RR Donnelley Posts Earnings Increase, Net Sales Decline

CHICAGO—August 1, 2012—R.R. Donnelley & Sons reported second-quarter 2012 net earnings attributable to common shareholders of $88.8 million on net sales of $2.5 billion (down 3.6 percent), compared to net earnings of $12.2 million on net sales of $2.6 billion in the second quarter of 2011.

Operating earnings in the quarter totaled $163.9 million, and were impacted by restructuring and impairment charges and acquisition-related expenses totaling $34.5 million in the second quarter of 2012, compared to operating earnings in the second quarter of 2011 of $116.1 million, which included restructuring and impairment charges and acquisition-related expenses totaling $76.6 million.

Non-GAAP net earnings attributable to common shareholders totaled $88.5 million in the second quarter of 2012, vs. $105.6 million in the second quarter of 2011.

Excluding restructuring and impairment charges and acquisition-related expenses, non-GAAP operating income increased from $192.7 million to $198.4 million in the second quarter of 2012 and non-GAAP operating margin improved to 7.8 percent in the second quarter of 2012 from 7.3 percent in the second quarter of 2011. Lower pension expense, productivity improvements and lower depreciation and amortization more than offset an unfavorable product mix, lower volume, continued pricing pressure and unfavorable pricing on by-products.

The company reports its results in two reportable segments: 1) U.S. Print and Related Services and 2) International.

Segments

Net sales for the U.S. Print and Related Services segment decreased 3.9 percent from the second quarter of 2011 to $1.8 billion in the second quarter of 2012. Pro forma for acquisitions, net sales in the segment decreased 4.5 percent, as volume declines across most product offerings, lower pass-through paper sales of $21.6 million or 112 basis points, and continued pricing pressure across the segment more than offset volume increases in office products and logistics.

The segment’s operating income of $165.7 million in the second quarter of 2012, which was negatively impacted by charges for restructuring and impairment of $26.1 million, increased $32.9 million from operating income of $132.8 million in the second quarter of 2011, which included charges for restructuring and impairment of $65.1 million.

The segment’s non-GAAP operating margin of 10.4 percent in the second quarter of 2012 improved 10 basis points from the second quarter of 2011, as productivity improvements and lower depreciation and amortization offset volume declines, an unfavorable product mix, unfavorable pricing on by-products and pricing pressure.

Net sales for the International segment of $682.6 million decreased $19.9 million, or 2.8 percent, from the second quarter of 2011, inclusive of a $43.3 million (616 basis points) unfavorable impact from changes in foreign exchange rates. The balance of the change in net sales was driven by volume growth in business process outsourcing, global turnkey and Asia and higher pass-through paper sales in Asia ($7.5 million or 107 basis points), which were only partially offset by volume declines in Europe, Canada and Latin America and the impact of continued pricing pressure across certain offerings within the segment.

The segment’s operating income of $42.0 million in the second quarter of 2012, which was negatively impacted by charges for restructuring of $3.5 million, decreased by $1.6 million from operating income of $43.6 million in the second quarter of 2011, which included charges for restructuring and impairment of $9.8 million.

The segment’s non-GAAP operating margin declined to 6.7 percent in the second quarter of 2012 from 7.6 percent in the second quarter of 2011 as an unfavorable product mix, pricing pressure and wage and other inflationary increases in certain countries were only partially offset by lower depreciation and amortization, productivity improvements and a favorable impact from changes in foreign exchange rates.

Outlook - 2012 Full-Year Guidance

For the full year of 2012, the RRD expects revenue of approximately $10.4 - $10.5 billion, which includes an unfavorable impact of changes in foreign exchange rates and pass-through paper sales of approximately $160 million.

About RR Donnelley
RR Donnelley (Nasdaq:RRD) is a global provider of integrated communications. The Company works collaboratively with more than 60,000 customers worldwide to develop custom communications solutions that reduce costs, drive top-line growth, enhance ROI and ensure compliance. Drawing on a range of proprietary and commercially available digital and conventional technologies deployed across four continents, the Company employs a suite of leading Internet-based capabilities and other resources to provide premedia, printing, logistics and business process outsourcing services to clients in virtually every private and public sector.

Source: RRD.