LSC Communications Reports Second Quarter 2018 Results and Updates Full-Year 2018 Guidance
CHICAGO--(BUSINESS WIRE)--Aug 2, 2018--LSC Communications, Inc. (NYSE: LKSD) today reported financial results for the second quarter of 2018.
2Q 2018 Highlights:Net sales of $943 million compared to $848 million in the second quarter of 2017, an increase of $95 million, or 11.2% GAAP net income of $8 million, or $0.23 per diluted share compared to net income of $5 million, or $0.12 per diluted share in the second quarter of 2017 Non-GAAP net income of $17 million, or $0.48 per diluted share, compared to non-GAAP net income of $21 million, or $0.59 per diluted share in the second quarter of 2017 Non-GAAP adjusted EBITDA of $77 million, or 8.2% of net sales, compared to $82 million, or 9.7% of net sales, in the second quarter of 2017 Company completed the acquisition of RR Donnelley’s Print Logistics business and announced entering into definitive agreement to divest LSC’s European printing business Company updates full-year guidance to include impact of the sale of the European printing business and completion of $20 million share repurchase program
“We are pleased with our second quarter results as we continued to experience favorable organic revenue trends and saw an improved sales mix. In addition, we continued our focus on acquisition integration and cost reductions that drove sequential margin improvement,” said Thomas J. Quinlan III, LSC Communications’ Chairman, Chief Executive Officer and President. “Our investment in growth areas, including our Print Logistics acquisition, will bring additional value to our customers. Additionally, we recently announced entering into an agreement to sell our European printing business which will allow us to increase strategic focus on our North America operations and customers and provide us with additional financial flexibility.”
Second quarter net sales were $943 million, up $95 million, or 11.2%, from the second quarter of 2017. After adjusting for acquisitions, divestitures, changes in foreign exchange rates, pass-through paper sales, and the adoption of new revenue recognition standards, organic net sales decreased 2.0% from the second quarter of 2017. This organic net sales change represents continued improvement compared to the Company’s 2017 organic net sales trends. This improvement was largely driven by sales performance in our Office Products segment and our Book reporting unit.
GAAP Net Income
Second quarter 2018 net income was $8 million, or $0.23 per diluted share, compared to net income of $5 million, or $0.12 per diluted share, in the second quarter of 2017. Second quarter 2018 net income included after-tax charges of $9 million and second quarter 2017 net income included after-tax charges of $16 million, both of which are excluded from the presentation of non-GAAP net income. Additional details regarding the amount and nature of these adjustments and other items are included in the attached schedules.
Non-GAAP Adjusted EBITDA and Non-GAAP Net Income
Non-GAAP adjusted EBITDA in the second quarter of 2018 was $77 million, or 8.2% of net sales, compared to $82 million, or 9.7% of net sales, in the second quarter of 2017. The decrease in non-GAAP adjusted EBITDA margin was primarily due to sales mix, pricing pressure and the impact of lower margins related to recent acquisitions partially offset by on-going productivity and cost control initiatives.
Non-GAAP net income totaled $17 million, or $0.48 per diluted share, in the second quarter of 2018 compared to non-GAAP net income of $21 million, or $0.59 per diluted share in the second quarter of 2017. Reconciliations of net income to non-GAAP adjusted EBITDA and non-GAAP net income are presented in the attached schedules.
The Company’s updated full-year guidance for 2018, in the table below, includes the sale of LSC’s European printing business (1) and the completion of the share repurchase authorization:
Certain components of the guidance given in the table 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, pension settlement charges, acquisition-related expenses, gains or losses on investments and business disposals, losses on debt extinguishment and other similar gains or losses not reflective of the Company’s ongoing operations. The Company does not believe that excluding such items is likely to be significant to an assessment of the Company’s ongoing operations, given that such excluded items are not indicators of business performance.
LSC Communications will host a conference call and simultaneous webcast to discuss its second-quarter results today, Thursday, August 2, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The live webcast will be accessible on LSC Communications’ web site: www.lsccom.com. Individuals wishing to participate must register in advance at the following link. After registering, participants will receive dial-in numbers, a passcode, and a link to access the live event. A webcast replay will be archived on the Company’s web site for 90 days after the call.
About LSC Communications
With a rich history of industry experience, innovative solutions and service reliability, LSC Communications (NYSE: LKSD) is a global leader in print and digital media solutions. Our traditional and digital print-related services and office products serve the needs of publishers, merchandisers and retailers around the world. With advanced technology and a consultative approach, our supply chain solutions meet the needs of each business by getting their content into the right hands as efficiently as possible.
For more information about LSC Communications, visit www.lsccom.com.
Use of non-GAAP Information
This news release contains certain non-GAAP measures. The Company believes that these non-GAAP measures, such as non-GAAP adjusted EBITDA, non-GAAP adjusted EBITDA margin, non-GAAP net income/loss and free cash flow, 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. Non-GAAP adjusted EBITDA, non-GAAP adjusted EBITDA margin, non-GAAP net income/loss and free cash flow allow investors to make a more meaningful comparison between the Company’s core business operating results over different periods of time. The Company believes that non-GAAP adjusted EBITDA, non-GAAP adjusted EBITDA margin, non-GAAP net income/loss and free cash flow, when viewed with the Company’s results under GAAP and the accompanying reconciliations, provides useful information about the Company’s business without regard to potential distortions. By eliminating 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, the Company believes that non-GAAP adjusted EBITDA, non-GAAP adjusted EBITDA margin and non-GAAP net income/loss can provide useful additional basis for comparing the current performance of the underlying operations being evaluated. 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.
This news release may contain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and 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 news release 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, including risks associated with the ability of LSC Communications to perform as expected as a separate, independent entity and risks associated with the volatility and disruption of the capital and credit markets, and adverse changes in the global economy. Readers are strongly encouraged to read the full cautionary statements contained in LSC’s filings with the SEC. LSC disclaims any obligation to update or revise any forward-looking statements.
This article has been truncated. You can see the rest of this article by visiting http://www.businesswire.com/news/home/20180802005102/en.