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R.R. Donnelley & Sons (RRD)
Q3 2010 Earnings Call
November 03, 2010 10:00 am ET
Miles McHugh - Chief Financial Officer and Executive Vice President
Thomas Quinlan - Chief Executive Officer, President and Director
Dave Gardella -
Daniel Leben - Robert W. Baird & Co. Incorporated
Charles Strauzer - CJS Securities, Inc.
Craig Huber -
Sachin Shah - ICAP
Hale Holden - Barclays Capital
Previous Statements by RRD
» R.R. Donnelley & Sons Q2 2010 Earnings Call Transcript
» R.R. Donnelley & Sons Q1 2010 Earnings Call Transcript
» R.R. Donnelley and Sons Company Q4 2009 Earnings Call Transcript
Thank you, Shaira. Good morning, everyone, and thank you for joining us for RR Donnelley's third quarter 2010 results conference call. Earlier this morning, we released our earnings report, a copy of which can be found in the Investors section of our website 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 detailed 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 are 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 and non-GAAP information. We also posted to our website in the Investors section a description as well as reconciliation of non-GAAP measures to which we will refer on this call.
We're joined this morning by Tom Quinlan, Miles McHugh, and Drew Coxhead. I'll now turn the call over to Tom.
Thank you, Dave. Good morning, everyone. You've heard us the phrase One RR Donnelley to describe the strategic framework that guides our approach to winning and expanding customer relationships, driving cost savings, integrating acquisitions and maximizing the value of our product development initiatives.
During the third quarter, our revenues increased 1% compared to the same period a year ago. We believe that the momentum we have established through our One RR Donnelley strategy is better reflected by the increase that we experienced when we exclude the negative impact of changes in foreign exchange rates, lower paper sales due to the mix of paper selected by our customers, and the one-time effect of the $12.5 million fee we received in third quarter 2009 for the transition of a customer's contract. Collectively, these items negatively impacted our revenue growth in the quarter by just over 200 basis points. Before Miles takes you through the quarter in detail, I will address three of the interrelated benefits associated with our One RR Donnelley strategy.
First, we are demonstrating a continuing ability to move from transactional to contractual customer relationships. Second, we are seeing customers embrace the unique ability RR Donnelley has developed to provide end-to-end solutions for them. And third, the digital initiatives that we are implementing are not just offering an alternative to conventional print production, they are helping to open the door to entirely new opportunities with customers. I'll begin with a shift from transactional to contractual relationships, which is driven by the intersection of customers' goals and our ability to meet their emerging needs.
The economic downturn that began in 2008 knocked down a lot of silos within organizations and increased their desire to put together programs that would maximize their procurement efficiencies. As an accelerating rate, we have seen parts of our customers' organizations being brought together for the first time to look for a single supplier that can meet all of their diverse needs. This plays directly into one of RR Donnelley's greatest strengths: The broad range of capabilities that we can use to help customers leverage and integrate their purchases with a single source provider. Now understand that these capabilities are not confined to the length or width of a printing press. The services that we provide extend across the integrated communication supply chain. This gives us a significant competitive advantage as our customers continue to reduce their supply bases in order to buy smaller and to more effectively integrate their communications.
For example, during the quarter, we were awarded a multimillion dollar multiyear contract by Prudential PLC to manage its U.K. enterprise-wide customer communications management operations. Our solution includes managing the production of marketing collateral, the production and delivery of outbound communications, inbound document processing, on-site management of multifunctional devices and print rooms, as well as scanning, indexing and archiving. RR Donnelley will also work collaboratively with Prudential to introduce communication innovations that will continue to help enhance its customers' relationships. This agreement runs to 2021, which demonstrates the enduring nature of our relationships with customers.
Being on-site and deeply involved with N10 processes also positions RR Donnelley to take advantage of new opportunities with customers like Prudential while these projects are still in the development phase. That gives us a chance to help engineer cost effectiveness into these programs as we make recommendations about how best they can be accomplished on our unmatched platform.
Another way to illustrate our ability to develop comprehensive contractual relationships is to consider where you would expect RR Donnelley's capabilities to address a pharmaceutical company's needs. Typically, the spectrum of printed products would come to mind, but that would be just the beginning of what could form the basis for a contractual relationship. For example, through our logistics operations, we provide expedited services, actually coordinating delivery of pharmaceutical products to drugstores throughout the week. We can place a team of people on-site to manage design of the communication material, coordinate the production of different departments' communications programs and draw on our photography studios to create digital assets that will come to life in print and electronic media. We can provide complex kitting and fulfillment services to send the pharma reps the clinicals and collateral that they use as they make sales calls. And much more, take these services individually and their organizations that complete with us in each one of those areas. Take them collectively and we believe that we occupy a distinct space. RR Donnelley is uniquely equipped to provide a suite of services and bond them all into a comprehensive contractual relationship.