RRD Reports Q4 and Full Year 2021 Results

R.R. Donnelley & Sons Company (RRD), Chicago, reported financial results for the fourth quarter and full year of 2021.

Full Year Key Messages

• GAAP net sales, including the impact of foreign exchange and a disposition in early 2020, increased $197 million or 4.1%; Non-GAAP organic net sales increased 3.2% primarily from higher demand for many of the company’s products and services.
• GAAP income from operations was up $55 million versus the prior year.
• Non-GAAP income from operations for the year improved $17 million despite headwinds in excess of $80 million which included one-time projects in the prior year related to COVID and the Census, unfavorable FX and valuation adjustments for certain incentive compensation awards caused by the stock price increase in 2021.
• Cash provided by operating activities in 2021 was $92.1 million as compared to $149.8 million in the prior year period; current year results include payments in excess of $100 million related to the planned merger, settlement of LSC bankruptcy related claims, repayment of half the payroll taxes deferred in 2020 and payments made to terminate certain interest rate swap agreements.
• Total debt outstanding of $1.47 billion at Dec. 31, 2021 is down $37 million from the prior year end; Pension and OPEB plans are overfunded by $42 million at Dec. 31, 2021, which is an improvement of $146 million from the $104 million underfunded amount at the prior year end.
• Gross leverage ratio of 3.6x and net leverage ratio of 2.9x both improved 0.1x from Dec. 31, 2020 and represent lowest levels since 2016 spin.

“We delivered a strong year of performance capped by fourth quarter results that exceeded our expectations,” said Dan Knotts, president and CEO of RRD. “I am proud of the RRD team as we continue to successfully execute our strategy and navigate through the COVID-19 pandemic. Our full year 2021 adjusted income from operations and operating margin represent our third consecutive year of improved performance, while also representing our best performance in those metrics since 2016.

“We have remained laser-focused on executing our strategic priorities and have a business that is consistently delivering profitable growth and improving margins through organic sales growth and a leaner cost structure,” he continued. “In addition, our balance sheet is in its best shape since the spin in 2016. I would like to thank our 32,000 employees for their many contributions and dedication to deliver the high level of business performance we have today for our stockholders. RRD is well-positioned for continued success under the expected future ownership of Chatham Asset Management.”

Financial highlights

The following table provides an overview of RRD’s financial performance:

On Dec. 14, 2021, RRD entered into a definitive merger agreement under which the company agreed to be acquired by affiliates of Chatham Asset Management LLC, a leading private investment firm. Under the terms of the merger agreement, an affiliate of Chatham will acquire all of the outstanding shares of RRD common stock not already owned by Chatham and its affiliates for $10.85 per share in cash. Necessary regulatory approvals for the transaction have been obtained, and, subject to the stockholder vote scheduled for Feb. 23, 2022, the transaction is expected to close expeditiously thereafter and as soon as Feb. 25, 2022. Once the transaction closes, RRD’s shares will no longer trade on the New York Stock Exchange, and RRD will become a private company.

Net sales in the fourth quarter were $1.38 billion, up $28.6 million or 2.1% from the same period in 2020. While fourth quarter net sales benefitted $3 million due to changes in foreign exchange rates, the majority of the increase relates to higher client demand for many of the company’s products and price increases to partially offset inflationary cost increases. Notably, net sales of Commercial Print products were up significantly due to strong demand for domestic trading cards, as well as other printed products produced in China while net sales in Supply Chain Management were negatively impacted by the large one-time COVID projects in the prior year period. Organic net sales increased 1.9%.

Income from operations was $37.1 million in the fourth quarter of 2021 compared to income from operations of $78.1 million in the fourth quarter of 2020. The fourth quarter of 2021 included $40.8 million of expenses related to the planned merger, and net restructuring, impairment and other charges of $13.8 million which was an increase from $6.2 million in the prior year period.

Non-GAAP adjusted income from operations of $96.4 million in the fourth quarter of 2021 increased $1.9 million from the prior year period. The increase was primarily due to the impact of higher net sales and ongoing cost control initiatives partially offset by continued inflation.

Loss per share from continuing operations attributable to common stockholders was $0.19 in the fourth quarter of 2021 compared to earnings per share of $0.46 reported in the fourth quarter of 2020. The 2021 results reflect lower income from operations and higher income tax expense, partially offset by lower interest expense.

Non-GAAP adjusted earnings per share from continuing operations attributable to common stockholders of $0.58 in the fourth quarter of 2021 decreased from $0.71 in the fourth quarter of 2020 primarily due to higher income taxes, partially offset by lower interest expense and higher adjusted income from operations.

Other highlights and information (including discontinued operations in 2020)

Cash provided by operating activities during the 12 months ended Dec. 31, 2021 was $92.1 million compared to $149.8 million in the prior year period. The 2021 results included payments of $44.2 million related to the planned merger, $31.1 million to settle LSC bankruptcy related claims, $17.5 million to repay half of the payroll taxes deferred in 2020 as part of the CARES Act and $9.2 million to terminate certain interest rate swap agreements. The current year results also reflect investments in working capital and lower restructuring, tax and interest payments in 2021 as compared to last year.

Capital expenditures in the 12 months ended Dec. 31, 2021 were $73.3 million compared to $85.6 million in the prior year period.

As of Dec. 31, 2021, cash on hand was $280.2 million, down $8.6 million from 2020. Total debt outstanding was $1.47 billion, down $36.8 million from 2020. Availability under the credit facility was $550.7 million at Dec. 31, 2021. Total liquidity, including cash on hand, was $830.9 million, up from $739.2 million at Sept. 30, 2021. As of Dec. 31, 2021, there are no scheduled debt maturities prior to November 2023.

At Dec. 31, 2021, the company’s pension and OPEB plans were overfunded by $42 million, which was an improvement of $146 million from the $104 million underfunded amount at Dec. 31, 2020. The improvement in funded status is due primarily to updated actuarial assumptions, asset returns and slightly higher discount rates.

During 2020, the company completed the sale of its DLS Worldwide, International Logistics and Courier Logistics businesses. The company has reflected the Logistics businesses as discontinued operations, and the financial results of these businesses have been excluded from continuing operations and segment results for all periods presented unless otherwise noted.

For more information, www.rrd.com.

The preceding press release was provided by a company unaffiliated with Print+Promo. The views expressed within do not directly reflect the thoughts or opinions of Print+Promo.