R.R. Donnelley decreases net debt by $244 million during fourth quarter

By Lisa Kerner

Charlotte, N.C., Feb. 26 - R.R. Donnelley & Sons Co. chief financial officer Dan Leib said he is pleased with the company's fourth-quarter performance.

The company's net debt was down $244 million from the third quarter, and net available liquidity of $1.4 billion was up $135 million from the third quarter, Leib said during an earnings conference call on Wednesday.

Total debt at Dec. 31 was about $3.9 billion, compared with about $3.4 billion at the end of 2012.

R.R. Donnelley ended the quarter with no term debt to pay down, no borrowings under its revolving credit agreement and about $1 billion of cash and equivalents, or more than double the amount reported at the end of 2012.

"As of Dec. 31, 2013, our gross leverage was elevated as we prefunded the Consolidated Graphics [Inc.] acquisition in November with a 10-year $350 million bond issuance as well as allowed cash to build to pay down the April 2014 debt maturity of $258 million," Leib said.

In October, R.R. Donnelley announced it would acquire Houston-based Consolidated Graphics in a cash-and-stock deal valued at about $620 million. The transaction closed on Jan. 31.

Gross leverage at Dec. 31 was 3.3 times and included all of the debt from the acquisition prefunding and none of the EBITDA related to the Consolidated Graphics acquisition.

Leib said the company continues to target leverage in the range of 2.25 times to 2.75 times "on a long-term, sustainable basis."

Gross leverage at Dec. 31, 2012 was 2.8 times, according to the company's earnings news release.

R.R. Donnelley's average term debt maturity from 2014 to 2018 is $256 million, with the highest maturity of $350 million due in May 2018.

At Dec. 31, the company's term debt was 83% fixed and had an average interest rate of 7½%, according to the CFO.

The company changed its reportable segments during the fourth quarter to reflect changes in the management reporting structure. The revised reporting structure includes four operating segments - publishing and retail services, variable print, strategic services and international - as well as unallocated corporate expenses, according to executives on the call.

Financial highlights

Leib said the company's free cash flow for the quarter decreased by $166 million from the prior-year period to $310.7 million.

Free cash flow for the full year of $478.2 million was $7.8 million lower than 2012. The company expects full-year 2014 free cash flow to be between $400 million and $500 million, said Leib.

R.R. Donnelley's net sales were up 3.6% for the quarter from the prior year at $2.8 billion.

The company reported fourth-quarter net earnings attributable to common shareholders of $104 million, or $0.56 per diluted share. This compares with a net loss of $849 million, or $3.70 per diluted share, for the fourth quarter of 2012.

R.R. Donnelley is a Chicago-based commercial printer and communications solutions company.

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