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Larger Q1 Charges Push Loss for RR Donnelley

Friday, May 02, 2014

Press release from the issuing company

CHICAGO - R.R. Donnelley & Sons Company today reported financial results for the first quarter of 2014:

Highlights:

  • First-quarter net sales of $2.7 billion grew 5.3% from the first quarter of 2013; organic sales down 0.1% in the quarter
  • First-quarter GAAP net loss attributable to common shareholders of $29.0 million, or $0.15 per diluted share, compared to GAAP net earnings attributable to common shareholders in the first quarter of 2013 of $27.1 million, or $0.15 per diluted share
  • First-quarter non-GAAP net earnings attributable to common shareholders of $59.7 million, or $0.31 per diluted share, compared to non-GAAP net earnings attributable to common shareholders in the first quarter of 2013 of $68.1 million, or $0.37 per diluted share
  • Non-GAAP adjusted EBITDA in the quarter of $276.5 million compared to $277.1 million in the first quarter of 2013

"We are pleased with our first-quarter performance, which was consistent with our expectations. While the difficult weather conditions and a lagging macroeconomic environment created challenges in the quarter, we were able to deliver nearly flat year-over-year organic revenue by leveraging the broad portfolio of product and service offerings that we have built to support our customers' communications requirements," said Thomas J. Quinlan III, RR Donnelley's President and Chief Executive Officer. "In addition, we further enhanced our breadth of offerings and geographic diversity with the acquisitions that closed in the quarter. While still early in the process, the integration of each is proceeding very well and we remain excited about the benefits associated with adding these companies to RR Donnelley."

Net Sales

Net sales in the quarter were $2.7 billion, up $135.3 million, or 5.3%, from the first quarter of 2013, largely due to the acquisition of Consolidated Graphics. After adjusting for the impact of acquisitions and dispositions, a 30 basis point negative impact from changes in foreign exchange rates and a 40 basis point negative impact from pass-through paper sales, organic sales declined 0.1% from the first quarter of 2013, as volume declines in the variable print and publishing and retail services segments and price erosion were nearly offset by volume growth in the strategic services and international segments.

GAAP Earnings

The first-quarter 2014 net loss attributable to common shareholders was $29.0 million, or $0.15 per diluted share, compared to net earnings attributable to common shareholders of $27.1 million, or $0.15 per diluted share, in the first quarter of 2013. The first-quarter net loss attributable to common shareholders included pre-tax charges, expenses and other adjustments, detailed on the attached schedules, of$148.1 million and $62.5 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

First-quarter 2014 non-GAAP adjusted EBITDA was $276.5 million, or 10.3% of net sales, compared to non-GAAP adjusted EBITDA of$277.1 million, or 10.9% of net sales, in the first quarter of 2013. Price pressure and wage and other cost inflation more than offset higher volume, the benefit of two months of Consolidated Graphics and a favorable product mix.

Non-GAAP net earnings attributable to common shareholders totaled $59.7 million, or $0.31 per diluted share, in the first quarter of 2014 compared to $68.1 million, or $0.37 per diluted share, in the first quarter of 2013. First-quarter non-GAAP net earnings attributable to common shareholders exclude pre-tax charges, expenses and other adjustments of $148.1 million and $62.5 million in 2014 and 2013, respectively. A reconciliation of net earnings (loss) attributable to common shareholders to non-GAAP adjusted EBITDA and non-GAAP net earnings attributable to common shareholders is presented in the attached schedules.

Full Release

 

Discussion

By Pete Basiliere on May 02, 2014

Am I missing something? (I could be - I am not a financial wiz!)

The RRD press release says in part "Net sales in the quarter were $2.7 billion, up $135.3 million, or 5.3%, from the first quarter of 2013, largely due to the acquisition of Consolidated Graphics."

Yet according to Printing Impressions, Consolidated's sales prior to the acquisition were just north of $1 billion - or a straight line quarterly average of $250 million: http://www.piworld.com/common/items/biz/pi/pdf/2013/12/2013_PI400_Listing.pdf

Now straight-lining quarterly sales doesn't account for peaks and valleys, of course, but in this case it is an interesting snapshot.

$250 million is a far cry from the $135 million increase in sales attributed to the CGI acquisition.

 

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