Q1 Key messages:
*GAAP net sales, including the impact of a disposition and foreign exchange, decreased 3.6%; Non-GAAP organic net sales decreased 4.3%; both decline rates improved from the prior three quarters
*Both GAAP and Non-GAAP income from operations and margins down from strong prior year results; both benefitted from continued cost reductions, but negatively impacted by approximately $11 million of unfavorable foreign exchange
*GAAP loss per share from continuing operations of $0.03 and Non-GAAP adjusted earnings per share from continuing operations of $0.08, both negatively impacted by a higher effective tax rate
*Operating cash flow improved $61 million versus prior year due to continued working capital improvements
*Gross leverage ratio of 3.9x improved 0.9x from March 31, 2020; net leverage ratio of 3.2x improved 0.6x from same period
*Recently announced offering of $400 million of 6.125% senior secured notes due 2026 on track to close on April 28th
“We are off to a strong start in 2021 as we continue to provide essential marketing and business communications for our clients while continuing to protect the health and safety of our global colleagues,” said Dan Knotts, RRD President and Chief Executive Officer. “Our first quarter organic sales rate marked our third consecutive quarter of improving sales trends, we continued to execute our cost reduction plans to align with client demand, and we delivered our best first quarter operating cash flow performance since the spin in 2016. We also made significant progress in improving our balance sheet flexibility with the recently announced extension of the maturity date for our ABL credit facility and the refinancing of a significant portion of our 2024 term loans with new senior secured notes. While the pace of the economic recovery remains uncertain, we continue to successfully advance our strategic priorities and are confident that we will emerge from the pandemic as a stronger company.”
Net sales in the first quarter were $1.17 billion, down $43.8 million or 3.6% from the first quarter of 2020. The decrease includes a $6.5 million impact from the previous closure of our operations in Chile and an increase of nearly $15 million due to changes in foreign exchange. The current period continued to be negatively impacted by the ongoing impact of the COVID-19 pandemic and last year’s Census project, which was completed mid-2020.
Organic net sales declined 4.3%. The Business Services segment was up 3.2% on a GAAP basis and 2.4% on a non-GAAP organic basis while the Marketing Solutions segment was down 22.5% on a GAAP and non-GAAP organic basis from the first quarter of 2020. The Business Services segment experienced growth in several of our strategic focus areas including Packaging, Labels and Supply Chain Management, while net sales in Marketing Services were negatively affected by last year’s Census project.
Income from operations was $25.1 million in the first quarter of 2021 compared to income from operations of $33.1 million in the first quarter of last year.
Non-GAAP adjusted income from operations of $37.4 million decreased $13.0 million from the prior year period. The decrease was primarily due to unfavorable foreign exchange of nearly $11 million, which was mostly associated with operations in China. In addition, proactive actions taken to reduce the Company’s cost structure nearly offset the impact of lower sales, which included the impact of last year’s Census project and the ongoing pandemic, and higher variable incentive compensation expense.
Loss per share from continuing operations attributable to common stockholders was $0.03 in the first quarter of 2021 compared to earnings per share of $0.10 reported in the first quarter of 2020. The 2021 results were negatively impacted by lower income from operations and higher income taxes, slightly offset by lower interest expense reflecting lower debt outstanding and a lower variable interest rate. The prior year effective tax rate reflected benefits from the CARES Act.
Non-GAAP adjusted earnings per share from continuing operations attributable to common stockholders of $0.08 in the first quarter of 2021 decreased from $0.27 in the first quarter of 2020 primarily due to lower adjusted income from operations and unfavorable income taxes.
details at: https://investor.rrd.com/news/news-details/2021/RRD-Reports-First-Quarter-2021-Results/default.aspx