EX-99.1 3 dex991.htm PRESS RELEASE Press release

EXHIBIT 99.1

 

RR DONNELLEY

      

Corporate Headquarters

77 West Wacker Drive

Chicago, Illinois 60601

Telephone (312) 326-8000

 

Media contact:

  

Investor contact:

    

Katherine Divita

  

Christopher Curtis

    

312-326-8336

  

312-326-8313

    

katherine.divita@rrd.com

  

christopher.curtis@rrd.com

    

 

FOR IMMEDIATE RELEASE

 

RR DONNELLEY REPORTS 1ST QUARTER 2003 RESULTS; AFFIRMS 2003 GUIDANCE

 

CHICAGO, May 7, 2003— RR Donnelley (NYSE: DNY) today announced first quarter 2003 earnings per diluted share of 5 cents, compared to 20 cents in the year ago period. Revenues for the first quarter were $1.1 billion, down 2 percent compared to the prior year. Net income was $6 million, compared to $23 million in the first quarter of 2002.

 

Included in the above results for the first quarter of 2003 are restructuring and impairment charges of $3 million ($2 million after-tax, or 1 cent per diluted share). In the year-earlier period, results included restructuring and impairment charges of $27 million ($17 million after-tax, or 14 cents per diluted share), and a $30 million reversal of excess tax reserves ($30 million benefit after-tax, or 26 cents per diluted share), related to the company’s settlement with the IRS on deductibility of interest payments for corporate-owned life insurance.

 

“We’re on track with our full-year earnings guidance,” said William L. Davis, RR Donnelley’s chairman, president and chief executive officer. “I’m particularly pleased that we’re not only delivering results today, we’re also building sales momentum that will pay off for years to come.”

 

The company continued to experience a weak environment in its print businesses, as well as continued weakness in domestic capital markets activity. The company’s logistics business continued its strong revenue growth, aided by the March acquisition of Momentum Logistics. Growth in Europe and Asia also contributed to the company’s performance. The company continued to benefit from prior restructuring efforts and ongoing productivity programs, partially mitigating the company’s print revenue decline.

RR Donnelley Reports 1st-Quarter 2003 Results; Affirms 2003 Guidance

May 7, 2003

Page 2 of 6

 

The company also affirmed its previously issued full year earnings guidance of $1.25 to $1.40 per diluted share. This range includes six cents per diluted share for expected restructuring activity. The company’s guidance continues to incorporate the weak print demand and pricing environment, offset by continued cost reduction and productivity efforts. Capital spending is expected to be below $250 million, also unchanged from prior guidance.

 

RR Donnelley will hold its quarterly investor conference call at 10 a.m., central time, on Wednesday, May 7, 2003. For a link to the call, log on to www.rrdonnelley.com. Check in approximately 10 minutes in advance of the start time to set up to receive the webcast. The call also will be archived on the site for seven days.

 

RR Donnelley (www.rrdonnelley.com) prepares, produces and delivers integrated communications across multiple channels for content owners such as publishers, merchandisers, and telecommunications companies as well as capital markets and diversified financial services companies. As a single source supplying services up and down the communications value chain, the company excels in digital photography, content management, printing, online services, and print and package logistics. With these integrated services, RR Donnelley provides effective solutions for its customers’ targeted communications and delivery needs. Headquartered in Chicago, Ill., RR Donnelley serves a global customer market and has 30,000 employees in more than 200 locations in North America, South America, Europe and the Asia/Pacific Basin.

 

Certain statements, including discussions of the company’s expectations for 2003 and beyond, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from the future results expressed or implied by these statements. Refer to Part I, Item I of the company’s annual report on Form 10-K for the year ended December 31, 2002, for a description of such factors.

RR Donnelley Reports 1st-quarter 2003 Results; Affirms 2003 Guidance

Page 3 of 6

 

CONDENSED CONSOLIDATED INCOME STATEMENT

(in thousands, except per-share data)

 

    

3 mos ended March 31,

     

% Change

  
    

2003

     

2002

     

Net sales

   

$

1,073,817

 

   

$

1,093,650

 

   

(1.8%

)

Cost of materials and transportation

   

 

455,747

 

   

 

462,105

 

   

(1.4%

)

    
  
  

Value added revenue (VAR)

   

 

618,070

 

   

 

631,545

 

   

(2.1%

)

Value added cost of sales

   

 

449,760

 

   

 

463,640

 

   

(3.0%

)

    
  
  

Gross profit

   

 

168,310

 

   

 

167,905

 

   

0.2%

 

Selling and administrative expenses

   

 

138,778

 

   

 

130,522

 

   

6.3%

 

Restructuring and impairment charges

   

 

2,609

 

   

 

26,692

 

   

(90.2%

)

    
  
  

Earnings from operations

   

 

26,923

 

   

 

10,691

 

   

151.8%

 

Interest expense, net

   

 

(12,707

)

   

 

(15,453

)

   

(17.8%

)

Other income (expense):

                         

Other, net

   

 

(4,943

)

   

 

(6,891

)

   

(28.3%

)

    
  
  

Earnings (loss) before income taxes

   

 

9,273

 

   

 

(11,653

)

   

(179.6%

)

Provision (benefit) for income taxes

   

 

3,571

 

   

 

(34,312

)

   

(110.4%

)

    
  
  

Net income

   

$

5,702

 

   

$

22,659

 

   

(74.8%

)

    
  
  

Earnings Per Share

                         

Basic

   

$

0.05

 

   

$

0.20

 

   

(75.0%

)

Diluted

   

 

0.05

 

   

 

0.20

 

   

(75.0%

)

Earnings per share include the following items:

                         

Restructuring and impairment charges

   

 

(0.01

)

   

 

(0.14

)

   

(92.9%

)

Reversal of excess COLI tax reserves*

   

 

—  

 

   

 

0.26

 

   

N/M

 

 

    

3 mos ended March 31,

  

Share Data

   

2003

     

2002

  

Basic shares outstanding at March 31

   

113,086

 

   

112,866

 

Average basic shares outstanding

   

113,101

 

   

112,894

 

Effect of dilutive securities

   

595

 

   

1,930

 

Average diluted shares outstanding

   

113,696

 

   

114,824

 

Percent to Net Sales

              

Gross profit

   

15.7

%

   

15.4

%

Selling & administrative expense

   

12.9

%

   

11.9

%

Earnings from operations

   

2.5

%

   

1.0

%

Net income

   

0.5

%

   

2.1

%

Percent to VAR**

              

Gross profit

   

27.2

%

   

26.6

%

Selling & administrative expense

   

22.5

%

   

20.7

%

Earnings from operations

   

4.4

%

   

1.7

%

Net income

   

0.9

%

   

3.6

%

*   Included in tax provision (benefit) in the condensed consolidated income statement.

 

**   Value-added revenue (VAR) represents net sales less the cost of materials (principally paper and ink) for the company’s print-related businesses, and net sales less the cost of transportation and postage for its logistics services businesses. With respect to print, certain customers supply their own paper; customer-furnished paper is not included in the company’s financial results. By measuring VAR, the company eliminates the effect of material prices and transportation costs, as well as the impact on net sales of fluctuations in the amount of customer-furnished paper. Management, therefore, views VAR as a better performance measure of its own value-added products and services. Other companies may use a measure which is calculated in a similar manner, but which may not be comparable.

RR Donnelley Reports 1st-quarter 2003 Results; Affirms 2003 Guidance

Page 4 of 6

 

KEY INFORMATION

(dollars in thousands, except per-share data)

 

    

2003

     

2002

  
    

3 mos ended March 31,

  

Other Data

                  

Capital expenditures

   

$

50,022

 

   

$

65,818

 

Acquisitions1

   

 

17,000

 

   

 

—  

 

Cash and equivalents

   

 

40,483

 

   

 

49,230

 

Total debt

   

 

1,004,145

 

   

 

1,082,564

 

Return on avg invested capital2

   

 

8.4

%

   

 

3.6

%

Operating working capital (% of net sales)3

   

 

1.6

%

   

 

4.7

%

 

Restructuring, Impairment &

Other Items Affecting Comparability

   

3 mos ended March 31,

  
    

2003

     

2002

  
    

Earnings (loss) before Income Taxes

     

Net Income

     

Earnings (loss) per Diluted share

     

Earnings (loss) before Income Taxes

     

Net Income

     

Earnings (loss) per Diluted share

  

Consolidated results as reported

   

$

9,273

 

   

$

5,702

 

   

$

0.05

 

   

$

(11,653

)

   

$

22,659

 

   

$

0.20

 

    
  
  
  
  
  

The consolidated results include the following significant items that affect comparability:

 

                  

Restructuring and impairment charge

   

$

(2,609

)

   

$

(1,618

)

   

$

(0.01

)

   

$

(26,692

)

   

$

(16,816

)

   

$

(0.14

)

Other items:

                                                      

Provision for doubtful accounts

   

 

(9,928

)

   

 

(6,155

)

   

 

(0.05

)

   

 

(2,959

)

   

 

(1,864

)

   

 

(0.02

)

By-product revenues

   

 

10,962

 

   

 

6,796

 

   

 

0.06

 

   

 

8,714

 

   

 

5,490

 

   

 

0.05

 

Gain on sale of assets

   

 

1,945

 

   

 

1,206

 

   

 

0.01

 

   

 

—  

 

   

 

—  

 

   

 

—  

 

Insurance recovery related to 9/11

   

 

2,047

 

   

 

1,269

 

   

 

0.01

 

   

 

—  

 

   

 

—  

 

   

 

—  

 

Affordable housing investment writedown*

   

 

(4,000

)

   

 

(2,480

)

   

 

(0.02

)

   

 

(2,700

)

   

 

(1,701

)

   

 

(0.01

)

Pension and post-retirement income

   

 

1,260

 

   

 

781

 

   

 

—  

 

   

 

5,718

 

   

 

3,602

 

   

 

0.03

 

Reversal of excess COLI tax reserves**

   

 

—  

 

   

 

—  

 

   

 

—  

 

   

 

—  

 

   

 

30,000

 

   

 

0.26

 

COLI-related expenses upon policy surrender*

   

 

—  

 

   

 

—  

 

   

 

—  

 

   

 

(4,883

)

   

 

(3,076

)

   

 

(0.03

)

    
  
  
  
  
  

Total significant items:

   

$

(323

)

   

$

(201

)

   

$

0.00

 

   

$

(22,802

)

   

$

15,635

 

   

$

0.14

 

    
  
  
  
  
  
*   Included in other income (expense) in the condensed consolidated income statement.

 

**   Included in tax provision in the condensed consolidated income statement.

 

1   On March 5, 2003, the Company acquired certain net assets of Momentum Logistics, Inc. for approximately $17 million in cash.

 

2   Computed on 12-month rolling net income, divided by a 13-month average of debt and equity.

 

3   Computed on a 13-month average of net receivables, net inventories, and prepaid expenses minus accounts payable and other accrued liabilities divided by 12-month rolling net sales.

RR Donnelley Reports 1st-quarter 2003 Results; Affirms 2003 Guidance

Page 5 of 6

KEY INFORMATION

(in thousands)

 

Industry Segment Data

 

    

Donnelley Print Solutions

   

Logistics Services

   

Financial Services

     

Other4

     

Corporate5,6

     

Consolidated Total

  

First Quarter 2003

                                                  

Sales

   

$

666,973

   

$

209,808

   

$

90,255

 

   

$

106,781

 

   

$

—  

 

   

$

1,073,817

 

Restructuring and impairment charges

   

 

169

   

 

—  

   

 

573

 

   

 

715

 

   

 

1,152

 

   

 

2,609

 

Earnings (loss) from operations

   

 

45,682

   

 

3,543

   

 

(6,362

)

   

 

(9,045

)

   

 

(6,895

)

   

 

26,923

 

Earnings (loss) before income taxes

   

 

45,707

   

 

3,517

   

 

(6,522

)

   

 

(10,858

)

   

 

(22,571

)

   

 

9,273

 

First Quarter 2002

                                                  

Sales

   

$

714,334

   

$

172,079

   

$

102,875

 

   

$

104,362

 

   

$

—  

 

   

$

1,093,650

 

Restructuring and impairment charges

   

 

23,122

   

 

24

   

 

21

 

   

 

2,387

 

   

 

1,138

 

   

 

26,692

 

Earnings (loss) from operations

   

 

23,978

   

 

3,043

   

 

(12,262

)

   

 

(14,494

)

   

 

10,426

 

   

 

10,691

 

Earnings (loss) before income taxes

   

 

27,109

   

 

2,981

   

 

(12,074

)

   

 

(19,397

)

   

 

(10,272

)

   

 

(11,653

)

Second Quarter 2002

                                                  

Sales

   

$

716,404

   

$

176,590

   

$

144,592

 

   

$

111,306

 

   

$

—  

 

   

$

1,148,892

 

Restructuring and impairment charges

   

 

14,032

   

 

98

   

 

711

 

   

 

913

 

   

 

271

 

   

 

16,025

 

Earnings (loss) from operations

   

 

47,268

   

 

2,013

   

 

12,427

 

   

 

(9,780

)

   

 

(10,519

)

   

 

41,409

 

Earnings (loss) before income taxes

   

 

51,693

   

 

2,033

   

 

12,686

 

   

 

(11,325

)

   

 

(18,023

)

   

 

37,064

 

Third Quarter 2002

                                                  

Sales

   

$

771,291

   

$

192,896

   

$

93,482

 

   

$

119,611

 

   

$

—  

 

   

$

1,177,280

 

Restructuring and impairment charges

   

 

6,562

   

 

286

   

 

2,866

 

   

 

222

 

   

 

12,773

 

   

 

22,709

 

Earnings (loss) from operations

   

 

106,890

   

 

2,159

   

 

(12,219

)

   

 

115

 

   

 

(11,698

)

   

 

85,247

 

Earnings (loss) before income taxes

   

 

110,131

   

 

2,160

   

 

(10,838

)

   

 

2,789

 

   

 

(29,541

)

   

 

74,701

 

Fourth Quarter 2002

                                                  

Sales

   

$

889,371

   

$

242,459

   

$

86,503

 

   

$

116,782

 

   

$

—  

 

   

$

1,335,115

 

Restructuring and impairment charges

   

 

10,929

   

 

1,941

   

 

6,901

 

   

 

2,127

 

   

 

1,605

 

   

 

23,503

 

Earnings (loss) from operations

   

 

126,133

   

 

3,884

   

 

(21,273

)

   

 

(3,375

)

   

 

2,245

 

   

 

107,614

 

Earnings (loss) before income taxes

   

 

126,660

   

 

3,875

   

 

(21,155

)

   

 

(5,334

)

   

 

(28,425

)

   

 

75,621

 

 

Consolidated Summary of Expense Trends—First Quarter

 

    

2003

   

% of Sales

   

2002

   

% of Sales

   

% Change

  

Cost of materials (excluding cost of transp.)

   

$

296,984

   

27.7%

   

$

333,905

   

30.5%

   

(11.1%

)

Cost of transportation

   

 

158,763

   

14.8%

   

 

128,200

   

11.7%

   

23.8%

 

Cost of manufacturing7

   

 

383,552

   

35.7%

   

 

393,984

   

36.0%

   

(2.6%

)

Depreciation

   

 

68,236

   

6.4%

   

 

72,120

   

6.6%

   

(5.4%

)

Amortization8

   

 

9,038

   

0.8%

   

 

9,747

   

0.9%

   

(7.3%

)

Selling and administrative expense7

   

 

136,749

   

12.7%

   

 

127,877

   

11.7%

   

6.9%

 

Restructuring and impairment charges

   

 

2,609

   

0.2%

   

 

26,692

   

2.4%

   

(90.2%

)

Net interest expense

   

 

12,707

   

1.2%

   

 

15,453

   

1.4%

   

(17.8%

)

 

4   Represents other operating segments of the company including RRD Direct, International and Other.

 

5   Corporate earnings (loss) from operations consist principally of the following unallocated items: net earnings of benefit plans (excluding service costs); last-in first-out (LIFO) inventory provisions; and general corporate, management and information technology costs.

 

6   Corporate earnings (loss) before income taxes consist principally of earnings (loss) from operations, adjusted for interest expense not assessed to the operating segments, affordable housing investment writedowns and other income (expense).

 

7   Excludes depreciation and amortization, which are shown separately.

 

8   Included primarily in net sales and other income (expense).

RR Donnelley Reports 1st-quarter 2003 Results; Affirms 2003 Guidance

Page 6 of 6

 

KEY INFORMATION

(in thousands)

 

Net Sales Detail—First Quarter

   

2003

   

% of Total

   

2002

   

% of Total

   

% Change

  

Magazines, Catalogs and Retail

   

$

362,535

   

33.8%

   

$

386,667

   

35.4%

   

(6.2%

)

Book Publishing Services

   

 

153,066

   

14.3%

   

 

154,670

   

14.1%

   

(1.0%

)

Telecommunications

   

 

124,101

   

11.6%

   

 

143,261

   

13.1%

   

(13.4%

)

Premedia

   

 

27,271

   

2.5%

   

 

29,736

   

2.7%

   

(8.3%

)

    
  
  
  
  

Donnelley Print Solutions

   

 

666,973

   

62.1%

   

 

714,334

   

65.3%

   

(6.6%

)

Logistics Services

   

 

209,808

   

19.5%

   

 

172,079

   

15.7%

   

21.9%

 

Financial Services

   

 

90,255

   

8.4%

   

 

102,875

   

9.4%

   

(12.3%

)

RRD Direct

   

 

29,146

   

2.7%

   

 

33,978

   

3.1%

   

(14.2%

)

Other9

   

 

77,635

   

7.2%

   

 

70,384

   

6.4%

   

10.3%

 

    
  
  
  
  

Other

   

 

106,781

   

9.9%

   

 

104,362

   

9.5%

   

2.3%

 

Total Net Sales

   

$

1,073,817

   

100.0%

   

$

1,093,650

   

100.0%

   

(1.8%

)

Cost of materials and transportation

   

 

455,747

        

 

462,105

            
    
       
           

Value added revenue (VAR)

   

$

618,070

        

$

631,545

            
    
       
           

VAR Detail—First Quarter

   

2003

   

% of Total

   

2002

   

% of Total

   

% Change

  

Magazines, Catalogs and Retail

   

$

229,583

   

37.1%

   

$

241,128

   

38.2%

   

(4.8%

)

Book Publishing Services

   

 

110,861

   

17.9%

   

 

111,534

   

17.7%

   

(0.6%

)

Telecommunications

   

 

64,257

   

10.4%

   

 

64,107

   

10.2%

   

0.2%

 

Premedia

   

 

27,272

   

4.4%

   

 

29,736

   

4.7%

   

(8.3%

)

    
  
  
  
  

Donnelley Print Solutions

   

 

431,973

   

69.9%

   

 

446,505

   

70.7%

   

(3.3%

)

Logistics Services

   

 

51,556

   

8.3%

   

 

43,984

   

7.0%

   

17.2%

 

Financial Services

   

 

75,277

   

12.2%

   

 

86,960

   

13.8%

   

(13.4%

)

RRD Direct

   

 

17,782

   

2.9%

   

 

18,824

   

3.0%

   

(5.5%

)

Other9

   

 

41,482

   

6.7%

   

 

35,272

   

5.6%

   

17.6%

 

    
  
  
  
  

Other

   

 

59,264

   

9.6%

   

 

54,096

   

8.6%

   

9.6%

 

Total VAR

   

$

618,070

   

100.0%

   

$

631,545

   

100.0%

   

(2.1%

)

    
  
  
  
  
9   Includes International (Latin America, Europe and Asia) and Other.