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RR Donnelley Net Sales/Profits Decline in Q3

Friday, November 06, 2015

Press release from the issuing company

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

Highlights:

  • Third-quarter net sales of $2.8 billion declined 4.4% from the third quarter of 2014; organic net sales declined 3.1% from the third quarter of 2014
  • Third-quarter GAAP net earnings attributable to common shareholders of $14.3 million, or $0.07 per diluted share, compared to GAAP net earnings attributable to common shareholders in the third quarter of 2014 of $62.2 million, or $0.31 per diluted share
  • Third-quarter non-GAAP net earnings attributable to common shareholders of $76.0 million, or $0.36 per diluted share, compared to non-GAAP net earnings attributable to common shareholders in the third quarter of 2014 of $78.9 million, or $0.39 per diluted share
  • Third-quarter non-GAAP adjusted EBITDA margin of 10.8%, compared to non-GAAP adjusted EBITDA margin of 10.6% in the third quarter of 2014 
  • Previously announced plan to create three independent publicly traded companies remains on schedule; expect transactions to be effective October 2016

"We are pleased with our performance during the quarter, given the challenging demand environment.  Our continuing focus on matching costs to demand resulted in a non-GAAP adjusted EBITDA margin of 10.8% in the quarter, a 20 basis point improvement from the same quarter last year," said Thomas J. Quinlan III, RR Donnelley's President and Chief Executive Officer.  "Our updated guidance assumes the fourth-quarter demand environment will be similar to what we've experienced throughout the year, and the improvement in margin guidance is reflective of our continuing to manage the business to create value for all of our stakeholders.  In addition, we continue to expect free cash flow in the range of $400 million to $500 million, unchanged from our previous guidance."

Net Sales
Net sales in the quarter were $2.8 billion, down $129.8 million, or 4.4%, from the third quarter of 2014.  After adjusting for the impact of acquisitions and dispositions, as well as changes in foreign exchange rates and pass-through paper, organic sales decreased 3.1% from the third quarter of 2014, as modest increases in the Strategic Services and International segments only partially offset declines in the Publishing and Retail Services and Variable Print segments.

GAAP Earnings
Third-quarter 2015 net earnings attributable to common shareholders was $14.3 million, or $0.07 per diluted share, compared to net earnings attributable to common shareholders of $62.2 million, or $0.31 per diluted share, in the third quarter of 2014.  The third-quarter net earnings attributable to common shareholders included pre-tax charges of $69.4 million and $22.6 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
Non-GAAP adjusted EBITDA in the third quarter of 2015 was $305.2 million, compared to $313.2 million in the third quarter of 2014.  Non-GAAP adjusted EBITDA margin in the third quarter of 2015 was 10.8%, or 20 basis points higher than in the third quarter of 2014, as productivity improvements more than offset volume declines and price pressure. 

Non-GAAP net earnings attributable to common shareholders totaled $76.0 million, or $0.36 per diluted share, in the third quarter of 2015 compared to $78.9 million, or $0.39 per diluted share, in the third quarter of 2014.  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 provides the following updated full-year guidance for 2015:

  Current Guidance   Previous Guidance
Net sales $11.2 to $11.4 billion   $11.4 to $11.6 billion
Non-GAAP adjusted EBITDA margin 10.6% to 10.8%   10.5% to 10.7%
Depreciation and amortization $460 to $470 million   $460 to $470 million
Interest expense $270 to $275 million   $270 to $275 million
Non-GAAP effective tax rate 33% to 34%   33% to 34%
Diluted share count Approximately 207 million    Approximately 207 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

 

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