“The positive momentum we experienced late in the first quarter carried through into the second quarter, where we returned to positive year-over-year organic revenue growth, generated higher EBITDA and reduced our total debt in the quarter by approximately $70 million,” said Thomas J. Quinlan III, RR Donnelley’s president and CEO. “As we begin the second half of the year, our year-to-date performance, including the on-boarding and integration of our acquisitions that closed in the first quarter, keeps us on track to deliver our full-year guidance. Our expectation for free cash flow, in the range of $400 million to $500 million, allows us to continue to migrate toward our targeted gross leverage range of 2.25x to 2.75x on a long-term sustainable basis.”
Net sales in the quarter were $2.9 billion, up $330.9 million, or 12.9%, from the second quarter of 2013, largely due to the acquisitions of Consolidated Graphics and the North American operations of Esselte. After adjusting for the positive impact of acquisitions and pass-through paper sales, and the negative impact of dispositions, organic sales increased 0.8% from the second quarter of 2013, as volume increases in the Strategic Services and Variable Print segments were partially offset by price erosion in each segment and volume declines in the Publishing and Retail Services segment.
Second-quarter 2014 net earnings attributable to common shareholders was $64.7 million, or $0.32 per diluted share, compared to net earnings attributable to common shareholders of $65.4 million, or $0.36 per diluted share, in the second quarter of 2013. The second-quarter 2014 diluted share count increased by 18.2 million shares from the second quarter of 2013, primarily related to shares issued in connection with the acquisitions of Consolidated Graphics and the North American operations of Esselte.
Second-quarter 2014 non-GAAP adjusted EBITDA was $325.6 million, or 11.2% of net sales, compared to non-GAAP adjusted EBITDA of $304.1 million, or 11.8% of net sales, in the second quarter of 2013. The increase in non-GAAP adjusted EBITDA was due to the acquisitions of Consolidated Graphics and the North American operations of Esselte, as well as higher volume. These increases were partially offset by price pressure in each segment and wage and other cost inflation, all of which also negatively impacted margin.