Highlights:
- Full-year 2008 GAAP net loss
from continuing operations of $191.7 million or $0.91 per diluted
share vs. net loss from continuing operations of $48.4 million or
$0.22 per diluted share in 2007
- Fourth-quarter 2008 GAAP net
loss from continuing operations of $686.9 million or $3.35 per
diluted share vs. net loss from continuing operations of $292.9
million or $1.37 per diluted share in 2007
- GAAP results include non-cash
impairment charges related to goodwill, intangible assets and other
long-lived assets of $1,127.6 million in the fourth quarter of 2008
and $460.3 million in the fourth quarter of 2007
- Full-year 2008 non-GAAP net
earnings from continuing operations of $617.2 million or $2.93 per
diluted share compared to $645.2 million or $2.94 per diluted share
in 2007
- Fourth-quarter 2008 non-GAAP net
earnings from continuing operations of $129.3 million or $0.63 per
diluted share compared to $172.3 million or $0.80 per diluted share
in the fourth quarter of 2007
- Generated cash from operations
of over $1 billion in 2008
R.R. Donnelley & Sons Company (NYSE:RRD) today
reported a fourth-quarter net loss from continuing operations of
$686.9 million or $3.35 per diluted share on net sales of $2.8
billion compared to a net loss from continuing operations of $292.9
million or $1.37 per diluted share on net sales of $3.1 billion in
the fourth quarter of 2007. The fourth-quarter net loss from
continuing operations included pre-tax charges for impairment
($1,127.6 million) and restructuring ($10.7 million) totaling
$1,138.3 million in 2008 and for impairment ($460.3 million) and
restructuring ($16.9 million) totaling $477.2 million in 2007. As
detailed in the attached tables, substantially all of the charges
are non-cash and follow the Company�s annual impairment test of
goodwill and intangible assets. Substantially all of the
restructuring charges in both the fourth quarter of 2008 and the
fourth quarter of 2007 were associated with the reorganization of
certain operations and the exiting of certain business activities.
The Company recorded an income tax benefit of $273.4 million in the
fourth quarter of 2008 primarily reflecting deductions related to
the decline in value and reorganization of certain entities within
the International segment.
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 earnings from continuing operations totaled $129.3
million or $0.63 per diluted share in the fourth quarter of 2008
compared to $172.3 million or $0.80 per diluted share in the fourth
quarter of 2007. Fourth-quarter non-GAAP net earnings from
continuing operations exclude impairment and restructuring charges
in both 2008 and 2007. For non-GAAP comparison purposes, the
effective tax rate increased to 30.8% in the fourth quarter of 2008
from 26.7% in the fourth quarter of 2007 due to lower benefits from
the release of tax valuation allowances and a lower benefit from
the expiration of state tax statutes of limitations in 2008. A
reconciliation of GAAP net earnings to non-GAAP net earnings for
these adjustments is presented in the attached tables.
"Volatility in the global economy has resulted in significant
declines in demand across nearly all of the diverse industries that
we serve," said Thomas J. Quinlan III, RR Donnelley's President and
Chief Executive Officer. "Though our industry has been adversely
impacted, we generated over $1 billion in cash from operations in
2008. We will continue to focus on two primary elements of our
strategy. These are to achieve operational excellence in serving
our customers and to maintain a very strong liquidity position by
maximizing cash flow and deploying it prudently."
Quinlan added, �We believe that the breadth of our product,
service, and geographic offerings, our scale and our proprietary
technologies create significant competitive advantages that
position us well to maintain our leadership position."
Business Review (Continuing Operations)
The company reports its results in two reportable segments: 1)
U.S. Print and Related Services and 2) International. The company
reports as Corporate its unallocated expenses associated with
general and administrative activities.
Summary
Net sales in the quarter were $2.8 billion, down 9.5% from the
fourth quarter of 2007. The decrease was caused by volume declines,
unfavorable foreign exchange rates and continued price pressure
primarily due to the worsening global recession, offset slightly by
acquisitions. Gross margin decreased to 24.0% in the fourth quarter
of 2008 from 25.1% in the fourth quarter of 2007 due to volume and
price declines and an increase in the LIFO provision, offset in
part by the benefits of our productivity efforts and a reduction in
our variable compensation expense. SG&A expense as a percentage
of net sales improved to 9.7% in the fourth quarter of 2008 from
10.5% in the fourth quarter of 2007, primarily due to the benefit
of productivity initiatives and reduced variable compensation
expense, offset in part by an increase in the bad debt provision.
Operating income in both periods was negatively impacted by charges
for impairment and restructuring of $1,138.3 million in the fourth
quarter of 2008 and $477.2 million in the fourth quarter of 2007
that resulted in an operating loss of $892.9 million in the fourth
quarter of 2008 and $183.4 million in the fourth quarter of
2007.
Excluding charges for impairment and restructuring, the non-GAAP
operating margin in the fourth quarter of 2008 decreased to 8.8%
from 9.5% in the fourth quarter of 2007, as the benefits from our
productivity efforts and reduction in variable compensation expense
were more than offset by volume and price declines.
Segments
Net sales for the U.S. Print and Related Services segment in the
quarter decreased 4.9% to $2.2 billion from the fourth quarter of
2007 due to volume declines and price pressure across most product
lines, driven primarily by economic conditions. Partially
offsetting these declines were sales from the acquisitions of
Cardinal Brands and Pro Line Printing. The segment�s operating
income, which was negatively impacted by charges for impairment and
restructuring of $380.2 million in the fourth quarter of 2008 and
$5.2 million in the fourth quarter of 2007, decreased to an
operating loss of $128.3 million in the fourth quarter of 2008
compared to operating income of $283.8 million in the fourth
quarter of 2007. Excluding impairment and restructuring charges,
the segment�s non-GAAP operating margin decreased to 11.7% in the
fourth quarter of 2008 from 12.7% in the fourth quarter of 2007, as
the impact of volume and price declines was partially offset by the
benefits of our productivity efforts and the reduction in variable
compensation expense.
Net sales for the International segment in the quarter decreased
22.1% to $637.8 million from the fourth quarter of 2007 due to
volume declines and unfavorable foreign exchange rates in most
reporting units as well as continued price pressure. Partially
offsetting these declines were volume increases in Latin America
and Asia. The segment�s operating income was negatively impacted by
charges for impairment and restructuring of $757.5 million in the
fourth quarter of 2008 and $466.8 million in the fourth quarter of
2007 that resulted in an operating loss of $712.8 million in the
fourth quarter of 2008 and $407.4 million in the fourth quarter of
2007. Excluding impairment and restructuring charges, the segment�s
non-GAAP operating margin decreased to 7.0% in the fourth quarter
of 2008 from 7.3% in the fourth quarter of 2007 as the impact of
volume and price declines as well as a higher bad debt provision
was partially offset by productivity and cost management
initiatives and the reduction in variable compensation expense.
Unallocated Corporate operating expense decreased to $51.8
million in the fourth quarter of 2008 from $59.8 million in the
fourth quarter of 2007. Excluding charges for restructuring of $0.6
million in the fourth quarter of 2008 and charges for restructuring
and impairment of $5.2 million in the fourth quarter of 2007,
Corporate operating expense decreased $3.4 million to $51.2 million
in the fourth quarter of 2008, as lower variable compensation
expense and the benefits of productivity initiatives were partially
offset by higher bad debt and LIFO provisions.
Outlook
As a consequence of the unpredictable global environment and its
potential impacts on competitors and customers, the Company will
not provide full-year earnings per share guidance for 2009 on its
conference call today. However, the Company will provide detail
behind its strategic and operational plans on the call.
Conference Call
RR Donnelley will host a conference call and simultaneous
webcast to discuss its fourth-quarter and full-year results today,
Wednesday, February 25, at 10:00 a.m. Eastern Time (9:00 a.m.
Central Time). The live webcast will be accessible on RR
Donnelley�s web site: http://www.rrdonnelley.com. Individuals
wishing to participate can join the conference call by dialing
706.634.1139. A webcast replay will be archived on the Company�s
web site for 30 days after the call. In addition, a telephonic
replay of the call will be available for seven days at
706.645.9291, passcode 79873109.
About RR Donnelley
RR Donnelley (NYSE: RRD) is the world's premier full-service
provider of print and related services, including business process
outsourcing. Founded more than 144 years ago, the company provides
products and solutions in commercial printing, direct mail,
financial printing, print fulfillment, labels, forms, logistics,
call centers, transactional print-and-mail, print management,
online services, digital photography, color services, and content
and database management to customers in the publishing, healthcare,
advertising, retail, technology, financial services and many other
industries. The largest companies in the world and others rely on
RR Donnelley's scale, scope and insight through a comprehensive
range of online tools, variable printing services and
market-specific solutions. For more information, visit the
company�s web site at www.rrdonnelley.com.
Use of Forward-Looking Statements
This news release contains �forward-looking statements� as
defined in the U.S. Private Securities Litigation Reform Act of
1995. Readers are cautioned not to place undue reliance on these
forward-looking statements and any such forward-looking statements
are qualified in their entirety by reference to the following
cautionary statements. All forward-looking statements speak only as
of the date of this news release and are based on current
expectations and involve a number of assumptions, risks and
uncertainties that could cause the actual results to differ
materially from such forward-looking statements. The company does
not undertake to and specifically declines any obligation to
publicly release the results of any revisions to these
forward-looking statements that may be made to reflect future
events or circumstances after the date of such statement or to
reflect the occurrence of anticipated or unanticipated events. The
factors that could cause material differences in the expected
results of RR Donnelley include, without limitation, the following:
the successful execution and integration of acquisitions and the
performance of the company�s businesses following acquisitions; the
ability to implement comprehensive plans for the integration of the
sales force, cost containment, asset rationalization and other key
strategies; competitive pressures in all markets in which the
company operates; the volatility and disruption of the capital and
credit markets, and adverse changes in the global economy; our
ability to access unsecured debt in the capital markets and the
reliability of the participants to our contractual lending
agreements; factors that affect customer demand, including changes
in postal rates and postal regulations, changes in advertising
markets, the rate of migration from paper-based forms to digital
format, customers� budgetary constraints and customers� changes in
short-range and long-range plans; customers� financial strength;
shortages or changes in availability, or increases in costs of, key
materials (such as ink, paper and fuel); and other risks and
uncertainties described in RR Donnelley�s periodic filings with the
Securities and Exchange Commission (SEC). Readers are strongly
encouraged to read the full cautionary statements contained in RR
Donnelley�s filings with the SEC.
R. R. Donnelley & Sons Company Condensed Consolidated
Balance Sheets As of December 31, 2008 and December 31, 2007
(UNAUDITED) (In millions, except per share data) � � � �
December 31, 2008 �
December 31, 2007
Assets
� � Current Assets Cash and cash equivalents $ 324.0 $ 379.0
Restricted cash equivalents 7.9 63.9 Receivables, less allowance
for doubtful accounts 1,903.2 2,180.7 Income taxes receivable 189.4
0.5 Inventories 695.7 709.5 Prepaid expenses and other current
assets 104.6 85.5 Deferred income taxes 56.2 � � 102.2 � Total
Current Assets
$ 3,281.0 � �
$ 3,521.3 � � Property,
plant and equipment - net 2,564.0 2,726.0 Goodwill 2,425.9 3,264.9
Other intangible assets - net 831.1 1,323.2 Prepaid pension cost
15.6 833.2 Other noncurrent assets 376.7 418.1 � � � � � � � � � �
Total Assets � � � �
$ 9,494.3 � �
$ 12,086.7
� � �
Liabilities
� Current Liabilities Accounts payable $ 767.6 $ 954.9 Accrued
liabilities 795.7 1,085.3 Short-term and current portion of
long-term debt 923.5 � � 725.0 � Total Current Liabilities
$
2,486.8 � �
$ 2,765.2 � � Long-term debt 3,203.3 3,601.9
Postretirement benefit obligations 291.9 247.9 Deferred income
taxes 260.9 872.3 Pension liability 491.5 128.9 Other noncurrent
liabilities 441.0 560.2 Liabilities of discontinued operations 0.4
3.0 � � � � � � � � � �
Total Liabilities � � � �
$
7,175.8 � �
$ 8,179.4 � � �
Shareholders' Equity
� Common stock, $1.25 par value $ 303.7 $ 303.7 Authorized shares:
500.0 Issued shares: 243.0 in 2008 and 2007 � Additional paid-in
capital 2,885.7 2,858.4 � Retained earnings 903.8 1,312.9 �
Accumulated other comprehensive income (loss) (580.7 ) 341.3 �
Treasury stock, at cost, 37.2 shares (1,194.0 ) (909.0 ) in 2008
(2007 - 27.1 shares) � � � � � � � � � � �
Total Shareholders'
Equity � � �
$ 2,318.5 � �
$ 3,907.3 � � � � � �
� � � � �
Total Liabilities and Shareholders' Equity � � �
$ 9,494.3 � �
$ 12,086.7 � � � � � � � � � � � � � �
R. R. Donnelley & Sons Company Condensed Consolidated
Statements of Operations Three and Twelve Months Ended December 31,
2008 and 2007 (In millions, except per share data)
(UNAUDITED) � � � � � � � � � � � � � � � � � � � � � � � �
Three Months Ended December
31,
Twelve Months Ended December
31,
2 0 0 8
GAAP
�
ADJUSTMENTS
TO NON-GAAP
�
2 0 0 8
NON-GAAP
�
2 0 0 7
GAAP
�
ADJUSTMENTS
TO NON-GAAP
�
2 0 0 7
NON-GAAP
2 0 0 8
GAAP
�
ADJUSTMENTS
TO NON-GAAP
�
2 0 0 8
NON-GAAP
�
2 0 0 7
GAAP
�
ADJUSTMENTS
TO NON-GAAP
�
2 0 0 7
NON-GAAP
� � � � � � � � � � � � � � � � � � � � � � � � Net sales $ 2,796.3
� � $ - � � $ 2,796.3 � � $ 3,088.2 � � $ - � � $ 3,088.2 $
11,581.6 � � $ - � � $ 11,581.6 � $ 11,587.1 � � $ - � � $ 11,587.1
� Cost of sales (exclusive of depreciation and amortization shown
below) 2,124.3 - 2,124.3 2,314.2 - 2,314.2 8,576.3 - 8,576.3
8,532.4 - 8,532.4 Selling, general and administrative expenses
(exclusive of depreciation and amortization shown below) 272.6 -
272.6 325.6 - 325.6 1,220.5 - 1,220.5 1,302.3 - 1,302.3
Restructuring and impairment charges 1,138.3 (1,138.3 ) - 477.2
(477.2 ) - 1,184.7 (1,184.7 ) - 839.0 (839.0 ) - Depreciation and
amortization 154.0 � � - � � 154.0 � � 154.6 � � - � � 154.6 640.6
� � - � � 640.6 � 598.3 � � - � � 598.3 Total operating expenses
3,689.2 � � (1,138.3 ) � 2,550.9 � � 3,271.6 � � (477.2 ) � 2,794.4
11,622.1 � � (1,184.7 ) � 10,437.4 � 11,272.0 � � (839.0 ) �
10,433.0
Income (loss) from continuing operations
(892.9 ) �
1,138.3 � �
245.4 � �
(183.4 ) �
477.2 � �
293.8 (40.5
) �
1,184.7 � �
1,144.2 �
315.1 � �
839.0 � �
1,154.1 � Interest expense - net 55.4 -
55.4 59.4 - 59.4 226.4 - 226.4 227.3 - 227.3 Investment and other
income (expense) - net (9.4 ) 9.9 0.5 1.3 - 1.3 (2.4 ) 9.9 7.5 3.6
- 3.6 � � � � � � � � � � � � � � � � � � � � � � � �
Earnings
(loss) from continuing operations before income taxes and minority
interest (957.7 ) �
1,148.2 � �
190.5 � �
(241.5 ) �
477.2 � �
235.7 (269.3 ) �
1,194.6 � �
925.3 �
91.4 � �
839.0 � �
930.4 �
Income tax expense (benefit) (273.4 ) 332.0 58.6 51.0 12.0 63.0
(83.9 ) 385.7 301.8 136.5 145.4 281.9 Minority interest 2.6 - 2.6
0.4 - 0.4 6.3 - 6.3 3.3 - 3.3 � � � � � � � � � � � � � � � � � � �
� � � � �
Net earnings (loss) from continuing operations
(686.9 ) �
816.2 � �
129.3 � �
(292.9 ) �
465.2 � �
172.3
(191.7 ) �
808.9 � �
617.2 �
(48.4 ) �
693.6 � �
645.2 � Income
(loss) from discontinued operations - net of tax 0.1 (0.1 ) - (0.4
) 0.4 - 1.8 (1.8 ) - (0.5 ) 0.5 - � � � � � � � � � � � � � � � � �
� � � � � � � �
Net earnings (loss) $ (686.8 )
�
$ 816.1 � �
$ 129.3 � �
$ (293.3 ) �
$ 465.6 � �
$ 172.3 $ (189.9 ) �
$
807.1 � �
$ 617.2 �
$ (48.9 ) �
$
694.1 � �
$ 645.2 Earnings per share:
Basic: Net earnings (loss) from continuing operations
$
(3.35 ) $ 0.63 $ (1.37 ) $
0.80 $ (0.91 ) $ 2.94 $ (0.22
) $ 2.96 Income from discontinued operations, net of
tax
$ - �
$ - $ - �
$ - $ 0.01 �
$ - $ - �
$ - Net earnings (loss)
$
(3.35 ) $ 0.63 � �
$ (1.37 ) $
0.80 $ (0.90 ) $ 2.94 �
$ (0.22
) $ 2.96 Diluted: Net earnings (loss) from
continuing operations
$ (3.35 ) $ 0.63 $
(1.37 ) $ 0.80 $ (0.91 ) $
2.93 $ (0.22 ) $ 2.94 Income from
discontinued operations, net of tax
$ - �
$ - $
- �
$ - $ 0.01 �
$ - $ - �
$
- Net earnings (loss)
$ (3.35 ) $ 0.63 � �
$ (1.37 ) $ 0.80 $ (0.90 ) $
2.93 �
$ (0.22 ) $ 2.94 � � � � � � � � �
� � �
Weighted average common shares outstanding: Basic
205.0 205.0 214.7 214.7 210.2
210.2 218.0 218.0 Diluted
205.0 � � � �
205.2 � �
214.7 � � � �
215.5 210.2 � �
� �
210.7 �
218.0 � � � �
219.1 �
The Company believes that certain
non-GAAP measures, when presented in conjunction with comparable
GAAP 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 this
indicator. These measures should be considered in addition to, not
a substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP.��������
R.R. Donnelley & Sons Company Reconciliation of GAAP
to Non-GAAP Measures IN MILLIONS, EXCEPT PER SHARE AND MARGIN
DATA
(UNAUDITED)
� � � � � � � � Three Months Ended December 31, 2008 Three Months
Ended December 31, 2007
Income (loss) from continuing
operations Operating margin Net earnings
(loss)
Net earnings (loss) per
diluted share
Income (loss) from continuing operations
Operating margin Net earnings (loss)
Net earnings (loss) per diluted share GAAP basis
measures $ (892.9 ) (31.9 %) $ (686.8 ) $ (3.35 ) $ (183.4 ) (5.9
%) $ (293.3 ) $ (1.37 ) � Non-GAAP adjustments: Restructuring and
impairment charges (1) 1,138.3 40.7 % 1,043.2 5.09 477.2 15.4 %
465.2 2.17 Investment and other income (expense) - net (2) - - 1.8
0.01 - - - - Income tax adjustments (3) - - (228.8 ) (1.12 ) - - -
- (Income) loss from discontinued operations - � � - � � (0.1 ) �
0.00 � - � � - � � 0.4 � � - � Total Non-GAAP adjustments $ 1,138.3
� � 40.7 % � $ 816.1 � � $ 3.98 �
$ 477.2
� � 15.4 % � $ 465.6 � � $ 2.17 � Non-GAAP measures $ 245.4 � � 8.8
% � $ 129.3 � � $ 0.63 � $ 293.8 � � 9.5 % � $ 172.3 � � $ 0.80 � �
� (1) Restructuring and impairment charges (pre-tax): Operating
results for the three months ended December 31, 2008 and 2007 were
affected by the following restructuring and impairment charges: �
2008
2007
Employee termination costs (a) $ 7.5 $ 14.7 Lease termination and
other facility closure costs 3.2 2.2
Total restructuring
expense $ 10.7 $ 16.9 �
Goodwill and intangible asset
impairment of the following reporting units:
Business process outsourcing $ 574.7 $ 436.1 Forms & labels
297.8 - Canada 152.0 - Office products 78.6 - Global Turnkey
Solutions 22.3 - Total goodwill and intangible asset impairment $
1,125.4 $ 436.1 Other asset impairment 2.2 24.2
Total impairment
charges $ 1,127.6 $ 460.3 �
(a) Employee termination costs
resulted from the reorganization of certain operations and the
exiting of certain business activities.
� � (2) Investment and other income (expense) - net: Net earnings
(loss) for the three months ended December 31, 2008 reflect a loss
of $1.8 million resulting from the termination of the Company's
cross-currency swaps. � (3) Income tax adjustments: Net earnings
(loss) for the three months ended December 31, 2008 reflect a tax
benefit of $228.8 million resulting from the decline in value and
reorganization of certain entities within the International
segment.
R.R. Donnelley & Sons Company Reconciliation
of GAAP to Non-GAAP Measures IN MILLIONS, EXCEPT PER SHARE AND
MARGIN DATA (UNAUDITED) � � � � � � � � Twelve Months Ended
December 31, 2008 Twelve Months Ended December 31, 2007
Income (loss) from continuing operations
Operating margin Net earnings (loss)
Net earnings (loss) per diluted share Income
(loss) from continuing operations Operating
margin Net earnings (loss) Net earnings
(loss) per diluted share GAAP basis measures $ (40.5 ) (0.3
%) $ (189.9 ) $ (0.90 ) $ 315.1 2.7 % $ (48.9 ) $ (0.22 ) �
Non-GAAP adjustments: Restructuring and impairment charges (1)
1,184.7 10.2 % 1,073.9 5.11 839.0 7.3 % 702.9 3.20 Investment and
other income (expense) - net (2) - - 1.8 0.01 - - - - Income tax
adjustments (3) - - (266.8 ) (1.28 ) - - (9.3 ) (0.04 ) (Income)
loss from discontinued operations (4) - � � - � � (1.8 ) � (0.01 )
- � - � � 0.5 � � - � Total Non-GAAP adjustments 1,184.7 � � 10.2 %
� 807.1 � � 3.83 � 839.0 � 7.3 % � 694.1 � � 3.16 � Non-GAAP
measures $ 1,144.2 � �
9.9
% � $ 617.2 � � $ 2.93 � $ 1,154.1 � 10.0 % � $ 645.2 � � $ 2.94 �
� � �
(1) Restructuring and impairment
charges (pre-tax): Operating results for the twelve months ended
December 31, 2008 and 2007 were affected by the following
restructuring and impairment charges:
�
�
2008
2007
Employee termination costs (a) $ 44.1 $ 49.3 Lease termination and
other facility closure costs 10.6 11.1
Total restructuring
expense $ 54.7 $ 60.4 � Goodwill and intangible
asset impairment of the following reporting units: Business process
outsourcing $ 574.7 $ 436.1 Forms & labels 297.8 - Canada 152.0
- Office products 78.6 - Global Turnkey Solutions 22.3 - Total
goodwill and intangible asset impairment $ 1,125.4 $ 436.1
Write-off of various trade name intangibles - 316.1 Other asset
impairment 4.6 26.4
Total impairment charges $
1,130.0 $ 778.6 �
(a) Employee termination costs
resulted from the reorganization of certain operations and the
exiting of certain business activities.
� �
(2) Investment and other income
(expense) - net: Net earnings for the twelve months ended December
31, 2008 reflect a loss of $1.8 million resulting from the
termination of the Company's cross-currency swaps.
�
�
(3) Income tax adjustments: Net
earnings for the twelve months ended December 31, 2008 were
affected by a $228.8 million tax benefit resulting from the decline
in value and reorganization of certain entities within the
International segment, and a $38 million reversal of reserves for
uncertain tax positions. Income tax expense for the twelve months
ended December 31, 2007 reflects a benefit from a reduction in
deferred tax liabilities due to a decrease in the statutory rate in
the United Kingdom.
� (4) (Income) loss from discontinued operations: The net income
from discontinued operations for the twelve months ended December
31, 2008 reflects the reversal of a deferred tax liability for the
Company's package logistics business.
R. R. Donnelley & Sons
Company Segment GAAP to Non-GAAP Operating Income and Margin
Reconciliation For the Three Months Ended December 31, 2008 and
2007 $ IN MILLIONS (UNAUDITED) � � � �
U.S. Print andRelated Services
� International � Corporate � Consolidated �
Three Months Ended December 31,
2008
Net sales $ 2,158.5 $ 637.8 $ - $ 2,796.3 Operating expense 2,286.8
� � 1,350.6 � � 51.8 � � 3,689.2 � Operating income (loss) (128.3 )
(712.8 ) (51.8 ) (892.9 ) Operating margin % (5.9 )% (111.8 )% nm
(31.9 )% �
Non-GAAP Adjustments
Restructuring charges 2.1 8.0 0.6 10.7 Impairment charges 378.1 � �
749.5 � � - � � 1,127.6 � Total Non-GAAP adjustments 380.2 757.5
0.6 1,138.3 � Operating income (loss) excluding restructuring and
impairment charges $ 251.9 $ 44.7 $ (51.2 ) $ 245.4 Operating
margin before restructuring and impairment charges % 11.7 % 7.0 %
nm 8.8 % � Depreciation and amortization 110.2 33.5 10.3 154.0
Capital expenditures 44.2 31.9 8.2 84.3 �
Three Months Ended December 31,
2007
Net sales $ 2,269.2 $ 819.0 $ - $ 3,088.2 Operating expense 1,985.4
� � 1,226.4 � � 59.8 � � 3,271.6 � Operating income (loss) 283.8
(407.4 ) (59.8 ) (183.4 ) Operating margin % 12.5 % (49.7 )% nm
(5.9 )% �
Non-GAAP Adjustments
Restructuring charges 3.1 11.0 2.8 16.9 Impairment charges 2.1 � �
455.8 � � 2.4 � � 460.3 � Total Non-GAAP adjustments 5.2 466.8 5.2
477.2 � Operating income (loss) excluding restructuring and
impairment charges $ 289.0 $ 59.4 $ (54.6 ) $ 293.8 Operating
margin before restructuring and impairment charges % 12.7 % 7.3 %
nm 9.5 % � Depreciation and amortization 108.3 40.4 5.9 154.6
Capital expenditures 117.3 36.7 6.9 160.9
R. R. Donnelley &
Sons Company Segment GAAP to Non-GAAP Operating Income and
Margin Reconciliation For the Twelve Months Ended December 31, 2008
and 2007 $ IN MILLIONS (UNAUDITED) � � � �
U.S. Print andRelated Services
� International � Corporate � Consolidated �
Twelve Months Ended December 31,
2008
Net sales $ 8,704.2 $ 2,877.4 $ - $ 11,581.6 Operating expense
7,995.3 � � 3,442.0 � � 184.8 � � 11,622.1 � Operating income
(loss) 708.9 (564.6 ) (184.8 ) (40.5 ) Operating margin % 8.1 %
(19.6 )% nm (0.3 )% �
Non-GAAP Adjustments
Restructuring charges 25.8 25.0 3.9 54.7 Impairment charges 380.0 �
� 749.7 � � 0.3 � � 1,130.0 � Total Non-GAAP adjustments 405.8
774.7 4.2 1,184.7 � Operating income (loss) excluding restructuring
and impairment charges $ 1,114.7 $ 210.1 $ (180.6 ) $ 1,144.2
Operating margin before restructuring and impairment charges % 12.8
% 7.3 % nm 9.9 % � Depreciation and amortization 432.9 166.4 41.3
640.6 Capital expenditures 187.9 104.4 30.6 322.9 �
Twelve Months Ended December 31,
2007
Net sales $ 8,601.9 $ 2,985.2 $ - $ 11,587.1 Operating expense
7,778.1 � � 3,300.2 � � 193.7 � � $ 11,272.0 � Operating income
(loss) 823.8 (315.0 ) (193.7 ) 315.1 Operating margin % 9.6 % (10.6
)% nm 2.7 % �
Non-GAAP Adjustments
Restructuring charges 23.5 24.1 12.8 60.4 Impairment charges 261.6
� � 514.6 � � 2.4 � � 778.6 � Total Non-GAAP adjustments 285.1
538.7 15.2 839.0 � Operating income (loss) excluding restructuring
and impairment charges $ 1,108.9 $ 223.7 $ (178.5 ) $ 1,154.1
Operating margin before restructuring and impairment charges % 12.9
% 7.5 % nm 10.0 % � Depreciation and amortization 405.1 161.1 32.1
598.3 Capital expenditures 307.1 151.7 23.2 482.0 � � � �
R. R.
Donnelley & Sons Company Condensed Consolidated Statements
of Cash Flows For the Twelve Months Ended December 31, 2008 and
2007 IN MILLIONS (UNAUDITED) � � � �
2008 �
2007
Operating Activities
� Net loss $ (189.9 ) $ (48.9 ) � Net (earnings) loss from
discontinued operations (1.8 ) 0.5 �
Adjustment to reconcile net loss
to cash provided by operating activities
1,733.1
1,345.7 � � Changes in operating assets and liabilities � �
(524.7
) � (120.5 ) Net cash provided by operating activities of
continuing operations 1,016.7 1,176.8 Net cash used in operating
activities of discontinued operations � � (0.8 ) � (0.7 )
Net
cash provided by operating activities � �
1,015.9 � �
1,176.1 � � � � � � � � � � Net cash used in investing
activities of continuing operations (351.2 ) (2,510.9 ) Net cash
used in investing activities of discontinued operations � � - � � -
�
Net cash used in investing activities � �
(351.2
) �
(2,510.9 ) � � � � � � � � � Net cash
(used in) provided by financing activities of continuing operations
(676.8 ) 1,476.2 Net cash used in financing activities of
discontinued operations � � - � � - �
Net cash (used in)
provided by financing activities � �
(676.8 ) �
1,476.2 � � Effect of exchange rate on cash and cash
equivalents (42.9 ) 26.2 � � � � � � � � �
Net (decrease)
increase in cash and cash equivalents � �
(55.0 )
�
167.6 � � Cash and cash equivalents at beginning of period
379.0 211.4 � � � � � � � � �
Cash and cash equivalents at end
of period � �
$ 324.0 � �
$ 379.0 � Supplemental
non-cash disclosure: � Use of restricted cash to fund obligations
associated with deferred compensation plans � $ 25.3 � � $ 36.5 �
R.R. Donnelley & Sons Company Revenue Reconciliation
Reported to Pro Forma For the Three Months Ended December 31, 2008
and 2007 $ IN MILLIONS (UNAUDITED) � � �
Reported net
sales
Adjustment for
net sales of acquired
businesses
Pro forma net
sales
Three Months Ended December 31,
2008
U.S. Print and Related Services $ 2,158.5 $ - $ 2,158.5
International 637.8 � - � 637.8 Consolidated $ 2,796.3 $ - $
2,796.3 �
Three Months Ended December 31,
2007
U.S. Print and Related Services $ 2,269.2 $ 78.8 $ 2,348.0
International 819.0 � - � 819.0 Consolidated $ 3,088.2 $ 78.8 $
3,167.0 �
Net sales change
U.S. Print and Related Services -4.9% -8.1% International -22.1%
-22.1% Consolidated -9.5% -11.7% �
The reported results of the
company include the results of acquired businesses from the
acquisition date forward.��The company has provided this schedule
to reconcile reported net sales for the three months ended December
31, 2008 and 2007 to pro forma net sales as if the acquisitions
took place at the beginning of the respective periods.
�
For the three months ended
December 31, 2007, the adjustment for net sales of acquired
businesses reflects the net sales of Cardinal Brands, Inc.
(acquired December 27, 2007) and Pro Line Printing, Incorporated
(acquired March 14, 2008).
R.R. Donnelley & Sons Company Revenue Reconciliation
Reported to Pro Forma For the Twelve Months Ended December 31, 2008
and 2007 $ IN MILLIONS (UNAUDITED) � � �
Reported net
sales
Adjustment for
net sales of acquired
businesses
Pro forma net
sales
Twelve Months Ended December 31,
2008
U.S. Print and Related Services $ 8,704.2 $ 23.6 $ 8,727.8
International 2,877.4 � - � 2,877.4 Consolidated $ 11,581.6 $ 23.6
$ 11,605.2
�
Twelve Months Ended December 31,
2007
U.S. Print and Related Services $ 8,601.9 $ 460.2 $ 9,062.1
International 2,985.2 � 9.2 � $ 2,994.4 Consolidated $ 11,587.1 $
469.4 $ 12,056.5 �
Net sales change
U.S. Print and Related Services 1.2% -3.7% International -3.6%
-3.9% Consolidated 0.0% -3.7% �
The reported results of the
company include the results of acquired businesses from the
acquisition date forward.��The company has provided this schedule
to reconcile reported net sales for the twelve months ended
December 31, 2008 and 2007 to pro forma net sales as if the
acquisitions took place at the beginning of the respective
periods.
�
For the twelve months ended
December 31, 2008, the adjustment for net sales of acquired
businesses reflects the net sales of Pro Line Printing,
Incorporated (acquired March 14, 2008).
�
For the twelve months ended
December 31, 2007, the adjustment for net sales of acquired
businesses reflects the net sales of Banta Corporation (acquired
January 9, 2007), Perry Judd's Holdings Incorporated (acquired
January 24, 2007), Von Hoffmann (acquired May 16, 2007), Cardinal
Brands, Inc. (acquired December 27, 2007) and Pro Line Printing,
Incorporated (acquired March 14, 2008).
R.R. Donnelley & Sons Company Liquidity Summary As of
December 31, 2008 $ IN MILLIONS (UNAUDITED) � � � �
Total Liquidity (1)
Cash (2) $ 324.0 Committed Credit Facility ("Facility") (3) 2,000.0
2,324.0
Usage
Commercial paper 289.8 Borrowings under Facility 200.0 Letters of
credit outstanding under Facility 35.7 525.5 � Net Available
Liquidity $ 1,798.5 � � (1) Liquidity does not include credit
facilities of non-U.S. subsidiaries, which are uncommitted
facilities. � (2) Over 80% of this cash is located outside the
U.S.; permanent repatriation to the U.S. would be taxable. � (3) $2
billion committed credit facility maturing on January 6, 2012.
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