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RR Donnelley Records Earnings Jump on Flat Sales

May 5, 2010
CHICAGO—May 05, 2010—R.R. Donnelley & Sons Co. (NASDAQ: RRD) today reported first-quarter net earnings attributable to common shareholders of $52.6 million on net sales of $2.4 billion, compared to net earnings attributable to common shareholders of $13.9 million on net sales of $2.5 billion in the first quarter of 2009.

The first-quarter net earnings attributable to common shareholders included pre-tax charges for restructuring ($14.5 million) and impairment ($1.0 million) totaling $15.5 million in 2010 compared to charges for restructuring ($41.4 million) and impairment ($12.8 million) totaling $54.2 million in 2009. Substantially all of the restructuring charges in both the first quarter 2010 and the first quarter 2009 were related to the reorganization of certain operations and the exiting of certain business activities.

The company believes that certain non-GAAP measures, when presented in conjunction with comparable GAAP (Generally Accepted Accounting Principles) 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.

Non-GAAP net earnings attributable to common shareholders totaled $69.5 million or $0.33 per diluted share in the first quarter of 2010 compared to $49.2 million or $0.24 per diluted share in the first quarter of 2009. First-quarter non-GAAP net earnings attributable to common shareholders exclude restructuring and impairment charges for both years. Also excluded from 2010 are acquisition expenses and charges associated with the currency devaluation in Venezuela.

For non-GAAP comparison purposes, the effective tax rate decreased to 35.6% in the first quarter of 2010 from 37.1% in the first quarter of 2009, due to the increased benefit from the domestic manufacturing deduction in 2010 and a change in the mix of income across tax jurisdictions, partially offset by a one-time charge of $3.3 million associated with the enacted Patient Protection and Affordable Care Act. A reconciliation of GAAP net earnings attributable to common shareholders to non-GAAP net earnings attributable to common shareholders is presented in the attached tables.

“We are very pleased with our first-quarter results. The benefits of our diverse product offerings and the actions taken to improve our cost structure have driven our higher operating margins," said Thomas J. Quinlan III, RR Donnelley's President and Chief Executive Officer.

Quinlan added, “While the economic outlook remains uncertain, we approach the balance of the year with tempered enthusiasm. For the full year, we continue to expect revenue growth, excluding acquisitions, in the low single digits, and operating cash flow less capital expenditures in the range of $600 million to $650 million. This expectation is in line with our proven ability to achieve consistent cash flow, as reflected by the nearly $4.2 billion in operating cash flow less capital expenditures generated since the beginning of 2004.”
 

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