EXHIBIT 99.1
RR DONNELLEY | | | | Corporate Headquarters 77 West Wacker Drive Chicago, Illinois 60601 Telephone (312) 326-8000 |
Media contact: | | Investor contact: | | |
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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
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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
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CONDENSED CONSOLIDATED INCOME STATEMENT
(in thousands, except per-share data)
| | | 3 mos ended March 31,
| | | % Change
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| | | 2003
| | | 2002
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Net sales | | $ | 1,073,817 | | | $ | 1,093,650 | | | (1.8% | ) |
Cost of materials and transportation | | | 455,747 | | | | 462,105 | | | (1.4% | ) |
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Value added revenue (VAR) | | | 618,070 | | | | 631,545 | | | (2.1% | ) |
Value added cost of sales | | | 449,760 | | | | 463,640 | | | (3.0% | ) |
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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% | ) |
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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% | ) |
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Earnings (loss) before income taxes | | | 9,273 | | | | (11,653 | ) | | (179.6% | ) |
Provision (benefit) for income taxes | | | 3,571 | | | | (34,312 | ) | | (110.4% | ) |
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Net income | | $ | 5,702 | | | $ | 22,659 | | | (74.8% | ) |
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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,
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Share Data | | 2003
| | | 2002
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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 | |
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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 | % |
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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
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KEY INFORMATION
(dollars in thousands, except per-share data)
| | | 2003
| | | 2002
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| | | 3 mos ended March 31,
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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,
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| | | 2003
| | | 2002
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| | | Earnings (loss) before Income Taxes
| | | Net Income
| | | Earnings (loss) per Diluted share
| | | Earnings (loss) before Income Taxes
| | | Net Income
| | | Earnings (loss) per Diluted share
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Consolidated results as reported | | $ | 9,273 | | | $ | 5,702 | | | $ | 0.05 | | | $ | (11,653 | ) | | $ | 22,659 | | | $ | 0.20 | |
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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 | ) |
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Total significant items: | | $ | (323 | ) | | $ | (201 | ) | | $ | 0.00 | | | $ | (22,802 | ) | | $ | 15,635 | | | $ | 0.14 | |
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| * | | 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
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KEY INFORMATION
(in thousands)
Industry Segment Data
| | | Donnelley Print Solutions
| | Logistics Services
| | Financial Services
| | | Other4
| | | Corporate5,6
| | | Consolidated Total
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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
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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
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KEY INFORMATION
(in thousands)
Net Sales Detail—First Quarter | | 2003
| | % of Total
| | 2002
| | % of Total
| | % Change
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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% | ) |
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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% | |
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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 | | | | | |
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Value added revenue (VAR) | | $ | 618,070 | | | | $ | 631,545 | | | | | |
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VAR Detail—First Quarter | | 2003
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| | 2002
| | % of Total
| | % Change
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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% | ) |
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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% | |
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Other | | | 59,264 | | 9.6% | | | 54,096 | | 8.6% | | 9.6% | |
Total VAR | | $ | 618,070 | | 100.0% | | $ | 631,545 | | 100.0% | | (2.1% | ) |
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| 9 | | Includes International (Latin America, Europe and Asia) and Other. |
