R.R. Donnelley Reports 1st-Quarter 2001 Earnings

Apr 25, 2001, 01:00 ET from R.R. Donnelley & Sons Company

    CHICAGO, April 25 /PRNewswire/ -- R.R. Donnelley & Sons Company
 (NYSE:   DNY) reported net income for the first quarter of 2001 of
 $14.5 million, or 12 cents per diluted share.  The results include
 restructuring charges of $22 million, or 11 cents per share, to cover the cost
 of closing operations in several of the company's business units, including
 printing facilities in South Daytona and St. Petersburg, Fla., and Houston.
 The charges also include costs associated with closing the company's existing
 directory-printing operations in York, England, and transitioning production
 to a new state-of-the-art four-color printing plant in Flaxby.
     Before restructuring charges, net income was $27.9 million, or 23 cents
 per share, compared with $46.7 million, or 38 cents per diluted share, a year
 ago.  Revenues for the quarter were $1.3 billion, down 3 percent from the
 year-earlier period.
     Contributing to the first-quarter earnings decline was continued softness
 in capital markets activity, which affected demand for printing in the
 company's R.R. Donnelley Financial unit.  In addition, demand for magazines,
 catalogs and trade books slipped as advertising spending declined, consumer
 orders slowed and book publishers cut reprint orders as they work off excess
 inventory from a slow holiday selling season.
     Among the actions the company has taken to counteract the volume
 shortfalls are adjusting capacity to current activity levels through closing
 of facilities, workforce reductions and reduced workweeks; and cutting
 discretionary spending.
     Despite the softer economy, R.R. Donnelley continued to take steps toward
 achieving its vision of transforming the company to lead the revolution in
 communications effectiveness.  Building on its investments in continuous
 improvement over the past several years, the company recently announced it is
 investing $300 million over the next 24 months to upgrade some plants and
 replace less-efficient equipment with fewer, though faster and more flexible
 printing presses and finishing equipment to improve speed and efficiency.
 This investment will not increase overall capacity, but will focus on cost,
 quality and service.
     The company also is adding other capabilities to help customers get their
 content into the hands of the right audiences, with more precise timing, less
 waste, lower total delivered costs and greater results that provide R.R.
 Donnelley the opportunity to compete on value, not cost.
     "I can report with confidence that, even in the current economic
 environment, we are satisfied with the progress we've made in repositioning
 R.R. Donnelley," said William L. Davis, chairman, president and chief
 executive officer.  "We have the resources and strong cash flow to manage and
 execute through this environment and strengthen our competitive position,
 while continuing to develop and deliver the broadest range of integrated
 communications solutions for our customers."
     Since February 1, the company has bought back 2.2 million shares at an
 aggregate cost of approximately $61 million in shares under a program
 authorizing the purchase of up to $300 million in shares before Jan. 31, 2002.
 The company expects to complete the purchase before year-end.
     The company maintains its expectations for 2001 earnings per share to
 range between $1.95 and $2.10 before one-time items and restructuring charges,
 assuming market demand in the second half will return to 2000 levels.
     R.R. Donnelley will hold its quarterly investor conference call to review
 its first-quarter 2001 results at 10 a.m., central time, on Wednesday, April
 25, 2001.  For a link to the call, log on to
 www.rrdonnelley.com/invest/events/ .  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 30 days.
     R.R. Donnelley ( www.rrdonnelley.com ) is revolutionizing communications
 effectiveness by providing comprehensive and integrated communications
 services.  These include premedia, digital photography, content management,
 printing, Internet consulting and logistics.  The company's full range of
 solutions help publishers and merchandisers, as well as telecommunications,
 financial and healthcare companies, deliver effective and targeted
 communications in the right format to the right audience at the right time.
 Its 34,000 employees serve customers in North America, South America, Europe
 and the Asia/Pacific Basin.
     Certain statements, including discussions of the company's expectations
 for 2001, 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, 2000, for
 a description of such factors.
 
                      CONDENSED CONSOLIDATED INCOME STATEMENT
                      ($000's omitted, except per-share data)
 
                                       3 mos ended March 31          % Change
                                       2001            2000
     Net Sales                      $1,302,650     $1,342,970          -3.0%
     Value Added Revenue               728,282        757,508          -3.9%
     Value Added Cost of Sales         528,909        518,073          -2.1%
     Gross Profit                      199,373        239,435         -16.7%
     Selling and Administrative
      expenses                         137,781        144,294           4.5%
     Restructuring and impairment
      charge                            21,742              -            n/a
     Earnings from Operations           39,850         95,141         -58.1%
     Other Income (expense):
       Interest expense                (17,624)       (22,141)         20.4%
       Other, net                        1,359          2,937         -53.7%
     Earnings before income taxes       23,585         75,937         -68.9%
     Provision for income taxes          9,080         29,236          68.9%
     NET INCOME                        $14,505        $46,701         -68.9%
 
 
                                             3 mos ended March 31
                                        2001                    2000
     Per-Share:                  Basic       Diluted      Basic       Diluted
     Continuing operations       $0.23        $0.23        $0.38       $0.38
     Restructuring and
      impairment charge          (0.11)       (0.11)        0.00        0.00
     Consolidated                $0.12        $0.12        $0.38       $0.38
 
 
                                                       3 mos ended March 31
                                                       2001           2000
     Average basic shares outstanding                 119,600        122,140
     Basic shares outstanding at March 31             118,169        121,910
     Effect of dilutive securities                      1,718            739
     Avg diluted shares outstanding                   121,318        122,879
 
     Percent to Net Sales(A)
     Gross profit                                       15.3%          17.8%
     S&A expense                                        10.6%          10.7%
     Earnings from operations                            4.7%           7.1%
     Net Income                                          2.1%           3.5%
 
     Percent to VAR(A)
     Gross profit                                       27.4%          31.6%
     S&A expense                                        18.9%          19.0%
     Earnings from operations                            8.5%          12.6%
     Net Income                                          3.8%           6.2%
 
 
                                                       3 mos ended March 31
                                                       2001            2000
     EBITDA(A)                                        160,862        192,965
 
 
                                                        3 mos ended March 31
                                                        2001           2000
     Return on avg invested capital(A,B)                12.5%          14.2%
     Operating working capital(C)                        6.2%           6.7%
     (% of net sales)
 
 
                                  KEY INFORMATION
                                  ($000's omitted)
 
     Industry Segment Data:
 
                     Commercial   Logistics                       Consolidated
                       Print      Services    Other(D)   Corporate    Total
     First Quarter
      2001
     Sales           $1,114,030   $186,218     $2,402        $-   $1,302,650
     Restructuring
      and impairment
      charge             19,702          -          -     2,040       21,742
     Earnings (loss)
      from operations    35,687     (4,593)    (7,266)   16,022       39,850
     Earnings (loss)
      before income
      taxes              38,456     (4,610)    (7,337)   (2,924)      23,585
 
     First Quarter
      2000
     Sales           $1,188,675   $149,251     $5,044        $-   $1,342,970
     Restructuring
      and impairment
      charge                  -          -          -         -            -
     Earnings (loss)
      from operations    94,539       (606)    (3,884)    5,092       95,141
     Earnings (loss)
      before income
      taxes              96,425       (648)    (3,838)  (16,002)      75,937
 
     (A) Excludes 2001 restructuring and impairment charge.
     (B) Computed on a 12-month rolling income from continuing operations
         excluding one-time items divided by a 13-point average of debt and
         equity.
     (C) Computed on a 13-point average of net receivables, net inventories,
         and prepaid expenses minus accounts payable and accrued liabilities
         (adjusted for restructuring reserves) divided by 12-month rolling net
         sales.
     (D) Represents other operating segments of the company.
 
 
                        Additional Financial Information
                      For the quarter ended March 31, 2001
                              Thousands of dollars
 
     Net Sales Detail - First Quarter
 
                          2001    % of Total     2000    % of Total  % Change
     Long-run Magazines,
      Catalogs and
      Inserts           442,603     34.0%       451,008     33.6%     (1.9%)
     Book Publishing
      Services          163,653     12.6%       182,032     13.6%    (10.1%)
     Financial
      Services          100,839      7.7%       133,310      9.9%    (24.4%)
     Telecommunications 190,494     14.6%       207,323     15.4%     (8.1%)
     International (A)   77,599      6.0%        82,093      6.1%     (5.5%)
     Specialized
      Publishing
      Services           64,958      5.0%        62,987      4.7%       3.1%
     RRD Direct          46,134      3.5%        48,161      3.6%     (4.2%)
     Premedia            27,750      2.1%        21,761      1.6%      27.5%
     Commercial
      Print           1,114,030     85.5%     1,188,675     88.5%     (6.3%)
     Logistics
      Services          186,218     14.3%       149,251     11.1%      24.8%
     Other (B)            2,402      0.2%         5,044      0.4%    (52.4%)
       Total Net
        Sales         1,302,650    100.0%     1,342,970    100.0%     (3.0%)
 
     Note: Net sales shown by operating unit, not by end market served
     (A) Includes South America, Poland and Mexico
     (B) Includes Red Rover, Housenet, Louisville Distribution and Other
 
 
     Consolidated Summary of Expense Trends - First Quarter
 
                          2001      % of Sales   2000     % of Sales % Change
     Cost of materials
      (excluding cost
      of transp.)       425,105       32.6%     463,384      34.5%    (8.3%)
     Cost of
      transportation    149,263       11.5%     122,078       9.1%     22.3%
     Cost of
      manufacturing     430,997       33.1%     423,186      31.5%      1.8%
     Depreciation        81,702        6.3%      80,509       6.0%      1.5%
     Amortization        16,210        1.2%      14,378       1.1%     12.7%
     Selling and admin  137,781       10.6%     144,294      10.7%    (4.5%)
     Restructuring and
      impairment         21,742        1.7%           -       0.0%       n/a
     Net interest
      expense            17,624        1.4%      22,141       1.6%   (20.4%)
 
 
     Capital Expenditures - Year-to-date
     2001                  2000
     32,546              56,101
 
 
     Average Shares Outstanding
     Shares                              Q1        Year-to-Date
     Basic                             119,600        119,600
     Diluted                             1,718          1,718
     Total                             121,318        121,318
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X15387948
 
 

SOURCE R.R. Donnelley & Sons Company
    CHICAGO, April 25 /PRNewswire/ -- R.R. Donnelley & Sons Company
 (NYSE:   DNY) reported net income for the first quarter of 2001 of
 $14.5 million, or 12 cents per diluted share.  The results include
 restructuring charges of $22 million, or 11 cents per share, to cover the cost
 of closing operations in several of the company's business units, including
 printing facilities in South Daytona and St. Petersburg, Fla., and Houston.
 The charges also include costs associated with closing the company's existing
 directory-printing operations in York, England, and transitioning production
 to a new state-of-the-art four-color printing plant in Flaxby.
     Before restructuring charges, net income was $27.9 million, or 23 cents
 per share, compared with $46.7 million, or 38 cents per diluted share, a year
 ago.  Revenues for the quarter were $1.3 billion, down 3 percent from the
 year-earlier period.
     Contributing to the first-quarter earnings decline was continued softness
 in capital markets activity, which affected demand for printing in the
 company's R.R. Donnelley Financial unit.  In addition, demand for magazines,
 catalogs and trade books slipped as advertising spending declined, consumer
 orders slowed and book publishers cut reprint orders as they work off excess
 inventory from a slow holiday selling season.
     Among the actions the company has taken to counteract the volume
 shortfalls are adjusting capacity to current activity levels through closing
 of facilities, workforce reductions and reduced workweeks; and cutting
 discretionary spending.
     Despite the softer economy, R.R. Donnelley continued to take steps toward
 achieving its vision of transforming the company to lead the revolution in
 communications effectiveness.  Building on its investments in continuous
 improvement over the past several years, the company recently announced it is
 investing $300 million over the next 24 months to upgrade some plants and
 replace less-efficient equipment with fewer, though faster and more flexible
 printing presses and finishing equipment to improve speed and efficiency.
 This investment will not increase overall capacity, but will focus on cost,
 quality and service.
     The company also is adding other capabilities to help customers get their
 content into the hands of the right audiences, with more precise timing, less
 waste, lower total delivered costs and greater results that provide R.R.
 Donnelley the opportunity to compete on value, not cost.
     "I can report with confidence that, even in the current economic
 environment, we are satisfied with the progress we've made in repositioning
 R.R. Donnelley," said William L. Davis, chairman, president and chief
 executive officer.  "We have the resources and strong cash flow to manage and
 execute through this environment and strengthen our competitive position,
 while continuing to develop and deliver the broadest range of integrated
 communications solutions for our customers."
     Since February 1, the company has bought back 2.2 million shares at an
 aggregate cost of approximately $61 million in shares under a program
 authorizing the purchase of up to $300 million in shares before Jan. 31, 2002.
 The company expects to complete the purchase before year-end.
     The company maintains its expectations for 2001 earnings per share to
 range between $1.95 and $2.10 before one-time items and restructuring charges,
 assuming market demand in the second half will return to 2000 levels.
     R.R. Donnelley will hold its quarterly investor conference call to review
 its first-quarter 2001 results at 10 a.m., central time, on Wednesday, April
 25, 2001.  For a link to the call, log on to
 www.rrdonnelley.com/invest/events/ .  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 30 days.
     R.R. Donnelley ( www.rrdonnelley.com ) is revolutionizing communications
 effectiveness by providing comprehensive and integrated communications
 services.  These include premedia, digital photography, content management,
 printing, Internet consulting and logistics.  The company's full range of
 solutions help publishers and merchandisers, as well as telecommunications,
 financial and healthcare companies, deliver effective and targeted
 communications in the right format to the right audience at the right time.
 Its 34,000 employees serve customers in North America, South America, Europe
 and the Asia/Pacific Basin.
     Certain statements, including discussions of the company's expectations
 for 2001, 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, 2000, for
 a description of such factors.
 
                      CONDENSED CONSOLIDATED INCOME STATEMENT
                      ($000's omitted, except per-share data)
 
                                       3 mos ended March 31          % Change
                                       2001            2000
     Net Sales                      $1,302,650     $1,342,970          -3.0%
     Value Added Revenue               728,282        757,508          -3.9%
     Value Added Cost of Sales         528,909        518,073          -2.1%
     Gross Profit                      199,373        239,435         -16.7%
     Selling and Administrative
      expenses                         137,781        144,294           4.5%
     Restructuring and impairment
      charge                            21,742              -            n/a
     Earnings from Operations           39,850         95,141         -58.1%
     Other Income (expense):
       Interest expense                (17,624)       (22,141)         20.4%
       Other, net                        1,359          2,937         -53.7%
     Earnings before income taxes       23,585         75,937         -68.9%
     Provision for income taxes          9,080         29,236          68.9%
     NET INCOME                        $14,505        $46,701         -68.9%
 
 
                                             3 mos ended March 31
                                        2001                    2000
     Per-Share:                  Basic       Diluted      Basic       Diluted
     Continuing operations       $0.23        $0.23        $0.38       $0.38
     Restructuring and
      impairment charge          (0.11)       (0.11)        0.00        0.00
     Consolidated                $0.12        $0.12        $0.38       $0.38
 
 
                                                       3 mos ended March 31
                                                       2001           2000
     Average basic shares outstanding                 119,600        122,140
     Basic shares outstanding at March 31             118,169        121,910
     Effect of dilutive securities                      1,718            739
     Avg diluted shares outstanding                   121,318        122,879
 
     Percent to Net Sales(A)
     Gross profit                                       15.3%          17.8%
     S&A expense                                        10.6%          10.7%
     Earnings from operations                            4.7%           7.1%
     Net Income                                          2.1%           3.5%
 
     Percent to VAR(A)
     Gross profit                                       27.4%          31.6%
     S&A expense                                        18.9%          19.0%
     Earnings from operations                            8.5%          12.6%
     Net Income                                          3.8%           6.2%
 
 
                                                       3 mos ended March 31
                                                       2001            2000
     EBITDA(A)                                        160,862        192,965
 
 
                                                        3 mos ended March 31
                                                        2001           2000
     Return on avg invested capital(A,B)                12.5%          14.2%
     Operating working capital(C)                        6.2%           6.7%
     (% of net sales)
 
 
                                  KEY INFORMATION
                                  ($000's omitted)
 
     Industry Segment Data:
 
                     Commercial   Logistics                       Consolidated
                       Print      Services    Other(D)   Corporate    Total
     First Quarter
      2001
     Sales           $1,114,030   $186,218     $2,402        $-   $1,302,650
     Restructuring
      and impairment
      charge             19,702          -          -     2,040       21,742
     Earnings (loss)
      from operations    35,687     (4,593)    (7,266)   16,022       39,850
     Earnings (loss)
      before income
      taxes              38,456     (4,610)    (7,337)   (2,924)      23,585
 
     First Quarter
      2000
     Sales           $1,188,675   $149,251     $5,044        $-   $1,342,970
     Restructuring
      and impairment
      charge                  -          -          -         -            -
     Earnings (loss)
      from operations    94,539       (606)    (3,884)    5,092       95,141
     Earnings (loss)
      before income
      taxes              96,425       (648)    (3,838)  (16,002)      75,937
 
     (A) Excludes 2001 restructuring and impairment charge.
     (B) Computed on a 12-month rolling income from continuing operations
         excluding one-time items divided by a 13-point average of debt and
         equity.
     (C) Computed on a 13-point average of net receivables, net inventories,
         and prepaid expenses minus accounts payable and accrued liabilities
         (adjusted for restructuring reserves) divided by 12-month rolling net
         sales.
     (D) Represents other operating segments of the company.
 
 
                        Additional Financial Information
                      For the quarter ended March 31, 2001
                              Thousands of dollars
 
     Net Sales Detail - First Quarter
 
                          2001    % of Total     2000    % of Total  % Change
     Long-run Magazines,
      Catalogs and
      Inserts           442,603     34.0%       451,008     33.6%     (1.9%)
     Book Publishing
      Services          163,653     12.6%       182,032     13.6%    (10.1%)
     Financial
      Services          100,839      7.7%       133,310      9.9%    (24.4%)
     Telecommunications 190,494     14.6%       207,323     15.4%     (8.1%)
     International (A)   77,599      6.0%        82,093      6.1%     (5.5%)
     Specialized
      Publishing
      Services           64,958      5.0%        62,987      4.7%       3.1%
     RRD Direct          46,134      3.5%        48,161      3.6%     (4.2%)
     Premedia            27,750      2.1%        21,761      1.6%      27.5%
     Commercial
      Print           1,114,030     85.5%     1,188,675     88.5%     (6.3%)
     Logistics
      Services          186,218     14.3%       149,251     11.1%      24.8%
     Other (B)            2,402      0.2%         5,044      0.4%    (52.4%)
       Total Net
        Sales         1,302,650    100.0%     1,342,970    100.0%     (3.0%)
 
     Note: Net sales shown by operating unit, not by end market served
     (A) Includes South America, Poland and Mexico
     (B) Includes Red Rover, Housenet, Louisville Distribution and Other
 
 
     Consolidated Summary of Expense Trends - First Quarter
 
                          2001      % of Sales   2000     % of Sales % Change
     Cost of materials
      (excluding cost
      of transp.)       425,105       32.6%     463,384      34.5%    (8.3%)
     Cost of
      transportation    149,263       11.5%     122,078       9.1%     22.3%
     Cost of
      manufacturing     430,997       33.1%     423,186      31.5%      1.8%
     Depreciation        81,702        6.3%      80,509       6.0%      1.5%
     Amortization        16,210        1.2%      14,378       1.1%     12.7%
     Selling and admin  137,781       10.6%     144,294      10.7%    (4.5%)
     Restructuring and
      impairment         21,742        1.7%           -       0.0%       n/a
     Net interest
      expense            17,624        1.4%      22,141       1.6%   (20.4%)
 
 
     Capital Expenditures - Year-to-date
     2001                  2000
     32,546              56,101
 
 
     Average Shares Outstanding
     Shares                              Q1        Year-to-Date
     Basic                             119,600        119,600
     Diluted                             1,718          1,718
     Total                             121,318        121,318
 
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                http://tbutton.prnewswire.com/prn/11690X15387948
 
 SOURCE  R.R. Donnelley & Sons Company