Printing major R.R. Donnelley
The numbers
Net income for the quarter plunged to a mere $12.2 million from $88.8 million a year ago. The revenue increased by 9% to $2.6 billion, mainly due to the acquisition of marketing communications provider Bowne and in part because of favorable foreign currency rates. However, excluding the impact of the acquisition, revenue was flat from a year ago.
It’s important to point out that the company incurred several one-time expenses such as restructuring and impairment charges and acquisitions expenses worth $76.6 million in 2011. Excluding the impact of these items, net income stood at $105.6 million, compared with $99.5 million last year.
Gross margins remained flat at 24.5%, hurt by pricing pressures and low volumes. One-time charges pulled the operating margin down to 4.4% from 7.3%. Moreover, higher pension and other benefits-related expenditure after the Bowne acquisition sent selling, general and administrative expenses higher.
The U.S. business of the company, which accounts for more than 70% of the revenue, saw growth of 6.2%, with net sales at $1.9 billion. However, barring the impact of the acquisition, net sales of the segment declined by 2.6%. This puts a big question mark on the company’s performance.
Added woes
R.R. Donnelley ended the quarter with cash and cash equivalents of $363 million, compared to $399.3 million in the previous quarter. Additionally, long-term debt increased to $3.43 billion as compared to $3.24 billion a year ago. A company in a struggling environment with an unhealthy balance sheet seems dangerous to me.
R.R. Donnelley has major customers such as AT&T
The Foolish bottom line
Lacking pricing power and suffering from low volumes, R.R. Donnelley could shape up to be one more company that gets blown away in a bad economy. Although new and old contracts may add to its sales, it is likely that the company will struggle to fight these challenging fundamentals.