R.R. Donnelley & Sons Company (NYSE: RRD) (“RRD”) today reported financial results for the third 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.
“We delivered solid results for the quarter with growth in both our net sales and non-GAAP diluted earnings per share,” said Dan Knotts, RRD’s President and Chief Executive Officer. “Through our ongoing focus on cost reduction initiatives and capital structure improvements, along with lower taxes, we were able to more than offset the negative impact of changes in foreign exchange rates and the devastating hurricanes in the south. We are now in the midst of our busiest time of the year, and we are focused on delivering a strong finish to 2017.”
Third Quarter 2017 Highlights
Net sales in the quarter were $1.73 billion, up $9.3 million or 0.5% from the third quarter of 2016. On an organic basis, consolidated net sales decreased 0.4% driven by volume growth in the International and Strategic Services segments and favorable changes in fuel surcharges which were more than offset by net volume declines in the Variable Print segment, lower postage pass through sales in the Strategic Services segment and modest price erosion across all segments.
Gross profit in the third quarter of 2017 was $324.4 million or 18.7% of net sales versus $364.2 million or 21.1% of net sales in the prior year quarter. The positive impact from our cost reduction initiatives was more than offset by an OPEB curtailment gain in the prior year period and unfavorable mix, modest price pressure, start-up costs related to a new facility in Asia and higher costs of transportation as a result of the hurricanes in the current period.
Selling, general and administrative expenses (“SG&A”) of $207.7 million, or 12.0% of net sales, in the third quarter of 2017 decreased from $218.1 million, or 12.6% of net sales, in the prior year. The improvement was primarily due to higher allocated costs from the pre-spin operations in the prior year period, cost reduction initiatives and a legal settlement which were partially offset by unfavorable changes in foreign exchange rates and higher variable incentive compensation expense.
Income from operations of $35.9 million in the third quarter decreased $48.1 million from $84.0 million in the 2016 quarter. The prior year period included the OPEB curtailment gain and restructuring charges while the current period included a goodwill impairment charge in Digital and Creative Solutions, which is part of the Strategic Services segment, and restructuring charges. Non-GAAP income from operations of $69.7 million, or 4.0% of net sales, decreased $6.7 million from $76.4 million, or 4.4% of net sales, reported in the prior year period primarily due to unfavorable changes in foreign exchange rates of $7.8 million and lower gross profit, partially offset by lower SG&A and depreciation and amortization expense.
Net loss attributable to common stockholders from continuing operations of $8.0 million in the third quarter compared to net earnings of $22.0 million in the third quarter of 2016. The third quarter of 2017 included a loss on debt extinguishments primarily related to the amendment of the Company’s credit agreement and a net gain on investments resulting from the debt-for-equity exchange of the remaining portion of the Company’s retained shares of common stock of Donnelley Financial for certain of its outstanding senior notes. Non-GAAP net earnings attributable to common stockholders from continuing operations was $21.1 million, an increase of $8.3 million compared to net earnings of $12.8 million in the third quarter of 2016, primarily driven by a lower effective tax rate and lower interest expense partially offset by lower income from operations.
Third quarter 2017 diluted loss per share attributable to common stockholders from continuing operations was $0.11 compared to diluted earnings per share of $0.31 from the third quarter of 2016. Non-GAAP diluted earnings per share attributable to common stockholders from continuing operations was $0.30 in 2017 compared to diluted earnings per share of $0.18 in 2016.
more detail at: http://investor.rrd.com/news-releases/2017/10-31-2017-203055531