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Donnelley Reports Mixed, Largely Flat Financial Results

November 3, 2010
CHICAGO—Nov. 3, 2010—R.R. Donnelley & Sons Co. reported third-quarter net earnings of $53.3 million on net sales of $2.5 billion, compared to net earnings of $13.1 million on net sales of $2.5 billion in the third quarter of 2009.

Non-GAAP net earnings attributable to common shareholders totaled $92.5 million in the third quarter of 2010, compared to $111.9 million in the third quarter of 2009.

Third-quarter net earnings attributable to common shareholders included pre-tax charges for restructuring ($20.2 million) and impairment ($28.5 million, non-cash) totaling $48.7 million in 2010 compared to charges for restructuring ($129.7 million) and impairment ($2.0 million, non-cash) totaling $131.7 million in 2009. Third-quarter non-GAAP net earnings attributable to common shareholders exclude restructuring and impairment charges and acquisition expenses for both years, as well as losses related to debt extinguishment in 2009.

“The sales momentum that we saw in the second quarter carried into the third quarter, as we continue to win new customer contracts and our customers’ businesses return to growth,” said Thomas J. Quinlan III, RR Donnelley's President and Chief Executive Officer.

Quinlan added, “Not only do we expect this momentum to continue during the fourth quarter, we also expect this trend to continue in 2011. As we build our 2011 operating plan, we are encouraged by the progress we are making in selling integrated communications solutions. These solutions span across the many products and services in our platform, and are enabling us to convert transactional business into broader contractual relationships.”

Segments

• Net sales for the U.S. Print and Related Services segment in the quarter increased 2.0% from the third quarter of 2009 to $1.9 billion, primarily attributable to volume increases in logistics, financial print and direct mail, partially offset by price declines across most products and services, as well as lower paper sales.

The segment’s operating income increased to $168.3 million in the third quarter of 2010 from $164.9 million in the third quarter of 2009 (factoring in the negative impact of charges for restructuring and impairment of $18.5 million in the third quarter of 2010 and $3.6 million in the third quarter of 2009).

Excluding the restructuring and impairment charges, the segment's non-GAAP operating margin increased to 10.0% in the third quarter of 2010 from 9.2% in the third quarter of 2009, as the benefits of productivity efforts, a higher recovery on print-related by-products and lower depreciation and amortization expense more than offset the impact of continued price erosion.

• Net sales for the International segment in the quarter decreased 1.8% from the third quarter of 2009 to $626.7 million, inclusive of the negative impacts of changes in foreign exchange rates (3.2%) and the fees received for the transition of a customer contract in the third quarter of 2009 (2.0%). The balance of the change in net sales was a result of increased volume in Asia, Europe and Latin America, partially offset by the lost volume related to the termination of a significant customer contract in 2009 and continued price pressure.

The segment's operating income improved to $23.5 million in the third quarter of 2010 from a loss of $72.3 million in the third quarter of 2009 (including the negative impact of charges for restructuring and impairment of $29.6 million in the third quarter of 2010 and $127.3 million in the third quarter of 2009).

Excluding the restructuring and impairment charges, the segment's non-GAAP operating margin decreased to 8.5% in the third quarter of 2010 from 8.6% in the third quarter of 2009 due to the fees received related to the transition of a customer contract in 2009 and the impact of continued price erosion, partially offset by increased volume.             

About R.R. Donnelley
R.R. Donnelley (Nasdaq:RRD) is a global provider of integrated communications. Founded more than 146 years ago, the Company works collaboratively with more than 60,000 customers worldwide to develop custom communications solutions that reduce costs, enhance ROI and ensure compliance. Drawing on a range of proprietary and commercially available digital and conventional technologies deployed across four continents, the Company employs a suite of leading Internet-based capabilities and other resources to provide premedia, printing, logistics and business process outsourcing products and services to leading clients in virtually every private and public sector. www.rrdonnelley.com.

Source: Financial release.

 

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