RRD

R.R. Donnelley & Sons Company (RRD)

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R.R. Donnelley and Sons Company (RRD)

Q4 2009 Earnings Call Transcript

February 24, 2010 10:00 am ET

Executives

Dave Gardella – VP, IR

Tom Quinlan – President and CEO

Miles McHugh – EVP and CFO

Analysts

Analysts

Charlie Strauzer – CJS Securities

Scott Whistleman – Goldman Sachs

Edward Atorino – Benchmark

Sachin Shah – Capstone Global Markets

Ken Silver – RBS

Hale Holden – Barclays Capital

Presentation

Operator

Good morning. My name is Trinity and I'll be your conference operator today. At this time, I would like to welcome everyone to R.R. Donnelley fourth quarter results call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions) Thank you. Mr. Gardella, you may begin your conference.

Dave Gardella

Thank you, Trinity. Good morning, and thank you for joining us for R.R. Donnelley's fourth quarter 2009 results conference call. Yesterday, we released our earnings report. A copy of which can be found in the Investors section of our Web site at rrdonnelley.com.

During this call, we'll refer to forward-looking statements that are subject to uncertainty. For a complete discussion, please refer to the cautionary statement included in our earnings release, and further details in our annual report on Form 10-K and other filings with the SEC.

Further, we will discuss non-GAAP and pro forma financial information. We believe the presentation of non-GAAP and pro forma results provide you with useful supplementary information concerning the company's ongoing operations and an appropriate way for you to evaluate the company's performance. They are, however, provided for informational purposes only. Please refer to the press release and related footnotes for GAAP information and a reconciliation of GAAP to non-GAAP information. We also posted to our Web site in the Investors section the description as well as reconciliations of non-GAAP measures to which we will refer on this call.

We are joined this morning by Tom Quinlan, Miles McHugh, and Drew Coxhead. I'll now turn the call over to Tom.

Tom Quinlan

Thank you, Dave. Good morning, everyone. Obviously, this is a very exciting day for all of us at R.R. Donnelley and Bowne & Company. We look forward to sharing with you why we are so excited during this call. We've got a lot of ground to cover this morning. So I will underscore some performance metrics for Q4 and full year 2009, talk specifically about some of the actions that we took during the year to prepare R.R. Donnelley for future growth, and then turn it over to Miles. After he takes you through the financial highlights, I will return with some comments about our definitive agreement to acquire Bowne, and then open it up for questions.

It is no exaggeration to say that as 2009 began, the world was in the midst of the worst financial crisis in 80 years. There were concerns about the solvency of large companies and a number of industries about overall liquidity, and about whether or not we were seeing a persistent structural change in consumer's buying habits. The goal for many organizations could be summed up in a single word, "Survive". Thanks to our employees' hard work, R.R. Donnelley did much more than that.

For Q4, we again posted sequential revenue growth as our sales increased 4.9% over the third quarter. Our ongoing attention to financial discipline and tight costs control helped us to post non-GAAP earnings per diluted share from continuing operations of $0.46 for the quarter and $1.60 for the full year.

A year ago, we told you that even in the midst of the worst economic environment in the lifetime, we would, at a minimum, maintain our financial strength and flexibility. We delivered, generating $1.4 billion of operating cash flow, up $400 million from 2008. We reduced our debt by $800 million, and improved our favorable debt maturity schedule. We continue to pursue a balanced use of capital. And our Board maintains our dividend at $1.04 per share.

For investors, these actions, in combination with the results of our continued pursuit of operational excellence, resulted in a total shareholder return of 78% from the year-end 2008. The economic crisis confronted R.R. Donnelley with a challenge of determining the right balance between making drastic reductions in our workforce and platform and staying the course in order to be ready to take full advantage when economic conditions improve. We struck that balance during 2009. During 2010, we intend to capitalize on significant actions that we took to prepare R.R. Donnelley for future growth.

Let me share four examples with you. First, we made acquisitions, opened new facilities, or invested in new businesses in Latin America, North America, Europe, and Asia. For example, in January of 2009, we announced the acquisition of another printer's assets to expand our existing platform in Latin America. The work we did to quickly make this operation an integral part of our platform helped us achieve a double-digit EBIT increase in Chile. This is indicative of the discipline we apply to integrating acquisitions, a subject which I will return to shortly.

Second, we invested in online content creation community called Helium. We already create a lot of content for our customers through design, copywriting, translation services, photography, and more. But when we got involved early in the life cycle of communication programs, we are able to create efficiencies for our customers, and in turn, create service revenue for us. The investment in Helium is another great example of how we incubate concepts and expand our product and service offering to deliver value to our current and future customers.

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