EX-99.1 4 dex991.htm PRESS RELEASE OF R.R. DONNELLEY & SONS COMPANY Prepared by R.R. Donnelley Financial -- Press Release of R.R. Donnelley & Sons Company
Exhibit 99.1
 
R.R. Donnelley
 
Media contact:
  
Investor contact:
Vera C. Panchak
  
Christopher Curtis
Director, Corporate Communication
  
Director, Investor Relations
312-326-8418
  
312-326-8313
vera.panchak@rrd.com
  
christopher.curtis@rrd.com
For Immediate Release
    
 
R.R. Donnelley Reports 1st Quarter 2002 Results; Affirms 2002 Guidance
 
CHICAGO, May 1, 2002— R.R. Donnelley & Sons Company (NYSE: DNY) today announced first quarter 2002 revenues of $1.1 billion, down 16 percent from the year ago period. Diluted earnings per share, excluding one-time items, were 8 cents, a decrease of 65 percent from 23 cents a year ago. Net income, excluding one-time items, was $9 million, down 66 percent from $28 million a year ago.
 
The company’s reported results were affected by several one-time items. Including one-time items, the company reported earnings per diluted share of 20 cents compared with 12 cents for the year-earlier period. Including one-time items, net income was $23 million, compared with $15 million in 2001.
 
First quarter 2002 one-time items included restructuring and impairment charges of $27 million ($17 million after-tax, or 14 cents per diluted share), and a $30 million reversal of excess tax reserves ($30 million benefit after-tax, or 26 cents per diluted share), related to the company’s settlement with the IRS on deductibility of interest payments for corporate-owned life insurance.
 
Results were impacted by lower activity levels across most of the company’s markets, most significantly in magazines, catalogs and retail. The company announced several cost reduction efforts during 2001 that are offsetting much of the market weakness. Those efforts will reduce the company’s annualized cost structure by $160 million by the end of the fourth quarter of 2002 versus levels at the end of 2000.
 
“Even though our markets are still in recession, we are continuing to strengthen our competitive position,” stated William L. Davis, chairman, president and chief executive officer of R.R. Donnelley. “This bodes well for R.R. Donnelley when activity levels improve.”
 
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R. R. Donnelley (Reports 1st-Quarter 2002 Earnings)
May 1, 2002
Page 2 of 5
 
The company also affirmed its previously issued guidance for 2002. Anticipating continued weak conditions across its key markets, the company expects earnings per share to range between $1.50 and $1.65, excluding restructuring and impairment charges and other one-time items. Capital spending is expected to range between $250 million and $300 million, also unchanged from previous guidance.
 
The company changed its segment reporting in the first quarter to reflect the creation of Donnelley Print Solutions and better align with how the company manages its businesses. Quarterly results for 2001 have been restated to conform to the new presentation and are included in this release.
 
On a pro forma basis, first quarter 2001 diluted earnings per share would have been 3 cents higher than as reported, or 15 cents, had the company applied the new changes in goodwill accounting for 2002 in the prior year.
 
R.R. Donnelley will hold its quarterly investor conference call at 10 a.m., central time, on Wednesday, May 1, 2002. For a link to the call, log on to invest.rrdonnelley.com. Check in approximately 10 minutes in advance of the start time to set up to receive the webcast. The call also will be archived on the site for seven days.
 
R.R. Donnelley (www.rrdonnelley.com) is revolutionizing communications effectiveness by providing comprehensive and integrated communications services. These include premedia, digital photography, content management, printing, Internet consulting and logistics. The company’s full range of solutions help publishers and merchandisers, as well as telecommunications, financial and healthcare companies, deliver effective and targeted communications in the right format to the right audience at the right time. The company serves customers in North America, South America, Europe and the Asia/Pacific Basin.
 
Certain statements, including discussions of the company’s expectations for 2002 and beyond, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from the future results expressed or implied by these statements. Refer to Part I, Item I of the company’s annual report on Form 10-K for the year ended December 31, 2001, for a description of such factors.
 
###

2

R. R. Donnelley Reports 1st-quarter 2002 Earnings
Page 3 of 5
 
CONDENSED CONSOLIDATED INCOME STATEMENT
($000's omitted, except per-share data)
 
    
3 mos ended March 31
     
% Change
  
    
2002
     
2001
         
Net sales
   
$
1,093,650
 
   
$
1,302,650
 
   
(16.0
%)
Value added revenue
   
 
631,545
 
   
 
728,282
 
   
(13.3
%)
Value added cost of sales
   
 
463,640
 
   
 
528,909
 
   
(12.3
%)
    
  
  
Gross profit
   
 
167,905
 
   
 
199,373
 
   
(15.8
%)
Selling and administrative expenses
   
 
130,522
 
   
 
137,781
 
   
(5.3
%)
Restructuring and impairment charges5
   
 
26,692
 
   
 
19,702
 
   
35.5
%
    
  
  
Earnings from operations
   
 
10,691
 
   
 
41,890
 
   
(74.5
%)
Other income (expense):
                         
Interest expense
   
 
(15,453
)
   
 
(17,624
)
   
(12.3
%)
Other, net
   
 
(6,891
)
   
 
(681
)
   
N/M
 
    
  
  
Earnings (loss) before income taxes
   
 
(11,653
)
   
 
23,585
 
   
N/M
 
Provision (benefit) for income taxes
   
 
(34,312
)
   
 
9,080
 
   
N/M
 
    
  
  
Net income
   
$
22,659.00
 
   
$
14,505.00
 
   
56.2
%
    
  
  
Diluted Earnings Per Share
                         
Continuing operations
   
$
0.08
 
   
$
0.23
 
   
(65.2
%)
Restructuring and impairment charges
   
 
(0.14
)
   
 
(0.10
)
   
40.0
%
Other investment writedowns
   
 
—  
 
   
 
(0.01
)
   
N/M
 
Reversal of excess COLI tax reserves
   
 
0.26
 
   
 
—  
 
   
N/M
 
    
  
  
Consolidated
   
$
0.20
 
   
$
0.12
 
   
66.7
%
    
  
  
    
3 mos ended March 31
         
    
2002
     
2001
         
Share Data
                         
Basic shares outstanding at March 31
   
 
112,866
 
   
 
118,169
 
       
Average basic shares outstanding
   
 
112,894
 
   
 
119,600
 
       
Effect of dilutive securities
   
 
1,930
 
   
 
1,718
 
       
Average diluted shares outstanding
   
 
114,824
 
   
 
121,318
 
       
Percent to Net Sales
                         
Gross profit
   
 
15.4
%
   
 
15.3
%
       
S&A expense
   
 
11.9
%
   
 
10.6
%
       
Earnings from operations1
   
 
3.4
%
   
 
4.7
%
       
Net Income1,2
   
 
0.9
%
   
 
2.1
%
       
Percent to VAR
                         
Gross profit
   
 
26.6
%
   
 
27.4
%
       
S&A expense
   
 
20.7
%
   
 
18.9
%
       
Earnings from operations1
   
 
5.9
%
   
 
8.5
%
       
Net Income1.2
   
 
1.5
%
   
 
3.8
%
       
Other Data
                         
EBITDA1,2
   
$
112,359
 
   
$
160,863
 
       
Capital spending
   
 
65,818
 
   
 
32,546
 
       
Goodwill and Other Intangible Assets—Adoption of
                         
Statement of Financial Accounting Standards No. 142
                         
Reported net income
   
$
22,659
 
   
$
14,505
 
       
Add back: Goodwill amortization, net of tax
   
 
—  
 
   
 
3,509
 
       
    
  
      
Adjusted pro forma net income
   
 
22,659
 
   
 
18,014
 
       
Basic and diluted earnings per share
                         
Reported net income
   
$
0.20
 
   
$
0.12
 
       
Goodwill amortization
   
 
—  
 
   
 
0.03
 
       
    
  
      
Adjusted pro forma net income
   
$
0.20
 
   
$
0.15
 
       
    
As of March 31
         
    
2002
     
2001
         
Return on avg invested capital1,2,3
   
 
9.4
%
   
 
12.5
%
       
Operating working capital4 (% of net sales)
   
 
4.9
%
   
 
6.2
%
       
Total debt
   
$
1,082,564
 
   
$
1,199,051
 
       
 
Impact of Restructuring, Impairment & One-time Items
   
3 mos ended March 31
  
    
2002
     
2001
  
    
Earnings before Income Taxes
     
Net Income
     
Earnings before Income Taxes
     
Net Income
  
Continuing operations
   
$
15,039
 
   
$
9,475
 
   
$
45,327
 
   
$
27,876
 
Restructuring and impairment charge5
   
 
(26,692
)
   
 
(16,816
)
   
 
(19,702
)
   
 
(12,117
)
One-time items*:
                                    
Reversal of excess COLI tax reserves
   
 
—  
 
   
 
30,000
 
   
 
—  
 
   
 
—  
 
Other investment writedowns
            
 
—  
 
   
 
(2,040
)
   
 
(1,254
)
    
  
  
  
Restruct., impairment & one-time items
   
 
(26,692
)
   
 
13,184
 
   
 
(21,742
)
   
 
(13,371
)
    
  
  
  
Consolidated results
   
$
(11,653
)
   
$
22,659
 
   
$
23,585
 
   
$
14,505
 
    
  
  
  
 
*
 
Included in other income (expense) and tax provision (benefit) in the condensed consolidated income statement.
 
1
 
Excludes the impact of restructuring and impairment charges as quantified in the table above.
 
2
 
Excludes the impact of one-time items as quantified in the table above.
 
3
 
Computed on 12-month rolling net income excluding restructuring and impairment charges and other one-time items divided by a 13-month average of debt and equity.
 
4
 
Computed on a 13-month average of net receivables, net inventories, and prepaid expenses minus accounts payable and accrued liabilities (excluding restructuring reserves) divided by 12-month rolling net sales.
 
5
 
2001 investment write-downs of $2.0 million represent non-operating charges to reduce the carrying values of internet-related investments.

3

R.R. Donnelley Reports 1st-quarter 2002 Earnings
Page 4 of 5
 
KEY INFORMATION
($000's omitted)
 
Industry Segment Data
                                 
    
Donnelley Print Solutions
   
Logistics Services
     
Other6
     
Corporate8,9
     
Consolidated Total
  
First Quarter 2002
                                           
Sales
   
$
714,334
   
$
172,079
 
   
$
207,237
 
   
$
—
 
   
$
1,093,650
 
Restructuring and impairment charges
   
 
23,122
   
 
24
 
   
 
2,408
 
   
 
1,138
 
   
 
26,692
 
Earnings (loss) from operations
   
 
23,978
   
 
3,043
 
   
 
(26,756
)
   
 
10,426
10
   
 
10,691
 
Earnings (loss) before income taxes
   
 
27,109
   
 
2,981
 
   
 
(31,471
)
   
 
(10,272
)
   
 
(11,653
)
First Quarter 2001 (as restated)
                                           
Sales
   
$
877,974
   
$
186,218
 
   
$
238,458
 
   
$
—
 
   
$
1,302,650
 
Restructuring and impairment charges
   
 
18,488
   
 
—  
 
   
 
1,081
 
   
 
133
 
   
 
19,702
 
Earnings (loss) from operations
   
 
63,600
   
 
(4,593
)
   
 
(35,179
)
   
 
18,062
 
   
 
41,890
 
Earnings (loss) before income taxes
   
 
66,289
   
 
(4,610
)
   
 
(35,170
)7
   
 
(2,924
)
   
 
23,585
 
Second Quarter 2001 (as restated)
                                           
Sales
   
$
806,000
   
$
186,118
 
   
$
299,932
 
   
$
—
 
   
$
1,292,050
 
Restructuring and impairment charges
   
 
46,711
   
 
91
 
   
 
5,428
 
   
 
103
 
   
 
52,333
 
Earnings (loss) from operations
   
 
16,392
   
 
(3,209
)
   
 
(2,128
)
   
 
14,487
 
   
 
25,542
 
Earnings (loss) before income taxes
   
 
19,974
   
 
(3,221
)
   
 
(679
)
   
 
(6,079
)
   
 
9,995
 
Third Quarter 2001 (as restated)
                                           
Sales
   
$
856,586
   
$
190,059
 
   
$
241,592
 
   
$
—
 
   
$
1,288,237
 
Restructuring and impairment charges
   
 
7,927
   
 
190
 
   
 
11,756
 
   
 
(13
)
   
 
19,860
 
Earnings (loss) from operations
   
 
96,966
   
 
236
 
   
 
(26,892
)
   
 
12,013
 
   
 
82,323
 
Earnings (loss) before income taxes
   
 
100,259
   
 
353
 
   
 
(26,458
)
   
 
(5,772
)
   
 
68,382
 
Fourth Quarter 2001 (as restated)
                                           
Sales
   
$
963,229
   
$
213,124
 
   
$
238,470
 
   
$
—
 
   
$
1,414,823
 
Restructuring and impairment charges
   
 
27,556
   
 
391
 
   
 
75,570
 
   
 
133
 
   
 
103,650
 
Earnings (loss) from operations
   
 
91,208
   
 
3,031
 
   
 
(103,534
)
   
 
6,811
 
   
 
(2,484
)
Earnings (loss) before income taxes
   
 
97,115
   
 
3,213
 
   
 
(119,084
)
   
 
(8,312
)
   
 
(27,068
)
Consolidated Summary of Expense Trends—First Quarter
                           
    
2002
   
% of Sales
     
2001
     
% of Sales
     
% Change
  
Cost of materials (excluding cost of transp.)
   
$
333,905
   
 
30.5%
 
   
$
425,105
 
   
 
32.6%
 
   
 
(21.5%
)
Cost of transportation
   
 
128,200
   
 
11.7%
 
   
 
149,263
 
   
 
11.5%
 
   
 
(14.1%
)
Cost of manufacturing11
   
 
393,984
   
 
36.0%
 
   
 
446,037
 
   
 
34.2%
 
   
 
(11.7%
)
Depreciation
   
 
72,120
   
 
6.6%
 
   
 
81,702
 
   
 
6.3%
 
   
 
(11.7%
)
Amortization
   
 
9,747
   
 
0.9%
 
   
 
16,210
 
   
 
1.2%
 
   
 
(39.9%
)
Selling and administrative expense11
   
 
127,877
   
 
11.7%
 
   
 
134,574
 
   
 
10.3%
 
   
 
(5.0%
)
Restructuring and impairment charges
   
 
26,692
   
 
2.4%
 
   
 
19,702
 
   
 
1.5%
 
   
 
35.5%
 
Net interest expense
   
 
15,453
   
 
1.4%
 
   
 
17,624
 
   
 
1.4%
 
   
 
(12.3%
)
 
6
 
Represents other operating segments of the company including Financial Services, RRD Direct, International and Other.
7
 
Includes $2 million of net non-operating losses related to investment write-downs.
8
 
Corporate earnings (loss) from operations consist principally of the following unallocated items: net earnings of benefit plans (excluding service costs); last-in first-out (LIFO) inventory provisions; and general corporate, management and information technology costs.
9
 
Corporate earnings (loss) before income taxes consist principally of earnings (loss) from operations, adjusted for interest expense not assessed to the operating segments, and other income (expense).
10
 
First quarter 2002 Corporate earnings from operations of $10.4 million includes higher bad debt expense ($1 million), lower benefit plan earnings ($3 million) and higher depreciation expense ($3 million) compared with the prior year.
11
 
Excludes depreciation and amortization, which are shown separately.

4

R. R. Donnelley Reports 1st-quarter 2002 Earnings
Page 5 of 5
 
KEY INFORMATION
($000's omitted)
 
Net Sales Detail—First Quarter
   
2002
   
% of Total
   
2001
   
% of Total
   
% Change
Magazines, Catalogs and Retail
   
$
386,667
   
35.4%
   
$
501,624
   
38.5%
   
(22.9%)
Book Publishing Services
   
 
154,670
   
14.1%
   
 
163,653
   
12.6%
   
(5.5%)
Telecommunications
   
 
143,261
   
13.1%
   
 
176,417
   
13.5%
   
(18.8%)
Premedia
   
 
29,736
   
2.7%
   
 
36,280
   
2.8%
   
(18.0%)
    
  
  
  
  
Donnelley Print Solutions
   
 
714,334
   
65.3%
   
 
877,974
   
67.4%
   
(18.6%)
Logistics Services
   
 
172,079
   
15.7%
   
 
186,218
   
14.3%
   
(7.6%)
Financial Services
   
 
102,875
   
9.4%
   
 
100,839
   
7.7%
   
2.0% 
RRD Direct
   
 
33,978
   
3.1%
   
 
46,134
   
3.5%
   
(26.3%)
International12
   
 
70,384
   
6.4%
   
 
90,440
   
6.9%
   
(22.2%)
Other13
   
 
—  
   
0.0%
   
 
1,045
   
0.1%
   
(100.0%)
    
  
  
  
  
Other
   
 
207,237
   
18.9%
   
 
238,458
   
18.3%
   
(13.1%)
Total Net Sales
   
$
1,093,650
   
100.0%
   
$
1,302,650
   
100.0%
   
(16.0%)
    
  
  
  
  
                              
VAR Detail—First Quarter
   
2002
   
% of Total
   
2001
   
% of Total
   
% Change
Magazines, Catalogs and Retail
   
$
241,128
   
38.2%
   
$
308,731
   
42.4%
   
(21.9%)
Book Publishing Services
   
 
111,534
   
17.7%
   
 
116,866
   
16.0%
   
(4.6%)
Telecommunications
   
 
64,107
   
10.2%
   
 
75,770
   
10.4%
   
(15.4%)
Premedia
   
 
29,736
   
4.7%
   
 
36,280
   
5.0%
   
(18.0%)
    
  
  
  
  
Donnelley Print Solutions
   
 
446,505
   
70.7%
   
 
537,647
   
73.8%
   
(17.0%)
Logistics Services
   
 
43,984
   
7.0%
   
 
36,954
   
5.1%
   
19.0% 
Financial Services
   
 
86,885
   
13.8%
   
 
84,154
   
11.6%
   
3.2% 
RRD Direct
   
 
18,824
   
3.0%
   
 
25,481
   
3.5%
   
(26.1%)
International12
   
 
34,918
   
5.5%
   
 
42,279
   
5.8%
   
(17.4%)
Other13
   
 
429
   
0.1%
   
 
1,767
   
0.2%
   
(75.7%)
    
  
  
  
  
Other
   
 
141,056
   
22.3%
   
 
153,681
   
21.1%
   
(8.2%)
Total VAR
   
$
631,545
   
100.0%
   
$
728,282
   
100.0%
   
(13.3%)
    
  
  
  
  
12   Includes Latin America, Poland and Asia
                             
13   Includes Red Rover and Other
                             

5