RR Donnelley reports $79M Loss in Q4
Wednesday, February 24, 2010
Press release from the issuing company
Chicago - Full-year cash flow from operations of $1.4 billion, an increase of $407.8 million from 2008
- Total debt reduction of $804.4 million during 2009
R.R. Donnelley & Sons Company today reported a fourth-quarter net loss from continuing operations attributable to common shareholders of $79.5 million or $0.39 per diluted share on net sales of $2.6 billion compared to a net loss from continuing operations attributable to common shareholders of $686.9 million or $3.35 per diluted share on net sales of $2.8 billion in the fourth quarter of 2008. The fourth-quarter net loss from continuing operations attributable to common shareholders included pre-tax charges for restructuring ($17.5 million) and impairment ($131.1 million) totaling $148.6 million in 2009 compared to charges for restructuring ($10.7 million) and impairment ($1,127.6 million) totaling $1,138.3 million in 2008. As detailed in the attached tables, substantially all of the impairment charges in both years are non-cash and follow the Company's annual impairment test of goodwill. Substantially all of the restructuring charges in both the fourth quarter 2009 and the fourth quarter 2008 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 $95.4 million or $0.46 per diluted share in the fourth quarter of 2009 compared to $129.3 million or $0.63 per diluted share in the fourth quarter of 2008. Fourth-quarter non-GAAP net earnings attributable to common shareholders exclude restructuring and impairment charges for both years. Also excluded from 2009 is the income tax expense related to the reorganization of entities within the International segment, the write-down of affordable housing investments and acquisition expenses. Excluded from 2008 are the income tax benefits resulting from the decline in value and reorganization of certain entities within the International segment, the loss related to the termination of cross-currency swaps and income from discontinued operations. For non-GAAP comparison purposes, the effective tax rate decreased to 21.1% in the fourth quarter of 2009 from 30.8% in the fourth 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.
"We achieved the expected sequential revenue growth versus the third quarter and effectively managed our operating costs and working capital to generate $327 million in operating cash flow during the quarter," said Thomas J. Quinlan III, RR Donnelley's President and Chief Executive Officer.
Quinlan added, "We began the year with a sharp focus on two primary elements of our strategy: achieving operational excellence in serving our customers and maintaining a very strong liquidity position by maximizing cash flow and deploying it prudently. As a result, we generated over $1.4 billion in operating cash flow during the year and reduced our total debt by more than $800 million. The actions we took in 2009 to enhance our already strong balance sheet provide us with continued significant liquidity and positioned us well to make the strategic acquisition of Bowne, which will be accretive to earnings within the first twelve months of completion."
Quinlan continued, "Although the pace of economic recovery remains uncertain, we begin 2010 with the ability and expectation to achieve revenue growth, above and beyond any impact of the acquisition."
Business Review (Continuing Operations)
Excluding charges for restructuring and impairment in the fourth quarter of both years and acquisition expenses in the fourth quarter of 2009, our non-GAAP operating margin in the fourth quarter of 2009 decreased to 6.9% from 8.8% in the fourth quarter of 2008, as the benefits from our productivity efforts and lower bad debt and LIFO inventory provisions were more than offset by an increase in incentive compensation expense, and price and volume declines.
Net sales for the International segment in the quarter increased 3.4% to $659.5 million from the fourth quarter of 2008, including a 7.2% positive impact from changes in foreign exchange rates. The positive impact of foreign exchange rates was partially offset by volume declines in our business process outsourcing and European units and pricing pressure in Europe. The segment's operating loss, which was negatively impacted by charges for restructuring and impairment of $44.2 million in the fourth quarter of 2009 and $757.5 million in the fourth quarter of 2008, improved to a $3.1 million loss in the fourth quarter of 2009 from a $712.8 million loss in the fourth quarter of 2008. Excluding restructuring and impairment charges, the segment's non-GAAP operating margin decreased to 6.2% in the fourth quarter of 2009 from 7.0% in the fourth quarter of 2008 due to the impact of price and volume declines, as well as higher incentive compensation expense, partially offset by the benefits of continued productivity efforts and a lower bad debt provision.
Unallocated Corporate operating expense decreased to $39.8 million in the fourth quarter of 2009 as compared to $51.8 million in the fourth quarter of 2008. Excluding restructuring charges of $2.9 million and acquisition expenses of $0.1 million in the fourth quarter of 2009 and restructuring charges of $0.6 million in the fourth quarter of 2008, unallocated Corporate operating expense decreased $14.4 million to $36.8 million in the fourth quarter of 2009. Driving this decrease were lower LIFO inventory and bad debt provisions and cost reduction actions, partially offset by higher incentive compensation expense.
Use of Forward-Looking Statements
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