R.R. Donnelley & Sons Company (NYSE: RRD) (“RRD”)
today reported financial results for the first quarter 2017. Unless
otherwise noted, today’s results represent RRD following the
October 1, 2016 spinoffs of LSC Communications, Inc. (“LSC”) and
Donnelley Financial Solutions, Inc. (“Donnelley Financial”) which
are presented as discontinued operations for periods prior to
October 1, 2016. Further, all references to the number of shares
and per share amounts have been retroactively adjusted to give
effect to the one-for-three reverse stock split which took place
October 1, 2016 immediately following the spinoffs.
Key financial highlights include:
Q1 2017
Q1 2016 % Change Net sales $1.68 billion
$1.65 billion 1.9% Income from operations $47.4
million $57.6 million (17.7%) Net earnings (loss) attributable to
common stockholders - continuing operations $(50.1) million $3.6
million nm Diluted earnings (loss) per share $(0.71) $0.05 nm
Income from operations - Non-GAAP(1) $58.6 million $51.2 million
14.5% Net earnings (loss) attributable to common stockholders -
continuing operations - Non-GAAP(1) $10.0 million $(1.1) million nm
Diluted earnings (loss) per share - Non-GAAP(1) $0.14 $(0.02) nm
(1)
Non-GAAP income from operations, net
earnings (loss) attributable to common stockholders - continuing
operations and diluted earnings per share exclude restructuring,
impairment, spin-off related expenses, acquisition related
expenses, gain on disposal of businesses, net loss on investments
and other charges, as applicable. See the accompanying schedule for
a complete listing of items excluded and a reconciliation of GAAP
income from operations, net earnings (loss) attributable to common
stockholders - continuing operations and diluted earnings (loss)
per share to non-GAAP income from operations, net earnings (loss)
attributable to common stockholders - continuing operations and
diluted earnings (loss) per share.
“Our first quarter financial performance represented a solid
start to the year as we grew both our net sales and non-GAAP income
from operations for the third consecutive quarter,” said Dan
Knotts, RRD’s President and Chief Executive Officer. “In addition,
we exceeded our expectations for operating cash flow in the quarter
from achieving planned improvements in working capital initiatives
earlier than expected, and we reduced our debt outstanding during
the quarter. With the spinoffs behind us, we are focused on growing
our business, and I am pleased to report that we remain on track to
deliver against our previous net sales and income from operations
guidance for 2017, and are raising our full year non-GAAP diluted
earnings per share and operating cash flow guidance due to lower
expected taxes.”
First Quarter 2017 Highlights
Net sales in the quarter were $1.68 billion, up $30.7 million or
1.9% from the first quarter of 2016. This increase was primarily
due to $38.7 million in net sales previously recognized by
reporting units that are now part of LSC and Donnelley Financial
and $13.8 million from the 2016 acquisition of Precision Dialogue,
partially offset by a $9.3 million unfavorable impact from changes
in foreign exchange rates and a $2.3 million reduction related to
dispositions completed in 2016. Excluding the impact of these
items, consolidated net organic sales declined 0.7%. Net volume
growth in the Strategic Services and International segments and
favorable changes in fuel surcharges were more than offset by lower
postage pass through sales in the Strategic Services segment,
modest price erosion across all segments and net volume declines in
the Variable Print segment.
Gross profit in the first quarter of 2017 was $327.8 million or
19.6% of net sales versus $332.5 million or 20.2% of net sales in
the prior year quarter. Continued cost reductions were more than
offset by modest price pressure in most reporting units and
unfavorable mix.
Selling, general and administrative expenses (“SG&A”) of
$222.7 million, or 13.3% of net sales, in the first quarter of 2017
decreased from $229.3 million, or 13.9% of net sales, in the prior
year. The current period included benefits from cost reduction
initiatives while the prior year period included higher legal
expenses and allocated costs from the pre-spin entity. Partially
offsetting these items were higher variable compensation expense in
all segments and lower pension and other postretirement benefits
income in the current year.
Income from operations of $47.4 million in the first quarter
decreased by $10.2 million from $57.6 million reported in the 2016
quarter. A $12.3 million gain from the sale of two businesses in
the first quarter of 2016 and higher restructuring charges in 2017
contributed to the decrease. Non-GAAP income from operations of
$58.6 million, or 3.5% of net sales, increased $7.4 million from
$51.2 million, or 3.1% of net sales, reported in the prior year
period as lower SG&A and depreciation and amortization expense
more than offset lower gross profit.
Net loss attributable to common stockholders from continuing
operations was $50.1 million in the first quarter compared to net
earnings of $3.6 million in the first quarter of 2016. The 2017
results included a loss of $51.6 million related to the sale of the
Company’s equity interest in LSC. In addition, the 2017 effective
tax rate was significantly lower than 2016 primarily due to a
valuation allowance recorded in conjunction with the disposition of
the LSC stock. Non-GAAP net earnings attributable to common
stockholders from continuing operations was $10.0 million, an
increase of $11.1 million compared to a net loss of $1.1 million in
the first quarter of 2016, primarily driven by higher income from
operations and a lower effective tax rate primarily due to a
favorable tax rate change obtained in Asia.
First quarter 2017 diluted loss per share attributable to common
stockholders from continuing operations was $0.71 compared to
diluted earnings per share of $0.05 from the first quarter of 2016.
Non-GAAP diluted earnings per share attributable to common
stockholders from continuing operations increased $0.16 to $0.14 in
2017 from a diluted loss per share of $0.02 in 2016.
Key financial highlights by segment include:
Variable Print
Strategic Services International Corporate Three Months Three
Months Three Months Three Months Ended March 31, Ended March 31,
Ended March 31, Ended March 31, ($ in millions) 2017 2016 2017 2016
2017 2016 2017 2016
Net sales $ 777.1 780.1 424.6 384.5 474.6 481.0 — —
Income (loss) from operations 43.8 53.8 3.8 3.1 16.9 37.0 (17.1 )
(36.3 ) Operating margin % 5.6 % 6.9 % 0.9 % 0.8 % 3.6 % 7.7 % nm
nm Non-GAAP income (loss) from operations (1) 44.8 55.1 5.8
3.5 21.4 26.6 (13.4 ) (34.0 ) Non-GAAP operating margin % (1) 5.8 %
7.1 % 1.4 % 0.9 % 4.5 % 5.5 % nm nm
(1) Refer to the accompanying schedule for
GAAP to Non-GAAP reconciliations by segment
VARIABLE PRINT:
Net sales decreased 0.4% from the first quarter of 2016 as net
sales from the digital print and inserting operations of Precision
Dialogue and volume increases in the Commercial and Digital Print
reporting unit were more than offset by volume declines in the
segment’s other reporting units and modest price erosion throughout
the segment.
Income from operations was down $10.0 million versus the prior
year first quarter. Non-GAAP income from operations was down $10.3
million versus the first quarter of 2016 primarily due to modest
price declines, higher actual costs in the current period versus
allocated costs from the pre-spin entity in the prior year period
and unfavorable mix.
STRATEGIC SERVICES:
Net sales in the quarter increased 10.4% from the first quarter
of 2016. Net sales in 2017 included $35.9 million related to sales
previously recognized by reporting units that are now part of LSC
and Donnelley Financial, volume increases in the Sourcing and
Logistics reporting units, an increase in fuel surcharges of $9.1
million and net sales from Precision Dialogue’s data analytics
services offering. Partially offsetting these increases were lower
postage pass through sales of $25.0 million, volume declines within
Digital and Creative Solutions and modest price declines.
Income from operations was up $0.7 million compared to the prior
year quarter. Non-GAAP income from operations was up $2.3 million
versus the first quarter of 2016 as the impact of higher net sales
and productivity improvements more than offset modest price
declines.
INTERNATIONAL:
Net sales declined 1.3% from the first quarter of 2016 primarily
due to significant volume increases in the Asia reporting unit
which were more than offset by volume declines in the Global
Turnkey Solutions, Canada and Business Process Outsourcing
reporting units, an unfavorable impact of changes in foreign
exchange rates and modest price pressure.
Income from operations declined $20.1 million compared to the
prior year quarter which included a gain of $12.3 million on the
disposition of two businesses. Non-GAAP income from operations
decreased $5.2 million as compared to the first quarter of 2016
primarily due to unfavorable mix and higher actual costs in the
current period versus allocated costs from the pre-spin entity in
the prior year period which more than offset lower depreciation and
amortization expense.
CORPORATE:
Unallocated corporate expenses were down $19.2 million versus
the prior year quarter. Non-GAAP unallocated corporate expenses
were down $20.6 million from the first quarter of 2016. The prior
year period included higher allocated costs from the pre-spin
entity and an $8.0 million legal settlement. Benefits in the
current year from cost reduction initiatives were partially offset
by lower pension and other postretirement benefits income.
Other Highlights
Cash used in operations in the first quarter was $18.6 million
compared to $192.8 million in the prior year quarter. Capital
expenditures in the first quarter were $26.1 million versus $48.1
million in the prior year quarter which included $17.7 million
related to discontinued operations. Prior year cash flow amounts
include the activities of LSC and Donnelley Financial and have not
been restated.
As of March 31, 2017, cash on hand was $244.3 million and total
debt outstanding was $2.25 billion, including $40.0 million drawn
against the credit facility. Availability under the credit facility
was $458.2 million at March 31, 2017.
During March 2017, the Company completed the disposition of its
equity interest in LSC and used the net proceeds of $121.4 million
to pay down borrowings under the credit facility. As previously
announced, the Company plans to dispose of its 19.25% equity
interest in Donnelley Financial and use the net proceeds to reduce
debt during 2017.
2017 Full Year Guidance
Current Guidance
Previous Guidance May 2, 2017
February 28, 2017 Net sales $6.80
billion to $7.00 billion $6.80 billion to $7.00 billion Non-GAAP
adjusted EBITDA(1) $475 million to $505 million $475 million to
$505 million Non-GAAP income from operations(1) $275 million to
$300 million $275 million to $300 million Depreciation and
amortization $200 million to $205 million $200 million to $205
million Interest expense $175 million to $180 million $175 million
to $180 million Non-GAAP effective tax rate(1) 24% to 25% 32% to
33% Non-GAAP diluted EPS(1) $1.00 to $1.30 $0.90 to $1.20 Capital
expenditures $100 million to $115 million $100 million to $115
million Cash flow from operations $230 million to $280 million $220
million to $270 million (1) Certain components of the
guidance given in the table above are provided on a non-GAAP basis
only, without providing a reconciliation to guidance provided on a
GAAP basis. Information is presented in this manner, consistent
with SEC rules, because the preparation of such a reconciliation
could not be accomplished without "unreasonable efforts." The
Company does not have access to certain information that would be
necessary to provide such a reconciliation, including non-recurring
items and other items that are not indicative of the Company's
ongoing operations. Such items include, but are not limited to,
restructuring charges, impairment charges, spinoff-related
transaction expenses, pension settlement charges,
acquisition-related expenses, gains or losses on investments and
business disposals, losses on debt extinguishment and other similar
gains or losses not reflective of the Company's ongoing operations.
The Company does not believe that excluding such items is likely to
be significant to an assessment of the Company's ongoing
operations, given that such excluded items are not indicators of
business performance.
Conference Call
RRD will host a conference call and simultaneous webcast to
discuss its fourth quarter results Wednesday, May 3, 2017 at 9:00
a.m. Eastern Time (8:00 a.m. Central Time). The live webcast will
be accessible on RRD's web site: www.rrdonnelley.com. Individuals
wishing to participate must register in advance at this link. 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 until May 2, 2018. In addition, a telephonic replay of the
call will be available until June 2, 2017 at 630.652.3042, passcode
9199776#.
About RRD
RRD is a leading global provider of multichannel solutions for
marketing and business communications. With more than 50,000
customers and 43,000 employees across 34 countries, RRD offers a
comprehensive portfolio of capabilities, experience and scale that
enables organizations around the world to effectively create,
manage and execute their multichannel communications
strategies.
For more information, visit the Company's web site at
www.rrdonnelley.com.
Use of non-GAAP Information
This news release contains non-GAAP financial measures,
including non-GAAP SG&A, non-GAAP Operating Income, non-GAAP
Adjusted EBITDA, non-GAAP effective tax rate, non-GAAP net
earnings, non-GAAP diluted EPS and non-GAAP organic net sales. The
Company believes that these non-GAAP measures, when presented in
conjunction with comparable GAAP measures, provide useful
information about its operating results and enhance the overall
ability to assess the Company’s financial performance. These
measures should be considered in addition to, and not as a
substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP. RR Donnelley uses these non-GAAP
measures, together with other measures of performance under GAAP,
to compare the relative performance of operations in planning,
budgeting and reviewing the performance of its business. Additional
information relating to the adjustments for the non-GAAP SG&A,
non-GAAP Operating Income, non-GAAP Adjusted EBITDA, non-GAAP
effective tax rate, non-GAAP net earnings, non-GAAP diluted EPS and
non-GAAP organic net sales for RR Donnelley is set forth in the
attached schedules.
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 the Company and
its expectations relating to future financial condition and
performance. These statements include all those under the column
labeled “Full Year 2017 Guidance” in the table included under the
“2017 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 RR Donnelley’s periodic public filings with the SEC,
including but not limited to those discussed under the “Risk
Factors” section in RR Donnelley’s Form 10-K for the fiscal year
ended December 31, 2016, and other filings with the SEC and in
other investor communications of RR Donnelley 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 Statements of Operations For the Three Months Ended
March 31, 2017 and 2016 (UNAUDITED) (in millions, except per share
data)
For the
Three Months Ended March 31, 2017 2016
Total net sales $ 1,676.3 $
1,645.6 Total cost of sales (1)
1,348.5 1,313.1 Total gross
profit (1) 327.8 332.5 Selling, general
and administrative expenses (SG&A) (1) 222.7 229.3
Restructuring, impairment and other charges - net 9.1 5.3
Depreciation and amortization 48.6 52.6 Other operating income
— (12.3 )
Income from operations
47.4 57.6 Interest expense - net 48.3 50.4
Investment and other expense (income) - net 48.7 (0.1
)
Net earnings (loss) before income taxes (49.6
) 7.3 Income tax expense 0.2 3.4
Net
earnings (loss) from continuing operations (49.8
) 3.9 Net earnings from discontinued
operations, net of income taxes (2) — 36.2
Net
earnings (loss) (49.8 ) 40.1 Less: Income
attributable to noncontrolling interests 0.3 0.3
Net earnings (loss) attributable to RRD common stockholders
$ (50.1 ) $ 39.8 Basic
net earnings (loss) per share attributable to RRD common
stockholders: Continuing operations $ (0.71 ) $ 0.05
Discontinued operations — 0.52 Net earnings (loss) attributable to
RRD stockholders (0.71 ) 0.57
Diluted net earnings (loss)
per share attributable to RRD common stockholders: Continuing
operations $ (0.71 ) $ 0.05 Discontinued operations — 0.52 Net
earnings (loss) attributable to RRD common stockholders (0.71 )
0.57
Weighted average common shares outstanding:
Basic 70.1 69.9 Diluted 70.1 70.3
Additional
information:
Gross margin (1) 19.6 % 20.2 % SG&A as a % of total net sales
(1) 13.3 % 13.9 % Operating margin 2.8 % 3.5 % Effective tax rate
(0.4 %) 46.6 % (1) Exclusive of depreciation and
amortization (2) Operating results from Donnelley Financial and LSC
are classified as discontinued operations for all periods
presented.
R. R. Donnelley & Sons Company
Condensed Consolidated Balance Sheets As of March 31, 2017 and
December 31, 2016 (UNAUDITED) (in millions, except per share data)
3/31/2017
12/31/2016
Assets
Cash and cash equivalents $ 244.3 $ 317.5 Receivables, less
allowances for doubtful accounts 1,268.9 1,354.4 Inventories 375.9
379.6 Prepaid expenses and other current assets 128.5 136.7
Investments in LSC & Donnelley Financial 120.4
328.7
Total Current Assets 2,138.0
2,516.9 Property, plant and equipment - net 637.0 650.3
Goodwill 603.1 602.0 Other intangible assets - net 164.5 171.9
Deferred income taxes 114.2 108.9 Other noncurrent assets
250.5 234.7
Total Assets $ 3,907.3
$ 4,284.7
Liabilities
Accounts payable 884.8 1,001.2 Accrued liabilities 515.1
541.7 Short-term and current portion of long-term debt 12.4
8.2
Total Current Liabilities 1,412.3
1,551.1 Long-term debt 2,234.9 2,379.2 Pension
liabilities 115.6 119.4 Other postretirement benefits plan
liabilities 131.3 134.1 Other noncurrent liabilities 187.3
193.1
Total Liabilities $ 4,081.4
$ 4,376.9
Equity
Common stock, $0.01 par value 0.9 0.9 Authorized: 165.0
shares; Issued: 89.0 shares in 2017 and 2016 Additional
paid-in capital 3,448.1 3,468.5 Accumulated deficit (2,215.2 )
(2,155.4 ) Accumulated other comprehensive loss (78.5 ) (55.7 )
Treasury stock, at cost, 19.0 shares in 2017 (2016 - 19.1 shares)
(1,343.4 ) (1,364.0 ) Total RRD stockholders' equity (188.1 )
(105.7 ) Noncontrolling interests 14.0 13.5
Total
Equity $ (174.1 ) $ (92.2
) Total Liabilities and Equity $
3,907.3 $ 4,284.7 R. R. Donnelley
& Sons Company Condensed Consolidated Statements of Cash
Flows For the Three Months Ended March 31, 2017 and 2016
(UNAUDITED) (in millions)
2017 2016 Net earnings (loss) $ (49.8 ) $ 40.1
Adjustment to reconcile net earnings to net cash used in operating
activities 103.3 83.4 Changes in operating assets and liabilities
(67.2 ) (308.3 ) Pension and other postretirement benefits plan
contributions (4.9 ) (8.0 )
Net cash used in
operating activities $ (18.6 ) $
(192.8 ) Capital expenditures (26.1 ) (48.1 )
All other cash provided by investing activities 121.6
18.6
Net cash provided by (used in) investing activities
$ 95.5 $ (29.5 )
Net cash (used in) provided by financing
activities $ (151.4 ) $ 92.0
Effect of exchange rate on cash and cash equivalents 1.3 4.4
Net decrease in cash and cash
equivalents $ (73.2 ) $
(125.9 ) Cash and cash equivalents at
beginning of period 317.5 389.6
Cash and cash equivalents at end of period $
244.3 $ 263.7 R.R. Donnelley &
Sons Company Reconciliation of GAAP to Non-GAAP Measures For
the Three Months Ended March 31, 2017 and 2016 (UNAUDITED) (in
millions, except per share data) For the Three
Months Ended March 31, 2017 For the Three Months Ended March 31,
2016 SG&A Income from operations Investment and
other expense (income) - net Income tax expense
Continuing Operations - Net (loss) earnings attributable to common
stockholders Net (loss) earnings attributable to common
stockholders per diluted share SG&A Income from
operations Income tax expense Continuing Operations -
Net (loss) earnings attributable to common stockholders Net
(loss) earnings attributable to common stockholders per diluted
share GAAP basis measures $ 222.7 $ 47.4 $ 48.7 $ 0.2 $
(50.1 ) $ (0.71 ) $ 229.3 $ 57.6 $ 3.4 $ 3.6 $ 0.05 Non-GAAP
adjustments: Restructuring charges - net (2) — 8.0 — 1.4 6.6 0.08 —
6.4 (0.7 ) 7.1 0.10 Impairment charges - net (2) — 0.5 — 0.1 0.4
0.01 — (1.6 ) (1.1 ) (0.5 ) (0.01 ) Other charges (2) — 0.6 — 0.1
0.5 0.01 — 0.5 (0.1 ) 0.6 0.01 Spinoff-related transaction expenses
(3) (2.1 ) 2.1 — 0.8 1.3 0.02 — — — — — Acquisition-related
expenses (4) — — — — — — (0.6 ) 0.6 0.2 0.4 0.01 Net loss on
investments (5) — — (50.3 ) (1.0 ) 51.3 0.73 — — — — — Gain on
disposal of businesses (6) — — — —
— — — (12.3 ) — (12.3 )
(0.18 ) Total Non-GAAP adjustments (2.1 ) 11.2
(50.3 ) 1.4 60.1 0.85 (0.6 )
(6.4 ) (1.7 ) (4.7 ) (0.07 ) Non-GAAP
measures $ 220.6 $ 58.6 $ (1.6 ) $ 1.6 $ 10.0 $ 0.14 $ 228.7 $ 51.2
$ 1.7 $ (1.1 ) $ (0.02 ) 2017 2016 GAAP diluted weighted
average common shares outstanding 70.1 70.3 Dilutive impact of
change in earnings (7) 0.2 (0.4 ) Non-GAAP diluted
weighted average common shares outstanding 70.3 69.9
Additional
non-GAAP information:
2017 2016 SG&A as a % of total net sales (1) 13.2 % 13.9 %
Operating margin 3.5 % 3.1 % Effective tax rate 13.4 % 188.9 %
(1)
Exclusive of depreciation and amortization.
(2)
Restructuring, impairment and other
charges - net: charges incurred in the first quarter of 2017
included pre-tax charges of $6.4 million for employee termination
costs; $1.6 million of lease termination and other restructuring
costs; $0.6 million for multi-employer pension plan withdrawal
obligations unrelated to facility closures; and $0.5 million of
impairment charges related to equipment. Charges incurred in the
first quarter of 2016 included pre-tax charges of $4.9 million for
employee termination costs; $1.6 million for a net gain on the sale
of previously impaired other long-lived assets, partially offset by
impairment charges related to buildings and machinery and equipment
associated with facility closures; $1.5 million of lease
termination and other restructuring costs; and $0.5 million of
other charges for multi-employer pension plan withdrawal
obligations unrelated to facility closures.
(3)
Spinoff-related transaction expenses:
included charges related to consulting and other expenses for the
three months ended March 31, 2017 associated with the 2016 spinoff
transactions.
(4)
Acquisition-related expenses: included
charges related to legal, accounting and other expenses for the
three months ended March 31, 2016 associated with contemplated or
completed acquisitions.
(5)
Net loss on investments: included a
pre-tax loss of $51.6 million ($51.6 million after-tax) resulting
from the sale of the Company’s investment in LSC, partially offset
by a pre-tax gain of $1.3 million ($0.3 million after-tax) related
to the Company’s affordable housing investments during the three
months ended March 31, 2017.
(6)
Gain on dispositions of businesses:
included a gain on the sale of businesses within the International
segment during the three months ended March 31, 2016.
(7)
Dilutive impact of change in earnings: in
periods when the Company is in a net loss from continuing
operations, share-based awards are excluded from the calculation of
earnings per share as their inclusion would have an anti-dilutive
effect. In the first quarter of 2017, the Company had a net loss on
a GAAP basis and thus did not include the dilutive impact of
share-based awards in the calculation of earnings per share but had
net earnings on a Non-GAAP basis and therefore included the impact
of the dilutive share-based awards in the calculation of earnings
per share. In the first quarter of 2016, the Company had net
earnings from continuing operations on a GAAP basis and thus
included the impact of the dilutive share-based awards in the
calculation of earnings per share but had a net loss from
continuing operations on a Non-GAAP basis and therefore did not
include the dilutive impact of share-based awards in the
calculation of earnings per share.
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, 2017 and 2016
(UNAUDITED) (in millions) Variable Print Strategic Services
International Corporate Consolidated
For the Three
Months Ended March 31, 2017
Net sales $ 777.1 $ 424.6 $ 474.6 $ — $ 1,676.3 Income (loss) from
operations 43.8 3.8 16.9 (17.1 ) 47.4 Operating margin % 5.6 % 0.9
% 3.6 % nm 2.8 %
Non-GAAP
Adjustments
Restructuring charges - net 0.5 1.4 4.5 1.6 8.0 Impairment charges
- net — 0.5 — — 0.5 Other charges 0.5 0.1 — — 0.6 Spinoff-related
transaction expenses — — — 2.1
2.1 Total Non-GAAP adjustments 1.0 2.0 4.5 3.7 11.2 Non-GAAP
income (loss) from operations $ 44.8 $ 5.8 $ 21.4 $ (13.4 ) $ 58.6
Non-GAAP operating margin % 5.8 % 1.4 % 4.5 % nm 3.5 %
Depreciation and amortization 29.2 4.2 13.9
1.3 48.6 Non-GAAP Adjusted EBITDA $ 74.0 $ 10.0 $
35.3 $ (12.1 ) $ 107.2 Non-GAAP Adjusted EBITDA margin % 9.5 % 2.4
% 7.4 % nm 6.4 %
For the Three
Months Ended March 31, 2016
Net sales $ 780.1 $ 384.5 $ 481.0 $ — $ 1,645.6 Income (loss) from
operations 53.8 3.1 37.0 (36.3 ) 57.6 Operating margin % 6.9 % 0.8
% 7.7 % nm 3.5 %
Non-GAAP
Adjustments
Restructuring charges - net 1.0 0.3 4.7 0.4 6.4 Impairment charges
- net (0.1 ) — (2.8 ) 1.3 (1.6 ) Other charges 0.4 0.1 — — 0.5
Acquisition-related expenses — — — 0.6 0.6 Net gain on disposition
of businesses — — (12.3 ) —
(12.3 ) Total Non-GAAP adjustments 1.3 0.4 (10.4 ) 2.3 (6.4 )
Non-GAAP income (loss) from operations $ 55.1 $ 3.5 $ 26.6 $
(34.0 ) $ 51.2 Non-GAAP operating margin % 7.1 % 0.9 % 5.5 % nm 3.1
% Depreciation and amortization 29.9 4.6
17.0 1.1 52.6 Non-GAAP Adjusted EBITDA $ 85.0
$ 8.1 $ 43.6 $ (32.9 ) $ 103.8 Non-GAAP Adjusted EBITDA margin %
10.9 % 2.1 % 9.1 % nm 6.3 %
R.R. Donnelley & Sons
Company Reconciliation of Reported to Organic Net Sales For the
Three Months Ended March 31, 2017 (UNAUDITED) (in millions)
Reported net sales change 1.9 % Less: Impact of acquisitions
(1) 1.0 % Year-over-year impact of changes in foreign currency (FX)
rates (0.6 %) Year-over-year impact of dispositions (2) (0.1 %)
Year-over-year impact of new sales under the Commercial Agreements
(3) 2.3 % Net organic sales change (4) (0.7 %)
(1) The reported results of the Company include the results
of acquired businesses from the acquisition date forward. To
calculate the impact of the acquisition of Precision Dialogue in
August of 2016, the Company has calculated pro forma net sales as
if the acquisition took place on January 1, 2016 for the purposes
of this schedule. This resulted in the addition of $14.8 million of
net sales in 2016. (2) Adjusted for net sales of disposed
businesses: Entities within International segment in the first and
third quarters of 2016. (3) Adjusted for new sales as a result of
the Commercial Agreements entered into in conjunction with the
spinoff transactions. (4) Adjusted for net sales of acquired and
disposed businesses, new sales under the Commercial agreements and
the impact of changes in FX rates.
R.R. Donnelley &
Sons Company Reconciliation of GAAP Net Earnings (Loss) to
Non-GAAP Adjusted EBITDA For the Three Ended March 31, 2017 and
2016 (UNAUDITED) (in millions)
For the Three Months Ended March 31,
2017 2016 GAAP net earnings (loss)
attributable to RRD common stockholders $ (50.1
) $ 39.8
Adjustments
Less: earnings from discontinued operations, net of tax — (36.2 )
Income attributable to noncontrolling interests 0.3 0.3 Income tax
expense 0.2 3.4 Interest expense - net 48.3 50.4 Investment and
other expense (income)- net 48.7 (0.1 ) Depreciation and
amortization 48.6 52.6 Restructuring, impairment and other charges
- net 9.1 5.3 Spinoff-related transaction costs 2.1 —
Acquisition-related expenses — 0.6 Net gain on dispositions of
businesses — (12.3 ) Total Non-GAAP adjustments 157.3
64.0
Non-GAAP adjusted EBITDA from continuing
operations $ 107.2 $ 103.8
Net sales $ 1,676.3 $ 1,645.6 Non-GAAP adjusted EBITDA margin % 6.4
% 6.3 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170502006912/en/
RR DonnelleyInvestor Contact:Brian Feeney, Senior Vice
President, Investor RelationsTelephone: 630-322-6908E-mail:
brian.feeney@rrd.com
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