RRD.WI Donnelley (R.R.) & Sons Co.

RR Donnelley Announces Common Stock Repurchase Program, Earnings Guidance and Plan to Divest its Peak Business CHICAGO, Dec. 16 /PRNewswire-FirstCall/ -- R.R. Donnelley & Sons Company (NYSE:RRD) announced today that its board of directors authorized the repurchase, at any time prior to December 31, 2006, of up to $300 million of the company's common stock. The company also announced that it expects its non-GAAP earnings per diluted share from continuing operations to be $0.57 for the fourth quarter of 2004, $1.61 for the full year of 2004 and $1.95 for the full year of 2005 (assuming the completion of approximately $200 million of the $300 million share repurchase for the entire year of 2005). RR Donnelley plans to divest its Peak business and, accordingly, will report this business as a discontinued operation effective with the fourth quarter of 2004. Non-GAAP earnings per diluted share from continuing operations exclude certain items that management believes are unrelated to the ongoing operations of the business. In the fourth quarter of 2004, the full year of 2004 and the full year of 2005, these items may include results of discontinued operations, restructuring, impairment and integration charges as well as certain tax adjustments that are not currently determinable, but may be significant. For that reason, the company is unable to provide GAAP (Generally Accepted Accounting Principles) earnings estimates at this time. The company believes that non-GAAP earnings per diluted share is 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. This measure should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. "We are announcing several positive developments today," said Mark A. Angelson, RR Donnelley's Chief Executive Officer. "The repurchase program reflects our confidence in the future profitability of RR Donnelley and delivers on our promise to invest our shareholders' capital wisely and avoid shareholder dilution when practicable. We believe that our significant cash flow and strong balance sheet will be sufficient to fund this program, pay our dividend and very comfortably service our debt, while allowing us to invest in and grow our business. We expect to enter into an accelerated share repurchase arrangement in the approximate amount of $200 million later this month." Angelson added, "We continuously evaluate our businesses for strategic fit. We have concluded that, although Peak is a valuable business, it is not central to our strategy. We will therefore seek alternative methods of optimizing the value of this unit." Share Repurchase Program The company is authorized to repurchase up to $300 million of the company's common stock through a variety of methods, including open market purchases, block transactions, accelerated share repurchase arrangements, or private transactions. Such purchases may be made from time to time and may be discontinued at any time. The company expects to enter into an accelerated share repurchase arrangement in the approximate amount of $200 million later this month. Expected Non-GAAP Fully Diluted Earnings Per Share The company expects its non-GAAP earnings per diluted share from continuing operations to be $0.57 for the fourth quarter of 2004, $1.61 for the full year of 2004 and $1.95 for the full year of 2005 (assuming the completion of approximately $200 million of the $300 million share repurchase for the entire year of 2005). The company expects its approximate weighted average fully diluted share count to be 224 million for the fourth quarter of 2004, 204 million for the full year of 2004 and 220 million for the full year of 2005. Planned Divestiture The company plans to divest its Peak business. As such, the company will report the results of operations and financial position (including conforming previously reported 2004 results) of the Peak business as a discontinued operation beginning with the fourth quarter of 2004. Peak provides integration, maintenance and consulting services related to automatic identification and data collection systems and hardware. Results for the nine months ended September 30, 2004 include net sales of $135.2 million and an operating loss of $5.8 million (includes $0.9 million in restructuring and impairment charges) from the Peak business. About RR Donnelley RR Donnelley (NYSE:RRD) designs, manages and produces words and images, and brings them to life on paper and in digital form for customers in the publishing, healthcare, advertising, retail, technology, financial services, and many other industries. Founded 140 years ago, the company provides solutions in commercial printing, forms and labels, direct mail, financial printing, print fulfillment, business communication outsourcing, logistics, online services, digital photography, and content and database management. 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. As the largest printer in North America with strong positions across the globe, RR Donnelley is changing the role of print in every marketplace it serves. For more information, visit the Company's web site at http://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. Many of the factors that could cause material differences in the expected results of RR Donnelley relate to the integration of Moore Wallace Incorporated, which was acquired by RR Donnelley on February 27, 2004. These factors include, without limitation, the following: the development and execution of comprehensive plans for asset rationalization, the ability to eliminate duplicative overhead without excessive cost or adversely affecting the business, the potential loss of customers and employees as a result of the transaction, the ability to achieve procurement savings by leveraging total spending across the organization, the success of the organization in leveraging its comprehensive product offering to the combined customer base as well as the ability of the organization to complete the integration of the combined companies without losing focus on the business. In addition, the ability of the combined company to achieve the expected net sales, accretion, cash flow and synergy savings will also be affected by the effects of competition (in particular the response to the transaction in the marketplace), the effects of pricing of paper and other raw materials and fuel price fluctuations and shortages of supply, the rate of migration from paper- based forms to digital formats, the impact of currency fluctuations in the countries in which RR Donnelley operates, general economic and other factors beyond the combined company's control, 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. RR Donnelley disclaims any obligation to update or revise any forward-looking statements. DATASOURCE: R.R. Donnelley & Sons Company CONTACT: Dan Leib, Vice President, Investor Relations, of R.R. Donnelley & Sons Company, +1-312-326-7710, or e-mail, Web site: http://www.rrdonnelley.com/

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