RR Donnelley Reports Higher Earnings on Slight Sales Decline
The Company reports its results in two reportable segments: 1) U.S. Print and Related Services and 2) International. The Company reports as Corporate its unallocated expenses associated with general and administrative activities.
Net sales in the quarter were $2.5 billion, down $58.6 million, or 2.3 percent, from the first quarter of 2011. Pro forma for acquisitions, net sales decreased 2.7 percent, due to volume declines in certain product offerings, price erosion and a 76 basis point unfavorable impact of changes in foreign exchange rates, partially offset by an adjustment to accounts receivable for prior periods' over-accruals of rebates owed to certain customers within the office products reporting unit. Gross margin of 23.0 percent in the first quarter of 2012 declined from 24.3 percent in the first quarter of 2011 as an unfavorable product mix, pricing pressure and the reinstatement of the Company's 401k plan match more than offset lower pension expense and the impact of the rebate adjustment. SG&A expense as a percentage of net sales in the first quarter of 2012 improved to 11.2 percent from 12.7 percent in the first quarter of 2011 primarily due to productivity improvements as well as lower pension and variable compensation expenses. Operating earnings of $121.4 million, which were impacted by restructuring and impairment charges and acquisition-related expenses totaling $50.3 million in the first quarter of 2012, compared to operating earnings of $109.4 million in the first quarter of 2011, which included restructuring and impairment charges and acquisition-related expenses totaling $51.2 million.
Excluding restructuring and impairment charges and acquisition-related expenses, non-GAAP operating margin improved to 6.8 percent in the first quarter of 2012 from 6.2 percent in the first quarter of 2011. Lower pension expense, the customer rebate adjustment, lower depreciation and amortization, productivity improvements and lower variable compensation expense more than offset an unfavorable product mix and continued pricing pressure.