Reading this little news article on a computer or smartphone screen? Chances are good that a lot of what you're reading these days is in electronic format, not printed on paper. Technology is replacing the need for paper, but for commercial printers like RR Donnelley (RRD) print isn’t going away just yet.
First-quarter net sales for RR Donnelley hit $2.6 billion, up 7 percent from the first quarter of 2010. However, acquisition costs and financial restructuring charges ate into profits for the quarter.
First quarter net income attributable to shareholders came to $33.9 million, or 16 cents a share, down from $52.6 million, or 25 cents a share, a year earlier.
"First-quarter results were in line with our expectations. We overcame both the absence of last year's U.S. Census project and this year's incremental expenses associated with the acquisition of Bowne and begin the second quarter building positive momentum," says President and CEO Thomas J. Quinlan III, referring to Bowne & Co, a business communications firm.
"The integration of Bowne is progressing well, and we expect the acquisition to be accretive in 2011. We remain on track to deliver full-year revenue, margin and cash flow consistent with our previous guidance."
Ratings agencies are little cool on the industry. "RR Donnelley participates in an industry with very poor supply/demand balance," Moody's Investors Service analysts write in a report. Moody’s downgraded RR Donnelley’s debt rating, although it did assign a stable outlook.
"Moreover, demand can fluctuate dramatically over short periods of time. Subsequent to an approximate 20 percent industry decline during the recent recession, demand has essentially remained at recessionary trough levels. Moody's thinks this backdrop indicates that business risks are increasing and that a more conservative financial profile is required to maintain a given rating," Moody’s analysts wrote.
RR Donnelley recently announced a $1 billion share buyback plan, which Moody's says merited ratings adjustments. Still, the company continues to pay dividends to shareholders and is growing through more acquisitions.
For instance, it bought Journalism Online, an e-commerce company catering to the publishing industry. It also bought Helium, the world's largest writing community and social publishing platform, serving publishers and other content managers with cost-effective editorial content.
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