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RR Donnelley Reports Second-Quarter 2016 Results

Thursday, August 04, 2016

Press release from the issuing company

CHICAGO - R.R. Donnelley & Sons Company (NASDAQ:RRD) today reported financial results for the second quarter of 2016.

Highlights:

  • Second-quarter net sales of $2.7 billion declined 0.7% from the second quarter of 2015
  • Second-quarter GAAP net loss attributable to common shareholders of $14.5 million, or $0.07 per diluted share, compared to GAAP net earnings attributable to common shareholders in the second quarter of 2015 of $43.5 million, or $0.21 per diluted share
  • Second-quarter non-GAAP net earnings attributable to common shareholders of $71.1 million, or $0.34 per diluted share, compared to non-GAAP net earnings attributable to common shareholders in the second quarter of 2015 of $83.6 million, or $0.41 per diluted share
  • Second-quarter non-GAAP adjusted EBITDA of $286.7 million, or 10.5% of net sales, compared to $309.2 million, or 11.3% of net sales, in the second quarter of 2015 
  • Company updates full-year 2016 guidance; remains on track to achieve previously provided ranges

"We are pleased with the second-quarter improvement in revenue trends, reflective of new customer wins and a modest improvement in capital markets activity.  We expect these improving trends, in conjunction with our continuing cost management efforts, to continue to have a positive impact during the second half of the year," said Thomas J. Quinlan III, RR Donnelley's President and Chief Executive Officer. 

Quinlan continued, "We are finalizing the spin-offs of LSC Communications and Donnelley Financial Solutions, both of which remain on track to be completed in October."

Net Sales
Net sales in the quarter were $2.7 billion, down $18.4 million, or 0.7%, from the second quarter of 2015.  After adjusting for the impact of acquisitions and dispositions, as well as changes in foreign exchange rates and pass-through paper sales, organic sales decreased 1.6% from the second quarter of 2015, as an increase in the Strategic Services segment only partially offset declines in the Variable Print, International and Publishing and Retail Services segments.

GAAP Earnings
Second-quarter 2016 net loss attributable to common shareholders was $14.5 million, or $0.07 per diluted share, compared to net earnings attributable to common shareholders of $43.5 million, or $0.21 per diluted share, in the second quarter of 2015.  The second-quarter net earnings attributable to common shareholders included pre-tax charges of $130.3 million and $50.9 million in 2016 and 2015, 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 second quarter of 2016 was $286.7 million, or 10.5% of net sales, compared to $309.2 million, or 11.3% of net sales, in the second quarter of 2015.  The decrease in the non-GAAP adjusted EBITDA was primarily due to price pressure in all four operating segments, which also negatively impacted margin.

Non-GAAP net earnings attributable to common shareholders totaled $71.1 million, or $0.34 per diluted share, in the second quarter of 2016 compared to $83.6 million, or $0.41 per diluted share, in the second quarter of 2015.  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.

2016 Guidance
The Company provides the following updated full-year guidance for 2016, which excludes the impact of the previously announced pending spin-off transactions:

  Current Guidance Previous Guidance
Net sales Low end of previous guidance of $11.3 to $11.5 billion $11.3 to $11.5 billion
Non-GAAP adjusted EBITDA margin High end of previous guidance of 10.4% to 10.6% 10.4% to 10.6%
Depreciation and amortization $420 to $430 million $430 to $440 million
Interest expense $260 to $270 million $260 to $270 million
Non-GAAP effective tax rate 34% to 35% 34% to 35%
Diluted share count Approximately 211 million Approximately 211 million
Capital expenditures $200 to $225 million $200 to $225 million
Free cash flow(1) $400 to $500 million $400 to $500 million

(1)  Defined as operating cash flow less capital expenditures

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 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 this information is likely to be significant to an assessment of the Company's ongoing operations, given that it is not an indicator of business performance.

 

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