Net sales in the quarter were $1.65 billion, up $13.4 million or 0.8% from the second quarter of 2016. On an organic basis, consolidated net sales declined 0.8%, driven by volume growth in the International and Strategic Services segments and favorable changes in fuel surcharges which were more than offset by lower postage pass through sales in the Strategic Services segment, net volume declines in the Variable Print segment and modest price erosion across all segments.
Gross profit in the second quarter of 2017 was $303.1 million or 18.4% of net sales versus $316.4 million or 19.4% of net sales in the prior year quarter.
“Our overall second quarter performance was within the range of our expectations. However, while net sales remained stable, income from operations was negatively impacted by unfavorable mix in several of our businesses and changes in foreign exchange rates,” said Dan Knotts, RRD’s president and CEO. “In addition, we incurred investments and start-up costs in Asia as we quickly ramp up a new packaging production facility to support a significant business opportunity that we expect will begin to generate incremental sales volume later in the third quarter.”
Net sales in Variable Print decreased 0.9% from the second quarter of 2016 to $735 million, primarily due to volume decreases in direct mail and commercial and digital print and modest price erosion throughout the segment, partially offset by net sales from the digital print and inserting operations of Precision Dialogue. Income from operations was $31.1 million, down $9.0 million versus the prior year second quarter
Net sales in Strategic Services in the quarter were $406 million, an increase of 1.5% from the second quarter of 2016. Income from operations was $4 million, down $4.9 million compared to the prior year quarter.
International net sales grew 2.8% to $505 million from the second quarter of 2016, primarily due to significant volume increases in Asia, partially offset by volume declines in Global Turnkey Solutions and Business Process Outsourcing, a $14.1 million unfavorable impact from changes in foreign exchange rates and modest price erosion in Asia. Income from operations was $16.3 million, a decrease of $12.5 million compared to the prior year quarter.
As of June 30, 2017, cash on hand was $224.0 million and total debt outstanding was $2.25 billion, including $350.0 million drawn against the credit facility. Availability under the credit facility was $329.0 million at June 30, 2017.