Donnelley Financial Reports First-Quarter 2018 Results

CHICAGO--()--Donnelley Financial Solutions (NYSE: DFIN) today reported financial results for the first quarter 2018.

“Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”

Highlights:

  • First-quarter net sales of $255.2 million declined 4.5% from the first quarter of 2017
  • First-quarter GAAP net earnings of $7.7 million, or $0.23 per diluted share, compared to GAAP net earnings in the first quarter of 2017 of $9.3 million, or $0.28 per diluted share
  • First-quarter non-GAAP net earnings(1) of $15.2 million, or $0.45 per diluted share, compared to non-GAAP net earnings in the first quarter of 2017 of $13.9 million, or $0.42 per diluted share
  • Non-GAAP adjusted EBITDA(1) in the quarter was $40.3 million, or 15.8% of net sales, compared to non-GAAP adjusted EBITDA in the first quarter of 2017 of $44.2 million, or 16.5% of net sales
  • Company reaffirms full-year 2018 guidance
(1)   Non-GAAP net earnings and non-GAAP adjusted EBITDA are non-GAAP measures that exclude the impact of items noted in the reconciliation tables below. See the tables below for amounts and reconciliations to the most comparable GAAP measures.
 

“I am pleased with our first-quarter results, which were in line with our expectations,” said Daniel N. Leib, Donnelley Financial’s President and Chief Executive Officer. “We continued to see double-digit growth in our SaaS revenue, driven by Venue and ActiveDisclosure, and remain excited about the future growth opportunities in our SaaS offerings. The growth in these areas partially offset declines in the transactional portion of U.S. Capital Markets and the funds portion of U.S. Investment Markets, against our most challenging quarter from a year-over-year comparison perspective. Given our first-quarter performance and outlook for the balance of the year, our full-year 2018 guidance remains unchanged.”

Leib continued, “Capital spending in the first quarter was slightly lower than we expected. We continue to be excited about growth-oriented investment opportunities, but at the same time remain committed to our disciplined approach toward capital deployment, as well as to our targeted gross leverage range of 2.25x to 2.75x.”

Net Sales

Net sales in the first quarter of 2018 were $255.2 million, a decrease of $12.1 million, or 4.5%, from the first quarter of 2017. After adjusting for changes in foreign exchange rates and the impact of the adoption of the new revenue recognition standard(2), organic sales decreased 6.0% from the first quarter of 2017. This decline was primarily due to the non-recurring special proxy volume that positively impacted U.S. Investment Markets in the first quarter of 2017, as well as lower transactional and compliance volume within U.S. Capital Markets, which was partially offset by growth in our SaaS and global Language Solutions offerings.

(2)   On January 1, 2018, the Company adopted the Accounting Standards Update No. 2014-09 "Revenue from Contracts with Customers (Topic 606)" ("the new revenue recognition standard") using the modified retrospective approach applied to contracts that were not completed as of January 1, 2018.
 

GAAP Earnings

First-quarter 2018 net earnings were $7.7 million, or $0.23 per diluted share, compared to net earnings of $9.3 million, or $0.28 per diluted share, in the first quarter of 2017. The first-quarter net earnings included after-tax charges of $7.5 million and $4.6 million in 2018 and 2017, respectively.

Non-GAAP Adjusted EBITDA and Net Earnings

Non-GAAP adjusted EBITDA in the first quarter of 2018 was $40.3 million, compared to $44.2 million in the first quarter of 2017. Non-GAAP adjusted EBITDA margin in the first quarter of 2018 was 15.8%, 70 basis points lower than in the first quarter of 2017. The decrease in non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA margin was primarily driven by lower mutual funds proxy volume and lower capital markets transactional volume as well as higher investments, partially offset by company-wide cost reductions and higher volume in International.

Non-GAAP net earnings totaled $15.2 million, or $0.45 per diluted share, in the first quarter of 2018 compared to non-GAAP net earnings of $13.9 million, or $0.42 per diluted share, in the first quarter of 2017. Reconciliations of net earnings to non-GAAP adjusted EBITDA and non-GAAP net earnings, as well as non-GAAP adjusted EBITDA margin, are presented in the attached schedules.

2018 Guidance

The Company reaffirms its previous full-year guidance for 2018:

 

2018 Guidance

Net sales Approximately $1 billion,

representing organic growth in the

range of 1% to 2%

Non-GAAP adjusted EBITDA(1) $165 to $175 million
Depreciation and amortization Approximately $50 million
Interest expense Approximately $37 million
Non-GAAP effective tax rate 29% to 31%
Diluted share count Approximately 34 million
Capital expenditures $40 to $45 million
Free cash flow(2) $55 to $60 million
(1)   Pension income excluded from non-GAAP adjusted EBITDA beginning in 2018; prior periods have also been restated in the tables below
(2) Defined as operating cash flow less capital expenditures. 2018 free cash flow guidance includes approximately $15 million for spinoff-related transition expenses.
 

Certain components of the guidance given above are provided on a non-GAAP basis only, without providing a reconciliation to guidance provided on a GAAP basis. Information is presented in this manner, consistent with SEC rules, because the preparation of such a reconciliation could not be accomplished without “unreasonable efforts.” The Company does not have access to certain information that would be necessary to provide such a reconciliation, including non-recurring items that are not indicative of the Company’s ongoing operations. Such items include, but are not limited to, restructuring charges, impairment charges, spinoff-related transaction expenses, acquisition-related expenses, gains or losses on investments and business disposals and other similar gains or losses not reflective of the Company's ongoing operations. The Company does not believe that this information is likely to be significant to an assessment of the Company’s ongoing operations, given that it is not an indicator of business performance.

Conference Call

Donnelley Financial will host a conference call and simultaneous webcast to discuss its first-quarter results today, Wednesday, May 2, at 9:00 a.m. Eastern Time (8:00 a.m. Central Time). The live webcast will be accessible on Donnelley Financial’s web site: www.dfsco.com. Individuals wishing to participate on the call must register in advance at http://www.meetme.net/DFIN. After registering, participants will receive dial-in numbers, a passcode, and a personal identification number (PIN) that is used to uniquely identify their presence and automatically join them into the audio conference. A webcast replay will be archived on the Company’s web site for 30 days after the call. In addition, a telephonic replay of the call will be available for seven days at 630.652.3042, passcode 7739939#.

About Donnelley Financial

With the right solutions in moments that matter, Donnelley Financial Solutions (NYSE: DFIN) delivers risk and compliance solutions that fuse deep industry experience, unparalleled service, and elegant technologies to provide our clients with insights that power their decisions and shape global markets. The company has 3,400 employees in 61 locations across 18 countries, serving thousands of clients globally. For more information about Donnelley Financial Solutions, visit www.dfsco.com or follow us on Twitter @DonnelleyFin or on LinkedIn.

Use of non-GAAP Information

This news release contains certain non-GAAP measures, including non-GAAP SG&A, non-GAAP SG&A as % of total net sales, non-GAAP income from operations, non-GAAP operating margin, non-GAAP adjusted EBITDA, non-GAAP adjusted EBITDA margin, non-GAAP effective tax rate, non-GAAP net earnings, non-GAAP diluted earnings per share, free cash flow and organic net sales. The Company believes that these non-GAAP measures, when presented in conjunction with comparable GAAP measures, provide useful information about the Company’s operating results and liquidity and enhance the overall ability to assess the Company’s financial performance. The Company uses these measures, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business.

Our non-GAAP statement of operations measures, non-GAAP SG&A, non-GAAP SG&A as % of total net sales, non-GAAP income from operations, non-GAAP operating margin, non-GAAP adjusted EBITDA, non-GAAP adjusted EBITDA margin, non-GAAP effective tax rate, non-GAAP net earnings and non-GAAP diluted earnings per share, are adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items that management believes are not indicative of our ongoing operations. These adjusted measures exclude the impact of expenses associated with the Company’s acquisition activities, spin-off related expenses, share-based compensation and eliminate potential differences in results of operations between periods caused by factors such as depreciation and amortization methods, historic cost and age of assets, financing and capital structures, taxation positions or regimes, restructuring, impairment and other charges and gain or loss on certain equity investments and asset sales.

Free cash flow is a non-GAAP financial measure and is defined by the Company as net cash flow provided by operating activities less capital expenditures. By adjusting for the level of capital investment in operations, the Company believes that free cash flow can provide useful additional basis for understanding the Company’s ability to generate cash after capital investment and provides a comparison to peers with differing capital intensity.

Organic net sales is a non-GAAP financial measure and is defined by the Company as reported net sales adjusted for the impact of changes in foreign exchange rates and acquired and disposed businesses.

These non-GAAP measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. In addition, these measures are defined differently by different companies in our industry and, accordingly, such measures may not be comparable to similarly-titled measures of other companies.

Use of Forward-Looking Statements

This news release includes certain "forward-looking statements" within the meaning of, and subject to the safe harbor created by, Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the business, strategy and plans of Donnelley Financial and its expectations relating to future financial condition and performance. Statements that are not historical facts, including statements about Donnelley Financial management’s beliefs and expectations, are forward-looking statements. Words such as "believes," "anticipates," "estimates," "expects," "intends," "aims," "potential," "will," "would," "could," "considered," "likely," "estimate" and variations of these words and similar future or conditional expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. While Donnelley Financial believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond Donnelley Financial’s control. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not occur. Actual results may differ materially from Donnelley Financial’s current expectations depending upon a number of factors affecting the business and risks associated with the performance of the business. These factors include such risks and uncertainties detailed in Donnelley Financial’s periodic public filings with the SEC, including but not limited to those discussed under "Risk Factors" in Donnelley Financial's Form 10-K for the fiscal year ended December 31, 2017, those discussed under “Cautionary Statement” in Donnelley Financial’s quarterly Form 10-Q filings, and in other investor communications of Donnelley Financial’s from time to time. Donnelley Financial does not undertake to and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

Donnelley Financial Solutions, Inc.

Condensed Consolidated Balance Sheets

As of March 31, 2018 and December 31, 2017

(UNAUDITED)

(in millions, except per share data)

 
  March 31, 2018   December 31, 2017

Assets

Cash and cash equivalents $ 12.1 $ 52.0
Receivables, less allowances for doubtful accounts of

$7.7 in 2018 (2017 - $7.3)

239.0 165.2
Inventories 18.5 23.3
Prepaid expenses and other current assets   28.2   29.6
Total Current Assets   297.8   270.1
Property, plant and equipment - net 33.1 34.7
Goodwill 447.3 447.4
Other intangible assets - net 36.5 39.9
Software-net 41.8 41.1
Deferred income taxes 21.0 22.2
Other noncurrent assets   37.7   38.1
Total Assets $ 915.2 $ 893.5
 

Liabilities

Accounts payable $ 87.7 $ 67.8
Accrued liabilities   91.5   119.2
Total Current Liabilities   179.2   187.0
Long-term debt 478.8 458.3
Deferred compensation liabilities 21.8 22.8
Pension and other postretirement benefits plan liabilities 51.0 52.5
Other noncurrent liabilities   22.8   23.5
Total Liabilities   753.6   744.1
 

Equity

Common stock, $0.01 par value
Authorized: 65.0 shares;

Issued: 34.0 shares in 2018 (2017 - 33.8 shares)

0.3 0.3
Treasury stock, at cost: 0.1 shares in 2018 (2017 - less than 0.1 shares) (1.7 ) (0.9 )
Additional paid-in capital 208.9 205.7
Retained earnings 17.5 8.9
Accumulated other comprehensive loss   (63.4 )   (64.6 )
Total Equity   161.6   149.4
Total Liabilities and Equity $ 915.2 $ 893.5
 
Donnelley Financial Solutions, Inc.

Condensed Consolidated Statements of Operations

For the Three Months Ended March 31, 2018 and 2017

(UNAUDITED)

(in millions, except per share data)

 
  For the Three Months Ended March 31,
2018   ADJUSTMENTS   2018   2017   ADJUSTMENTS   2017
GAAP TO NON-GAAP NON-GAAP GAAP TO NON-GAAP NON-GAAP
Services net sales $ 159.5 $ $ 159.5 $ 154.0 $ $ 154.0
Products net sales   95.7     95.7   113.3     113.3
Total net sales   255.2     255.2   267.3     267.3
Services cost of sales (1)

85.9

85.9

77.7 77.7
Services cost of sales with

R.R. Donnelley affiliates (1) (2)

9.9 9.9
Products cost of sales (1)

72.7

72.7

63.0 63.0
Products cost of sales with

R.R. Donnelley affiliates (1) (2)

        18.8     18.8
Total cost of sales (1)   158.6     158.6   169.4     169.4
Selling, general and administrative

expenses (SG&A) (1) (3)

66.1 (9.8 ) 56.3 57.5 (3.8 ) 53.7
Restructuring, impairment and other

charges - net

0.7 (0.7 ) 3.8 (3.8 )
Depreciation and amortization   10.4     10.4   10.2     10.2
Income from operations   19.4   10.5   29.9   26.4   7.6   34.0
Interest expense-net 9.0 9.0 11.1 11.1
Investment and other income – net (3)   (0.8 )     (0.8 )   (0.8 )     (0.8 )
Earnings before income taxes   11.2   10.5   21.7   16.1   7.6   23.7
Income tax expense   3.5   3.0   6.5   6.8   3.0   9.8
Net earnings $ 7.7 $ 7.5 $ 15.2 $ 9.3 $ 4.6 $ 13.9
Net earnings per share:
Basic net earnings per share $ 0.23 $ 0.45 $ 0.29 $ 0.43
Diluted net earnings per share $ 0.23 $ 0.45 $ 0.28 $ 0.42
Weighted average number of

common shares outstanding (2):

Basic 33.7 33.7 32.6 32.6
Diluted 33.9 33.9 32.8 32.8

Additional information:

Gross margin (1) 37.9 % 37.9 % 36.6 % 36.6 %
SG&A as a % of total net sales (1) 25.9 % 22.1 % 21.5 % 20.1 %
Operating margin 7.6 % 11.7 % 9.9 % 12.7 %
Effective tax rate 31.3 % 30.0 % 42.2 % 41.4 %
(1)   Exclusive of depreciation and amortization
(2) Beginning in the quarter ended June 30, 2017, LSC Communications, Inc (“LSC”) no longer qualified as a related party, therefore the amounts disclosed related to LSC are only presented for the three months ended March 31, 2017. Beginning in the quarter ended September 30, 2017, R.R. Donnelley & Sons Company ("RRD") no longer qualified as a related party, therefore the amounts disclosed related to RRD are only presented for the three months ended March 31, 2017
(3) During the three months ended March 31, 2018, the Company adopted Accounting Standards Update No. 2017-07 “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” ("ASU 2017-07"), which resulted in the presentation of net pension income within investment and other income in the condensed consolidated statement of operations instead of selling, general and administrative expenses. Prior period net pension income was also reclassified.

The Company believes that certain non-GAAP measures, when presented in conjunction with comparable GAAP measures, are useful because that information is an appropriate measure for evaluating the Company’s operating performance. Internally, the Company uses this non-GAAP information as an indicator of business performance, and evaluates management’s effectiveness with specific reference to this indicator. These measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

Donnelley Financial Solutions, Inc.

Reconciliation of GAAP to Non-GAAP Measures

For the Three Months Ended March 31, 2018 and 2017

(UNAUDITED)

(in millions, except per share data)

 
  For the Three Months Ended March 31, 2018
            Net
Income earnings
from Operating Net per diluted
  SG&A   operations   margin   earnings   share
GAAP basis measures $ 66.1 $ 19.4   7.6 % $ 7.7 $ 0.23
Non-GAAP adjustments:
Restructuring, impairment and other

charges - net

0.7 0.3 % 0.5 0.01
Spin-off related transaction expenses (7.8 ) 7.8 3.0 % 5.6 0.17
Share-based compensation expense (1.8 ) 1.8 0.7 % 1.3 0.04
Acquisition-related expenses   (0.2 )   0.2   0.1 %   0.1   0.00
Total Non-GAAP adjustments   (9.8 )   10.5   4.1 %   7.5   0.22
Non-GAAP measures $ 56.3 $ 29.9   11.7 % $ 15.2 $ 0.45
 
For the Three Months Ended March 31, 2017
Net
Income earnings
from Operating Net per diluted
SG&A   operations   margin   earnings   share
GAAP basis measures $ 57.5 $ 26.4 9.9 % $ 9.3 $ 0.28
Non-GAAP adjustments:
Restructuring, impairment and other

charges - net

3.8 1.4 % 2.3 0.07
Spin-off related transaction expenses (2.7 ) 2.7 1.0 % 1.6 0.05
Share-based compensation expense   (1.1 )   1.1   0.4 %   0.7   0.02
Total Non-GAAP adjustments   (3.8 )   7.6   2.8 %   4.6   0.14
Non-GAAP measures $ 53.7 $ 34.0   12.7 % $ 13.9 $ 0.42
 
Donnelley Financial Solutions, Inc.

Segment GAAP to Non-GAAP Operating Income and Non-GAAP Adjusted EBITDA and Margin Reconciliation

For the Three Months Ended March 31, 2018 and 2017

(UNAUDITED)

(in millions)

 
  U.S.   International   Corporate   Consolidated

For the Three Months Ended March 31, 2018

Net sales $ 213.1 $ 42.1 $ $ 255.2
Income (loss) from operations 26.4 2.5 (9.5 ) 19.4
Operating margin % 12.4 % 5.9 % nm 7.6 %
 

Non-GAAP Adjustments

Restructuring, impairment and other charges - net 0.7 (0.1 ) 0.1 0.7
Spin-off related transaction expenses 6.3 1.5 7.8
Share-based compensation expense 1.8 1.8
Acquisition-related expenses       0.2   0.2
Total Non-GAAP adjustments 7.0 (0.1 ) 3.6 10.5
 
Non-GAAP income (loss) from operations $ 33.4 $ 2.4 $ (5.9 ) $ 29.9
Non-GAAP operating margin % 15.7 % 5.7 % nm 11.7 %
 
Depreciation and amortization   8.9   1.4   0.1   10.4
Non-GAAP Adjusted EBITDA $ 42.3 $ 3.8 $ (5.8 ) $ 40.3
Non-GAAP Adjusted EBITDA margin 19.8 % 9.0 % nm 15.8 %
 

For the Three Months Ended March 31, 2017

Net sales $ 230.4 $ 36.9 $ $ 267.3
Income (loss) from operations 37.0 0.2 (10.8 ) 26.4
Operating margin % 16.1 % 0.5 % nm 9.9 %
 

Non-GAAP Adjustments

Restructuring, impairment and other charges - net 2.5 0.7 0.6 3.8
Spin-off related transaction expenses 2.7 2.7
Share-based compensation expense       1.1   1.1
Total Non-GAAP adjustments 2.5 0.7 4.4 7.6
 
Non-GAAP income (loss) from operations $ 39.5 $ 0.9 $ (6.4 ) $ 34.0
Non-GAAP operating margin % 17.1 % 2.4 % nm 12.7 %
 
Depreciation and amortization   8.8   1.4     10.2
Non-GAAP Adjusted EBITDA $ 48.3 $ 2.3 $ (6.4 ) $ 44.2
Non-GAAP Adjusted EBITDA margin 21.0 % 6.2 % nm 16.5 %
 
Donnelley Financial Solutions, Inc.

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2018 and 2017

(UNAUDITED)

(in millions)

 
  For the Three Months Ended March 31,
2018   2017
Net earnings $ 7.7 $ 9.3
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization 10.4 10.2
Provision for doubtful accounts receivable 1.0 1.8

Share-based compensation

1.8 1.1
Deferred income taxes 0.6 (2.2 )

Net pension plan income

(0.8 ) (0.8 )
Other 0.5 0.4
Changes in operating assets and liabilities - net of acquisitions:
Accounts receivable - net (65.4 ) (66.7 )
Inventories (5.8 ) (3.4 )
Prepaid expenses and other current assets (0.2 ) (4.4 )
Accounts payable 20.3 15.0
Income taxes payable and receivable 0.6 7.7
Accrued liabilities and other (23.1 ) (6.1 )
Pension and other postretirement benefits plan contributions   (1.2 )   (0.1 )
Net cash used in operating activities $ (53.6 ) $ (38.2 )
 
Capital expenditures (6.4 ) (4.3 )

Purchase of investment

(3.4 )
Other investing activities     0.2
Net cash used in investing activities $ (6.4 ) $ (7.5 )
 
Revolving facility borrowings 88.0 57.0
Payments on revolving facility borrowings (68.0 ) (37.0 )
Debt issuance costs (1.5 )
Net transfers related to the Separation 3.1
Proceeds from issuance of common stock 1.2
Treasury stock repurchases   (0.8 )  
Net cash provided by financing activities $ 20.4 $ 21.6
Effect of exchange rate on cash and cash equivalents   (0.3 )   0.2
Net decrease in cash and cash equivalents   (39.9 )   (23.9 )
Cash and cash equivalents at beginning of year   52.0   36.2
Cash and cash equivalents at end of period $ 12.1 $ 12.3
 

Additional Information:

2018 2017
For the Three Months Ended March 31:
Net cash used in operating activities $ (53.6 ) $ (38.2 )
Less: capital expenditures   6.4   4.3
Free cash flow $ (60.0 ) $ (42.5 )
 
Donnelley Financial Solutions, Inc.

Reconciliation of Reported to Organic Net Sales

For the Three Months Ended March 31, 2018 and 2017

(UNAUDITED)

(in millions)

 
U.S.    
Language
Capital Investment Solutions Total
Markets Markets and other U.S. International Consolidated

Reported Net Sales:

For the Three Months Ended March 31, 2018 $ 117.5 $ 84.6 $ 11.0 $ 213.1 $ 42.1 $ 255.2
 
For the Three Months Ended March 31, 2017 119.1 100.1 11.2 230.4 36.9 267.3
                                         
Net sales change   (1.3 %)   (15.5 %)   (1.8 %)   (7.5 %)     14.1 %     (4.5 %)
 

Supplementary non-GAAP information:

 
Year-over-year impact of changes in foreign exchange (FX) rates % % % % 6.8 % 0.9 %
 
Year-over-year impact of the adoption of the new revenue recognition standard (1) 5.8 % (5.9 %) % 0.4 % 1.6 % 0.6 %
                                         
Net organic sales change (2)   (7.1 %)   (9.6 %)   (1.8 %)   (7.9 %)     5.7 %     (6.0 %)
(1)   Adjusted for the adoption of the new revenue recognition standard
(2) Adjusted for the impact of changes in FX rates and the adoption of the new revenue standard.
 
Donnelley Financial Solutions, Inc.

Reconciliation of GAAP Net Earnings (Loss) to Non-GAAP Adjusted EBITDA

For the Three and Twelve Months Ended March 31, 2018 and 2017

(UNAUDITED)

(in millions)

 
  For the Twelve

Months Ended

  For the Three Months Ended
March 31,

2018

March 31,

2018

  December 31,

2017

  September 30,

2017

  June 30,

2017

GAAP net earnings (loss) $ 8.1 $ 7.7 $ (23.7 ) $ 5.3 $ 18.8
 

Adjustments

Income tax expense 43.2 3.5

 

24.5

2.1 13.1
Interest expense-net 40.8 9.0

 

10.2

10.6 11.0
Investment and other income-net(1) (3.4 ) (0.8 )

 

(0.9 ) (0.8 ) (0.9 )
Depreciation and amortization 44.7 10.4

 

12.8

10.6 10.9
Restructuring, impairment and other charges-net 4.0 0.7

 

0.7

(0.6 ) 3.2
Share-based compensation expense 7.5 1.8

 

1.6

1.7 2.4
Spin-off related transaction expenses 21.6 7.8

 

6.7

2.6 4.5
Acquisition-related expenses   0.4   0.2

 

0.2

   
Total Non-GAAP adjustments 158.8 32.6

 

55.8

26.2 44.2
 
Non-GAAP adjusted EBITDA $ 166.9 $ 40.3 $ 32.1 $ 31.5 $ 63.0

 

Net sales $ 992.8 $ 255.2

$

224.8

$ 222.6 $ 290.2
Non-GAAP adjusted EBITDA margin % 16.8 % 15.8 % 14.3 % 14.2 % 21.7 %
 
 
For the Twelve

Months Ended

For the Three Months Ended
March 31,

2017

March 31,

2017

December 31,

2016

September 30,

2016

June 30,

2016

GAAP net earnings (loss) $ 55.0 $ 9.3 $ (0.8 ) $ 10.2 $ 36.3
 

Adjustments

Income tax expense (benefit) 33.2 6.8 (4.1 ) 7.9 22.6
Interest expense (income)-net 22.5 11.1 11.4 (0.1 ) 0.1
Investment and other income-net(1) (1.6 ) (0.8 ) (0.6 ) (0.2 )
Depreciation and amortization 44.0 10.2 13.2 9.8 10.8
Restructuring, impairment and other charges-net 8.6 3.8 1.8 1.7 1.3
Share-based compensation expense 3.3 1.1 1.3 0.2 0.7
Spin-off related transaction expenses   7.6   2.7   4.9    
Total Non-GAAP adjustments 117.6 34.9 27.9 19.3 35.5
 
Non-GAAP adjusted EBITDA $ 172.6 $ 44.2 $ 27.1 $ 29.5 $ 71.8
 
Net sales $ 1,010.7 $ 267.3 $ 221.0 $ 224.4 $ 298.0
Non-GAAP adjusted EBITDA margin % 17.1 % 16.5 % 12.3 % 13.1 % 24.1 %
(1)   During the three months ended March 31, 2018, the Company adopted ASU 2017-07, which resulted in the presentation of net pension income within investment and other income in the condensed consolidated statement of operations instead of selling, general and administrative expenses. Prior period net pension income was also reclassified.
 
Donnelley Financial Solutions, Inc.

Debt and Liquidity Summary

As of March 31, 2018 and 2017 and December 31, 2017

(UNAUDITED)

(in millions)

 

Total Liquidity

  March 31, 2018   December 31, 2017   March 31, 2017

Availability

Stated amount of the Revolving Facility $ 300.0 $ 300.0 $ 300.0

Less: availability reduction from covenants

 

80.2

    107.5
Amount available under the Revolving Facility (1)

219.8

300.0 192.5
 

Usage

Borrowings under the Revolving Facility (1) 20.0 20.0

Impact on availability related to outstanding letters of credit

      2.2
20.0 22.2
           
Availability under the Revolving Facility  

199.8

  300.0   170.3
 
Cash (2) 12.1 52.0 12.3
 
Net Available Liquidity $

211.9

$ 352.0 $ 182.6
 
 
Short-term debt $ $ $
Long-term debt   478.8   458.3   607.5
Total debt $ 478.8 $ 458.3 $ 607.5
 
Non-GAAP adjusted EBITDA for the twelve
months ended March 31, 2018 and 2017, and
the year ended December 31, 2017 $ 166.9 $ 170.8 $ 172.6
 
Non-GAAP Gross Leverage (defined as total
debt divided by non-GAAP adjusted
EBITDA) 2.9 x 2.7 x 3.5 x
(1)  

The Company has a $300.0 million senior secured revolving credit facility (the “Revolving Facility”). The Revolving Facility is subject to a number of covenants, including a minimum Interest Coverage Ratio and a maximum Leverage Ratio, both as defined and calculated in the Credit Agreement. There was $20.0 million of outstanding borrowings under the Revolving Facility as of March 31, 2018. Based on the Company’s results of operations for the twelve months ended March 31, 2018 and existing debt, the Company would have had the ability to utilize $199.8 million of the $300.0 million Revolving Facility and not have been in violation of the terms of the agreement

(2) Approximately 71% of cash as of March 31, 2018, 30% of cash as of December 31, 2017 and 84% of cash as of March 31, 2017 was located outside of the U.S. Certain cash balances of foreign subsidiaries may be subject to U.S. or local country taxes if repatriated to the U.S. In addition, repatriation of some foreign cash balances is further restricted by local laws.
 

Contacts

Investor Contact:
Sloan Bohlen
Solebury Communications Group
investors@dfsco.com

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