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R.R. Donnelley & Sons Company Reports Operating Results (10-Q)

August 06, 2009 | About:

R.R. Donnelley & Sons Company (RRD) filed Quarterly Report for the period ended 2009-06-30.

R.R. Donnelley & Sons Company is a premier provider of commercial printinginformation services and logistics. The company helps the customers communicate more efficiently and effectively as they use words and images to inform educate entertain and sell. In each of the businesses the company uses the distinctive capabilities to manage and distribute words and images in ways that provide the greatest value to every customer. The company has manufacturing plants with a broad range of capabilities to serve our customers\' needs. R.R. Donnelley & Sons Company has a market cap of $2.91 billion; its shares were traded at around $14.2 with a P/E ratio of 5.8 and P/S ratio of 0.3. The dividend yield of R.R. Donnelley & Sons Company stocks is 7.3%. R.R. Donnelley & Sons Company had an annual average earning growth of 7.9% over the past 10 years.

Highlight of Business Operations:

2008 restructuring and impairment charges: included $10.3 million for employee termination costs, substantially all of which were associated with restructuring actions resulting from the reorganization of certain operations and the exiting of certain business activities; $5.5 million of other restructuring costs, primarily lease termination costs; and $0.4 million for impairment of long-lived assets.

Cash flows from continuing operations for the six months ended June 30, 2009 increased $477.2 million compared to the six months ended June 30, 2008, despite the declines in net sales and earnings. This increase reflected the receipt of income tax refunds of $159.2 million and decreases in working capital requirements driven by volume declines and a focus on improved working capital management. The Company also reduced its discretionary capital expenditures by $65.3 million, or 41.5%, compared to the six months ended June 30, 2008. The strong operating cash flow in the six months ended June 30, 2009 enabled the Company to improve its total available liquidity. As of June 30, 2009, cash and cash equivalents totaled $470.9 million and approximately $2.0 billion was available for borrowings under the Companys committed credit facilities. Total debt decreased from $4.1 billion at December 31, 2008 to $3.6 billion at June 30, 2009. See Liquidity and Capital Resources for further discussion.

Net sales for the three months ended June 30, 2009 decreased $568.0 million, or 19.4%, to $2,355.6 million versus the same period in the prior year. Changes in foreign exchange rates decreased net sales by $87.1 million, or 3.0%, while the acquisition of PROSA increased net sales $4.8 million, or 0.2%. The remaining decreases were primarily attributable to significant volume declines and continued price pressures across most products and services as customer demand decreased due to the global economic slowdown.

For the three months ended June 30, 2009, the Company recorded a net restructuring and impairment provision of $48.2 million compared to $16.2 million in the same period of 2008. In 2009, these charges included $24.8 million for workforce reductions of 598 employees (of whom 447 were terminated as of June 30, 2009) associated with actions resulting from the reorganization of certain operations. These actions included the closing of one catalog, magazine and retail insert manufacturing facility and two book manufacturing facilities within the U.S. Print and Related Services segment and the closing of one business process outsourcing facility and one Global Turnkey Solutions manufacturing facility within the International segment. In addition, the Company recorded $8.1 million of impairment charges of other long-lived assets and $15.3 million of other restructuring costs, including lease termination and other facility closure costs. Net restructuring and impairment charges for the three months ended June 30, 2008 included $10.3 million for workforce reductions of 348 employees (all of whom were terminated as of June 30, 2009) associated with actions resulting from the reorganization of certain

Depreciation and amortization decreased $20.5 million to $143.7 million for the three months ended June 30, 2009 compared to the same period in 2008, primarily due to reduced spending on capital expenditures as compared to historical levels and the reduced balance of amortizable intangible assets resulting from the impairment of customer relationship intangible assets in the business process outsourcing reporting unit in 2008. Changes in foreign exchange rates also caused the lower depreciation and amortization expense. Depreciation and amortization included $24.4 million and $32.9 million of amortization of purchased intangibles related to customer relationships, trade names and patents for the three months ended June 30, 2009 and 2008, respectively.

Net earnings from continuing operations attributable to RR Donnelley common shareholders for the three months ended June 30, 2009 was $25.2 million, or $0.12 per diluted share, compared to $145.1 million, or $0.68 per diluted share, for the three months ended June 30, 2008. In addition to the factors described above, the per share results reflect a decrease in weighted average diluted shares outstanding of 5.2 million, primarily resulting from the Companys repurchases of 5.9 million shares of its common stock since June 30, 2008.

Read the The complete ReportRRD is in the portfolios of George Soros of Soros Fund Management LLC, David Dreman of Dreman Value Management, Richard Aster Jr of Meridian Fund, Richard Aster Jr of Meridian Fund.

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