RR Donnelley Records Earnings Jump on Flat Sales

Operating earnings were negatively impacted by charges for restructuring and impairment of $15.5 million and acquisition expenses of $2.0 million in the first quarter of 2010 and restructuring and impairment charges of $54.2 million in the first quarter of 2009 that resulted in operating income of $145.8 million in 2010 and $87.4 million in 2009.

Excluding charges for restructuring and impairment in the first quarter of both years and acquisition expenses in the first quarter of 2010, our non-GAAP operating margin in the first quarter of 2010 increased to 6.8% from 5.8% in the first quarter of 2009, as the benefits from our productivity efforts and the higher by-products recoveries were partially offset by continued price pressure.

Segments

Net sales for the U.S. Print and Related Services segment in the quarter decreased 3.7% from the first quarter of 2009 to $1.8 billion primarily due to lower paper sales and price declines across most products and services. The reduction in paper sales was related to both lower paper prices and an increase in the relative amount of customer-supplied paper.

The segment’s operating income, which was negatively impacted by charges for restructuring and impairment of $5.9 million in the first quarter of 2010 and $32.7 million in the first quarter of 2009, increased to $163.8 million in the first quarter of 2010 from $114.4 million in the first quarter of 2009.

Excluding the restructuring and impairment charges, the segment’s non-GAAP operating margin increased to 9.2% in the first quarter of 2010 from 7.7% in the first quarter of 2009, as the benefits of continued productivity efforts and higher by-products recoveries more than offset the impact of price erosion.

Net sales for the International segment in the quarter increased 5.5% from the first quarter of 2009 to $578.3 million due to a 9.0% positive impact from changes in foreign exchange rates, partially offset by volume and price declines.