R.R. Donnelley & Sons Company (NYSE: RRD) (“RRD”) today reported financial results for the first quarter of 2018.
Key messages
• Net sales grew 2.9% and organic sales grew 1.3% for the first quarter 2018 – represents second consecutive quarter of organic growth
• GAAP and non-GAAP income from operations down from prior year – both include unfavorable foreign exchange losses of approximately $12 million and an $8.3 million charge related to a retail client bankruptcy
• GAAP and non-GAAP diluted earnings (loss) per share both include reduced interest expense of $6.6 million and higher income tax expense
• Results provided on recently announced new segment basis – Marketing Solutions, a preeminent provider of multichannel marketing activation programs and Business Services, a premier global provider of business communications services
• Company reaffirms its full year guidance
“I am pleased to report that we delivered our second consecutive quarter of organic sales growth as we extend our differentiated capabilities to win new business and fuel growth with our existing clients. And despite an unexpected client bankruptcy-related charge and unfavorable foreign exchange rates, our underlying results for the first quarter of 2018 were in line with our expectations, and we remain on track to deliver our plan for the year,” said Dan Knotts, RRD’s President and Chief Executive Officer. “Our sales growth is directly attributable to the progress we are making in advancing our strategic transformation as a leading marketing and business communications services company. Our new organizational alignment positions us to further leverage our extensive business portfolio to help our clients create better connections with their customers across the full customer journey – from the marketing programs needed to acquire new and repeat customers, to the business communications that service those customers and strengthen the brand over time. Our teams remain focused on executing our cost reduction plans and driving long-term value for our stockholders.”
Net sales in the quarter were $1.71 billion, up $48.9 million or 2.9% from the first quarter of 2017. On an organic basis, consolidated net sales increased 1.3% driven by higher volumes in both segments as well as higher fuel surcharges in Business Services, partially offset by price pressure in Business Services. From a products and services perspective, Packaging, Logistics, Direct Mail and Business Process Outsourcing accounted for most of the increase while Commercial Print was down due to ongoing secular pressure and lower specialty card sales.
Gross profit in the first quarter of 2018 was $294.7 million or 17.3% of net sales versus $326.8 million or 19.7% of net sales in the prior year quarter. The favorable impact of volume growth and cost reduction initiatives was more than offset by inflationary increases, primarily in paper and costs of transportation, unfavorable changes in foreign exchange rates, operational inefficiencies due to volume reductions from two clients and modest price pressure.
Selling, general and administrative expenses (“SG&A”) of $214.6 million, or 12.6% of net sales, in the first quarter of 2018 decreased from $225.8 million, or 13.6% of net sales, in the prior year. The improvement was primarily due to cost reduction initiatives, partially offset by higher bad debt expense due to the retail client bankruptcy.
Income from operations was $32.2 million in the first quarter compared to $43.3 million in the 2017 quarter. The first quarter of 2018 included pre-tax restructuring and other charges of $0.8 million. The prior year period included pre-tax restructuring and other charges of $9.1 million and $2.1 million for spinoff-related transaction expenses. Non-GAAP income from operations of $32.9 million, or 1.9% of net sales, decreased $21.6 million from $54.5 million, or 3.3% of net sales, reported in the prior year period. This decrease was primarily due to lower gross profit, partially offset by lower SG&A and depreciation and amortization expense.
Net loss attributable to common stockholders of $9.6 million in the first quarter compared to a net loss of $50.1 million in the first quarter of 2017. The prior year period included a loss of $51.6 million related to the sale of the Company’s equity interest in LSC Communications, Inc. (“LSC”). Non-GAAP net loss attributable to common stockholders was $7.1 million, a decrease of $17.1 million compared to net earnings of $10.0 million in the first quarter of 2017, primarily driven by lower income from operations and higher taxes, partially offset by lower interest expense. The prior year effective tax rate included a one-time benefit due to a favorable tax rate change obtained in Asia.
more detail at: http://investor.rrd.com/news-releases/2018/05-01-2018-213030879