RR Donnelley Reports Q4 and 2015 Results, Issues 2016 Guidance

CHICAGO — February 25, 2016 — RR Donnelley & Sons Company today reported financial results for the fourth quarter and full year of 2015.

Fourth-quarter and full-year 2015 results favorable to or in line with previous guidance as detailed below:

(1) GAAP net earnings attributable to RR Donnelley common shareholders was $71.0 million; see page 14 for a reconciliation of GAAP net earnings to Non-GAAP adjusted EBITDA

(2) GAAP effective tax rate was 41.4%

(3) Defined as operating cash flow less capital expenditures, which were $652.0 million and $207.6 million, respectively.

• Fourth-quarter net sales of $2.9 billion declined 4.4% from the fourth quarter of 2014; organic net sales declined 2.8% from the fourth quarter of 2014
• Fourth-quarter GAAP net earnings attributable to common shareholders of $71.0 million, or $0.34 per diluted share, compared to GAAP net earnings attributable to common shareholders in the fourth quarter of 2014 of $19.5 million, or $0.10 per diluted share
• Fourth-quarter non-GAAP net earnings attributable to common shareholders of $101.0 million, or $0.48 per diluted share, compared to non-GAAP net earnings attributable to common shareholders in the fourth quarter of 2014 of $105.8 million, or $0.52 per diluted share
• Fourth-quarter non-GAAP adjusted EBITDA of $329.0 million, or 11.2% of net sales, compared to $326.9 million, or 10.7% of net sales, in the fourth quarter of 2014
• Company issues full-year 2016 guidance

"Despite a challenging demand environment, our continued focus on managing costs resulted in a non-GAAP adjusted EBITDA margin of 11.2% in the quarter, a 50 basis point improvement from the same quarter last year," said Thomas J. Quinlan III, RR Donnelley's president and CEO. "For the full year, we achieved a non-GAAP adjusted EBITDA margin of 10.7%, flat to full-year 2014, and generated $444 million in free cash flow. These results enabled us to reduce year-end total debt by $179 million and decrease our gross leverage ratio to 2.8x, just above the top end of our targeted range of 2.25x to 2.75x."

Quinlan continued, "As we begin 2016, we remain focused on operational excellence, while also preparing for the spin offs of LSC Communications and Donnelley Financial Solutions, which we expect to complete in October."

Net Sales
Net sales in the quarter were $2.9 billion, down $134.7 million, or 4.4%, from the fourth quarter of 2014. After adjusting for the impact of acquisitions and dispositions, as well as changes in foreign exchange rates and pass-through paper, organic sales decreased 2.8% from the fourth quarter of 2014, as increases in the International and Strategic Services segments only partially offset declines in the Variable Print and Publishing and Retail Services segments.

GAAP Earnings
Fourth-quarter 2015 net earnings attributable to common shareholders was $71.0 million, or $0.34 per diluted share, compared to net earnings attributable to common shareholders of $19.5 million, or $0.10 per diluted share, in the fourth quarter of 2014. The fourth-quarter net earnings attributable to common shareholders included pre-tax charges of $27.0 million and $143.6 million in 2015 and 2014, respectively, all of which are excluded from the presentation of non-GAAP net earnings attributable to common shareholders. Additional details regarding the amount and nature of these and other items are included in the attached schedules.

Non-GAAP Earnings
Non-GAAP adjusted EBITDA in the fourth quarter of 2015 was $329.0 million, compared to $326.9 million in the fourth quarter of 2014. Non-GAAP adjusted EBITDA margin in the fourth quarter of 2015 was 11.2%, or 50 basis points higher than in the fourth quarter of 2014, as productivity improvements and lower variable compensation expense more than offset price pressure and volume declines.

Non-GAAP net earnings attributable to common shareholders totaled $101.0 million, or $0.48 per diluted share, in the fourth quarter of 2015 compared to $105.8 million, or $0.52 per diluted share, in the fourth quarter of 2014. Reconciliations of net earnings attributable to common shareholders to non-GAAP adjusted EBITDA and non-GAAP net earnings attributable to common shareholders are presented in the attached schedules.

2016 Guidance
The Company provides the following full-year guidance for 2016, which excludes the impact of the previously announced pending spin-off transactions:

About RR Donnelley
RR Donnelley (Nasdaq:RRD) helps organizations communicate more effectively by working to create, manage, produce, distribute and process content on behalf of our customers. The Company assists customers in developing and executing multichannel communication strategies that engage audiences, reduce costs, drive revenues and increase compliance. RR Donnelley's innovative technologies enhance digital and print communications to deliver integrated messages across multiple media to highly targeted audiences at optimal times for clients in virtually every private and public sector. Strategically located operations provide local service and responsiveness while leveraging the economic, geographic and technological advantages of a global organization.

Source: RR Donnelley.