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RR Donnelley Reports Gains, Largely Due to Bowne Acquisition

November 2, 2011
CHICAGO—Nov. 2, 2011—R.R. Donnelley & Sons reported third-quarter net earnings attributable to common shareholders of $158.0 million on net sales of $2.7 billion, compared to $53.3 million on net sales of $2.5 billion in the third quarter of 2010.

Non-GAAP net earnings attributable to common shareholders totaled $98.0 million in the quarter, compared to $92.5 million in the same period of 2010.

“We continue to have success in the marketplace, winning new work and expanding customer relationships. Given the challenging global economic environment and sluggish financial markets activity, we are pleased with our results,” said Thomas J. Quinlan III, RR Donnelley’s president and CEO. “Despite these headwinds, we generated more than $300 million of operating cash flow in the quarter, an increase of over $90 million from last year’s third quarter. Our strong and stable cash flow funds our debt payments and our $1.04 per share annual dividend, while allowing us to reinvest in the business and prudently manage our capital structure.”

Quinlan continued, “In addition to expanding customer relationships, we continued to enhance the capabilities offered by our CustomPoint Solutions Group with the acquisition of Sequence Personal. The addition of these capabilities reflects our continued commitment to serve the evolving needs of our customers, particularly with innovative content creation, management and delivery solutions.”

Summary   

Net sales in the quarter were $2.7 billion, up $195.2 million (or 7.8 percent), from the third quarter of 2010, including the impact of acquisitions. Pro forma for acquisitions, net sales grew by $40.7 million, or 1.5 percent, vs. the third quarter of 2010, driven by a $26.8 million increase from favorable changes in foreign exchange rates, as well as volume growth in certain product offerings.

The company’s gross margin of 23.4 percent in the third quarter of 2011 compared to 23.7 percent in the third quarter of 2010 as pricing pressure was mostly offset by productivity improvements, a higher recovery on print-related by-products and lower variable compensation expense.

Operating earnings were negatively impacted by restructuring and impairment charges and acquisition expenses of $34.9 million in the third quarter of 2011 and $51.3 million in the third quarter of 2010, resulting in operating income of $156.8 million in 2011 and $148.7 million in 2010. Operating margin was 5.8 percent in 2011 and 6.0 percent in 2010.

Segments

Net sales for the U.S. Print and Related Services segment increased 6.3 percent from the third quarter of 2010, to $2.0 billion. The increase was primarily due to the acquisition of Bowne and volume increases in commercial print and logistics, partially offset by volume declines in books and directories and continued pricing pressure across the segment. Pro forma for acquisitions, net sales in the segment decreased 0.4 percent.
 

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