Donnelley (R.R.) & Sons Co. (NYSE:RRD.WI)
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Highlights:
Second-quarter 2008 GAAP net earnings from continuing operations of
$145.1 million or $0.68 per diluted share vs. a net loss of $69.4
million or $0.32 per diluted share in 2007
Second-quarter 2008 non-GAAP net earnings from continuing operations
of $156.4 million or $0.73 per diluted share, an increase of 9.0% in
non-GAAP earnings per diluted share from 2007
Reaffirms full-year, 2008 non-GAAP net earnings per diluted share from
continuing operations guidance of $3.08 to $3.15
Repurchased 5 million shares year-to-date through today; remaining
authorization of 5 million shares
R.R. Donnelley & Sons Company (NYSE:RRD) today reported
second-quarter net earnings from continuing operations of $145.1 million
or $0.68 per diluted share on net sales of $2.9 billion compared to a
net loss from continuing operations of $69.4 million or $0.32 per
diluted share on net sales of $2.8 billion in the second quarter of
2007. The second-quarter net earnings from continuing operations
included pre-tax charges, substantially all associated with the
reorganization of certain operations and the exiting of certain business
activities, for restructuring ($15.8 million) and impairment ($0.4
million) totaling $16.2 million in 2008. The net loss from continuing
operations in the second quarter of 2007 included pre-tax charges for
impairment ($316.7 million) and restructuring ($13.8 million), totaling
$330.5 million. Substantially all of the second-quarter 2007 impairment
charge related to the write-off of the Moore Wallace, OfficeTiger and
other trade names and substantially all of the second quarter-2007
restructuring charges related to the reorganization of certain
operations and exiting of certain business activities. The company’s
effective tax rate was 33.5% in the second quarter of 2008 compared to a
net tax benefit of 37.8% in the second quarter of 2007 primarily due to
a tax benefit recognized on the pre-tax loss resulting from the non-cash
impairment charge included in the second quarter of 2007.
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 earnings from continuing operations totaled $156.4 million or
$0.73 per diluted share in the second quarter of 2008 compared to $149.2
or $0.67 per diluted share in the second quarter of 2007. Second-quarter
non-GAAP net earnings from continuing operations exclude restructuring
and impairment charges in both 2008 and 2007. For non-GAAP comparison
purposes, the effective tax rate increased to 33.3% in the second
quarter of 2008 from 31.9% in the second quarter of 2007 due to a larger
proportion of taxable income being generated in higher tax jurisdictions
in 2008. A reconciliation of GAAP net earnings to non-GAAP net earnings
for these adjustments is presented in the attached tables.
"As we mentioned in the pre-release of our second-quarter results on
July 16, we are pleased with our results in the context of challenging
global economic conditions,” said Thomas J.
Quinlan III, RR Donnelley's President and Chief Executive Officer. “The
preparation and diligence in continuously managing our cost structure
paid off as operating margins expanded, driven by our U.S. Print and
Related Services segment. We reaffirm our full-year non-GAAP operating
margin guidance of slightly greater than 10.0%.”
Quinlan added, “We continue to employ a
balanced approach to capital deployment allowing us to maintain
investment grade credit metrics and substantial liquidity.”
Business Review (Continuing Operations)
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.
Summary
The company acquired Von Hoffmann in May of 2007, Cardinal Brands in
December of 2007 and Pro Line Printing in March of 2008. In aggregate,
these acquired companies carried a lower operating margin historically
than the company has been able to achieve. The company's proven
financial discipline and approach to achieving productivity increases
have had a positive impact on these operations, and the company sees
opportunities for continued improvement.
Net sales in the quarter were $2.9 billion, up nearly 4.6% from the
second quarter of 2007. The increase was due to acquisitions and
favorable foreign exchange rates, offset in part by continued price
pressure and volume declines. The gross margin rate decreased to 26.7%
in the second quarter of 2008 from 27.1% in the second quarter of 2007
due to the inclusion of the acquired companies that in aggregate carried
a lower margin historically, an unfavorable product mix and continued
price pressure that more than offset the benefits from productivity
efforts. While the gross margin rate decreased, the Company’s
aggressive cost management resulted in a larger decrease in SG&A as a
percentage of revenue than the gross margin decrease. SG&A expense as a
percentage of net sales decreased to 11.1% in the second quarter of 2008
from 11.9% in the second quarter of 2007 due to the benefits of our
productivity initiatives. Operating margin, which was negatively
impacted by charges for restructuring and impairment of $16.2 million in
the second quarter of 2008 and $330.5 million in the second quarter of
2007, increased to 9.5% in the second quarter of 2008 from –1.9%
in the second quarter of 2007.
Excluding charges for restructuring and impairment, the non-GAAP
operating margin in the second quarter of 2008 increased to 10.0% from
9.9% in the second quarter of 2007, as benefits from our costs savings
and productivity efforts offset continued price pressure, the inclusion
of the acquired companies that in aggregate carried a lower margin
historically and changes in foreign exchange rates.
Segments
Net sales for the U.S. Print and Related Services segment increased 4.5%
to $2.2 billion from the second quarter of 2007 due to the acquisitions
of Von Hoffmann, Cardinal Brands and Pro Line, as well as sales
increases in logistics services and volume increases in stock products,
direct mail and digital solutions, offset in part by decreases in
commercial print, financial print and forms. The segment’s
operating margin, which was negatively impacted by charges for
restructuring of $3.9 million in the second quarter of 2008 and
restructuring and impairment charges of $263.3 million in the second
quarter of 2007, increased to 13.1% from 0.2% in the second quarter of
2007. Excluding restructuring and impairment charges, the segment’s
non-GAAP operating margin increased to 13.3% in the second quarter of
2008 from 12.9% in the second quarter of 2007, as the benefit of
productivity efforts more than offset the impact of continued price
pressure and the inclusion of the acquired companies that in aggregate
carried a lower margin historically.
Net sales for the International segment increased 4.8% to $762.0 million
from the second quarter of 2007 due to the impact of changes in foreign
exchange rates and increased sales in Global Turnkey Solutions and Latin
America, partially offset by continued price pressure. The segment’s
operating margin, which was negatively impacted by charges for
restructuring of $9.2 million in the second quarter of 2008 and
restructuring and impairment charges of $65.6 million in the second
quarter of 2007, increased to 5.1% in the second quarter of 2008 from –2.0%
in the second quarter of 2007. Excluding restructuring and impairment
charges, the segment’s non-GAAP operating
margin decreased to 6.3% in the second quarter of 2008 from 7.0% in the
second quarter of 2007 due to changes in foreign exchange rates, an
unfavorable business mix and continued price pressure.
Unallocated Corporate operating expense increased slightly to $44.7
million in the second quarter of 2008 from $43.6 million in the second
quarter of 2007. Excluding restructuring and impairment charges of $3.1
million in the second quarter of 2008 and restructuring charges of $1.6
million in the second quarter of 2007, Corporate operating expense
decreased slightly from $42.0 million to $41.6 million in the second
quarter of 2008.
Outlook – 2008 Full-year non-GAAP EPS from
Continuing Operations Reaffirmed
For the full year of 2008, RR Donnelley is projecting non-GAAP net
earnings per diluted share from continuing operations to be in the range
of $3.08 to $3.15. This guidance includes the expected impact of the
previously completed acquisitions and assumes no additional shares
repurchased under the authorization available to the company. The
non-GAAP effective tax rate for 2008 is expected to be approximately
33.5% to 34.5%. GAAP net earnings per diluted share from continuing
operations in 2008 may include restructuring and impairment 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 6, 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
55582190.
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 144 years ago, the
company provides products and 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 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 integration of the
sales force, 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
Condensed Consolidated Balance Sheets
As of June 30, 2008 and December 31, 2007
(UNAUDITED)
(In millions, except per share data)
June 30, 2008
December 31, 2007
Assets
Current Assets
Cash and cash equivalents
435.3
379.0
Restricted cash equivalents
8.4
63.9
Receivables, less allowance for doubtful accounts
2,165.4
2,181.2
Inventories
748.5
709.5
Prepaid expenses and other current assets
84.5
85.5
Deferred income taxes
119.8
102.2
Total current assets
3,561.9
3,521.3
Property, plant and equipment, net
2,758.5
2,726.0
Goodwill
3,287.1
3,264.9
Other intangibles - net
1,283.6
1,323.2
Prepaid pension cost
846.6
833.2
Other noncurrent assets
433.2
418.1
Total Assets
12,170.9
12,086.7
Liabilities
Accounts payable
Accounts payable
875.5
954.9
Accrued liabilities
986.6
1,085.3
Short-term and current portion of long-term debt
1,211.1
725.0
Total Current Liabilities
3,073.2
2,765.2
Long-term debt
3,198.3
3,601.9
Postretirement benefit obligations
254.2
247.9
Deferred income taxes
900.3
872.3
Other noncurrent liabilities
651.4
689.1
Liabilities from discontinued operations
0.5
3.0
Total Liabilities
8,077.9
8,179.4
Shareholders' Equity
Common stock, $1.25 par value
303.7
303.7
Authorized shares: 500.0
Issued shares: 243.0 in 2008 and 2007
Additional paid-in capital
2,874.1
2,858.4
Retained earnings
1,530.4
1,312.9
Accumulated other comprehensive income
423.1
341.3
Treasury stock, at cost, 31.3 shares
(1,038.3
)
(909.0
)
in 2008 (2007 - 27.1 shares)
Total Shareholders' Equity
4,093.0
3,907.3
Total Liabilities and Shareholders' Equity
12,170.9
12,086.7
R. R. Donnelley & Sons Company
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 2008 and 2007
(In millions, except per share data)
(UNAUDITED)
Three months ended June 30,
Six months ended June 30,
2 0 0 8
GAAP
ADJUSTMENTS
TO NON-GAAP
2 0 0 8
NON-GAAP
2 0 0 7
GAAP
ADJUSTMENTS
TO NON-GAAP
2 0 0 7
NON-GAAP
2 0 0 8
GAAP
ADJUSTMENTS
TO NON-GAAP
2 0 0 8
NON-GAAP
2 0 0 7
GAAP
ADJUSTMENTS
TO NON-GAAP
2 0 0 7
NON-GAAP
Net sales
$ 2,923.6
$ -
$ 2,923.6
$ 2,796.3
$ -
$ 2,796.3
$ 5,920.7
$ -
$ 5,920.7
$ 5,588.9
$ -
$ 5,588.9
Cost of sales (exclusive of depreciation and amortization shown
below)
2,143.5
-
2,143.5
2,039.8
-
2,039.8
4,361.7
-
4,361.7
4,095.8
-
4,095.8
Selling, general and administrative expenses (exclusive of
depreciation and amortization shown below)
323.3
-
323.3
331.7
-
331.7
668.0
-
668.0
656.2
-
656.2
Restructuring and impairment charges
16.2
(16.2
)
-
330.5
(330.5
)
-
23.1
(23.1
)
-
341.9
(341.9
)
-
Depreciation and amortization
164.2
-
164.2
148.7
-
148.7
321.8
-
321.8
290.9
-
290.9
Total operating expenses
2,647.2
(16.2
)
2,631.0
2,850.7
(330.5
)
2,520.2
5,374.6
(23.1
)
5,351.5
5,384.8
(341.9
)
5,042.9
Income (loss) from continuing operations
276.4
16.2
292.6
(54.4
)
330.5
276.1
546.1
23.1
569.2
204.1
341.9
546.0
Interest expense - net
57.8
-
57.8
55.4
-
55.4
114.8
-
114.8
108.8
-
108.8
Investment and other income - net
3.4
-
3.4
(0.4
)
-
(0.4
)
8.0
-
8.0
1.8
-
1.8
Earnings (loss) from continuing operations before income taxes
and minority interest
222.0
16.2
238.2
(110.2
)
330.5
220.3
439.3
23.1
462.4
97.1
341.9
439.0
Income tax expense (benefit)
74.4
4.9
79.3
(41.7
)
111.9
70.2
109.8
45.3
155.1
26.2
116.3
142.5
Minority interest
2.5
-
2.5
0.9
-
0.9
2.4
-
2.4
1.4
-
1.4
Net earnings (loss) from continuing operations
145.1
11.3
156.4
(69.4
)
218.6
149.2
327.1
(22.2
)
304.9
69.5
225.6
295.1
Income (loss) from discontinued operations - net of tax
1.2
(1.2
)
-
-
-
-
1.7
(1.7
)
-
(0.1
)
0.1
-
Net earnings (loss)
$ 146.3
$ 10.1
$ 156.4
$ (69.4
)
$ 218.6
$ 149.2
$ 328.8
$ (23.9
)
$ 304.9
$ 69.4
$ 225.7
$ 295.1
Earnings per share:
Basic:
Net earnings (loss) from continuing operations
$ 0.68
$ 0.74
$ (0.32
)
$ 0.67
$ 1.53
$ 1.43
$ 0.32
$ 1.34
Income (loss) from discontinued operations, net of tax
$ 0.01
$ -
$ -
$ -
$ 0.01
$ -
$ -
$ -
Net earnings
$ 0.69
$ 0.74
$ (0.32
)
$ 0.67
$ 1.54
$ 1.43
$ 0.32
$ 1.34
Diluted:
Net earnings (loss) from continuing operations
$ 0.68
$ 0.73
$ (0.32
)
$ 0.67
$ 1.53
$ 1.43
$ 0.31
$ 1.33
Income (loss) from discontinued operations, net of tax
$ 0.01
$ -
$ -
$ -
$ 0.01
$ -
$ -
$ -
Net earnings
$ 0.69
$ 0.73
$ (0.32
)
$ 0.67
$ 1.54
$ 1.43
$ 0.31
$ 1.33
Weighted average common shares outstanding:
Basic
212.3
212.3
220.9
220.9
213.4
213.4
219.7
219.7
Diluted
212.9
212.9
220.9
221.8
213.9
213.9
221.1
221.1
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, 2008
Three months ended June 30, 2007
Income fromcontinuingoperations
Operatingmargin
Net earnings
Net earningsper dilutedshare
Income (loss)fromcontinuingoperations
Operatingmargin
Net earnings(loss)
Net earnings(loss) perdiluted
share
GAAP basis measures
$ 276.4
9.5
%
$ 146.3
$ 0.69
$ (54.4
)
-1.9
%
$ (69.4
)
$ (0.32
)
Non-GAAP adjustments:
Restructuring and impairment charges (1)
16.2
0.5
%
11.3
0.05
330.5
11.8
%
218.6
0.99
Net income from discontinued operations (2)
-
-
(1.2
)
(0.01
)
-
-
-
-
Total Non-GAAP adjustments
16.2
0.5
%
10.1
0.04
330.5
11.8
%
218.6
0.99
Non-GAAP measures
$ 292.6
10.0
%
$ 156.4
$ 0.73
$ 276.1
9.9
%
$ 149.2
$ 0.67
(1) Restructuring and impairment (pre-tax): Operating results for
the three months ended June 30, 2008 and 2007 were affected by the
following restructuring and impairment charges:
- 2008 included restructuring charges of $10.3 million for
employee termination costs resulting from the reorganization of
certain operations and the exiting of certain business activities;
$5.5 million of other restructuring costs, including lease
termination and other facility closure costs; and $0.4 million of
impairment charges related to the impairment of other long-lived
assets.
- 2007 included impairment charges of $316.1 million for the
write-off of the Moore Wallace, OfficeTiger, and other trade names;
restructuring charges of $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.
(2) Net income from discontinued operations: The net income from
discontinued operations for the three months ended June 30, 2008
reflects the reversal of a deferred tax liability for 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, 2008
Six months ended June 30, 2007
Income fromcontinuingoperations
Operatingmargin
Net earnings
Net earningsper dilutedshare
Income fromcontinuingoperations
Operatingmargin
Net earnings
Net earningsper dilutedshare
GAAP basis measures
$ 546.1
9.2
%
$ 328.8
$ 1.54
$ 204.1
3.7
%
$ 69.4
$ 0.31
Non-GAAP adjustments:
Restructuring and impairment charges (1)
23.1
0.4
%
15.8
0.07
341.9
6.1
%
225.6
1.02
Income tax adjustments (2)
-
-
(38.0
)
(0.17
)
-
-
-
-
Net (income) loss from discontinued operations (3)
-
-
(1.7
)
(0.01
)
-
-
0.1
-
Total Non-GAAP adjustments
23.1
0.4
%
(23.9
)
(0.11
)
341.9
6.1
%
225.7
1.02
Non-GAAP measures
$ 569.2
9.6
%
$ 304.9
$ 1.43
$ 546.0
9.8
%
$ 295.1
$ 1.33
(1) Restructuring and impairment (pre-tax): Operating results for
the six months ended June 30, 2008 and 2007 were affected by the
following restructuring and impairment charges:
- 2008 included restructuring charges of $15.0 million for employee
termination costs resulting from the reorganization of certain
operations and the exiting of certain business activities; $6.0
million of other restructuring costs, including lease termination
and other facility closure costs; and $2.1 million of impairment
charges related to the impairment of other long-lived assets.
- 2007 included impairment charges of $316.1 million for the
write-off of the Moore Wallace, OfficeTiger, and other trade names;
restructuring charges of $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.
(2) Income tax adjustments: Net earnings for the six months ended
June 30, 2008 were affected by a $38 million reversal of reserves
for uncertain tax positions.
(3) Net income (loss) from discontinued operations: The net income
from discontinued operations for the six months ended June 30, 2008
reflects the reversal of a deferred tax liability for 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, 2008 and 2007
$ IN MILLIONS
(UNAUDITED)
U.S. Print andRelated Services
International
Corporate
Consolidated
Three Months Ended June 30, 2008
Net Sales
$ 2,161.6
$ 762.0
$ -
$ 2,923.6
Operating Expense
1,879.0
723.5
44.7
2,647.2
Operating Income (Loss)
282.6
38.5
(44.7
)
276.4
Operating Margin %
13.1
%
5.1
%
nm
9.5
%
Non-GAAP Adjustments
Restructuring charges
3.9
9.2
2.7
15.8
Impairment charges
-
-
0.4
0.4
Total Non-GAAP Adjustments
3.9
9.2
3.1
16.2
Operating income (loss) excluding restructuring and impairment
charges
$ 286.5
$ 47.7
$ (41.6
)
$ 292.6
Operating margin before restructuring and impairment charges %
13.3
%
6.3
%
nm
10.0
%
Depreciation and amortization
109.2
44.8
10.2
164.2
Capital expenditures
53.6
26.4
5.5
85.5
Three Months Ended June 30, 2007
Net Sales
$ 2,069.2
$ 727.1
$ -
$ 2,796.3
Operating Expense
2,065.4
741.7
43.6
2,850.7
Operating Income (Loss)
3.8
(14.6
)
(43.6
)
(54.4
)
Operating Margin %
0.2
%
(2.0
)%
nm
(1.9
)%
Non-GAAP Adjustments
Restructuring charges
5.3
6.9
1.6
13.8
Impairment charges
258.0
58.7
-
316.7
Total Non-GAAP Adjustments
263.3
65.6
1.6
330.5
Operating income (loss) excluding restructuring and impairment
charges
$ 267.1
$ 51.0
$ (42.0
)
$ 276.1
Operating margin before restructuring and impairment charges %
12.9
%
7.0
%
nm
9.9
%
Depreciation and amortization
100.1
40.1
8.5
148.7
Capital expenditures
66.6
55.0
5.8
127.4
R. R. Donnelley & Sons Company
Segment GAAP to Non-GAAP Operating Income and Margin Reconciliation
For the Six months ended June 30, 2008 and 2007
$ IN MILLIONS
(UNAUDITED)
U.S. Print andRelated Services
International
Corporate
Consolidated
Six Months Ended June 30, 2008
Net Sales
$ 4,402.3
$ 1,518.4
$ -
$ 5,920.7
Operating Expense
3,853.0
1,431.0
90.6
5,374.6
Operating Income (Loss)
549.3
87.4
(90.6
)
546.1
Operating Margin %
12.5
%
5.8
%
nm
9.2
%
Non-GAAP Adjustments
Restructuring charges
7.5
12.0
1.5
21.0
Impairment charges
1.7
-
0.4
2.1
Total Non-GAAP Adjustments
9.2
12.0
1.9
23.1
Operating income (loss) excluding restructuring and impairment
charges
$ 558.5
$ 99.4
$ (88.7
)
$ 569.2
Operating margin before restructuring and impairment charges %
12.7
%
6.5
%
nm
9.6
%
Depreciation and amortization
213.5
87.7
20.6
321.8
Capital expenditures
101.3
47.6
8.5
157.4
Six Months Ended June 30, 2007
Net Sales
$ 4,171.0
$ 1,417.9
$ -
$ 5,588.9
Operating Expense
3,907.9
1,379.0
97.9
5,384.8
Operating Income (Loss)
263.1
38.9
(97.9
)
204.1
Operating Margin %
6.3
%
2.7
%
nm
3.7
%
Non-GAAP Adjustments
Restructuring charges
10.1
9.3
5.7
25.1
Impairment charges
258.0
58.8
-
316.8
Total Non-GAAP Adjustments
268.1
68.1
5.7
341.9
Operating income (loss) excluding restructuring and impairment
charges
$ 531.2
$ 107.0
$ (92.2
)
$ 546.0
Operating margin before restructuring and impairment charges %
12.7
%
7.5
%
nm
9.8
%
Depreciation and amortization
194.0
79.6
17.3
290.9
Capital expenditures
138.4
88.4
10.0
236.8
R. R. Donnelley & Sons Company
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2008 and 2007
IN MILLIONS
(UNAUDITED)
2008
2007
Operating Activities
Net earnings
$ 328.8
$ 69.4
Net (earnings) loss from discontinued operations
(1.7
)
0.1
Adjustment to reconcile net earnings to cash provided by operating
activities
314.3
516.1
Changes in operating assets and liabilities
(269.7
)
(149.1
)
Net cash provided by operating activities of continuing operations
371.7
436.5
Net cash used in operating activities of discontinued operations
(0.8
)
(0.6
)
Net cash provided by operating activities
370.9
435.9
Net cash used in investing activities of continuing operations
(197.0
)
(2,163.5
)
Net cash used in investing activities of discontinued operations
-
-
Net cash used in investing activities
(197.0
)
(2,163.5
)
Net cash (used in) provided by financing activities of continuing
operations
(134.5
)
1,806.1
Net cash used in financing activities of discontinued operations
-
-
Net cash (used in) provided by financing activities
(134.5
)
1,806.1
Effect of exchange rate on cash and cash equivalents
16.9
11.2
Net increase in cash and cash equivalents
56.3
89.7
Cash and cash equivalents at beginning of period
379.0
211.4
Cash and cash equivalents at end of period
$ 435.3
$ 301.1
Supplemental non-cash disclosure:
Use of restricted cash to fund obligations associated with deferred
compensation plans
$ 24.2
$ 10.4
R.R. Donnelley & Sons Company
Revenue Reconciliation Reported to Pro Forma
For the three months ended June 30, 2008 and 2007
$ IN MILLIONS
(UNAUDITED)
Reported netsales
Adjustmentfor net salesof
acquiredbusinesses
Pro forma netsales
Three Months Ended June 30, 2008
U.S. Print and Related Services
$ 2,161.6
$ -
$ 2,161.6
International
762.0
-
762.0
Consolidated
$ 2,923.6
$ -
$ 2,923.6
Three Months Ended June 30, 2007
U.S. Print and Related Services
$ 2,069.2
$ 117.1
$ 2,186.3
International
727.1
-
727.1
Consolidated
$ 2,796.3
$ 117.1
$ 2,913.4
Net sales change
U.S. Print and Related Services
4.5
%
-1.1
%
International
4.8
%
4.8
%
Consolidated
4.6
%
0.4
%
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, 2008 and 2007 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), Cardinal Brands, Inc. (acquired December 27, 2007) and
Pro Line Printing, Incorporated (acquired March 14, 2008).
R.R. Donnelley & Sons Company
Revenue Reconciliation Reported to Pro Forma
For the six months ended June 30, 2008 and 2007
$ IN MILLIONS
(UNAUDITED)
Reported netsales
Adjustmentfor net salesof
acquiredbusinesses
Pro forma netsales
Six Months Ended June 30, 2008
U.S. Print and Related Services
$ 4,402.3
$ 23.6
$ 4,425.9
International
1,518.4
-
1,518.4
Consolidated
$ 5,920.7
$ 23.6
$ 5,944.3
Six Months Ended June 30, 2007
U.S. Print and Related Services
$ 4,171.0
$ 306.6
$ 4,477.6
International
1,417.9
9.2
1,427.1
Consolidated
$ 5,588.9
$ 315.8
$ 5,904.7
Net sales change
U.S. Print and Related Services
5.5%
-1.2%
International
7.1%
6.4%
Consolidated
5.9%
0.7%
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, 2008 and 2007 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, 2008, the adjustment for net sales of
acquired businesses reflects the net sales of Pro Line Printing,
Incorporated (acquired March 14, 2008).
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), Von Hoffmann (acquired May 16, 2007), Cardinal
Brands, Inc. (acquired December 27, 2007) and Pro Line Printing,
Incorporated (acquired March 14, 2008).