R.R. Donnelley & Sons Co. (
reported third quarter 2013 non-GAAP earnings of 39 cents per
share, beating the Zacks Consensus Estimate by a couple of cents.
However, earnings per share were down on a year over year
Quarterly revenues were up 4.2% year over year to $1.91
billion, but missed the Zacks Consensus Estimate by $2.54
billion. The year-over-year growth can be attributed to volume
growth in many offerings, the shift in timing of a project in
Latin America as well as a rise in pass-through postage
U.S. Print and related services revenues moved up 3.1% from
the year-ago quarter to $1.91 billion, primarily driven by higher
revenues from 2012 acquisitions. On an organic basis, the U.S.
segment posted growth of 0.6% as volume growth in most offerings
more than offset price erosion.
Donnelley's logistics business recorded another quarter of
substantial growth, driven by higher volume in all its offerings,
which includes pass-through postage volumes that resulted from
the Presort Solutions acquisition in late 2012. On an organic
basis, logistics witnessed 14% growth, which was mainly
influenced by increased volumes in nearly all of its product
International sales in the third quarter of 2013 were $704.9
million, up 7.6% from the year-ago quarter. Organic net sales
grew 7.0% with 280 basis points (bps) attributable to a timing
shift of a major customer project in Latin America, Other than
business process outsourcing, all other offerings in the
International segment realized volume growth in the quarter.
Selling, general & administrative expenses as a percentage
of revenues increased 110 bps from the year-ago quarter, which
was attributed to higher variable compensation and lower pension
Adjusted non-GAAP operating profit was $173.8 million compared
to an operating loss of $4.75 billion reported in the year ago
quarter. Non-GAAP net earnings for the quarter were $71.4 million
or 39 cents per share.
Balance Sheet and Cash Flow
Donnelley exited the quarter with $462.8 million in cash
versus $354.4 million in the previous quarter. Long-term debt was
at $3.24 billion, remaining flat sequentially.
Free cash flow in the quarter was $193.9 million, a solid
increase from $107.3 million in the previous quarter, driven by
lower pension and other post retirement, post tax plan
Donnelley provided its fiscal 2013 guidance. The company
expects revenues to be in the range of $10.35 billion to $10.45
billion. Adjusted earnings before interest, tax, depreciation and
amortization (EBITDA) are expected to be in the range of 11.0% to
11.2% for fiscal 2013. Depreciation and amortization is expected
to be in the range of $435.0 to $440.0 million, while interest
expense is likely to be $260.0 million.
Capital expenditure is expected to be in the range of $200
million to $225 million and free cash flow in the range of $400
million to $500 million.
Donnelley reported mixed third quarter results with earnings
beating the Zacks Consensus Estimate, while revenues falling
Although, Donnelley continually focuses on acquisitions and
wins contracts from various companies such as
Office Depot Inc. (
, the deteriorating macroeconomic conditions continue to dampen
its business prospects.
We expect Donnelley to remain under pressure in the near term
due to continuing pricing pressure, volatility in raw material
prices, and increasing competition. Moreover the increasing
adoption of the e-book reader from the likes of
remains a major concern for its legacy printing business.
Currently, Donnelley has a Zacks Rank #5 (Strong Sell).
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