2010 r r donnelly investor presentation - october 2010
DESCRIPTION
2010 R R Donnelly Investor Presentation - October 2010TRANSCRIPT
R.R. Donnelley & Sons CompanyInvestor PresentationOctober 2010
Safe Harbor & Non-GAAP
Use of Forward-Looking Statements This presentation contains "forward-looking statements" as defined in the U.S. Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements and any such forward-looking statements are qualified in their entirety by reference to the following cautionary statements. All forward-looking statements speak only as of the date of this presentation and are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements The company does not undertake to and specifically declines any obligation tothat could cause the actual results to differ materially from such forward-looking statements. The company 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.
The factors that could cause material differences in the expected results of RR Donnelley include, without limitation, the following: the volatility and disruption of the capital and credit markets, and adverse changes in the global economy; successful execution and integration of acquisitions; successful negotiation of future acquisitions; and our ability to integrate operations successfully and achieve enhanced earnings or effect cost savings; the ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, system integration and other key strategies; the ability to divest non-core businesses; future growth rates in our core businesses; competitive y g y g y g ppressures in all markets in which we operate; our ability to access unsecured debt in the capital markets and the participants’ ability to perform to our contractual lending and insurance agreements; factors that affect customer demand, including changes in postal rates and postal regulations, changes in the capital markets, changes in advertising markets, the rate of migration from paper-based forms to digital formats, customers’ budgetary constraints, and customers’ changes in short-range and long-range plans; the ability to gain customer acceptance of our new products and technologies; the ability to secure and defend intellectual property rights and, when appropriate, license required technology; customer expectations and financial strength; performance issues with key suppliers; changes in the availability or costs of key materials (such as ink, paper and fuel) or in prices received for the sale of by-products; changes in ratings of our debt securities, as a result of financial community and rating agency perceptions of our business, operations and financial condition and the industry in which we operate; the ability to generate cash flow or obtain financing to fund growth; the effect of inflation, changes in currency exchange rates and changes in interest rates; the effect of changes in laws and regulations, including changes in accounting standards, trade, tax, environmental y g g ; g g , g g g , , ,compliance (including the emission of greenhouse gases and other air pollution controls), health and welfare benefits, price controls and other regulatory matters and the cost, which could be substantial, of complying with these laws and regulations; contingencies related to actual or alleged environmental contamination; the retention of existing, and continued attraction of additional, customers and key employees; the effect of a material breach of security of any of our systems; the effect of labor disruptions or labor shortages; the effect of economic and political conditions on a regional, national or international basis; the effect of economic weakness and constrained advertising; uncertainty about future economic conditions; the possibility of future terrorist activities or the possibility of a future escalation of hostilities in the Middle East or elsewhere; the possibility of a regional or global health pandemic outbreak; adverse outcomes of pending and threatened litigation; and other risks and uncertainties detailed from time to time in our filings with the SEC, including under “Risk Factors” in our Annual Report on Form 10-K. Readers are strongly encouraged to read the full cautionary statements contained in RR Donnelley's filings with the SEC. y g
Non-GAAP Financial InformationThe 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 these indicators. These measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.A reconciliation of GAAP net earnings to non GAAP net earnings and further descriptions are presented in the tables attached to our Earnings Releases which are available in
2
A reconciliation of GAAP net earnings to non-GAAP net earnings and further descriptions are presented in the tables attached to our Earnings Releases, which are available in the investors section of our website, rrdonnelley.com. Also available in the investors section of our website, rrdonnelley.com, is a description of additional non-GAAP financial measures referred to in this presentation.
Agenda
I Executive Summary page 4I. Executive Summary – page 4
II Industry Dynamics – page 8II. Industry Dynamics page 8
III. RR Donnelley Strategy – page 15y gy p g
IV. Financial Review – page 23
3
Company Overview
NASDAQ: RRD
Global provider of integrated communications
DescriptionDescription CustomersCustomersOver 60,000 customers
• 143 customers with revenue > $10 million (2009 revenue)
Founded more than 145 years ago
Approximately 57,000 employees
The company leases or owns 547 facilities worldwide: 344 in the U.S. and 203 internationally.
( )
• 890 customers with revenue > $1 million (2009 revenue)
Serve 100% of Fortune 100 and 94% of the Fortune 500, and 88% of the Fortune 1000
$8 4$9.3
$11.6 $11.6
$9.9
14%15%16%
$10.0
$12.0
n
Sales / EBITDASales / EBITDA11 / Margin/ Margin
$4.2
$7.2
$8.4
$1.0 $1.3 $1.4 $1.8 $1.8$1.3
7%8%9%10%11%12%13%
$2.0
$4.0
$6.0
$8.0 EB
ITDA
Mar
gin
(in $
bill
ions
)
$0.6 $1.0
6%7%
$-2003 2004 2005 2006 2007 2008 2009 2010G
Revenue EBITDA EBITDA Margin
1. Excludes restructuring, impairment, integration charges and other one-time items.2. 2010G (as of August 4, 2010 and not reaffirmed here) for revenue is 1% growth
2
4
Opportunity to expand our Fortune 1000 relationships
Strategic Differentiators
Largest player in a highly fragmented marketDifferentiating front-end and logistics capabilitiesScaleCost advantage driven by platform flexibility and economies in procurement, production and distribution
Blue chip customer relationships; single-source provider opportunitiesBroadest offering of industry leading products and servicesTechnology-based investments driving further differentiation
Breadth & Depthgy g
Industry experienced executive and senior management teams
Strong cash flow generation in a challenging price environmentGrowth rate has been greater than the broader print marketFinancial discipline and productivity gains drive resultsBest positioned industry participant to withstand economic headwinds
Financial
5
Best-positioned industry participant to withstand economic headwinds
Business Generates Substantial Cash Flow
Current RRD Metrics(Stock Price and Market Cap as of 9/8/10; net debt and TTM EBITDA as of 6/30/10)
Stock Price $16.42
Market Cap $3.4B
Enterprise Value $6 2B
1 426
1,400
1,600 $50.00
net debt and TTM EBITDA as of 6/30/10) Enterprise Value $6.2B
EV/EBITDA (TTM) 4.7x
759
972 904
1,182
1,018
1,426
838
1,231
800
1,000
1,200
lions
$20 00
$30.00
$40.00
tock
Pric
e
376
183
494 501 530
700 695 625
0
200
400
600
in $
mil
$10.00
$20.00 St
2004 – 2010G avgCFCO – Capex is
~$584mm, excluding the impact of 2009 items noted below
0 2003 2004 2005 2006 2007 2008 2009 2010G
Cash Flow from Continuing Ops (CFCO) CFCO - Capex
6
Note: 2009 cash flow includes benefits related to the decline in value and reorganization of certain entities within the International segment, reductions in working capital and the impact of no bonus payments in 2009. The aggregate impact of these items is approximately $685 million. 2010G is guidance as of Q2 2010 Earnings Call on August 4, 2010; assumes midpoint of guidance range for CFCO-Capex ($600mm - $650mm) and midpoint of guidance range for Capex ($200mm - $225mm), and is not being reaffirmed here.
Agenda
I Executive Summary page 4I. Executive Summary – page 4
II Industry Dynamics – page 8II. Industry Dynamics page 8
III. RR Donnelley Strategy – page 15y gy p g
IV. Financial Review – page 23
7
A Large, Highly Fragmented Market Opportunity
Total U.S. Printing Industry2009
The global print industry in 2009 was estimated at approx. $393 7 billion2 $278 3 billion e cl ding Ne spaper
$140.7 Bn1
CommercialPrintingNewspaper
$393.7 billion2, $278.3 billion excluding NewspaperThe US print market, excluding Newspaper, was estimated at approximately $111.5 billion in 2009Despite some recent consolidation, the industry remains highly fragmented; top 400 printers in the US account for
i t l 35% f th k tapproximately 35% of the marketRR Donnelley is the largest printer in the world and the U.S.
U.S. Print Industry – Value of Shipments ($mm)
Forms Labels
Packaging
100,000120,000140,000160,000180,000200,000
TradeServices(PreMedia)
Specialty,Greeting
Forms, Labels
020,00040,00060,00080,000
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
8
2) Datamonitor, Global Commercial Printing, Mar 2010Sources: 1) PIA/GATF, Print Market Atlas Source: PIA/GATF
1 1 1 1 2 2 2 2 2 2 2 2 2 2
Industry Trends
PrinterConsolidation
SupplierC lid ti
CustomerConsolidation
Share Gain OpportunityMany printers looking/forced to exit the business
Consolidation ConsolidationCompeting MediaChallenging Pricing DynamicsRaw Material Cost Increases
Over-leveredB l Sh t
ExcessC it
9
Balance Sheets Capacity
Consolidation in Print Industry and with Supplier Base
RR Donnelley Quad/Graphics Cenveo Consolidated Graphics
1980 Banta Moore RR Donnelley World Color Quebecor Quad/Graphics Cadmus Mail Well Consolidated GraphicsBushman Quality Color American InLine Graphics Alden Press Pendell Waverly Press American Envelope AGS Custom Graphics
Danbury Printing Nielsen Ringier (SR) Ringier Eusey Press Lancaster Press Supermex Eastwood PrintingGreenfield Wallace Meredith/Burda Brown (Franklin) Arcata Mack Printing Graphic Art Center KelmscottGreenfield Wallace Meredith/Burda Brown (Franklin) Arcata Mack Printing Graphic Art Center Kelmscott
Astron 9 Commercial Co's ASG RX Label Tech Litho GraphixAsia Printers Group Petty Commercial Envelope Global Group
Poligrafia Maxwell Rex Corporation Electricity Printing Spencer Press Diversified Nies / Artcraft
AdPlex (Charlestown) Alco Gravure GraphcomOffice Tiger Kable Annan & BirdPerry Judd's Providence Hennegan
Von Hoffmann Web Cyril ScottCardinal Brands Pikes Peak LithographingCardinal Brands Pikes Peak LithographingPro Line Printing
Banta Moore Wallace RR Donnelley World Color Quebecor Quad/Graphics Cadmus CenveoMoore Wallace World Color World Color Cadmus
Banta
2010 RR Donnelley Quad/Graphics Cenveo Consolidated Graphics
Paper Suppliers Ink Suppliers– Domtar/Weyerhaeuser
– Abitibi/Bowater– Mead/Westvaco
UPM/Kymmene
– Flint/NAPIC + Continental BASF Graphics
+ Alper Ink Group+ SICPA
D– UPM/Kymmene– IP/Champion
– Georgia Pacific/Ft. James
– Stora NA/Newpage
+ Day
– Flint acquired by XSYS European
10
Sample representation, for illustrative purposes onlySource: RR Donnelley management estimates
RRD Is The Largest Printer With The Broadest Product And Service Offering
LTM Revenue as of 6/30/10 (unless otherwise noted), $ in Billions
And Service Offering$9.9 $9.8
$7.9
(c)(a) (b)
$4.8
$2.0 $1.8 $1.4 $1.3 $1.0 $0.7 $0.7 $0.7
Direct MCR & Forms and Financial Statement Document PrintMarketing Directories Labels Print Outsourcing BPO Mgmt
Quad/GraphicsBrown Printing (Bertelsmann)Cenveo
Company Commercial Books
Toppan PrintingTranscontinentalVertisDeluxe CorpBowne & Co.Dai Nippon PrintingMerrillStandard RegisterConsolidated GraphicsWorkflowDSTWilliams LeaXeroxPitney BowesADPInnerworkings
11
Note: Transcontinental as of LTM 7/31/10(a) Revenue for Information Network segment only. Total revenue of $16.8 billion.(b) Revenue for Information Communication segment only. Total revenue of $17.5 billion.(c) Revenue estimates for Brown Printing combined with Bertelsmann Arvato AG.
Customer Buying Habits Evolving
Clients focus on print supply chain, not just printMany
ers
Bid & Buy Processes
j pRRD reaches across total value chainAbility to bring scale
• Procurement
r of P
rovi
de
Bundled Offerings
• Distribution• Production
Leverage the relationship• 100% Positions
Num
ber Offerings • 100% Positions
• Trust in place• Vested Interest
RRD’s financial strength enables a T t l C t f O hi f
Value to Customers
Total Cost of Ownership Focus
Total Cost of Ownership focus• Strong cash flow• Debt reduction and maturity profile• Investment grade credit metrics
Few
Low High
12
Value to Customers Investment grade credit metricsLow High
Industry Peer Comparison in $mm
1
in $mm
Company Name Revenue EBITDA EBITDA Margin Timeframe Debt Debt /
EBITDA
3
2
9,869.9 1,315.7 13.3% LTM 6/10 3,405.9 2.6x
4,775.1 721.3 15.1% LTM 6/10 1,805.0 2.5x
2,009.8 367.0 18.3% LTM 7/10 700.6 1.9x2,009.8 367.0 18.3% LTM 7/10 700.6 1.9x
1,804.1 216.6 12.0% LTM 6/10 1,292.7 6.0x
1,256.1 339.0 27.0% LTM 6/10 1,430.0 4.2x
1,001.7 124.7 12.4% LTM 6/10 174.0 1.4x,
700.7 54.4 7.8% LTM 6/10 24.2 0.4x
680.5 48.1 7.1% LTM 6/10 50.6 1.1x
444.4 25.0 5.6% LTM 6/10 47.6 1.9x
281.3 37.4 13.3% LTM 6/10 82.0 2.2x
Total of peers listed above 12,953.7 1,933.5 14.9% 5,606.7 2.9x
13
1. Calculated as Total Debt divided by Non-GAAP EBITDA.2. Pro forma for acquisition of Worldcolor3. Transcontinental data reported in CAD, converted to USD at rate of 1 USD:1.04089 CAD
Agenda
I Executive Summary page 4I. Executive Summary – page 4
II Industry Dynamics – page 8II. Industry Dynamics page 8
III. RR Donnelley Strategy – page 15y gy p g
IV. Financial Review – page 23
14
Short Term Priorities
Top line strategyNew product developmentLeverage existing customer base to generate organic growthp gy Leverage existing customer base to generate organic growthM&A opportunities
Maintain variable cost structureUse technology to continue to increase productivityDisciplined approach to managing costs
Cost control
Cash flowDebt: No significant obligations until 2014
$ $ 1Cash flow& liquidity Capex: Prudent capital deployment ($200mm - $225mm in 20101)
M&A: Very disciplined approach; focus in lieu of capexDividends: Quarterly Board of Directors’ review
15
1. 2010 Guidance as of Q2 2010 Earnings Call on August 4, 2010; not reaffirmed here
RRD is Positioned to Meet Changing Needs
Buying Patterns/NeedsCost Compression/Synergy
RRD Strategic Selling Proposition Diversified Global Platform
Total System Cost Approach
Economies of Scale Required
ROI Management Focus
Scale Across All Operations
Differentiated Logistics/Fulfillment Offering
Complete Print Management ServicesROI Management Focus
Short Term Focus
History of Relationship Valueless
P d t R i i
Complete Print Management Services
Linkage With All Media Types
Ability To Expand With CustomersProduct Reengineering
Personalization/Variability
Outsourcing Print Procurement
16
Expanding Relationships With Existing Customers
Opportunity for RRD to leverage scale and product breadth to increase customer penetration
154 customers purchased 7 or more products and services in 2009, compared to 133 customers in 2008
Strategy remains focused on organic growth through further expansion of existing customer relationships
160 2007 2008 2009
131 133
154
100
120
140
tom
ers
70
81
49
88
59
40
60
80
# of
Cus
t
39
22 28 31
-
20
7+ 8+ 9+ 10+Number of Products & Services Purchased
17
Note: Includes only products/services provided in North America
Number of Products & Services Purchased
2010 Announced Contract Wins
• 8/9/10 - RR Donnelley Awarded Multi-Year Agreement to Provide Enterprise-Wide Promotional and Marketing Materials to Pharmaceutical Company Eisai Inc.
• 7/22/10 - RR Donnelley Awarded New 5-Year Contract by Desjardins Group• 7/22/10 - RR Donnelley Awarded New 5-Year Contract by Desjardins GroupAgreement Includes Variable Digital Printing and Mailing of Client Statements and Other Critical Communications Documents
• 7/14/10 - RR Donnelley Awarded Multi-Year Premedia and Catalog Production Agreement by Hanover Direct, Inc.
• 7/13/10 - RR Donnelley Awarded Production of Leading Hotels of the World, Ltd. Directory
• 7/12/10 - RR Donnelley Awarded Agreement to Produce Harvard Business Review Magazine• 7/12/10 - RR Donnelley Awarded Agreement to Produce Harvard Business Review Magazine
• 7/7/10 - RR Donnelley Awarded New Multi-Year Multi-Million Dollar Contract by SourceMediaExclusive Agreement Includes All Of Its Magazines Plus Digital And Commercial Printing Of Books, Collateral Materials And Show Daily Publications
• 5/18/10 - RR Donnelley Awarded Multi-Year Multi-Million Dollar Agreement by Workman Publishing Company
• 5/4/10 RR Donnelley to Produce Digitally Printed Books for Penguin Group (USA) Inc• 5/4/10 - RR Donnelley to Produce Digitally Printed Books for Penguin Group (USA) Inc.
• 5/3/10 - RR Donnelley Awarded Multi-Year Multi-Million Dollar Agreement by Thomas Nelson, Inc.Will Draw On RR Donnelley's Global Platform For Production Of Bibles And Other Religious Texts
• 4/29/10 - RR Donnelley to Provide All of Publisher Hanley Wood's Digital Magazine EditionsDigiMag(R) Complements Printed Communications
• 3/23/10 - RR Donnelley Awarded Multiyear Agreement by Williams-Sonoma, Inc.Renewed Agreement Expands Relationship With Catalog Production And Distribution Services
• 3/9/10 - RR Donnelley Awarded $375 Million Multiyear Agreement by Cengage Learning to Provide College Textbook Printing, Graphic Management and Related Services
1/14/10 RR D ll A d d M lti A t t P id P i ti S i f AT&T Ad ti i S l ti
18
• 1/14/10 - RR Donnelley Awarded Multiyear Agreement to Provide Printing Services for AT&T Advertising Solutions
Well Positioned in the Evolving Digital World
Powerful combination of:Traditional print & bind assetsFront-end and back-end servicesTechnology-based investmentsBlue chip customer portfolio
enables growth opportunities beyond print
19
…enables growth opportunities beyond print
RR Donnelley Technology AnnouncementsExtending our reputation as the industry’s technology leaderExtending our reputation as the industry s technology leader
Date Press Release Focus Segment
7/15/10 RR Donnelley Expands Research & Development Center to Feature Printed Electronics, Ink and Materials Labs All
7/8/10 RR Donnelley Introduces First High Resolution High Speed Digital/Offset Press Combination Book7/8/10 y g g p g / Book
5/4/10 RRD to Produce Digitally Printed Books for Penguin Group (USA) Inc. Book
4/29/10 RRD to Provide All of Publisher Hanley Wood's Digital Magazine Editions Magazine
2/23/10 RRD to Acquire Bowne for $481 Million in Cash Financial/All
2/11/10 RRD Announces the Release of iCOMPLi iPhone App Financial
12/17/09 RRD Introduces New Mobile Application for Broker/Dealers and Financial Advisors Financial12/17/09 RRD Introduces New Mobile Application for Broker/Dealers and Financial Advisors Financial
11/4/09 RRD Introduces iPhone Application as First in a Series That Brings Innovative Offerings to Mobile Devices Office Products
10/27/09 RRD Introduces Enhancements to VenueSM Financial
10/8/09 RRD Announces Release of RightContent® Shared Content Solution Financial
9/14/09 RRD and Muller Martini Reach Exclusive Agreement to Create Industry's First High Speed Inline Ink Jet printing and Book Binding System Book
9/10/09 RRD and HP Plan to Create an Alliance to Develop Next‐Generation Digital Printing Technology All
9/1/09 RRD Expands Service Offering with Stake in Helium, World's Largest Collaborative Writing Community Magazine/All
6/24/09 RRD Recognized for Logistics Excellence (OneSite) All
6/18/09 RRD Enhances eDelivery Capabilities with Acquisition of Prospectus Central, LLC Financial
5/4/09 RRD Unveils Breakthrough Technology: Fully Variable Offset Printing All
3/30/09 RRD Announces First Integrated Global Digital Print Platform with New Digital High Speed Color Press Technology Statements
3/13/09 RRD Leverages Google's Leading Search Capabilities to Enhance VenueSM Data Room Application Financial
2/4/09 RRD Enhances CustomPoint ® System with Powerful Direct Mail Capabilities Direct Mail
12/8/08 RRD Announces New Question and Answer Module for Venue(SM) Virtual Data Room Financial
11/13/08 RRD Announces of RightProspectus® Document Repository Financial
20
11/6/08 RRD Launches ECoM™ ‐ Enterprise Communications Management BPO
Logistics Capabilities are a Key Differentiator
RR Donnelley Logistics is a leader in 3rd party Logistics and Warehousing Solutions
Over the road Transportation• LTL • Full Truckload
Expedited Servicesp• Air• Courier
International DistributionIntermodal TransportationConsolidation & Warehousing
320 000 Truck Load Shipments
Consolidation & Warehousing
O 7 500 (3 Di it Zi t 3 Di it) O i i &
Annual volumes in excess of: Transportation Network Comprised of:320,000 Truck Load Shipments250,000 LTL & Dock Drop Distribution Shipments35,000 Intermodal Shipments12.5 Million Expedited shipments
Over 7,500 (3-Digit Zip to 3-Digit) Origin & Destination Lane PairingsNational distributionTonnage in excess of 5 Billion pounds 1.8 million sq ft of warehouse and cross dock space
21
18 million pallets distributed q p
Agenda
I Executive Summary page 4I. Executive Summary – page 4
II Industry Dynamics – page 8II. Industry Dynamics page 8
III. RR Donnelley Strategy – page 15y gy p g
IV. Financial Review – page 23
22
Operational and Financial Flexibility
Strong cash flow performance; stable through economic cycles• Free cash flow of $600mm - $650mm expected in 20101$ $ p
Diversified and balanced platform
Structural and financial flexibility to react to market conditions• Variable cost reduction
– Incentive compensation– Workforce reduction– Plant closuresPlant closures
• Balanced capital deployment– Strong cash position and balance sheet– Optimize cash flows– Focus on investment grade credit metrics
Available liquidity of $1.9 billion at 6/30/10
Experienced management team with proven track record
23
Experienced management team with proven track record1. 2010 guidance as of August 4, 2010 and is not being reaffirmed here; free cash flow defined as operating cash flow less capex
Diversified Revenue Sources
15%3%
2000 Revenue: $5.8 Billion 2009 Revenue: $9.9 Billion
21%
3%
15%
37%11%
2%6%
3%
15%2%
6%
2%
37%
5%
5%12%
12%8%
6%
MagCatRetail Book/Dir Var. Print F&LCom Print Logistics Fin Print PremediaOffice Products BPO GTS Int'l
29%
MagCatRetail Book/Dir Logistics Fin Print
Premedia Int'l Var Print
24
As reported, International Segment, which includes BPO (6.1%), GTS (3.3%) and Int’l (15.2%), represents 24.6% of total revenue.
Broad offering provides balance and some protection from economic cyclefrom economic cycle
Least Sensitive Most Sensitive
Performance Relative to Economic Cycle
Compliance / Business Support
• Global Investment Markets
Core Business / Product
• Books
Marketing/Branding
• Direct MailMarkets
• Statement Printing
• Business Process Outsourcing
H lth C li
• Magazines
• Catalogs
• Office Products
• Directories
• Commercial Print
• Retail Inserts
• Digital Solutions
• Healthcare Compliance• Technology Manuals
• Forms and Labels
Revenue Mix Revenue Mix Revenue Mix20-25% 40-45% 35-40%
25
Strong Liquidity and Favorable Maturity Profile
Total Liquidity June 30, 2010C h 61 8$
Liquidity Profile (in $mm) at 6/30/10
Cash 615.8$ Committed Credit Facility ("Facility") (1) 1,244.9
1,860.7 UsageBorrowings under Facility -
-
622599
$800
Debt Maturity Profile (in $mm) at 6/30/10
3
Net Available Liquidity 1,860.7$
349400
500
599
400346
159$200
$400
$600
2
4
$02010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021+
4.95% 5.50% 6.13%Interest Rate 5.63% 7.58%
1. Due to the Facility’s financial covenant that limits total debt to four times adjusted EBITDA for the last twelve months, the Company could have incurred up $1,244.9 million of additional debt under the Facility or otherwise, in aggregate, ith t i l ti Th $1 244 9 illi f i dditi l d bt i $755 1 illi l th th t th i il bl d th $2 billi itt d F ilit
11.25%8.60% 7.63%
26
without violation. The $1,244.9 million of maximum additional debt is $755.1 million less than the amount otherwise available under the $2 billion committed Facility. 2. The Company expects to close the Bowne acquisition ($481mm) in the second half of 2010 and finance it through a combination of cash on hand, borrowings under the Revolving Credit Facility or through the issuance of debt securities.3. On April 9, 2010, the Company entered into interest rate swap agreements to effectively change the interest rate on $600 million of its fixed-rate senior notes to floating rate LIBOR plus a basis point spread. These interest rate swaps are
designated as fair value hedges against changes in value of the Company’s 4.95% senior notes due April 1, 2014 attributable to changes in the benchmark interest rate. 4. The $400mm 2019 notes are subject to coupon step-ups based on debt ratings.
2010 Guidance – as of August 4, 2010(all excluding the impact of the Bowne acquisition)(all excluding the impact of the Bowne acquisition)
Year-over-year revenue growth of approximately 1%Includes slightly unfavorable year-over-year impact of changes in foreign exchange rates
Non-GAAP Operating margin of 7.3% – 7.5%Overcoming non-cash increases in pension and post-retirement benefits expense (~$44mm) and the non-cash increase in the LIFO inventory provision (~$30mm) in 2010increase in the LIFO inventory provision ( $30mm) in 2010
Depreciation and amortization of approximately $540 million
Interest expense of approximately $225 million
Effective tax rate (non-GAAP) range of approximately 29% to 31%This estimate could be significantly impacted by business trends affecting different countries in which we do business or by changes in tax law
Fully-diluted share base of approximately 210 millionFully diluted share base of approximately 210 million
Free cash flow1 of approximately $600 million to $650 million
Capex of approximately $200 million to $225 million
27
1. Free cash flow defined as operating cash flow less capex