RR Donnelley Releases Earnings Guidance, Plans to Divest Peak Business
Press release from the issuing company
CHICAGO, Dec. 16 -- R.R. Donnelley & Sons Company announced today that its board of directors authorized the repurchase, at any time prior to December 31, 2006, of up to $300 million of the company's common stock. The company also announced that it expects its non-GAAP earnings per diluted share from continuing operations to be $0.57 for the fourth quarter of 2004, $1.61 for the full year of 2004 and $1.95 for the full year of 2005 (assuming the completion of approximately $200 million of the $300 million share repurchase for the entire year of 2005). RR Donnelley plans to divest its Peak business and, accordingly, will report this business as a discontinued operation effective with the fourth quarter of 2004.
Non-GAAP earnings per diluted share from continuing operations exclude certain items that management believes are unrelated to the ongoing operations of the business. In the fourth quarter of 2004, the full year of 2004 and the full year of 2005, these items may include results of discontinued operations, restructuring, impairment and integration charges as well as certain tax adjustments that are not currently determinable, but may be significant. For that reason, the company is unable to provide GAAP (Generally Accepted Accounting Principles) earnings estimates at this time.
The company believes that non-GAAP earnings per diluted share is useful because that information is an appropriate measure for evaluating the company's operating performance. Internally, the company uses this non-GAAP information as an indicator of business performance, and evaluates management's effectiveness with specific reference to this indicator. This measure should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
"We are announcing several positive developments today," said Mark A. Angelson, RR Donnelley's Chief Executive Officer. "The repurchase program reflects our confidence in the future profitability of RR Donnelley and delivers on our promise to invest our shareholders' capital wisely and avoid shareholder dilution when practicable. We believe that our significant cash flow and strong balance sheet will be sufficient to fund this program, pay our dividend and very comfortably service our debt, while allowing us to invest in and grow our business. We expect to enter into an accelerated share repurchase arrangement in the approximate amount of $200 million later this month."
Angelson added, "We continuously evaluate our businesses for strategic fit. We have concluded that, although Peak is a valuable business, it is not central to our strategy. We will therefore seek alternative methods of optimizing the value of this unit."
Share Repurchase Program
The company is authorized to repurchase up to $300 million of the company's common stock through a variety of methods, including open market purchases, block transactions, accelerated share repurchase arrangements, or private transactions. Such purchases may be made from time to time and may be discontinued at any time. The company expects to enter into an accelerated share repurchase arrangement in the approximate amount of $200 million later this month.
Expected Non-GAAP Fully Diluted Earnings Per Share
The company expects its non-GAAP earnings per diluted share from continuing operations to be $0.57 for the fourth quarter of 2004, $1.61 for the full year of 2004 and $1.95 for the full year of 2005 (assuming the completion of approximately $200 million of the $300 million share repurchase for the entire year of 2005). The company expects its approximate weighted average fully diluted share count to be 224 million for the fourth quarter of 2004, 204 million for the full year of 2004 and 220 million for the full year of 2005.
The company plans to divest its Peak business. As such, the company will report the results of operations and financial position (including conforming previously reported 2004 results) of the Peak business as a discontinued operation beginning with the fourth quarter of 2004. Peak provides integration, maintenance and consulting services related to automatic identification and data collection systems and hardware. Results for the nine months ended September 30, 2004 include net sales of $135.2 million and an operating loss of $5.8 million (includes $0.9 million in restructuring and impairment charges) from the Peak business.
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