R.R.Donnelley & Sons Co RRD
Q4 2012 Earnings Call Transcript

Transcript Call Date 02/26/2013

Operator: Welcome to the R.R. Donnelley Fourth Quarter 2012 Results Conference Call. My name is Don and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Dave Gardella. Mr. Gardella, you may begin.

Dave Gardella - SVP, IR: Thank you, Don. Good morning, everyone, and thank you for joining us for R.R. Donnelley's fourth quarter 2012 results conference call. Earlier this morning we released our earnings report, a copy of which can be found in the Investors section of our website at

During this call, we will refer to forward-looking statements that are subject to uncertainty. For a complete discussion, please refer to the cautionary statement included in our earnings release and further detailed in our Annual Report on Form 10-K and other filings with the SEC.

Further, we will discuss non-GAAP and pro forma financial information. We believe the presentation of non-GAAP and pro forma results provides you with useful supplementary information concerning the Company's ongoing operations and is an appropriate way for you to evaluate the Company's performance. They are, however, provided for informational purposes only.

Please refer to the press release and related footnotes for GAAP information and a reconciliation of GAAP to non-GAAP information. We also posted to our website in the Investor's section a description, as well as reconciliations of non-GAAP measures to which we will refer on this call. We are joined this morning by Tom Quinlan, Dan Leib, and Drew Coxhead.

I'll now turn the call over to Tom.

Thomas J. Quinlan III - President and CEO: Thank you, Dave, and good morning everyone. I will briefly highlight two measures of our performance and also provide guidance about our plan gross leverage moving forward. Then I will turn it over to Dan who will take you through the quarter in detail, when Dan is finished I will share some comments regarding how our strategy is reflected in our revolving go-to-market approach and how it will continue to position R.R. Donnelley to be the profitable leader of our industry.

We have said before that one of the pillars of our strategy is to drive free cash flow and margin through aggressive cost compression. Two performance measures illustrate how we achieved that. But first performance measure is free cash flow or operating cash flow less capital expenditures which was $486 million for the full-year 2012. Our fourth quarter free cash flow came in better than expected reflecting improved underlying business performance and our aggressive working capital and cost management. They key to this enhanced Q4 business performance was an improvement in our revenue and margin trends as Dan will detail in a few moments.

The second performance measure is operating income. For the full-year we generated $747.5 million in non-GAAP operating income better than 2011 by $35.7 million or 5%. Additionally, our non-GAAP operating margin of 7.3% improved 60 basis points from 2011. Dan will also take you through both the drivers there in more detail shortly.

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