R.R. Donnelley & Sons (RRD)
Q4 2011 Earnings Call
February 22, 2012 10:00 am ET
Dave Gardella - Vice President of Investor Relations
Thomas J. Quinlan - Chief Executive Officer, President and Director
Daniel N. Leib - Chief Financial Officer and Executive Vice President
Scott Wipperman - Goldman Sachs Group Inc., Research Division
Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division
Bryan Keith Carlson - Atlantic Investment Management, Inc.
Thomas Cubeta - UBS Investment Bank, Research Division
Previous Statements by RRD
» R.R. Donnelley & Sons Company Presents at Bank of America Merrill Lynch Leveraged Finance Conference, Dec-01-2011 04:10 PM
» R.R. Donnelley & Sons' CEO Discusses Q3 2011 Results - Earnings Call Transcript
» R.R. Donnelley & Sons' CEO Discusses Q2 2011 Results - Earnings Call Transcript
Thank you, Sandra. Good morning, everyone, and thank you for joining us for RR Donnelley's fourth quarter and full year 2011 results conference call. Earlier this morning, we released our earnings report, a copy of which can be found in the Investor 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 provides you with useful supplementary information concerning the company's ongoing operations and is 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 website, in the Investors section, a description as well as reconciliations of GAAP measures to which we'll refer on this call.
We're joined this morning by Tom Quinlan; Dan Leib and Drew Coxhead. I'll now turn the call over to Tom.
Thomas J. Quinlan
Thank you, Dave, and good morning, everyone. As you know, in mid-January, we updated our full year guidance as we saw that our results would reflect a significant increase in cash flow as compared with our previous guidance. For the full year, our operating cash flow was up more than 25% as compared with 2010, and we delivered free cash flow of $695 million. That was at the high end of the revised guidance that we provided in mid-January. While full year revenue for 2011 was up nearly $600 million or almost 6% from 2010, we indicated in our January guidance that we had seen a slowing of revenue momentum during the closing weeks of last year. We also indicated that we saw some margin compression which was primarily a result of the volume declines that we saw during the latter months of the quarter. The change in our expectations regarding revenues during the fourth quarter arose particularly as a result of 2 factors. First, during the quarter, some customers deferred or canceled anticipated activity as they sought to impact their own end-of-the-year expenditures. This was not a surprise directionally but the number and volume of the programs that they pulled back on was significantly more than we had forecast. It was, in fact, a fast-moving departure from what the customers themselves had indicated that they were going to do during the last half of the fourth quarter. Second, the ongoing discrepancy between the number of filings and the number of IPOs priced continued to create an inventory of IPOs that are waiting to move forward. During the fourth quarter, this significant backlog grew even more and it affected revenues associated with our offering that supports capital markets activity. Despite these challenges, we were very pleased with our free cash flow performance. It reflected the operational controls and focus on working capital that we had baked into every aspect of our business.
Before Dan takes you through the fourth quarter in detail, I am going to reiterate our strategy and then add color to each of the strategic elements. The pillars of our strategy are as follows: One, we will share -- we will win share by aggressively pursuing all appropriate print opportunities across a diverse range of vertical segments and by using the comprehensive range of our integrated offering as a key value-added differentiator; two, we leverage our unmatched operating expertise, procurement scale and customer relationships; three, we build on our relationships with customers internationally to sell more services that can diversify and increase our revenue base; four, we internally develop and acquire technologies that serve important communication and supply chain needs for our customers and that continue to diversify our product and service mix as we serve a growing portion of our customers' communication and supply chain needs; and finally, we drive free cash flow and margin through continuing aggressive cost compression. With regard to winning share, there's still a lot of printing business to be had. We are competing for every opportunity. We've talked about our One RR Donnelley approach which positions us to efficiently present the full range of our capabilities to our customers. To make that happen from an organizational standpoint, we have knocked down all sales silos and incented our sales team to sell the full breadth of our offering; consolidated our infrastructure to provide for integrated solutions, productions and transactions; created a global print management solution and taken it enterprise-wide to both customers and prospects; and leverage the capabilities that have come from our recent technology acquisitions, which provide our customers with the integrated communication options that they need and that further differentiates us from our competitors.