R.R. Donnelley & Sons Company (Nasdaq:RRD)
today reported financial results for the second quarter of 2014:
Highlights:
- Second-quarter net sales of $2.9 billion grew 12.9% from the
second quarter of 2013; organic net sales grew 0.8% from the second
quarter of 2013
- Second-quarter GAAP net earnings attributable to common
shareholders of $64.7 million, or $0.32 per diluted share, compared
to GAAP net earnings attributable to common shareholders in the
second quarter of 2013 of $65.4 million, or $0.36 per diluted
share
- Second-quarter non-GAAP net earnings attributable to common
shareholders of $84.4 million, or $0.42 per diluted share, compared
to non-GAAP net earnings attributable to common shareholders in the
second quarter of 2013 of $82.5 million, or $0.45 per diluted
share
- Non-GAAP adjusted EBITDA in the quarter of $325.6 million
increased by $21.5 million, or 7.1%, from the second quarter of
2013
- Company reiterates full-year 2014 guidance for net sales,
non-GAAP adjusted EBITDA margin and free cash flow
"The positive momentum we experienced late in the first quarter
carried through into the second quarter, where we returned to
positive year-over-year organic revenue growth, generated higher
EBITDA and reduced our total debt in the quarter by approximately
$70 million," said Thomas J. Quinlan III, RR Donnelley's President
and Chief Executive Officer. "As we begin the second half of the
year, our year-to-date performance, including the on-boarding and
integration of our acquisitions that closed in the first quarter,
keeps us on track to deliver our full-year guidance. Our
expectation for free cash flow, in the range of $400 million to
$500 million, allows us to continue to migrate toward our targeted
gross leverage range of 2.25x to 2.75x on a long-term sustainable
basis."
Net Sales
Net sales in the quarter were $2.9 billion, up $330.9 million,
or 12.9%, from the second quarter of 2013, largely due to the
acquisitions of Consolidated Graphics and the North American
operations of Esselte. After adjusting for the positive impact of
acquisitions and pass-through paper sales, and the negative impact
of dispositions, organic sales increased 0.8% from the second
quarter of 2013, as volume increases in the Strategic Services and
Variable Print segments were partially offset by price erosion in
each segment and volume declines in the Publishing and Retail
Services segment.
GAAP Earnings
Second-quarter 2014 net earnings attributable to common
shareholders was $64.7 million, or $0.32 per diluted share,
compared to net earnings attributable to common shareholders of
$65.4 million, or $0.36 per diluted share, in the second quarter of
2013. The second-quarter 2014 diluted share count increased by 18.2
million shares from the second quarter of 2013, primarily related
to shares issued in connection with the acquisitions of
Consolidated Graphics and the North American operations of Esselte.
The second-quarter net earnings attributable to common shareholders
included pre-tax charges of $28.3 million and $25.4 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
Second-quarter 2014 non-GAAP adjusted EBITDA was $325.6 million,
or 11.2% of net sales, compared to non-GAAP adjusted EBITDA of
$304.1 million, or 11.8% of net sales, in the second quarter of
2013. The increase in non-GAAP adjusted EBITDA was due to the
acquisitions of Consolidated Graphics and the North American
operations of Esselte, as well as higher volume. These increases
were partially offset by price pressure in each segment and wage
and other cost inflation, all of which also negatively impacted
margin.
Non-GAAP net earnings attributable to common shareholders
totaled $84.4 million, or $0.42 per diluted share, in the second
quarter of 2014 compared to $82.5 million, or $0.45 per diluted
share, in the second quarter of 2013. The second-quarter 2014
diluted share count increased by 18.2 million shares from the
second quarter of 2013, primarily related to shares issued in
connection with the acquisitions of Consolidated Graphics and the
North American operations of Esselte. Second-quarter non-GAAP net
earnings attributable to common shareholders excluded pre-tax
charges and other adjustments of $28.3 million and $25.4 million in
2014 and 2013, respectively. A reconciliation of net earnings
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:
|
|
Current
Guidance |
Previous
Guidance |
Net sales |
$11.5 to $11.8 billion |
$11.5 to $11.8 billion |
Non-GAAP adjusted EBITDA margin |
10.5% to 11.0% |
10.5% to 11.0% |
Depreciation and amortization |
$480 to $490 million |
$485 to $495 million |
Interest expense |
$275 to $285 million |
$275 to $285 million |
Non-GAAP effective tax rate |
34% to 36% |
33% to 35% |
Diluted share count |
Approximately 200 million |
Approximately 200 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 second-quarter results today, Wednesday,
July 30, 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
"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 June 30, 2014 and
December 31, 2013 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
June 30,
2014 |
December 31,
2013 |
Assets |
|
|
|
|
|
Cash and cash equivalents |
$ 288.9 |
$ 1,028.4 |
Receivables, less allowances for doubtful
accounts |
2,083.3 |
1,832.3 |
Inventories |
586.4 |
501.2 |
Prepaid expenses and other current
assets |
244.3 |
199.7 |
Total Current Assets |
3,202.9 |
3,561.6 |
Property, plant and equipment -
net |
1,650.0 |
1,430.1 |
Goodwill |
1,736.6 |
1,436.3 |
Other intangible assets - net |
481.4 |
315.9 |
Deferred income taxes |
86.7 |
118.8 |
Other noncurrent
assets |
389.3 |
375.5 |
Total
Assets |
$ 7,546.9 |
$ 7,238.2 |
|
|
|
Liabilities |
|
|
|
|
|
Accounts payable |
$ 1,124.5 |
$ 1,143.0 |
Accrued liabilities |
817.5 |
814.8 |
Short-term and current portion of
long-term debt |
406.4 |
270.9 |
Total Current Liabilities |
2,348.4 |
2,228.7 |
Long-term debt |
3,428.9 |
3,587.0 |
Pension liabilities |
198.8 |
245.2 |
Other postretirement benefits plan
liabilities |
179.0 |
174.1 |
Other noncurrent
liabilities |
477.0 |
349.5 |
Total
Liabilities |
6,632.1 |
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 |
3,032.8 |
2,802.4 |
Accumulated deficit |
(536.9) |
(473.4) |
Accumulated other comprehensive
loss |
(485.8) |
(488.1) |
Treasury stock, at cost, 59.2 shares in
2014 (2013 - 61.2 shares) |
(1,439.4) |
(1,512.8) |
Total RR Donnelley shareholders'
equity |
894.4 |
631.8 |
Noncontrolling
interests |
20.4 |
21.9 |
Total
Equity |
914.8 |
653.7 |
Total Liabilities and
Equity |
$ 7,546.9 |
$ 7,238.2 |
|
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated
Statements of Operations |
For the Three and Six Months
Ended June 30, 2014 and 2013 |
(UNAUDITED) |
(in millions, except per
share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Three Months Ended June 30, |
For the Six
Months Ended June 30, |
|
2014 GAAP |
ADJUSTMENTS TO
NON-GAAP |
2014 NON-GAAP |
2013 GAAP |
ADJUSTMENTS TO
NON-GAAP |
2013 NON-GAAP |
2014 GAAP |
ADJUSTMENTS TO
NON-GAAP |
2014 NON-GAAP |
2013 GAAP |
ADJUSTMENTS TO
NON-GAAP |
2013 NON-GAAP |
Net sales |
$ 2,902.5 |
$ -- |
$ 2,902.5 |
$ 2,571.6 |
$ -- |
$ 2,571.6 |
$ 5,576.3 |
$ -- |
$ 5,576.3 |
$ 5,110.1 |
$ -- |
$ 5,110.1 |
Cost of sales (1) |
2,240.3 |
(2.2) |
2,238.1 |
1,973.4 |
-- |
1,973.4 |
4,340.9 |
(14.3) |
4,326.6 |
3,953.6 |
-- |
3,953.6 |
Gross profit
(1) |
662.2 |
2.2 |
664.4 |
598.2 |
-- |
598.2 |
1,235.4 |
14.3 |
1,249.7 |
1,156.5 |
-- |
1,156.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
(SG&A) (1) |
339.3 |
(0.5) |
338.8 |
294.2 |
(0.1) |
294.1 |
655.8 |
(8.2) |
647.6 |
576.4 |
(1.1) |
575.3 |
Restructuring, impairment and other charges -
net |
22.8 |
(22.8) |
-- |
19.8 |
(19.8) |
-- |
68.0 |
(68.0) |
-- |
42.5 |
(42.5) |
-- |
Depreciation and
amortization |
121.9 |
-- |
121.9 |
111.0 |
-- |
111.0 |
237.4 |
-- |
237.4 |
224.6 |
-- |
224.6 |
Income from
operations |
178.2 |
25.5 |
203.7 |
173.2 |
19.9 |
193.1 |
274.2 |
90.5 |
364.7 |
313.0 |
43.6 |
356.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense - net |
70.8 |
-- |
70.8 |
65.5 |
-- |
65.5 |
141.8 |
-- |
141.8 |
128.3 |
-- |
128.3 |
Investment and other expense (income) -
net |
2.3 |
(2.8) |
(0.5) |
6.0 |
(5.5) |
0.5 |
6.9 |
(8.8) |
(1.9) |
9.5 |
(8.7) |
0.8 |
Loss on debt extinguishment |
-- |
-- |
-- |
-- |
-- |
-- |
77.1 |
(77.1) |
-- |
35.6 |
(35.6) |
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income
taxes |
105.1 |
28.3 |
133.4 |
101.7 |
25.4 |
127.1 |
48.4 |
176.4 |
224.8 |
139.6 |
87.9 |
227.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
39.5 |
9.3 |
48.8 |
35.2 |
8.3 |
43.5 |
16.0 |
61.6 |
77.6 |
47.8 |
28.8 |
76.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings |
65.6 |
19.0 |
84.6 |
66.5 |
17.1 |
83.6 |
32.4 |
114.8 |
147.2 |
91.8 |
59.1 |
150.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Income (loss) attributable to
noncontrolling interests |
0.9 |
(0.7) |
0.2 |
1.1 |
-- |
1.1 |
(3.3) |
6.4 |
3.1 |
(0.7) |
1.0 |
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to RR
Donnelley common shareholders |
$ 64.7 |
$ 19.7 |
$ 84.4 |
$ 65.4 |
$ 17.1 |
$ 82.5 |
$ 35.7 |
$ 108.4 |
$ 144.1 |
$ 92.5 |
$ 58.1 |
$ 150.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share attributable
to RR Donnelley common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per share |
$ 0.32 |
|
$ 0.42 |
$ 0.36 |
|
$ 0.45 |
$ 0.18 |
|
$ 0.73 |
$ 0.51 |
|
$ 0.83 |
Diluted net earnings per share |
$ 0.32 |
|
$ 0.42 |
$ 0.36 |
|
$ 0.45 |
$ 0.18 |
|
$ 0.73 |
$ 0.51 |
|
$ 0.82 |
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
200.2 |
|
200.2 |
182.0 |
|
182.0 |
196.7 |
|
196.7 |
181.6 |
|
181.6 |
Diluted |
201.4 |
|
201.4 |
183.2 |
|
183.2 |
198.2 |
|
198.2 |
183.1 |
|
183.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
information: |
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin (1) |
22.8% |
|
22.9% |
23.3% |
|
23.3% |
22.2% |
|
22.4% |
22.6% |
|
22.6% |
SG&A as a % of net sales (1) |
11.7% |
|
11.7% |
11.4% |
|
11.4% |
11.8% |
|
11.6% |
11.3% |
|
11.3% |
Operating margin |
6.1% |
|
7.0% |
6.7% |
|
7.5% |
4.9% |
|
6.5% |
6.1% |
|
7.0% |
Effective tax rate |
37.6% |
|
36.6% |
34.6% |
|
34.2% |
33.1% |
|
34.5% |
34.2% |
|
33.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
June 30, 2014 and 2013 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended June 30, 2014 |
For the Three Months
Ended June 30, 2013 |
|
Gross Profit |
SG&A |
Income from operations |
Operating margin |
Net earnings attributable to common
shareholders |
Net earnings 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 |
$ 662.2 |
$ 339.3 |
$ 178.2 |
6.1% |
$ 64.7 |
$ 0.32 |
$ 294.2 |
$ 173.2 |
6.7% |
$ 65.4 |
$ 0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges - net (1) |
-- |
-- |
15.9 |
0.6% |
9.3 |
0.05 |
-- |
16.1 |
0.6% |
10.9 |
0.06 |
Impairment charges - net (2) |
-- |
-- |
3.1 |
0.1% |
1.5 |
0.01 |
-- |
3.7 |
0.2% |
2.5 |
0.01 |
Other charges (3) |
-- |
-- |
3.8 |
0.1% |
1.0 |
0.00 |
-- |
-- |
-- |
-- |
-- |
Acquisition-related expenses (4) |
-- |
(0.5) |
0.5 |
0.0% |
0.5 |
0.00 |
(0.1) |
0.1 |
0.0% |
0.1 |
0.00 |
Purchase accounting inventory adjustment
(5) |
2.2 |
-- |
2.2 |
0.1% |
1.5 |
0.01 |
-- |
-- |
-- |
-- |
-- |
Loss on investments (6) |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
3.6 |
0.02 |
Venezuela currency remeasurement (7) |
-- |
-- |
-- |
-- |
(0.2) |
-- |
-- |
-- |
-- |
-- |
-- |
Gain - net on bargain purchase (8) |
-- |
-- |
-- |
-- |
6.1 |
0.03 |
-- |
-- |
-- |
-- |
-- |
Total Non-GAAP adjustments |
2.2 |
(0.5) |
25.5 |
0.9% |
19.7 |
0.10 |
(0.1) |
19.9 |
0.8% |
17.1 |
0.09 |
Non-GAAP measures |
$ 664.4 |
$ 338.8 |
$ 203.7 |
7.0% |
$ 84.4 |
$ 0.42 |
$ 294.1 |
$ 193.1 |
7.5% |
$ 82.5 |
$ 0.45 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Restructuring charges -
net: Operating results for the three months ended June 30, 2014 and
2013 were affected by the following pre-tax restructuring
charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
|
|
|
|
Employee termination costs (a) |
|
|
$ 9.1 |
$ 7.3 |
|
|
|
|
|
|
|
Other restructuring charges (b) |
|
|
6.8 |
8.8 |
|
|
|
|
|
|
|
Total restructuring charges -
net |
|
|
$ 15.9 |
$ 16.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) For the three months
ended June 30, 2014, employee termination costs resulted from the
integration of Consolidated Graphics, including the closure of
three Consolidated Graphics facilities and the reorganization of
certain operations. For the three months ended June 30, 2013,
employee termination costs resulted from 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. |
|
|
|
|
|
|
|
|
|
|
|
|
(2) Impairment charges -
net: Operating results for the three months ended June 30, 2014 and
2013 were affected by other long-lived asset impairment
charges. |
|
|
|
|
|
|
|
|
|
|
|
|
(3) Other charges:
Recognition of estimated charges related to the Company's decision
to partially withdraw from certain multi-employer pension
plans. |
|
|
|
|
|
|
|
|
|
|
|
|
(4) Acquisition-related
expenses: Legal, accounting and other expenses associated with
completed or contemplated acquisitions. |
|
|
|
|
|
|
|
|
|
|
|
|
(5) Purchase accounting
inventory adjustment: Recognition of a pre-tax charge of $2.2
million ($1.5 million after-tax) as a result of an inventory
purchase accounting adjustment for the three months ended June 30,
2014. |
|
|
|
|
|
|
|
|
|
|
|
|
(6) Loss on investments:
Pre-tax impairment losses on equity investments of $5.5 million
($3.6 million after-tax) for the three months ended June 30,
2013. |
|
|
|
|
|
|
|
|
|
|
|
|
(7) Venezuela currency
remeasurement: Currency remeasurement in Venezuela, net of foreign
exchange gains, resulted in a net pre-tax gain of $3.2 million
($0.9 million after-tax), of which $0.7 million was included in
income attributable to noncontrolling interests for the three
months ended June 30, 2014. |
|
|
|
|
|
|
|
|
|
|
|
|
(8) Gain on bargain
purchase: Reduction of $6.1 million ($6.1 million after-tax) to the
previously recorded pre-tax gain on the acquisition of
substantially all of the North American operations of Esselte
Corporation ("Esselte"), as a result of finalizing the purchase
price allocation. |
|
|
R.R. Donnelley &
Sons Company |
Reconciliation of GAAP to
Non-GAAP Measures |
For the Six Months Ended June
30, 2014 and 2013 |
(UNAUDITED) |
(in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
June 30, 2014 |
For the Six Months Ended
June 30, 2013 |
|
Gross profit |
SG&A |
Income from operations |
Operating margin |
Net earnings attributable to common
shareholders |
Net earnings 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 |
$ 1,235.4 |
$ 655.8 |
$ 274.2 |
4.9% |
$ 35.7 |
$ 0.18 |
$ 576.4 |
$ 313.0 |
6.1% |
$ 92.5 |
$ 0.51 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges - net (1) |
-- |
-- |
33.9 |
0.6% |
22.6 |
0.12 |
-- |
34.7 |
0.7% |
22.9 |
0.12 |
Impairment charges - net (2) |
-- |
-- |
9.8 |
0.2% |
6.5 |
0.03 |
-- |
7.8 |
0.1% |
5.2 |
0.03 |
Other charges (3) |
-- |
-- |
24.3 |
0.4% |
16.2 |
0.08 |
-- |
-- |
-- |
-- |
-- |
Acquisition-related expenses (4) |
-- |
(8.2) |
8.2 |
0.1% |
6.7 |
0.03 |
(1.1) |
1.1 |
0.1% |
1.1 |
0.00 |
Purchase accounting inventory adjustments
(5) |
14.3 |
-- |
14.3 |
0.3% |
9.1 |
0.05 |
-- |
-- |
-- |
-- |
-- |
Loss on disposal of business (6) |
-- |
-- |
-- |
-- |
0.4 |
0.00 |
-- |
-- |
-- |
-- |
-- |
Loss on investments (7) |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
3.6 |
0.02 |
Venezuela currency remeasurement (8) |
-- |
-- |
-- |
-- |
7.6 |
0.04 |
-- |
-- |
-- |
2.2 |
0.01 |
Loss on debt extinguishment (9) |
-- |
-- |
-- |
-- |
49.8 |
0.25 |
-- |
-- |
-- |
23.1 |
0.13 |
Gain on bargain purchase (10) |
-- |
-- |
-- |
-- |
(10.5) |
(0.05) |
-- |
-- |
-- |
-- |
-- |
Total Non-GAAP adjustments |
14.3 |
(8.2) |
90.5 |
1.6% |
108.4 |
0.55 |
(1.1) |
43.6 |
0.9% |
58.1 |
0.31 |
Non-GAAP measures |
$ 1,249.7 |
$ 647.6 |
$ 364.7 |
6.5% |
$ 144.1 |
$ 0.73 |
$ 575.3 |
$ 356.6 |
7.0% |
$ 150.6 |
$ 0.82 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Restructuring
charges - net: Operating results for the six months ended June 30,
2014 and 2013 were affected by the following pre-tax restructuring
charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
|
|
|
|
Employee termination costs (a) |
|
|
$ 23.0 |
$ 16.1 |
|
|
|
|
|
|
|
Other restructuring charges (b) |
|
|
10.9 |
18.6 |
|
|
|
|
|
|
|
Total restructuring charges -
net |
|
|
$ 33.9 |
$ 34.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) For the six months ended
June 30, 2014, employee termination costs resulted from the
integration of Consolidated Graphics, including the closure of six
facilities and one additional facility closure within the Variable
Print segment, one facility closure in Publishing and Retail
Services segment and the reorganization of certain operations. For
the six months ended June 30, 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. |
|
|
|
|
|
|
|
|
|
|
|
|
(2) Impairment charges
- net: Operating results for the six months ended June 30, 2014 and
2013 were affected by other long-lived asset impairment
charges. |
|
|
|
|
|
|
|
|
|
|
|
|
(3) Other charges:
Recognition of estimated charges related to the Company's decision
to partially withdraw from certain multi-employer pension
plans. |
|
|
|
|
|
|
|
|
|
|
|
|
(4)
Acquisition-related expenses: Legal, accounting and other expenses
associated with completed or contemplated acquisitions. |
|
|
|
|
|
|
|
|
|
|
|
|
(5) Purchase
accounting inventory adjustments: Recognition of a pre-tax charge
of $14.3 million ($9.1 million after-tax) as a result of inventory
purchase accounting adjustments for the six months ended June 30,
2014. |
|
|
|
|
|
|
|
|
|
|
|
|
(6) Loss on disposal
of business: Recognition of the sale of Office Tiger Global Real
Estate Services Inc. in the International segment of $0.7 million
($0.4 million after-tax) for the six months ended June 30,
2014. |
|
|
|
|
|
|
|
|
|
|
|
|
(7) Loss on
investments: Pre-tax impairment losses on equity investments of
$5.5 million ($3.6 million after-tax) for the six months ended June
30, 2013. |
|
|
|
|
|
|
|
|
|
|
|
|
(8) Venezuela currency
remeasurement: Currency remeasurement in Venezuela resulted in a
pre-tax loss, net of foreign exchange gains, of $18.6 million
($14.0 million after-tax), of which $6.4 million was included in
loss attributable to noncontrolling interests for the six months
ended June 30, 2014. During the six months ended June 30,
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. |
|
|
|
|
|
|
|
|
|
|
|
|
(9) Loss on debt
extinguishment: Pre-tax loss of $77.1 million ($49.8 million
after-tax) was recognized for the six months ended June 30, 2014
related to the repurchase of $211.1 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 six months ended June 30, 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. |
|
|
|
|
|
|
|
|
|
|
|
|
(10) Gain on bargain
purchase: Acquisition of Esselte resulted in a pre-tax bargain
purchase gain of $10.5 million ($10.5 million after-tax) for the
six months ended June 30, 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 June
30, 2014 and 2013 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
|
Publishing and Retail
Services |
Variable Print |
Strategic Services |
International |
Corporate |
Consolidated |
|
|
|
|
|
|
|
For the Three Months Ended June 30,
2014 |
|
|
|
|
|
|
Net sales |
$ 625.9 |
$ 957.4 |
$ 687.5 |
$ 631.7 |
$ -- |
$ 2,902.5 |
Income (loss) from operations |
27.8 |
61.7 |
81.1 |
24.7 |
(17.1) |
178.2 |
Operating margin % |
4.4% |
6.4% |
11.8% |
3.9% |
nm |
6.1% |
|
|
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
|
|
Restructuring charges - net |
1.9 |
5.5 |
2.4 |
3.0 |
3.1 |
15.9 |
Impairment charges - net |
1.4 |
0.7 |
-- |
1.0 |
-- |
3.1 |
Other charges |
-- |
-- |
3.8 |
-- |
-- |
3.8 |
Acquisition-related expenses |
-- |
0.1 |
-- |
0.2 |
0.2 |
0.5 |
Purchase accounting inventory
adjustments |
-- |
2.2 |
-- |
-- |
-- |
2.2 |
Total Non-GAAP adjustments |
3.3 |
8.5 |
6.2 |
4.2 |
3.3 |
25.5 |
|
|
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 31.1 |
$ 70.2 |
$ 87.3 |
$ 28.9 |
$ (13.8) |
$ 203.7 |
Non-GAAP operating margin % |
5.0% |
7.3% |
12.7% |
4.6% |
nm |
7.0% |
|
|
|
|
|
|
|
Depreciation and amortization |
37.2 |
41.5 |
16.3 |
24.9 |
2.0 |
121.9 |
Non-GAAP Adjusted EBITDA |
$ 68.3 |
$ 111.7 |
$ 103.6 |
$ 53.8 |
$ (11.8) |
$ 325.6 |
Non-GAAP Adjusted EBITDA margin % |
10.9% |
11.7% |
15.1% |
8.5% |
nm |
11.2% |
|
|
|
|
|
|
|
Capital expenditures |
$ 10.3 |
$ 18.7 |
$ 8.0 |
$ 18.4 |
$ 1.9 |
$ 57.3 |
|
|
|
|
|
|
|
For the Three Months Ended June 30,
2013 |
|
|
|
|
|
|
Net sales |
$ 649.3 |
$ 626.2 |
$ 660.7 |
$ 635.4 |
$ -- |
$ 2,571.6 |
Income (loss) from operations |
37.7 |
38.5 |
81.1 |
29.3 |
(13.4) |
173.2 |
Operating margin % |
5.8% |
6.1% |
12.3% |
4.6% |
nm |
6.7% |
|
|
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
|
|
Restructuring charges - net |
1.2 |
6.6 |
2.2 |
4.7 |
1.4 |
16.1 |
Impairment charges - net |
1.3 |
0.1 |
1.4 |
0.9 |
-- |
3.7 |
Acquisition-related expenses |
-- |
-- |
-- |
-- |
0.1 |
0.1 |
Total Non-GAAP adjustments |
2.5 |
6.7 |
3.6 |
5.6 |
1.5 |
19.9 |
|
|
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 40.2 |
$ 45.2 |
$ 84.7 |
$ 34.9 |
$ (11.9) |
$ 193.1 |
Non-GAAP operating margin % |
6.2% |
7.2% |
12.8% |
5.5% |
nm |
7.5% |
|
|
|
|
|
|
|
Depreciation and amortization |
42.3 |
26.4 |
14.9 |
26.0 |
1.4 |
111.0 |
Non-GAAP Adjusted EBITDA |
$ 82.5 |
$ 71.6 |
$ 99.6 |
$ 60.9 |
$ (10.5) |
$ 304.1 |
Non-GAAP Adjusted EBITDA margin % |
12.7% |
11.4% |
15.1% |
9.6% |
nm |
11.8% |
|
|
|
|
|
|
|
Capital expenditures |
$ 11.7 |
$ 13.9 |
$ 12.6 |
$ 7.2 |
$ 1.0 |
$ 46.4 |
|
|
|
|
|
|
|
nm Not meaningful |
|
|
|
|
|
|
|
|
R. R. Donnelley
& Sons Company |
Segment GAAP to Non-GAAP
Operating Income and Non-GAAP Adjusted EBITDA and Margin
Reconciliation |
For the Six Months Ended
June 30, 2014 and 2013 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
|
Publishing and Retail
Services |
Variable Print |
Strategic Services |
International |
Corporate |
Consolidated |
|
|
|
|
|
|
|
For the Six Months Ended June 30,
2014 |
|
|
|
|
|
|
Net sales |
$ 1,268.6 |
$ 1,749.5 |
$ 1,307.2 |
$ 1,251.0 |
$ -- |
$ 5,576.3 |
Income (loss) from operations |
37.7 |
89.4 |
136.5 |
54.9 |
(44.3) |
274.2 |
Operating margin % |
3.0% |
5.1% |
10.4% |
4.4% |
nm |
4.9% |
|
|
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
|
|
Restructuring charges - net |
4.2 |
17.5 |
3.9 |
4.6 |
3.7 |
33.9 |
Impairment charges - net |
3.6 |
5.2 |
-- |
1.0 |
-- |
9.8 |
Other charges |
16.3 |
4.1 |
3.9 |
-- |
-- |
24.3 |
Acquisition-related expenses |
-- |
0.1 |
-- |
0.4 |
7.7 |
8.2 |
Purchase accounting inventory
adjustments |
-- |
14.3 |
-- |
-- |
-- |
14.3 |
Total Non-GAAP adjustments |
24.1 |
41.2 |
7.8 |
6.0 |
11.4 |
90.5 |
|
|
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 61.8 |
$ 130.6 |
$ 144.3 |
$ 60.9 |
$ (32.9) |
$ 364.7 |
Non-GAAP operating margin % |
4.9% |
7.5% |
11.0% |
4.9% |
nm |
6.5% |
|
|
|
|
|
|
|
Depreciation and amortization |
74.9 |
76.6 |
32.4 |
49.8 |
3.7 |
237.4 |
Non-GAAP Adjusted EBITDA |
$ 136.7 |
$ 207.2 |
$ 176.7 |
$ 110.7 |
$ (29.2) |
$ 602.1 |
Non-GAAP Adjusted EBITDA margin % |
10.8% |
11.8% |
13.5% |
8.8% |
nm |
10.8% |
|
|
|
|
|
|
|
Capital expenditures |
$ 22.2 |
$ 29.1 |
$ 17.9 |
$ 30.4 |
$ 6.7 |
$ 106.3 |
|
|
|
|
|
|
|
For the Six Months Ended June 30,
2013 |
|
|
|
|
|
|
Net sales |
$ 1,313.7 |
$ 1,274.6 |
$ 1,252.7 |
$ 1,269.1 |
$ -- |
$ 5,110.1 |
Income (loss) from operations |
59.5 |
95.9 |
139.1 |
57.2 |
(38.7) |
313.0 |
Operating margin % |
4.5% |
7.5% |
11.1% |
4.5% |
nm |
6.1% |
|
|
|
|
|
|
|
Non-GAAP Adjustments |
|
|
|
|
|
|
Restructuring charges - net |
11.3 |
9.0 |
2.9 |
6.9 |
4.6 |
34.7 |
Impairment charges - net |
4.5 |
0.4 |
1.8 |
0.7 |
0.4 |
7.8 |
Acquisition-related expenses |
-- |
-- |
-- |
-- |
1.1 |
1.1 |
Total Non-GAAP adjustments |
15.8 |
9.4 |
4.7 |
7.6 |
6.1 |
43.6 |
|
|
|
|
|
|
|
Non-GAAP income (loss) from
operations |
$ 75.3 |
$ 105.3 |
$ 143.8 |
$ 64.8 |
$ (32.6) |
$ 356.6 |
Non-GAAP operating margin % |
5.7% |
8.3% |
11.5% |
5.1% |
nm |
7.0% |
|
|
|
|
|
|
|
Depreciation and amortization |
85.7 |
54.3 |
29.7 |
51.9 |
3.0 |
224.6 |
Non-GAAP Adjusted EBITDA |
$ 161.0 |
$ 159.6 |
$ 173.5 |
$ 116.7 |
$ (29.6) |
$ 581.2 |
Non-GAAP Adjusted EBITDA margin % |
12.3% |
12.5% |
13.9% |
9.2% |
nm |
11.4% |
|
|
|
|
|
|
|
Capital expenditures |
$ 24.2 |
$ 24.8 |
$ 13.2 |
$ 18.2 |
$ 3.9 |
$ 84.3 |
|
|
|
|
|
|
|
nm Not
meaningful |
|
|
|
|
|
|
|
|
R. R. Donnelley &
Sons Company |
Condensed Consolidated
Statements of Cash Flows |
For the Six Months Ended June
30, 2014 and 2013 |
(UNAUDITED) |
(in millions) |
|
|
|
2014 |
2013 |
|
|
|
|
|
|
Net earnings |
$ 32.4 |
$ 91.8 |
Adjustment to reconcile net earnings to
net cash provided by operating activities |
334.2 |
288.1 |
Changes in operating assets and
liabilities |
(269.4) |
(307.3) |
Pension and other
postretirement benefits plan contributions |
(27.5) |
(14.7) |
Net cash provided by operating
activities |
$ 69.7 |
$ 57.9 |
|
|
|
Capital expenditures |
(106.3) |
(84.3) |
All other cash provided
by (used in) investing activities |
(365.4) |
5.7 |
Net cash used in investing
activities |
$ (471.7) |
$ (78.6) |
|
|
|
Net cash used in financing
activities |
$ (321.8) |
$ (44.9) |
|
|
|
Effect of exchange rate on cash and cash
equivalents |
(15.7) |
(10.7) |
|
|
|
Net decrease in cash and cash
equivalents |
$ (739.5) |
$ (76.3) |
|
|
|
Cash and cash equivalents at beginning of
period |
1,028.4 |
430.7 |
|
|
|
Cash and cash equivalents at
end of period |
$ 288.9 |
$ 354.4 |
|
|
|
|
|
|
Additional
Information: |
|
|
2014 |
2013 |
For the Six Months Ended June 30: |
|
|
Net cash provided by operating
activities |
$ 69.7 |
$ 57.9 |
Less: capital expenditures |
106.3 |
84.3 |
Free cash flow |
$ (36.6) |
$ (26.4) |
|
|
|
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) |
|
|
|
For the Three Months Ended June
30: |
|
|
Net cash provided by operating
activities |
$ 150.1 |
$ 153.7 |
Less: capital expenditures |
57.3 |
46.4 |
Free cash flow |
$ 92.8 |
$ 107.3 |
|
|
R.R. Donnelley
& Sons Company |
Reconciliation of
Reported to Pro Forma Net Sales |
For the Three Months
Ended June 30, 2014 and 2013 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
|
|
Reported net sales |
Adjustments (1) |
Pro forma net sales |
For the Three Months Ended June 30,
2014 |
|
|
|
Publishing and Retail Services |
$ 625.9 |
$ -- |
$ 625.9 |
Variable Print |
957.4 |
-- |
957.4 |
Strategic Services |
687.5 |
-- |
687.5 |
International |
631.7 |
-- |
631.7 |
Consolidated |
$ 2,902.5 |
$ -- |
$ 2,902.5 |
|
|
|
|
For the Three Months Ended June 30,
2013 |
|
|
|
Publishing and Retail Services |
$ 649.3 |
$ -- |
$ 649.3 |
Variable Print |
626.2 |
303.2 |
929.4 |
Strategic Services |
660.7 |
1.1 |
661.8 |
International |
635.4 |
11.9 |
647.3 |
Consolidated |
$ 2,571.6 |
$ 316.2 |
$ 2,887.8 |
|
Net sales change |
|
|
|
Publishing and Retail Services |
(3.6%) |
|
(3.6%) |
Variable Print |
52.9% |
|
3.0% |
Strategic Services |
4.1% |
|
3.9% |
International |
(0.6%) |
|
(2.4%) |
Consolidated |
12.9% |
|
0.5% |
|
|
|
|
Supplementary non-GAAP
information: |
|
|
|
|
|
|
|
Year-over-year impact of changes in
foreign exchange (FX) rates |
|
|
|
Publishing and Retail Services |
|
|
0.0% |
Variable Print |
|
|
(0.2%) |
Strategic Services |
|
|
0.1% |
International |
|
|
(0.1%) |
Consolidated |
|
|
(0.1%) |
|
|
|
|
Approximate year-over-year impact of
changes in pass-through paper sales |
|
|
|
Publishing and Retail Services |
|
|
(0.6%) |
Variable Print |
|
|
0.0% |
Strategic Services |
|
|
0.0% |
International |
|
|
0.9% |
Consolidated |
|
|
0.1% |
|
|
|
|
Year-over-year impact of dispositions
(2) |
|
|
|
Publishing and Retail Services |
|
|
0.0% |
Variable Print |
|
|
0.0% |
Strategic Services |
|
|
0.0% |
International |
|
|
(1.2%) |
Consolidated |
|
|
(0.3%) |
|
Net organic sales change
(3) |
|
|
|
Publishing and Retail Services |
|
|
(3.0%) |
Variable Print |
|
|
3.2% |
Strategic Services |
|
|
3.8% |
International |
|
|
(2.0%) |
Consolidated |
|
|
0.8% |
|
|
The reported results of the
Company include the results of Consolidated Graphics, MultiCorpora
and Esselte from the acquisition date forward. |
|
The Company has provided this
schedule to reconcile reported net sales for the three months ended
June 30, 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. |
|
|
|
|
There were no acquisitions during
the three months ended June 30, 2014. |
|
|
|
|
For the three months ended
June 30, 2013, 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: Variable Print included a portion of net sales
of Consolidated Graphics and Esselte, Strategic Services included
net sales of MultiCorpora and International included a portion of
the net sales of Consolidated Graphics |
(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
Reported to Pro Forma Net Sales |
For the Six Months Ended
June 30, 2014 and 2013 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
Reported net sales |
Adjustments (1) |
Pro forma net sales |
For the Six Months Ended June 30,
2014 |
|
|
|
Publishing and Retail Services |
$ 1,268.6 |
$ -- |
$ 1,268.6 |
Variable Print |
1,749.5 |
149.4 |
1,898.9 |
Strategic Services |
1,307.2 |
1.1 |
1,308.3 |
International |
1,251.0 |
2.3 |
1,253.3 |
Consolidated |
$ 5,576.3 |
$ 152.8 |
$ 5,729.1 |
|
|
|
|
For the Six Months Ended June 30,
2013 |
|
|
|
Publishing and Retail Services |
$ 1,313.7 |
$ -- |
$ 1,313.7 |
Variable Print |
1,274.6 |
621.9 |
1,896.5 |
Strategic Services |
1,252.7 |
2.5 |
1,255.2 |
International |
1,269.1 |
11.9 |
1,281.0 |
Consolidated |
$ 5,110.1 |
$ 636.3 |
$ 5,746.4 |
|
Net sales change |
|
|
|
Publishing and Retail Services |
(3.4%) |
|
(3.4%) |
Variable Print |
37.3% |
|
0.1% |
Strategic Services |
4.4% |
|
4.2% |
International |
(1.4%) |
|
(2.2%) |
Consolidated |
9.1% |
|
(0.3%) |
|
|
|
|
Supplementary non-GAAP
information: |
|
|
|
|
|
|
|
Year-over-year impact of changes in
foreign exchange (FX) rates |
|
|
|
Publishing and Retail Services |
|
|
0.0% |
Variable Print |
|
|
(0.1%) |
Strategic Services |
|
|
0.0% |
International |
|
|
(0.6%) |
Consolidated |
|
|
(0.2%) |
|
|
|
|
Approximate year-over-year impact of
changes in pass-through paper sales |
|
|
|
Publishing and Retail Services |
|
|
(1.0%) |
Variable Print |
|
|
0.0% |
Strategic Services |
|
|
0.0% |
International |
|
|
0.4% |
Consolidated |
|
|
(0.1%) |
|
|
|
|
Year-over-year impact of dispositions
(2) |
|
|
|
Publishing and Retail Services |
|
|
0.0% |
Variable Print |
|
|
0.0% |
Strategic Services |
|
|
0.0% |
International |
|
|
(1.4%) |
Consolidated |
|
|
(0.3%) |
|
Net organic sales change
(3) |
|
|
|
Publishing and Retail Services |
|
|
(2.4%) |
Variable Print |
|
|
0.2% |
Strategic Services |
|
|
4.2% |
International |
|
|
(0.6%) |
Consolidated |
|
|
0.3% |
|
|
|
|
|
The reported results of the
Company include the results of Consolidated Graphics, MultiCorpora
and Esselte from the acquisition date forward. |
|
|
|
|
The Company has provided this
schedule to reconcile reported net sales for the six months ended
June 30, 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 six months ended
June 30, 2014 and 2013, 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: Variable Print included a portion of the net
sales of Consolidated Graphics and Esselte, Strategic Services
included net sales of MultiCorpora and International included a
portion of the net sales of Consolidated Graphics |
(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 Six Months
Ended June 30, 2014 and 2013 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended |
For the Three Months
Ended |
|
June 30, 2014 |
June 30, 2014 |
March 31, 2014 |
December 31,
2013 |
September 30,
2013 |
|
|
|
|
|
|
GAAP net earnings (loss) attributable
to RR Donnelley common shareholders |
$ 154.4 |
$ 64.7 |
$ (29.0) |
$ 104.0 |
$ 14.7 |
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
Income (loss) attributable to noncontrolling
interests |
4.4 |
0.9 |
(4.2) |
4.4 |
3.3 |
Income tax expense (benefit) |
(41.0) |
39.5 |
(23.5) |
(62.0) |
5.0 |
Interest expense - net |
274.9 |
70.8 |
71.0 |
67.5 |
65.6 |
Investment and other expense (income) -
net |
24.8 |
2.3 |
4.6 |
18.2 |
(0.3) |
Loss on debt extinguishment (1) |
123.4 |
-- |
77.1 |
-- |
46.3 |
Depreciation and amortization |
448.6 |
121.9 |
115.5 |
104.9 |
106.3 |
Restructuring, impairment and other charges -
net (2) |
159.0 |
22.8 |
45.2 |
52.9 |
38.1 |
Acquisition-related expenses (3) |
13.0 |
0.5 |
7.7 |
3.7 |
1.1 |
Purchase accounting inventory adjustments
(4) |
14.3 |
2.2 |
12.1 |
-- |
-- |
Total Non-GAAP adjustments |
1,021.4 |
260.9 |
305.5 |
189.6 |
265.4 |
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA |
$ 1,175.8 |
$ 325.6 |
$ 276.5 |
$ 293.6 |
$ 280.1 |
|
|
|
|
|
|
Net sales |
$ 10,946.5 |
$ 2,902.5 |
$ 2,673.8 |
$ 2,755.3 |
$ 2,614.9 |
Non-GAAP adjusted EBITDA margin % |
10.7% |
11.2% |
10.3% |
10.7% |
10.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended |
For the Three Months
Ended |
|
June 30, 2013 |
June 30, 2013 |
March 31, 2013 |
December 31,
2012 |
September 30,
2012 |
|
|
|
|
|
|
GAAP net earnings (loss) attributable
to RR Donnelley common shareholders |
$ (685.1) |
$ 65.4 |
$ 27.1 |
$ (849.0) |
$ 71.4 |
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
Income (loss) attributable to noncontrolling
interests |
(3.6) |
1.1 |
(1.8) |
(2.7) |
(0.2) |
Income tax expense (benefit) |
43.0 |
35.2 |
12.6 |
(57.0) |
52.2 |
Interest expense - net |
255.8 |
65.5 |
62.8 |
63.8 |
63.7 |
Investment and other expense (income) -
net |
8.2 |
6.0 |
3.5 |
(0.9) |
(0.4) |
Loss on debt extinguishment (1) |
39.6 |
-- |
35.6 |
4.0 |
-- |
Depreciation and amortization |
460.3 |
111.0 |
113.6 |
116.7 |
119.0 |
Restructuring, impairment and other charges -
net (2) |
1,077.0 |
19.8 |
22.7 |
1,020.6 |
13.9 |
Acquisition-related expenses (3) |
2.8 |
0.1 |
1.0 |
0.4 |
1.3 |
Gain on pension curtailment (5) |
(3.7) |
-- |
-- |
(3.7) |
-- |
Total Non-GAAP adjustments |
1,879.4 |
238.7 |
250.0 |
1,141.2 |
249.5 |
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA |
$ 1,194.3 |
$ 304.1 |
$ 277.1 |
$ 292.2 |
$ 320.9 |
|
|
|
|
|
|
Net sales |
$ 10,278.5 |
$ 2,571.6 |
$ 2,538.5 |
$ 2,659.6 |
$ 2,508.8 |
Non-GAAP adjusted EBITDA margin % |
11.6% |
11.8% |
10.9% |
11.0% |
12.8% |
|
|
|
|
|
|
|
|
|
|
|
|
(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 June 30, 2014, 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
adjustments: Recognition of charges as a result of inventory
purchase accounting adjustments. |
|
|
|
|
|
|
(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 June 30, 2014 and
2013 and December 31, 2013 |
(UNAUDITED) |
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liquidity (1) |
June 30, 2014 |
December 31, 2013 |
June 30, 2013 |
Cash (2) |
$ 288.9 |
$ 1,028.4 |
$ 354.4 |
Committed credit agreement (3) |
1,150.0 |
387.5 |
987.7 |
|
1,438.9 |
1,415.9 |
1,342.1 |
Usage |
|
|
|
Borrowings under credit agreement (3) |
193.0 |
-- |
-- |
Impact on availability related to outstanding
letters of credit |
58.0 |
-- |
-- |
|
|
|
|
Net Available Liquidity |
$ 1,187.9 |
$ 1,415.9 |
$ 1,342.1 |
|
|
|
|
|
|
|
|
|
Short-term and current portion of long-term
debt |
$ 406.4 |
$ 270.9 |
$ 277.6 |
Long-term debt |
3,428.9 |
3,587.0 |
3,237.7 |
Total debt |
$ 3,835.3 |
$ 3,857.9 |
$ 3,515.3 |
|
|
|
|
Non-GAAP adjusted EBITDA for the twelve
months ended June 30, 2014 and 2013 and the year ended December 31,
2013 |
$ 1,175.8 |
$ 1,154.9 |
$ 1,194.3 |
|
|
|
|
Non-GAAP Gross Leverage
(defined as total debt divided by non-GAAP adjusted
EBITDA) |
3.3x |
3.3x |
2.9x |
|
|
|
|
|
(1) Liquidity does not
include uncommitted credit facilities, located primarily outside of
the U.S. |
|
|
|
|
(2) Approximately 82% of cash
as of June 30, 2014, 39% of cash as of December 31, 2013 and 70% of
cash as of June 30, 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 June 30, 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 $193 million in
borrowings under the Credit Agreement as of June 30, 2014. Based on
the Company's results of operations for the twelve months ended
June 30, 2014 and existing debt, the Company would have had the
ability to utilize $0.9 billion of the $1.15 billion Credit
Agreement and not have been in violation of the terms of the
agreement. |
|
|
|
|
|
|
|
|
|
June 30, 2014 |
December 31, 2013 |
June 30, 2013 |
Stated amount of the credit
agreement |
$ 1,150.0 |
$ 1,150.0 |
$ 1,150.0 |
Less: availability reduction from
covenants |
-- |
762.5 |
162.3 |
Total amount available |
1,150.0 |
387.5 |
987.7 |
|
|
|
|
Less: borrowings under the credit
agreement |
193.0 |
-- |
-- |
Impact on availability related to
outstanding letters of credit |
58.0 |
-- |
-- |
Availability under the credit
agreement |
$ 899.0 |
$ 387.5 |
$ 987.7 |
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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