R.R. Donnelley Reports 3Q Earnings, Transformation on Track
Press release from the issuing company
CHICAGO, Oct. 24 -- R.R. Donnelley & Sons Company reported third-quarter earnings before restructuring charges and other one-time items of 46 cents per diluted share compared with 69 cents a year ago. Net income was $54.3 million compared with $84.4 million a year ago.
2001 results exclude a pretax restructuring and impairment charge of $19.9 million ($12.2 million after-tax, or 10 cents per diluted share). The $19.9 million pretax restructuring and impairment charge includes $11.6 million of noncash charges related to the impairment of goodwill and other noncurrent assets of the company's commercial print operation in Mexico. 2000 results exclude a $12.9 million pretax gain ($7.9 million after-tax, or 6 cents per diluted share) from the sale of shares received in the demutualization of the company's basic life insurance carrier.
After restructuring and impairment charges, net income for the quarter was $42.0 million, or 36 cents per diluted share. Revenues for the quarter were $1.3 billion, down 10.1 percent from the year-earlier period.
The company's performance in July and August offset the weakness of the last three weeks of September, enabling the company to meet its internal expectations. The effects of the economy are being felt across the company's businesses, with the largest impacts in the commercial print operations that produce magazine, catalog and advertising inserts, and R.R. Donnelley Financial, which is being affected by the slowdown in capital markets activity.
Due to the overall effect of the deteriorating economy, the company adjusted its expectations for 2001 earnings per share to range between $1.45 and $1.55 before restructuring and impairment charges and other one-time items.
"We remain firmly committed to transforming our organization to deliver world-class service and distinctive solutions to meet our customers' increasingly challenging communications needs,'' stated William L. Davis, chairman, president and chief executive officer for R.R. Donnelley. "Despite a worsening economy, our transformation is on track.''
R.R. Donnelley Logistics achieved double-digit revenue growth despite the economic slowdown in the markets it serves. Sales were up 16 percent year-over-year during the third quarter. In addition, higher prices, improved management of transportation costs and lower postage costs from increased postal penetration contributed to a profitable quarter for this segment.
The company continues to drive its transformation to an integrated communications solutions provider. These efforts, which are well under way, include building the print platform of the future, which involves the investment of up to $300 million over the next two years to consolidate, upgrade and modernize plants with fewer, yet wider and faster, presses.
"This streamlined, flexible and integrated platform will give us the capabilities to stay ahead of our customers' increasingly challenging communications needs,'' noted Davis. "The printed word is not going away. Our customers will continue to be the leading users of content. And, Donnelley's transformation is essential to their success.''
Across all its businesses, the company also is realizing the financial benefits of idling equipment and reducing work hours to adjust capacity to current activity levels, and streamlining the delivery of general and administrative services. Announced actions will reduce the total workforce by more than 7 percent.
R.R. Donnelley is also reprioritizing activities and scaling back capital spending for 2001, which is now expected to be below $300 million, down from previous guidance of $300 million to $350 million. Through September, the company has spent $163 million.
During the quarter the company repurchased $46 million of its shares, or 1.6 million shares. Since February, R.R. Donnelley has repurchased 5.6 million shares at a cost of $159 million. The company has slowed the pace of share repurchase under its current authorization and will not complete the $300 million program this year, as previously expected.
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