R.R. Donnelley & Sons Company (NYSE: RRD) (“RRD”) today reported financial results for the second quarter 2017. Unless otherwise noted, today’s results represent RRD following the October 1, 2016 spinoffs of LSC Communications, Inc. (“LSC”) and Donnelley Financial Solutions, Inc. (“Donnelley Financial”) which are presented as discontinued operations for periods prior to October 1, 2016. Further, all references to the number of shares and per share amounts have been retroactively adjusted to give effect to the one-for-three reverse stock split which took place October 1, 2016 immediately following the spinoffs.
“Our overall second quarter performance was within the range of our expectations. However, while net sales remained stable, income from operations was negatively impacted by unfavorable mix in several of our businesses and changes in foreign exchange rates,” said Dan Knotts, RRD’s President and Chief Executive Officer. “In addition, we incurred investments and start-up costs in Asia as we quickly ramp up a new packaging production facility to support a significant business opportunity that we expect will begin to generate incremental sales volume later in the third quarter. We continue to make good progress in advancing our long term strategic priorities while aggressively managing our cost structure, and as we look to the back half of the year, we remain confident in our ability to deliver against our previous guidance for 2017.”
Second Quarter 2017 Highlights
Net sales in the quarter were $1.65 billion, up $13.4 million or 0.8% from the second quarter of 2016. On an organic basis, consolidated net sales declined 0.8% driven by volume growth in the International and Strategic Services segments and favorable changes in fuel surcharges which were more than offset by lower postage pass through sales in the Strategic Services segment, net volume declines in the Variable Print segment and modest price erosion across all segments.
Gross profit in the second quarter of 2017 was $303.1 million or 18.4% of net sales versus $316.4 million or 19.4% of net sales in the prior year quarter. The decline was primarily due to unfavorable mix in several businesses, modest price pressure in all segments and unfavorable changes in foreign exchange rates.
Selling, general and administrative expenses (“SG&A”) of $213.2 million, or 13.0% of net sales, in the second quarter of 2017 decreased from $233.6 million, or 14.3% of net sales, in the prior year. This decline was primarily due to pension settlement charges of $20.4 million in the second quarter of 2016 while higher bad debt expense and allocated costs from the pre-spin operations in the prior year period were offset by unfavorable changes in foreign exchange rates and higher variable incentive compensation expense in the current year period.
Income from operations of $38.6 million in the second quarter increased $13.9 million from $24.7 million in the 2016 quarter. The prior year period included the pension settlement charges and higher restructuring and impairment charges. Non-GAAP income from operations of $43.6 million, or 2.6% of net sales, decreased $11.1 million from $54.7 million, or 3.4% of net sales, reported in the prior year period primarily due to lower gross profit partially offset by lower depreciation and amortization expense.
Net earnings attributable to common stockholders from continuing operations was $76.5 million in the second quarter compared to a net loss of $23.2 million in the second quarter of 2016. During the second quarter of 2017, the debt-for-equity exchange of most of the Company’s retained shares of Donnelley Financial for certain outstanding senior notes resulted in an after tax net realized gain of $94.4 million. In addition, the Company tendered certain outstanding debentures and senior notes. These transactions resulted in a net after-tax loss on debt extinguishments of $8.5 million. The prior year period included the after tax impact of the pension settlement charges and higher restructuring and impairment charges. Non-GAAP net loss attributable to common stockholders from continuing operations was $4.1 million, a decrease of $4.9 million compared to net earnings of $0.8 million in the second quarter of 2016, primarily driven by lower income from operations partially offset by lower interest expense.
Second quarter 2017 diluted earnings per share attributable to common stockholders from continuing operations was $1.09 compared to a diluted loss per share of $0.33 from the second quarter of 2016. Non-GAAP diluted loss per share attributable to common stockholders from continuing operations was $0.06 in 2017 compared to diluted earnings per share of $0.01 in 2016.
more detail at: http://investor.rrd.com/news-releases/2017/08-01-2017-213117603