4 ) 2,534.8 6,958.5 (235.6 ) 6,722.9 7,932.9 (46.5 ) 7,886.4
Income from continuing operations 93.4 131.8 225.2 306.4 23.4 329.8 315.8 235.6 551.4 852.4 46.5 898.9
Interest expense - net 59.6 - 59.6 56.2 - 56.2 178.7 - 178.7 171.0 - 171.0
Investment and other income (expense) - net (13.6 ) 13.0 (0.6 ) (1.1 ) - (1.1 ) (14.9 ) 13.0 (1.9 ) 7.0 - 7.0
Net earnings from continuing operations before income taxes 20.2 144.8 165.0 249.1 23.4 272.5 122.2 248.6 370.8 688.4 46.5 734.9
Income tax expense 5.6 46.0 51.6 79.7 8.4 88.1 65.0 63.4 128.4 189.5 53.7 243.2
Net earnings from continuing operations 14.6 98.8 113.4 169.4 15.0 184.4 57.2 185.2 242.4 498.9 (7.2 ) 491.7
Income from discontinued operations - net of tax - - - - - - - - - 1.7 (1.7 ) -
Net earnings 14.6 98.8 113.4 169.4 15.0 184.4 57.2 185.2 242.4 500.6 (8.9 ) 491.7
Less: Income attributable to noncontrolling interests (1.5 ) - (1.5 ) (1.2 ) - (1.2 ) (5.0 ) - (5.0 ) (3.6 ) - (3.6 )
Net earnings attributable to common shareholders $ 13.1 $ 98.8 $ 111.9 $ 168.2 $ 15.0 $ 183.2 $ 52.2 $ 185.2 $ 237.4 $ 497.0 $ (8.9 ) $ 488.1
Earnings per share attributable to common shareholders
Basic:
Net earnings from continuing operations $ 0.06 $ 0.55 $ 0.80 $ 0.88 $ 0.25 $ 1.16 $ 2.33 $ 2.30
Income from discontinued operations, net of tax - - - - - - 0.01 -
Net earnings attributable to common shareholders $ 0.06 $ 0.55 $ 0.80 $ 0.88 $ 0.25 $ 1.16 $ 2.34 $ 2.30
Diluted:
Net earnings from continuing operations $ 0.06 $ 0.54 $ 0.80 $ 0.87 $ 0.25 $ 1.14 $ 2.33 $ 2.30
Income from discontinued operations, net of tax - - - - - - 0.01 -
Net earnings attributable to common shareholders $ 0.06 $ 0.54 $ 0.80 $ 0.87 $ 0.25 $ 1.14 $ 2.34 $ 2.30
Weighted average common shares outstanding:
Basic 205.3 205.3 209.1 209.1 205.2 205.2 212.0 212.0
Diluted 208.5 208.5 209.7 209.7 207.7 207.7 212.5 212.5
Amounts attributable to common shareholders
Net earnings from continuing operations $ 13.1 $ 98.8 $ 111.9 $ 168.2 $ 15.0 $ 183.2 $ 52.2 $ 185.2 $ 237.4 $ 495.3 $ (7.2 ) $ 488.1
Income from discontinued operations, net of tax - - - - - - - - - 1.7 (1.7 ) -
Net earnings attributable to common shareholders $ 13.1 $ 98.8 $ 111.9 $ 168.2 $ 15.0 $ 183.2 $ 52.2 $ 185.2 $ 237.4 $ 497.0 $ (8.9 ) $ 488.1
The Company believes that certain non-GAAP measures, when presented in conjunction with comparable GAAP measures, are useful because that information is an appropriate measure for evaluating the Company's operating performance.Internally, the Company uses this non-GAAP information as an indicator of business performance, and evaluates management's effectiveness with specific reference to this indicator. These measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
-------------------------------------------------------------------------------
R.R. Donnelley & Sons Company
Reconciliation of GAAP to Non-GAAP Measures
IN MILLIONS, EXCEPT PER SHARE AND MARGIN DATA
(UNAUDITED)
Three Months Ended September 30, 2009 Three Months Ended September 30, 2008
Income from continuing operations Operating margin Net earnings attributable to common shareholders Net earnings attributable to common shareholders per diluted share Income from continuing operations Operating margin Net earnings attributable to common shareholders Net earnings attributable to common shareholders per diluted share
GAAP basis measures $ 93.4 3.8% $ 13.1 $ 0.06 $ 306.4 10.7% $ 168.2 $ 0.80
Non-GAAP adjustments:
Restructuring and impairment charges (1) 131.7 5.3% 90.8 0.44 23.4 0.8% 15.0 0.07
Acquisition-related expenses (2) 0.1 0.0% - - - - - -
Losses related to debt extinguishment (3) - - 8.0 0.04 - - - -
Total Non-GAAP adjustments 131.8 5.3% 98.8 0.48 23.4 0.8% 15.0 0.07
Non-GAAP measures $ 225.2 9.1% $ 111.9 $ 0.54 $ 329.8 11.5% $ 183.2 $ 0.87
(1) Restructuring and impairment charges (pre-tax): Operating results for the three monA service of YellowBrix, Inc.
