Highlights:
CHICAGO, Aug. 1 /PRNewswire-FirstCall/ -- R.R. Donnelley & Sons Company (NYSE:RRD) today reported a second-quarter 2007 net loss from continuing operations of $69.4 million or $0.32 per diluted share on net sales of $2.8 billion compared to net earnings from continuing operations of $124.4 million or $0.57 per diluted share on net sales of $2.3 billion in the second quarter of 2006. The net loss from continuing operations in the second quarter of 2007 included pre-tax charges totaling $330.5 million for impairment ($316.7 million) and restructuring ($13.8 million). Substantially all of the impairment charge related to the write-off of the Moore Wallace, OfficeTiger and other trade names and substantially all of the restructuring charge related to the reorganization of certain operations and exiting of certain business activities. The second-quarter 2006 net earnings from continuing operations included pre-tax charges totaling $14.6 million for restructuring ($12.7 million) and impairment ($1.9 million) substantially all associated with the reorganization of certain operations and the exiting of certain business activities. The company's effective tax rate was 37.8% in the second quarter of 2007 compared to 31.9% in the second quarter of 2006, primarily reflecting the tax impact of the non-cash impairment charge on the pre-tax loss in the second quarter of 2007. The company recorded income from discontinued operations of $0.8 million in the second quarter of 2006. Including discontinued operations, net loss was $69.4 million or $0.32 per diluted share in the second quarter of 2007 and net earnings was $125.2 million or $0.57 per diluted share in the second quarter of 2006.
The company believes that certain non-GAAP measures, when presented in conjunction with comparable GAAP (Generally Accepted Accounting Principles) measures, are 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 these indicators. These measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
Non-GAAP net earnings from continuing operations totaled $149.2 million or $0.67 per diluted share in the second quarter of 2007 compared to $133.6 million or $0.61 per diluted share in the second quarter of 2006. Non-GAAP net earnings from continuing operations exclude restructuring and impairment charges in the second quarter of both 2007 and 2006. For non-GAAP comparison purposes, the effective tax rate decreased to 31.9% in the second quarter of 2007 from 32.3% in the second quarter of 2006, primarily reflecting an increased benefit from the domestic manufacturing deduction. A reconciliation of GAAP net earnings to non-GAAP net earnings for these adjustments is presented in the attached tables.
"We are pleased by our strong performance in the second quarter," said Thomas J. Quinlan III, RR Donnelley's President and Chief Executive Officer. "Sales growth on our legacy platform was in-line with real GDP growth and while the companies we acquired in 2007, in aggregate, carried a lower operating margin historically, we made great progress in integrating them as well as beginning to utilize their open capacity and close the margin gap. Our recently announced re-branding under the one RR Donnelley brand reflects our ability to provide fully integrated single-source solutions that span a complete range of printing and service capabilities. By managing our sales and manufacturing as one platform, we have platform flexibility, utilize our capacity efficiently and drive productivity to be the lowest cost provider." Quinlan added, "We are also pleased with our strong generation of cash from continuing operations of $437 million during the first half of 2007. Our share repurchases and the replenishment of our share repurchase authorization demonstrate the confidence we have in our ability to generate strong cash flow that will provide us with the flexibility to execute on all aspects of our growth and capital deployment strategy, while very comfortably paying our dividend and servicing our debt." Business Review (Continuing Operations) The company reports its results in two reportable segments, 1) Global Print Solutions and 2) Global Services, and Corporate.
Summary During 2007, we acquired Banta Corporation, Perry Judd's and Von Hoffmann, which in aggregate carried a lower operating margin historically. Our proven financial discipline and approach to achieving productivity increases already have had a positive margin impact in these operations, and we see opportunities for continued improvement.
Net sales in the quarter were $2.8 billion, up 23.0% from the second quarter of 2006. The increase was due to acquisitions and favorable foreign exchange comparisons as well as new customer wins and increased volume with existing customers, offset in part by continued price pressure. The gross margin rate decreased to 27.1% in the second quarter of 2007 from 27.5% in the second quarter of 2006 reflecting the inclusion of the acquired companies that more than offset the benefits from higher sales volume and our productivity efforts. SG&A expense as a percentage of net sales decreased to 11.9% in the second quarter of 2007 from 12.1% in the second quarter of 2006, reflecting the benefits of our integration and productivity efforts. Operating margin, which was negatively impacted by charges for impairment and restructuring totaling $330.5 million in the second quarter of 2007 and $14.6 million in the second quarter of 2006, was -1.9% in the second quarter of 2007 compared to 9.8% in the second quarter of 2006.
Excluding charges for restructuring and impairment, non-GAAP operating income increased 16.8% to $276.1 million in the second quarter of 2007 compared to the second quarter of 2006. Non-GAAP operating margin in the second quarter of 2007 was 9.9% compared to 10.4% in the second quarter of 2006 reflecting the inclusion of the acquired companies that collectively carried a lower margin historically that more than offset the benefits from higher sales volume and our productivity efforts. Reconciliations of GAAP operating income and margin to non-GAAP operating income and margin are presented in the attached tables.
Segments Net sales for the Global Print Solutions segment increased 33.1% to $1.8 billion from the second quarter of 2006 due to the Banta, Perry Judd's and Von Hoffmann acquisitions as well as sales increases in our Asian operations, logistics and book offerings and favorable foreign exchange comparisons. The segment's operating margin, which was negatively impacted by charges for impairment ($53.4 million) and restructuring ($4.7 million) totaling $58.1 million in the second quarter of 2007 and a restructuring charge of $2.3 million in the second quarter of 2006, decreased to 9.6% in the second quarter of 2007 from 14.6% in the second quarter of 2006. Excluding impairment and restructuring charges, the segment's non-GAAP operating income increased 15.6% to $231.4 million. Non-GAAP operating margin in the second quarter of 2007 decreased to 12.8% from 14.8% in the second quarter of 2006 reflecting the inclusion of the acquired companies that collectively carried a lower margin historically as well as incremental non-cash purchase accounting-related amortization expenses that more than offset the benefits of our productivity initiatives.
Net sales for the Global Services segment increased 8.0% to $990.0 million from the second quarter of 2006 due to the acquisitions of Banta, Von Hoffmann and OfficeTiger; sales growth in our financial print, global document solutions and forms and labels offerings; and favorable foreign exchange comparisons, offset in part by lower sales of statement printing. The segment's operating margin, which was negatively impacted by charges for restructuring ($7.5 million) and impairment ($263.3 million) totaling $270.8 million in the second quarter of 2007 and by charges for restructuring ($9.7 million) and impairment ($1.9 million) totaling $11.6 million in the second quarter of 2006, decreased to -18.6% in the second quarter of 2007 from 8.5% in the second quarter of 2006. Non-GAAP operating margin decreased to 8.8% in the second quarter of 2007 from 9.7% in the second quarter of 2006 due to continued price pressure and the performance of statement printing.
Corporate operating expenses decreased to $43.6 million in the second quarter of 2007 from $53.8 million in the second quarter of 2006. Excluding restructuring charges of $1.6 million in the second quarter of 2007 and $0.7 million in the second quarter of 2006, corporate operating expenses decreased $11.1 million from the second quarter of 2006 to $42.0 million reflecting lower employee benefit and compensation expenses.
Outlook - 2007 Full-Year Non-GAAP EPS from Continuing Operations For the full year of 2007, RR Donnelley is projecting non-GAAP net earnings per diluted share from continuing operations to be in the range of $2.70 to $2.75, but trending toward the high end of the range. This guidance assumes no additional shares repurchased under the authorization available to the company. The non-GAAP effective tax rate for 2007 is expected to be approximately 33.0%.
GAAP net earnings per diluted share from continuing operations in 2007 may include restructuring, impairment and integration charges, the resolution of certain tax items and other items that are not currently determinable, but may be significant. For that reason, the company is unable to provide full-year GAAP net earnings estimates at this time.
Conference Call RR Donnelley will host a conference call and simultaneous webcast to discuss its second-quarter results today, Wednesday, August 1, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The live webcast will be accessible on RR Donnelley's web site: http://www.rrdonnelley.com/. Individuals wishing to participate can join the conference call by dialing 706.634.1139. A webcast replay will be archived on the Company's web site for 30 days after the call. In addition, a telephonic replay of the call will be available for seven days at 706.645.9291, passcode 6964388.
About RR Donnelley RR Donnelley (NYSE:RRD) is the world's premier full-service provider of print and related services, including business process outsourcing. Founded more than 140 years ago, the company provides solutions in commercial printing, direct mail, financial printing, print fulfillment, labels, forms, logistics, call centers, transactional print-and-mail, print management, online services, digital photography, color services, and content and database management to customers in the publishing, healthcare, advertising, retail, technology, financial services and many other industries. The largest companies in the world and others rely on RR Donnelley's scale, scope and insight through a comprehensive range of online tools, variable printing services and market-specific solutions. For more information, visit the company's web site at http://www.rrdonnelley.com/.
Use of Forward-Looking Statements This news release contains "forward-looking statements" as defined in the U.S. Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements and any such forward-looking statements are qualified in their entirety by reference to the following cautionary statements. All forward-looking statements speak only as of the date of this news release and are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. The company does not undertake to and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events. The factors that could cause material differences in the expected results of RR Donnelley include, without limitation, the following: the successful execution and integration of acquisitions and the performance of the company's businesses following acquisitions; the ability to implement comprehensive plans for the execution of cross-selling, cost containment, asset rationalization and other key strategies; competitive pressures in all markets in which the company operates; factors that affect customer demand, including changes in postal rates and postal regulations, changes in the capital markets, changes in advertising markets, the rate of migration from paper-based forms to digital format, customers' budgetary constraints and customers' changes in short-range and long-range plans; shortages or changes in availability, or increases in costs of, key materials (such as ink, paper and fuel); and other risks and uncertainties described in RR Donnelley's periodic filings with the Securities and Exchange Commission (SEC). Readers are strongly encouraged to read the full cautionary statements contained in RR Donnelley's filings with the SEC.
R. R. Donnelley & Sons Company
Consolidated Balance Sheets
As of June 30, 2007 and December 31, 2006
(UNAUDITED)
(In millions, except per share data) June 30, 2007 December 31, 2006
Assets Current Assets
Cash and cash equivalents $301.1 $211.4
Restricted cash equivalents 54.9 -
Receivables, less allowance for
doubtful accounts 2,067.5 1,638.6
Inventories 633.4 501.8
Prepaid expenses and other
current assets 92.0 70.4
Deferred income taxes 124.5 94.8
Total Current Assets 3,273.4 2,517.0 Property, plant and equipment
- net 2,692.0 2,142.3
Goodwill 3,754.5 2,886.8
Other intangible assets - net 1,349.3 1,119.8
Prepaid pension cost 768.3 638.6
Other noncurrent assets 427.1 331.3 Total Assets $12,264.6 $9,635.8 Liabilities Current Liabilities
Accounts payable 868.8 749.1
Accrued liabilities 1,039.8 839.2
Short-term debt and current
portion of long-term debt 662.2 23.5
Total Current Liabilities 2,570.8 1,611.8 Long-term debt 3,602.2 2,358.6
Postretirement benefit
obligations 298.7 288.0
Deferred income taxes 816.5 604.1
Other noncurrent liabilities 781.1 645.4
Liabilities from discontinued
operations 2.7 3.2 Total Liabilities $8,072.0 $5,511.1 Shareholders' Equity Preferred stock, $1.00 par value - -
Authorized shares: 2.0; Issued: None Common stock, $1.25 par value
Authorized shares: 500.0
Issued shares: 243.0 in 2007
and 2006 303.7 303.7 Additional paid-in capital 2,836.4 2,871.8 Retained earnings 1,544.0 1,615.0 Accumulated other comprehensive
income 168.3 62.1 Treasury stock, at cost, 20.9
shares (659.8) (727.9)
in 2007 (2006 - 24.2 shares)
Total Shareholders' Equity $4,192.6 $4,124.7 Total Liabilities and Shareholders'
Equity $12,264.6 $9,635.8 R. R. Donnelley & Sons Company
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2007 and 2006
(In millions, except per share data)
(UNAUDITED) Three months ended June 30,
2007 ADJUSTMENTS 2007 2006 ADJUSTMENTS 2006
GAAP TO NON-GAAP NON-GAAP GAAP TO NON-GAAP NON-GAAP Net sales $2,796.3 $- $2,796.3 $2,273.7 $- 2,273.7 Cost of sales
(exclusive of
depreciation
and
amortization
shown below) 2,039.8 - 2,039.8 1,648.0 - 1,648.0
Selling,
general
and
administrative
expenses
(exclusive
of
depreciation
and
amortization
shown below) 331.7 - 331.7 275.2 - 275.2
Restructuring
and
impairment
charges
-- net 330.5 (330.5) - 14.6 (14.6) -
Depreciation
and
amortization 148.7 - 148.7 114.2 - 114.2
Total
operating
expenses 2,850.7 (330.5) 2,520.2 2,052.0 (14.6) 2,037.4
Income
(loss) from
continuing
operations (54.4) 330.5 276.1 221.7 14.6 236.3 Interest
expense
-- net 55.4 - 55.4 35.6 - 35.6
Investment
and
other
income
(expense)
-- net (0.4) - (0.4) (3.7) - (3.7) Earnings
(loss)
from
continuing
operations
before
income
taxes and
minority
interest (110.2) 330.5 220.3 182.4 14.6 197.0 Income tax
expense
(benefit) (41.7) 111.9 70.2 58.2 5.4 63.6
Minority
interest 0.9 - 0.9 (0.2) - (0.2) Net earnings
(loss) from
continuing
operations (69.4) 218.6 149.2 124.4 9.2 133.6 Income (loss)
from
discontinued
operations
-- net of tax - - - 0.8 (0.8) - Net earnings
(loss) $(69.4) $218.6 $149.2 $125.2 $8.4 $133.6
Earnings per
share:
Basic:
Net earnings
(loss) from
continuing
operations $(0.32) $0.67 $0.57 $0.62
Loss from
discontinued
operations,
net of tax - - - -
Net earnings
(loss) $(0.32) $0.67 $0.57 $0.62
Diluted:
Net earnings
(loss) from
continuing
operations $(0.32) $0.67 $0.57 $0.61
Loss from
discontinued
operations,
net of tax - - - -
Net earnings
(loss) $(0.32) $0.67 $0.57 $0.61
Weighted
average
common shares
outstanding:
Basic 220.9 220.9 216.9 216.9
Diluted 220.9 221.8 218.9 218.9 R. R. Donnelley & Sons Company
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2007 and 2006
(In millions, except per share data)
(UNAUDITED) Six months ended June 30,
2007 ADJUSTMENTS 2007 2006 ADJUSTMENTS 2006
GAAP TO NON-GAAP NON-GAAP GAAP TO NON-GAAP NON-GAAP Net sales $5,588.9 $- $5,588.9 $4,540.6 $- $4,540.6 Cost of sales
(exclusive of
depreciation
and
amortization
shown below) 4,095.8 - 4,095.8 3,309.4 - 3,309.4
Selling,
general
and
administrative
expenses
(exclusive of
depreciation
and
amortization
shown below) 656.2 - 656.2 537.3 - 537.3
Restructuring
and
impairment
charges
-- net 341.9 (341.9) - 31.2 (31.2) -
Depreciation
and
amortization 290.9 - 290.9 229.0 - 229.0
Total
operating
expenses 5,384.8 (341.9) 5,042.9 4,106.9 (31.2) 4,075.7
Income (loss)
from
continuing
operations 204.1 341.9 546.0 433.7 31.2 464.9 Interest
expense
-- net 108.8 - 108.8 70.5 - 70.5
Investment
and other
income
(expense)
-- net 1.8 - 1.8 (4.5) - (4.5) Earnings
(loss) from
continuing
operations
before
income taxes
and minority
interest 97.1 341.9 439.0 358.7 31.2 389.9 Income tax
expense
(benefit) 26.2 116.3 142.5 120.7 11.6 132.3
Minority
interest 1.4 - 1.4 (0.6) - (0.6) Net earnings
(loss) from
continuing
operations 69.5 225.6 295.1 238.6 19.6 258.2 Income
(loss) from
discontinued
operations
-- net of tax (0.1) 0.1 - (1.5) 1.5 - Net earnings
(loss) $69.4 $225.7 $295.1 $237.1 $21.1 $258.2
Earnings
per share:
Basic:
Net earnings
(loss) from
continuing
operations $0.32 $1.34 $1.10 $1.19
Loss from
discontinued
operations,
net of tax - - (0.01) -
Net earnings
(loss) $0.32 $1.34 $1.09 $1.19
Diluted:
Net earnings
(loss) from
continuing
operations $0.31 $ 1.33 $1.09 $ 1.18
Loss from
discontinued
operations,
net of tax - - (0.01) -
Net earnings
(loss) $0.31 $1.33 $1.08 $1.18
Weighted
average
common shares
outstanding:
Basic 219.7 219.7 216.4 216.4
Diluted 221.1 221.1 218.3 218.3
The Company believes that certain non-GAAP measures, when presented in
conjunction with comparable GAAP measures, are 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. These measures should be considered in addition to, not a substitute for,
or superior to, measures of financial performance prepared in accordance
with GAAP.
R.R. Donnelley & Sons Company
Reconciliation of GAAP to Non-GAAP Measures
IN MILLIONS, EXCEPT PER SHARE AND MARGIN DATA
(UNAUDITED) Three months ended June 30, 2007
Net
Income (loss) earnings
from Net per
continuing Operating earnings diluted
operations margin (loss) share GAAP basis measures $(54.4) (1.9%) $(69.4) $(0.32) Non-GAAP adjustments:
Restructuring and impairment
charges, net (1) 330.5 11.8% 218.6 0.99
Net income from discontinued
operations (2) - - - -
Total non-GAAP adjustments 330.5 11.8% 218.6 0.99
Non-GAAP measures $276.1 9.9% $149.2 $0.67 R.R. Donnelley & Sons Company
Reconciliation of GAAP to Non-GAAP Measures
IN MILLIONS, EXCEPT PER SHARE AND MARGIN DATA
(UNAUDITED) Three months ended June 30, 2006 Net
earnings
Income Net per
continuing Operating earnings diluted
operations margin (loss) share
GAAP basis measures $221.7 9.8% $125.2 $0.57 Non-GAAP adjustments:
Restructuring and impairment
charges, net (1) 14.6 0.6% 9.2 0.04
Net income from discontinued
operations (2) - - (0.8) -
Total non-GAAP adjustments 14.6 0.6% 8.4 0.04
Non-GAAP measures $236.3 10.4% $133.6 $0.61
(1) Restructuring and impairment (pre-tax): Operating results for the
three months ended June 30, 2007 and 2006 were affected by the
following restructuring and impairment charges:
- 2007 included $316.1 million for the write-off of the Moore
Wallace, OfficeTiger, and other trade names; $11.7 million for
employee termination costs resulting from the reorganization of
certain operations and the exiting of certain business activities;
$2.1 million of other restructuring costs, including lease
termination costs; and $0.6 million for the impairment of other
long-lived assets. - 2006 included $10.2 million for employee termination costs
resulting from the reorganization of certain operations and the
exiting of certain business activities; $2.5 million of other
restructuring costs, including lease termination costs; and $1.9
million for the impairment of other long-lived assets.
(2) Net income from discontinued operations: The net income from
discontinued operations for the three months ended June 30, 2006
primarily reflects the sublease of a facility previously occupied by
the Company's package logistics business.
R.R. Donnelley & Sons Company
Reconciliation of GAAP to Non-GAAP Measures
IN MILLIONS, EXCEPT PER SHARE AND MARGIN DATA
(UNAUDITED) Six months ended June 30, 2007
Net
Income earnings
from per
continuing Operating Net diluted
operations margin earnings share
GAAP basis measures $204.1 3.7% $69.4 $0.31 Non-GAAP adjustments:
Restructuring and impairment
charges, net (1) 341.9 6.1% 225.6 1.02
Net loss from discontinued
operations (2) - - 0.1 -
Total non-GAAP adjustments 341.9 6.1% 225.7 1.02
Non-GAAP measures $546.0 9.8% $295.1 $1.33 R.R. Donnelley & Sons Company
Reconciliation of GAAP to Non-GAAP Measures
IN MILLIONS, EXCEPT PER SHARE AND MARGIN DATA
(UNAUDITED) Six months ended June 30, 2006
Net
Income earnings
from per
continuing Operating Net diluted
operations margin earnings share
GAAP basis measures $433.7 9.6% $237.1 $1.08 Non-GAAP adjustments:
Restructuring and impairment
charges, net (1) 31.2 0.7% 19.6 0.09
Net loss from discontinued
operations (2) - - 1.5 0.01
Total non-GAAP adjustments 31.2 0.7% 21.1 0.10
Non-GAAP measures $464.9 10.2% $258.2 $1.18
(1) Restructuring and impairment (pre-tax): Operating results for the
six months ended June 30, 2007 and 2006 were affected by the
following restructuring and impairment charges:
- 2007 included $316.1 million for the write-off of the Moore
Wallace, OfficeTiger, and other trade names; $21.0 million for
employee termination costs resulting from the reorganization of
certain operations and the exiting of certain business activities;
$4.1 million of other restructuring costs, including lease
termination costs; and $0.7 million for the impairment of other
long-lived assets. - 2006 included $23.7 million for employee termination costs
resulting from the reorganization of certain operations and the
exiting of certain business activities; $5.2 million of other
restructuring costs, including lease termination costs; and $2.3
million for the impairment of other long-lived assets.
(2) Net loss from discontinued operations: The net loss from
discontinued operations for the six months ended June 30, 2006
primarily reflects costs resulting from a subtenant bankruptcy
related to a facility previously occupied by the Company's package
logistics business.
R. R. Donnelley & Sons Company
Segment GAAP to Non-GAAP Operating Income and Margin Reconciliation
For the three months ended June 30, 2007 and 2006
$ IN MILLIONS
(UNAUDITED) Global
Print Global Corporate Consolidated
Solutions Services Three Months Ended
June 30, 2007
Net Sales $1,806.3 $990.0 $- $2,796.3
Operating Expense 1,633.0 1,174.1 43.6 2,850.7
Operating Income (Loss) 173.3 (184.1) (43.6) (54.4)
Operating Margin % 9.6% (18.6)% nm (1.9)% Non-GAAP Adjustments
Restructuring charges 4.7 7.5 1.6 13.8
Impairment charges 53.4 263.3 - 316.7
Integration charges - - - -
Total Non-GAAP Adjustments 58.1 270.8 1.6 330.5 Operating income (loss) excluding
restructuring, impairment and
integration charges $231.4 $86.7 $(42.0) $276.1
Operating margin before
restructuring, impairment and
integration charges % 12.8% 8.8% nm 9.9% Depreciation and amortization 98.1 42.1 8.5 148.7
Capital expenditures 90.1 31.5 5.8 127.4
Three Months Ended
June 30, 2006
Net Sales $1,357.0 $916.7 $- $2,273.7
Operating Expense 1,159.1 839.1 53.8 2,052.0
Operating Income (Loss) 197.9 77.6 (53.8) 221.7
Operating Margin % 14.6% 8.5% nm 9.8% Non-GAAP Adjustments
Restructuring charges 2.3 9.7 0.7 12.7
Impairment charges - 1.9 - 1.9
Integration charges - - - -
Total Non-GAAP Adjustments 2.3 11.6 0.7 14.6 Operating income (loss) excluding
restructuring, impairment and
integration $200.2 $89.2 $(53.1) $236.3
Operating margin before
restructuring, impairment and
integration charges % 14.8% 9.7% nm 10.4% Depreciation and amortization 66.7 40.4 7.1 114.2
Capital expenditures 65.6 18.5 2.7 86.8 R. R. Donnelley & Sons Company
Segment GAAP to Non-GAAP Operating Income and Margin Reconciliation
For the six months ended June 30, 2007 and 2006
$ IN MILLIONS
(UNAUDITED) Global
Print Global Corporate Consolidated
Solutions Services Six Months Ended
June 30, 2007
Net Sales $3,628.1 $1,960.8 $- $5,588.9
Operating Expense 3,229.3 2,057.6 97.9 5,384.8
Operating Income (Loss) 398.8 (96.8) (97.9) 204.1
Operating Margin % 11.0% (4.9)% nm 3.7% Non-GAAP Adjustments
Restructuring charges 9.0 10.4 5.7 25.1
Impairment charges 53.4 263.4 - 316.8
Integration charges - - - -
Total Non-GAAP Adjustments 62.4 273.8 5.7 341.9 Operating income (loss) excluding
restructuring, impairment and
integration charges $461.2 $177.0 $(92.2) $546.0
Operating margin before
restructuring, impairment and
integration charges % 12.7% 9.0% nm 9.8% Depreciation and amortization 189.0 84.6 17.3 290.9
Capital expenditures 180.9 45.9 10.0 236.8
Six Months Ended June 30, 2006
Net Sales $2,728.8 $1,811.8 $- $4,540.6
Operating Expense 2,353.6 1,651.1 102.2 4,106.9
Operating Income (Loss) 375.2 160.7 (102.2) 433.7
Operating Margin % 13.7% 8.9% nm 9.6% Non-GAAP Adjustments
Restructuring charges 7.6 14.6 6.7 28.9
Impairment charges - 2.3 - 2.3
Integration charges - - - -
Total Non-GAAP Adjustments 7.6 16.9 6.7 31.2 Operating income (loss) excluding
restructuring, impairment and
integration $382.8 $177.6 $(95.5) $464.9
Operating margin before
restructuring, impairment and
integration charges % 14.0% 9.8% nm 10.2% Depreciation and amortization 134.2 79.8 15.0 229.0
Capital expenditures 142.0 29.7 6.0 177.7 R. R. Donnelley & Sons Company
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2007 and 2006
IN MILLIONS
(UNAUDITED) 2007 2006
Operating Activities Net earnings $69.4 $237.1 Net loss from discontinued
operations 0.1 1.5 Adjustment to reconcile net
earnings to cash provided by
operating activities 516.1 290.7 Changes in operating assets and
liabilities (149.1) (286.0)
Net cash provided by operating
activities of continuing operations 436.5 243.3
Net cash used in operating activities
of discontinued operations (0.6) (0.5)
Net cash provided by operating
activities 435.9 242.8 Net cash used in investing activities
of continuing operations (2,163.5) (412.3)
Net cash provided by investing
activities of discontinued operations - -
Net cash used in investing activities (2,163.5) (412.3) Net cash provided by (used in)
financing activities of continuing
operations 1,806.1 (62.7)
Net cash provided by financing
activities of discontinued operations - -
Net cash provided by (used in)
financing activities 1,806.1 (62.7) Effect of exchange rate on cash and
cash equivalents 11.2 4.0 Net increase (decrease) in cash and
cash equivalents 89.7 (228.2) Cash and cash equivalents at beginning
of period 211.4 366.7 Cash and cash equivalents at end of
period $301.1 $138.5
Supplemental non-cash disclosure:
Use of restricted cash to fund
obligations associated with
deferred compensation plans $10.4 $-
Acquisition of business - purchase
price payable $- $8.7
Acquisition of assets through
direct financing $- $10.8 R.R. Donnelley & Sons Company
Revenue Reconciliation Reported to Pro Forma
For the three months ended June 30, 2007 and 2006
$ IN MILLIONS
(UNAUDITED) Adjustment
for net
sales of
Reported net acquired Pro forma
sales businesses net sales
Three Months Ended June 30, 2007
Global Print Solutions $1,806.3 $38.0 $1,844.3
Global Services 990.0 2.9 992.9
Consolidated $2,796.3 $40.9 $2,837.2 Three Months Ended June 30, 2006
Global Print Solutions $1,357.0 $478.1 $1,835.1
Global Services 916.7 34.6 951.3
Consolidated $2,273.7 $512.7 $2,786.4 Net sales change
Global Print Solutions 33.1% 0.5%
Global Services 8.0% 4.4%
Consolidated 23.0% 1.8%*
The reported results of the company include the results of acquired
businesses from the acquisition date forward. The company has provided
this schedule to reconcile reported net sales for the three months ended
June 30, 2007 and 2006 to pro forma net sales as if the acquisitions took
place at the beginning of the respective periods.
For the three months ended June 30, 2007, the adjustment for net sales of
acquired businesses reflects the net sales of Von Hoffmann (acquired May
16, 2007).
For the three months ended June 30, 2006 the adjustment for net sales of
acquired businesses reflects the net sales of OfficeTiger Holdings, Inc. (acquired April 27, 2006), Banta Corporation (acquired January 9, 2007),
Perry Judd's Holdings Incorporated (acquired January 24, 2007) and Von
Hoffmann (acquired May 16, 2007).
* Includes growth from legacy RRD platform of approximately 3% and the
acquired companies of approximately -4%.
R.R. Donnelley & Sons Company
Revenue Reconciliation Reported to Pro Forma
For the six months ended June 30, 2007 and 2006
$ IN MILLIONS
(UNAUDITED) Adjustment
for net
sales of
Reported net acquired Pro forma
sales businesses net sales
Six Months Ended June 30, 2007
Global Print Solutions $3,628.1 $155.0 $3,783.1
Global Services 1,960.8 11.1 1,971.9
Consolidated $5,588.9 $166.1 $5,755.0 Six Months Ended June 30, 2006
Global Print Solutions $2,728.8 $981.6 $3,710.4
Global Services 1,811.8 87.3 1,899.1
Consolidated $4,540.6 $1,068.9 $5,609.5 Net sales change
Global Print Solutions 33.0% 2.0%
Global Services 8.2% 3.8%
Consolidated 23.1% 2.6%*
The reported results of the company include the results of acquired
businesses from the acquisition date forward. The company has provided
this schedule to reconcile reported net sales for the six months ended
June 30, 2007 and 2006 to pro forma net sales as if the acquisitions took
place at the beginning of the respective periods.
For the six months ended June 30, 2007, the adjustment for net sales of
acquired businesses reflects the net sales of Banta Corporation (acquired
January 9, 2007), Perry Judd's Holdings Incorporated (acquired January 24,
2007), and Von Hoffmann (acquired May 16, 2007).
For the six months ended June 30, 2006 the adjustment for net sales of
acquired businesses reflects the net sales of OfficeTiger Holdings, Inc. (acquired April 27, 2006), Banta Corporation (acquired January 9, 2007),
Perry Judd's Holdings Incorporated (acquired January 24, 2007) and Von
Hoffmann (acquired May 16, 2007).
* Includes growth from legacy RRD platform of approximately 3% and the
acquired companies of approximately 0%. DATASOURCE: R.R. Donnelley & Sons Company CONTACT: Media, Doug Fitzgerald, EVP, Marketing & Communications, +1-312-326-7740, or , or Investors, Dan Leib, SVP, Finance, +1-312-326-7710, or Web site: http://www.rrdonnelley.com/
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