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RRD Reports Q3 2013 Results, Net Sales Up from Q3 2012

November 5, 2013
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CHICAGO—November 5, 2013—R.R. Donnelley & Sons Company today reported financial results for the third quarter of 2013.

Third-quarter 2013 highlights:

  • Net sales of $2.6 billion grew 4.2 percent from the third quarter of 2012; organic revenue growth of 2.2 percent in the quarter.
  • GAAP net earnings attributable to common shareholders of $14.7 million, or $0.08 per diluted share.
  • Non-GAAP net earnings attributable to common shareholders of $69.3 million, or $0.38 per diluted share.
  • Non-GAAP adjusted EBITDA of $280.1 million, or 10.7 percent of net sales.
  • Free cash flow of $193.9 million exceeded the third quarter of 2012 by $100.6 million; on a year-to-date basis, free cash flow was better than last year by $158 million.
  • Company updates revenue, margin and other guidance for full-year 2013; re-affirms free cash flow guidance.

"As we communicated in our October 24th announcement, we are very pleased with our third-quarter performance," said Thomas J. Quinlan III, R.R. Donnelley's president and CEO. "We have shown steady improvement over the past four quarters in our top-line performance, reflecting positive trends in a number of our offerings. In addition, our free cash flow remained strong in the quarter, improving $101 million from the third quarter of 2012, contributing to a year-to-date free cash flow that exceeded the prior year by $158 million. Our third-quarter cash flow performance was in line with our expectations, and we are reiterating our full-year guidance in the range of $400 million to $500 million. This level of cash flow provides us the ability to migrate toward our targeted gross leverage range of 2.25x to 2.75x on a long-term sustainable basis." Quinlan continued, "We look forward to completing the acquisition of Consolidated Graphics, expected in the first quarter of 2014."

Net sales in the quarter were $2.6 billion, up $106.1 million, or 4.2 percent, from the third quarter of 2012. After adjusting for the impact of acquisitions, changes in foreign exchange rates, pass-through paper sales and the 2012 rebate adjustment, organic sales grew by 2.2 percent from the third quarter of 2012, driven by volume growth in many offerings, a timing shift of a project in Latin America and an increase in pass-through postage revenue.

GAAP Earnings
Third-quarter 2013 net earnings attributable to common shareholders were $14.7 million, or $0.08 per diluted share, compared to net earnings attributable to common shareholders of $71.4 million, or $0.39 per diluted share, in the third quarter of 2012. Third-quarter net earnings attributable to common shareholders included pre-tax charges and expenses, of $85.5 million and $15.2 million in 2013 and 2012, respectively, as well as an $11.0 million income tax adjustment in 2012, all of which were excluded from the presentation of non-GAAP net earnings attributable to common shareholders.

Non-GAAP Earnings

Third-quarter 2013 non-GAAP adjusted EBITDA was $280.1 million or 10.7 percent of net sales. Compared to the third quarter of 2012, non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA margin were lower by $40.8 million and 210 basis points, respectively. The unfavorable variances were primarily due to the impact of non-comparable items totaling approximately $59 million, which included higher variable compensation expense, lower pension and other postretirement benefits income, and higher workers compensation expense and LIFO inventory provisions in 2013, as well as the office products rebate adjustment in 2012.

Non-GAAP net earnings attributable to common shareholders totaled $69.3 million, or $0.38 per diluted share, in the third quarter of 2013 compared to $92.9 million, or $0.51 per diluted share, in the third quarter of 2012. Third-quarter non-GAAP net earnings attributable to common shareholders exclude pre-tax charges and expenses of $85.5 million and $15.2 million in 2013 and 2012, respectively, as well as, in 2012, an $11.0 million income tax adjustment.

Outlook
The Company has updated its full-year 2013 guidance, most notably with respect to revenue and non-GAAP adjusted EBITDA margin. While expectations for EBITDA in absolute dollars have not changed since the Company first provided 2013 guidance back in February, growth in pass-through postage revenue has exceeded expectations and is the primary driver of the increase in the range for full-year revenue guidance. The pass-through nature of this revenue has the effect of reducing non-GAAP adjusted EBITDA margin, and is reflected in the Company's updated guidance, as set forth in the chart shown in the upper right tab.

About RR Donnelley
RR Donnelley (Nasdaq:RRD) is a global provider of integrated communications. The company works collaboratively with more than 60,000 customers worldwide to develop custom communications solutions that reduce costs, drive top-line growth, enhance ROI and increase compliance. Drawing on a range of proprietary and commercially available digital and conventional technologies deployed across four continents, the Company employs a suite of leading Internet-based capabilities and other resources to provide premedia, printing, logistics and business process outsourcing services to clients in virtually every private and public sector.

Source: RRD.


 

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