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RR Donnelley Turns to Profit in Q1

Friday, May 08, 2015

Press release from the issuing company

CHICAGO - R.R. Donnelley & Sons Company (Nasdaq:RRD) today reported financial results for the first quarter of 2015:

Highlights:

  • First-quarter net sales of $2.7 billion grew 2.7% from the first quarter of 2014; organic net sales grew 0.1% from the first quarter of 2014
  • First-quarter GAAP net earnings attributable to common shareholders of $22.3 million, or $0.11 per diluted share, compared to GAAP net loss attributable to common shareholders in the first quarter of 2014 of $29.0 million, or $0.15 per diluted share
  • First-quarter non-GAAP net earnings attributable to common shareholders of $51.9 million, or $0.26 per diluted share, compared to non-GAAP net earnings attributable to common shareholders in the first quarter of 2014 of $59.7 million, or $0.31 per diluted share
  • Company reiterates full-year 2015 guidance and commitment to continue to migrate toward its targeted gross leverage range of 2.25x to 2.75x on a long-term sustainable basis

"Organic revenue in the quarter was flat to the first quarter of last year, but importantly, we saw improvement in this trend as the quarter progressed," said Thomas J. Quinlan III, RR Donnelley's President and Chief Executive Officer. "This performance, in combination with the success we are having with each of our four go-to-market strategies, keeps us on track to deliver full-year results in line with our previous guidance, which we reiterate today."

Net Sales

Net sales in the quarter were $2.7 billion, up $72.3 million, or 2.7%, from the first quarter of 2014, largely due to the acquisitions of Consolidated Graphics and the North American operations of Esselte. After adjusting for the impact of acquisitions, changes in foreign exchange rates, dispositions and changes in pass-through paper, organic sales increased 0.1% from the first quarter of 2014, as increases in the Strategic Services and Variable Print segments were partially offset by declines in the Publishing and Retail Services and International segments.

GAAP Earnings

First-quarter 2015 net earnings attributable to common shareholders was $22.3 million, or $0.11 per diluted share, compared to net loss attributable to common shareholders of $29.0 million, or $0.15 per diluted share, in the first quarter of 2014. The first-quarter 2015 diluted share count increased by 9.0 million shares from the first quarter of 2014, primarily related to shares issued in connection with the acquisitions of Consolidated Graphics and the North American operations of Esselte. The first-quarter net earnings attributable to common shareholders included pre-tax charges of $60.2 million and $148.1 million in 2015 and 2014, respectively, all of which are 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 2015 non-GAAP adjusted EBITDA was $259.3 million, or 9.4% of net sales, compared to non-GAAP adjusted EBITDA of $276.5 million, or 10.3% of net sales, in the first quarter of 2014. The decrease in non-GAAP adjusted EBITDA was primarily due to price pressure in all four operating segments and volume declines in Publishing and Retail Services, both of which also negatively impacted margin.

Non-GAAP net earnings attributable to common shareholders totaled $51.9 million, or $0.26 per diluted share, in the first quarter of 2015 compared to $59.7 million, or $0.31 per diluted share, in the first quarter of 2014. The first-quarter 2015 diluted share count increased by 7.2 million shares from the first quarter of 2014, primarily related to shares issued in connection with the acquisitions of Consolidated Graphics and the North American operations of Esselte. Reconciliations of net earnings attributable to common shareholders to non-GAAP adjusted EBITDA and non-GAAP net earnings attributable to common shareholders are presented in the attached schedules.

2015 Guidance

The Company reiterates the following full-year guidance for 2015, which excludes any impact of the previously announced pending acquisition of Courier Corporation:

 
  Current Guidance
Net sales $11.7 to $11.9 billion
Non-GAAP adjusted EBITDA margin 10.3% to 10.5%
Depreciation and amortization $455 to $465 million
Interest expense $265 to $275 million
Non-GAAP effective tax rate 33% to 34%
Diluted share count Approximately 202 million
Capital expenditures $225 to $250 million
Free cash flow(1) $400 to $500 million
(1) Defined as operating cash flow less capital expenditures

 

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