UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 2, 2016
R. R. DONNELLEY & SONS COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 1-4694 | 36-1004130 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
35 West Wacker Drive, Chicago, Illinois |
60601 | |
(Address of Principal Executive Offices) | (Zip Code) |
(312) 326-8000
(Registrants Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 7.01. | Regulation FD Disclosure. |
On October 1, 2016, RR Donnelley & Sons Company and its subsidiaries (the Company or RR Donnelley) completed the previously announced separation of its financial communications and data services business (Donnelley Financial Solutions, Inc. or Donnelley Financial) and the publishing and retail-centric print services and office products business (LSC Communications, Inc. or LSC) into two separate publicly-traded companies (the Separation). The Company completed the tax free distribution of 80.75% of the outstanding common stock of Donnelley Financial and 80.75% of the outstanding common stock of LSC to the Companys stockholders (the Distribution). Immediately following the Distribution, RR Donnelley retained a 19.25% ownership stake in Donnelley Financial and LSC. Donnelley Financial and LSC are now independent public companies trading on the New York Stock Exchange under the symbols DFIN and LKSD, respectively.
Filed as Exhibit 99.1 is the unaudited condensed consolidated statement of operations of RR Donnelley adjusted for discontinued operations. This is presented to illustrate the effects of the Separation of Donnelley Financial and LSC from the historical combined company and have been derived from the historical consolidated financial statements of RR Donnelley, as prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The historical financial results of Donnelley Financial and LSC for the period have been reflected within Exhibit 99.1 as discontinued operations. The unaudited condensed consolidated statement of operations adjusted for discontinued operations for the nine months ended September 30, 2016 assumes that the Separation occurred on January 1, 2016. Beginning in the fourth quarter of 2016, the historical financial results of Donnelley Financial and LSC for the periods prior to the Separation will be reflected in RR Donnelleys consolidated financial statements as discontinued operations.
Filed as Exhibit 99.2 is a reconciliation of GAAP Net Earnings to Non-GAAP Adjusted EBITDA adjusted for discontinued operations as well as selected balance sheet information as of September 30, 2016. This exhibit contains Non-GAAP financial measures, including Non-GAAP Operating Income, Non-GAAP Adjusted EBITDA and Margin Reconciliation and Net Debt. RR Donnelley believes that certain Non-GAAP measures, such as Non-GAAP Adjusted EBITDA for RR Donnelley continuing operations, provide useful information about RR Donnelleys operating results and enhance the overall ability to assess RR Donnelleys financial performance. RR Donnelley uses these measures, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business. Non-GAAP Adjusted EBITDA for RR Donnelley continuing operations allows investors to make a more meaningful comparison between RR Donnelleys core business operating results over different periods of time. RR Donnelley believes that Non-GAAP Adjusted EBITDA for RR Donnelley continuing operations, when viewed with RR Donnelleys results under GAAP, the financial statements included in Exhibit 99.1 and the accompanying reconciliations, provides useful information about RR Donnelleys business without regard to potential distortions. By eliminating potential differences in results of operations between periods caused by factors such as depreciation and amortization methods, acquisition expenses, historic cost and age of assets, financing and capital structures, taxation positions or regimes, restructuring, impairment and other charges, pension or other postretirement settlements or curtailments and gain or loss on certain equity investments and asset sales, RR Donnelley believes that Non-GAAP Adjusted EBITDA can provide a useful additional basis for comparing the current performance of the underlying operations being evaluated. Additional information relating to the adjustments for the Non-GAAP Adjusted EBITDA for RR Donnelley continuing operations is set forth in the notes to Exhibit 99.2. For a description of RR Donnelleys continuing operations operating segments, refer to the Business Section as filed under Exhibit 99.4 to the Current Report on Form 8-K filed on September 26, 2016.
The presentation of RR Donnelleys historical adjusted continuing operations is inherently limited in that it does not include, for all periods, income RR Donnelley receives from Donnelley Financial and LSC related to transition service agreements. Furthermore, certain expenses incurred to support RR Donnelley, Donnelley Financial and LSCs shared operations are included, which are not necessarily representative of costs required to support RR Donnelleys stand-alone business.
The financial information is intended for informational purposes only and does not purport to project RR Donnelleys financial performance or cost structure for any future period. The financial information should be read in conjunction with the audited consolidated financial statements and accompanying notes and Managements Discussion and Analysis of Financial Condition and Results of Operations included in RR Donnelleys Form 10-K for the year ended December 31, 2015 and the unaudited condensed consolidated financial statements and accompanying notes and Managements Discussion and Analysis of Financial Condition and Results of Operations included in RR Donnelleys Form 10-Q for the periods ended March 31, 2016, June 30, 2016, and September 30, 2016. Such reports, however, do not give effect to the Separation, as described above, or the Distribution.
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits |
Exhibit No. |
Description of Exhibit | |
99.1 | Unaudited Condensed Consolidated Statement of Operations of RR Donnelley adjusted for discontinued operations for the nine months ended September 30, 2016 | |
99.2 | Reconciliation of GAAP Net Earnings to Non-GAAP Adjusted EBITDA from RR Donnelley Continuing Operations, adjusted for discontinued operations for the nine months ended September 30, 2016 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
R. R. DONNELLEY & SONS COMPANY | ||||||
Date: November 2, 2016 | By: | /s/ Terry D. Peterson | ||||
Name: | Terry D. Peterson | |||||
Title: | Executive Vice President and Chief Financial Officer |
Exhibit 99.1
R. R. Donnelley & Sons Company
Unaudited Condensed Consolidated Statement of Operations
(in millions, except per share data)
For the Nine Months Ended September 30, 2016 |
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Products net sales |
$ | 3,817.8 | ||
Services net sales |
1,201.6 | |||
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Total net sales |
5,019.4 | |||
Products cost of sales (exclusive of depreciation and amortization) |
3,003.4 | |||
Services cost of sales (exclusive of depreciation and amortization) |
1,002.9 | |||
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Total cost of sales |
4,006.3 | |||
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Products gross profit |
814.4 | |||
Services gross profit |
198.7 | |||
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Total gross profit |
1,013.1 | |||
Selling, general and administrative expenses (exclusive of depreciation and amortization) |
681.0 | |||
Restructuring, impairment and other charges-net |
24.3 | |||
Depreciation and amortization |
153.5 | |||
Other operating income |
(12.0 | ) | ||
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Income from operations |
166.3 | |||
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Interest expense-net |
150.6 | |||
Investment and other income-net |
(0.4 | ) | ||
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Earnings before income taxes |
16.1 | |||
Income tax expense |
12.9 | |||
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Net earnings from continuing operations |
3.2 | |||
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Net earnings from discontinued operations, net of income taxes |
15.8 | |||
Less: Income attributable to noncontrolling interests |
0.8 | |||
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Net earnings attributable to RR Donnelley common stockholders |
$ | 18.2 | ||
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Basic net earnings per share attributable to RR Donnelley common stockholders: |
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Continuing operations |
$ | 0.03 | ||
Discontinued operations |
0.23 | |||
Net earnings attributable to RR Donnelley stockholders |
0.26 | |||
Diluted net earnings per share attributable to RR Donnelley common stockholders: |
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Continuing operations |
$ | 0.03 | ||
Discontinued operations |
0.23 | |||
Net earnings attributable to RR Donnelley stockholders |
0.26 | |||
Weighted average number of common shares outstanding: |
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Basic |
70.0 | |||
Diluted |
70.5 |
Exhibit 99.2
R.R. Donnelley & Sons Company
Reconciliation of GAAP Net Earnings to Non-GAAP Adjusted EBITDA from Continuing Operations
(in millions)
Nine Months Ended September 30, 2016 |
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GAAP net earnings attributable to RR Donnelley common shareholders |
$ | 18.2 | ||
Adjustments |
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Less: earnings from discontinued operations, net of tax (a) |
(15.8 | ) | ||
Income attributable to noncontrolling interests |
0.8 | |||
Income tax expense |
12.9 | |||
Interest expense - net |
150.6 | |||
Investment and other income - net |
(0.4 | ) | ||
Depreciation and amortization |
153.5 | |||
Restructuring, impairment and other charges - net (b) |
24.3 | |||
Acquisition-related expenses (c) |
2.7 | |||
Pension settlement charges (d) |
20.7 | |||
Net gain on dispositions of businesses (e) |
(12.0 | ) | ||
OPEB curtailment gains(f) |
(19.7 | ) | ||
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Total Non-GAAP adjustments |
317.6 | |||
Non-GAAP adjusted EBITDA RRD continuing operations (g) |
$ | 335.8 | ||
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Net sales |
$ | 5,019.4 | ||
Non-GAAP adjusted EBITDA margin % (g) |
6.7 | % |
See accompanying notes to the unaudited non-GAAP financial information.
R. R. Donnelley & Sons Company
Unaudited Segment GAAP to Non-GAAP Operating Income and Non-GAAP Adjusted EBITDA and Margin Reconciliation
For the Nine Months Ended September 30, 2016
(in millions)
Variable Print | Strategic Services | International | Corporate | Consolidated | ||||||||||||||||
Net sales |
$ | 2,311.8 | $ | 1,229.6 | $ | 1,478.0 | $ | | $ | 5,019.4 | ||||||||||
Operating expense |
2,167.8 | 1,204.3 | 1,378.5 | 102.5 | 4,853.1 | |||||||||||||||
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Income (loss) from operations |
144.0 | 25.3 | 99.5 | (102.5 | ) | 166.3 | ||||||||||||||
Operating margin % |
6.2 | % | 2.1 | % | 6.7 | % | nm | 3.3 | % | |||||||||||
Non-GAAP Adjustments |
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Restructuring, impairment and other charges - net (b) |
4.7 | 2.0 | 6.2 | 11.4 | 24.3 | |||||||||||||||
Acquisition-related expenses (c) |
| | | 2.7 | 2.7 | |||||||||||||||
Pension settlement charges (d) |
| | | 20.7 | 20.7 | |||||||||||||||
OPEB curtailment gains (f) |
| | (0.1 | ) | (19.6 | ) | (19.7 | ) | ||||||||||||
Net gain on dispositions of businesses (e) |
| | (12.6 | ) | $ | 0.6 | (12.0 | ) | ||||||||||||
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Total Non-GAAP adjustments |
4.7 | 2.0 | (6.5 | ) | 15.8 | 16.0 | ||||||||||||||
Non-GAAP income (loss) from continuing operations (g) |
$ | 148.7 | $ | 27.3 | $ | 93.0 | $ | (86.7 | ) | $ | 182.3 | |||||||||
Non-GAAP operating margin % (g) |
6.4 | % | 2.2 | % | 6.3 | % | nm | 3.6 | % | |||||||||||
Depreciation and amortization |
90.5 | 13.9 | 46.6 | 2.5 | 153.5 | |||||||||||||||
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Non-GAAP Adjusted EBITDA (g) |
$ | 239.2 | $ | 41.2 | $ | 139.6 | $ | (84.2 | ) | $ | 335.8 | |||||||||
Non-GAAP Adjusted EBITDA margin % (g) |
10.3 | % | 3.4 | % | 9.4 | % | nm | 6.7 | % |
See accompanying notes to the unaudited non-GAAP financial information.
R. R. Donnelley & Sons Company
Unaudited Selected Balance Sheet Information
As of September 30, 2016
(in millions)
Consolidated R.R. Donnelley (h) |
Discontinued Operations |
Continuing Operations (h) |
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Short-term and current portion of long-term debt |
$ | 255.6 | $ | 69.3 | $ | 186.3 | ||||||
Long-term debt |
3,635.3 | 1,375.1 | 2,260.2 | |||||||||
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Total debt |
$ | 3,890.9 | $ | 1,444.4 | $ | 2,446.5 | ||||||
Less: cash and cash equivalents |
411.8 | 96.8 | 315.0 | |||||||||
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Net debt (g) |
$ | 3,479.1 | $ | 1,347.6 | $ | 2,131.5 | ||||||
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See accompanying notes to the unaudited non-GAAP financial information.
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
Notes to Unaudited Non-GAAP Financial Information
(a) | Reflects the net earnings directly associated with the discontinued operations of the Donnelley Financial and LSC businesses. |
(b) | Restructuring, impairment and other charges - net: included charges for employee termination costs, lease termination and other restructuring costs, multi-employer pension plan withdrawal obligations unrelated to facility closures, and net impairment charges of long-lived assets. |
(c) | Acquisition-related expenses: included charges related to legal, accounting and other expenses associated with contemplated or completed acquisitions. |
(d) | Pension settlement charges: included charges related to lump-sum pension settlement payments. |
(e) | Net gain on dispositions of businesses: included a net gain on the sale of entities. |
(f) | Other postretirement benefit plan obligation (OPEB) curtailment gains: included a gain as a result of the curtailments of the Companys OPEB plans. |
(g) | The information contained in this line is a non-GAAP measure and thus is not calculated in accordance with GAAP. The Company believes that these non-GAAP measures, when presented in conjunction with comparable GAAP measures, are useful because that information is an appropriate measure for evaluating the Companys operating performance. Internally, the Company uses this non-GAAP information as an indicator of business performance, and evaluates managements effectiveness with specific reference to these indicators. These measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. |
(h) | On October 6, 2016, the Company redeemed the outstanding $45.8 million principal amount of its 7.250% notes due May 15, 2018 and the outstanding $21.3 principal amount of its 8.25% senior notes due March 15, 2019 plus accrued and unpaid interest. Additionally, on November 2, 2016 the Company redeemed $155.2 million aggregate principal of its 6.125% senior notes due January 15, 2017 plus accrued and unpaid interest. |