Note 2. Acquisitions

2011 Acquisitions

On November 21, 2011, the Company acquired StratusGroup, Inc. ("Stratus"), a full service manufacturer of custom pressure sensitive label and paperboard packaging products for health and beauty, food, beverage and other segments. Stratus' decorative labeling and paperboard resources complement the Company's prime label, corrugated and other global packaging capabilities. The purchase price for Stratus was $29.0 million net of cash acquired of $0.1 million. Stratus' operations are included in the U.S. Print and Related Services segment.

On September 6, 2011, the Company acquired Genesis Packaging & Design Inc. ("Genesis"), a full service provider of custom packaging, including designing, printing, die cutting, finishing and assembling. The addition of Genesis complements the Company's existing packaging and merchandising business with a centrally located facility and enhanced ability to service customers in a range of industries. The purchase price for Genesis was $10.1 million. Genesis' operations are included in the U.S. Print and Related Services segment.

On August 16, 2011, the Company acquired LibreDigital, Inc. ("LibreDigital"), a leading provider of digital content distribution, e-reading software, content conversion, data analytics and business intelligence services. LibreDigital's capabilities will enable the Company to offer a broader selection of digital content creation and delivery services to publishing, retail, e-reader provider and other customers. The purchase price for LibreDigital was $19.9 million net of cash acquired of $0.1 million. LibreDigital's operations are included in the U.S. Print and Related Services segment.

On August 15, 2011, the Company acquired Sequence Personal LLC ("Sequence"), a provider of proprietary software that enables readers to select relevant content to be digitally produced as specialized publications. Sequence's software offers publishers and other customers a practical way to increase revenues by allowing advertisers to select unique ad selection criteria for targeted delivery. The purchase price for Sequence, which includes the Company's estimate of contingent consideration, was $14.7 million net of cash acquired of $0.1 million. A former equity holder of Sequence is entitled to receive the contingent consideration in the form of cash payments of up to $14.0 million, subject to Sequence achieving certain milestones related to volume or revenue in 2013 and 2014. The Company estimated the fair value of the contingent consideration as of the acquisition date to be $6.8 million, using a probability weighting of the potential payouts. Subsequent changes in the estimated contingent consideration will be recognized in the Consolidated Statement of Operations. Sequence's operations are included in the U.S. Print and Related Services segment.

On June 21, 2011, the Company acquired Helium, Inc. ("Helium"), an online community offering publishers, catalogers and other customers stock and custom content, as well as a comprehensive range of editorial solutions. The ability to bundle Helium's content development solutions with the Company's complete offering of content delivery resources addresses customers' needs across the full breadth of the supply chain. As the Company previously held a 23.7% equity investment in Helium, the purchase price for the remaining equity of Helium was $57.0 million net of cash acquired of $0.1 million and included an amount due from Helium of $1.1 million. The fair value of the Company's previously held equity investment was $12.8 million, resulting in the recognition of a $10.0 million gain, which is reflected in investment and other income (expense) in the Consolidated Statements of Operations for the year ended December 31, 2011. The fair value of the previously held equity investment was determined based on the purchase price paid for the remaining equity less an estimated control premium and was determined to be Level 3 under the fair value hierarchy. Helium's operations are included in the U.S. Print and Related Services segment.

On March 24, 2011, the Company acquired Journalism Online, LLC ("Journalism Online"), an online provider of tools that allow consumers to purchase online subscriptions from publishers. Journalism Online's Press+ offering provides subscription management and online content payment services that increase the breadth of services the Company offers to its existing base of publishing customers. The purchase price for Journalism Online was $19.6 million net of cash acquired of $0.4 million. Journalism Online's operations are included in the U.S. Print and Related Services segment.

The operations of these acquired businesses are complementary to the Company's existing products and services. As a result, the additions of these businesses are expected to improve the Company's ability to serve customers and reduce redundant management, support and manufacturing costs. For the year ended December 31, 2011, the Company recorded $2.2 million of acquisition-related expenses, associated with acquisitions completed or contemplated, within selling, general and administrative expenses in the Consolidated Statements of Operations.

The Stratus, Genesis, LibreDigital, Sequence, Helium and Journalism Online acquisitions were recorded by allocating the cost of the acquisitions to the assets acquired, including intangible assets, based on their estimated fair values at the acquisition date. The excess of the cost of the acquisitions and the fair value of the previously-held investments in Helium over the net amounts assigned to the fair value of the assets acquired was recorded as goodwill. $47.4 million of goodwill related to these acquisitions is expected to be tax deductible. Based on the valuations, the final purchase price allocation for these acquisitions were as follows:


Accounts receivable	$	6.0
Inventories		2.3
Prepaid expenses and other current assets		0.4
Property, plant and equipment and other long-term assets		16.8
Amortizable intangible assets		16.2
Goodwill		118.3
Accounts payable and accrued liabilities		(8.2	)
Other noncurrent liabilities		(2.9	)
Deferred taxes-net		14.2

Total purchase price-net of cash acquired		163.1
Less: fair value of Company's previously-held investments in Helium		13.9
Less: fair value of contingent consideration		6.8

Net cash paid	$	142.4

The fair values of property, plant and equipment, amortizable intangible assets, contingent consideration and goodwill associated with the acquisitions of Stratus, Genesis, LibreDigital, Sequence, Helium and Journalism Online were determined to be Level 3 under the fair value hierarchy. Property, plant and equipment values were estimated based on discussions with machinery and equipment brokers, dealer quotes and internal expertise related to the equipment and current marketplace conditions. Customer relationships intangible asset values were estimated based on expected future cash flows discounted using an estimated weighted-average cost of capital. Estimates of future customer attrition rates were considered in estimating the expected future cash flows from customer relationships. Tradename intangible asset values were estimated based on the relief of royalty method.

2010 Acquisitions

On December 31, 2010, the Company acquired 8touches, an online provider of tools that allow real estate associates, brokers, Multiple Listing Service (MLS) associations and other marketers to create customized communications materials. The purchase price for 8touches was $1.1 million. 8touches' operations are included in the U.S. Print and Related Services segment.

On December 14, 2010, the Company acquired Nimblefish Technologies ("Nimblefish"), a provider of multi-channel marketing services to leading retail, technology, telecom, hospitality and other customers. The purchase price for Nimblefish was $3.9 million, including debt assumed of $2.0 million. The Company subsequently repaid $1.9 million of the debt assumed in December 2010. Nimblefish's operations are included in the U.S. Print and Related Services segment.

On November 24, 2010, the Company acquired Bowne & Co., Inc. ("Bowne"), a provider of shareholder and marketing communication services with operations in North America, Latin America, Europe and Asia. The purchase price for Bowne was $465.2 million, including debt assumed of $26.2 million and net of cash acquired of $41.4 million. Immediately following the acquisition, the Company repaid $25.4 million of the debt assumed. Bowne's operations are included in both the U.S. Print and Related Services and International segments.

The operations of these acquired businesses are complementary to the Company's existing products and services. As a result, the additions of these businesses are expected to improve the Company's ability to serve customers and reduce redundant management, real estate and manufacturing costs. For the year ended December 31, 2010, the Company's Consolidated Financial Statements included $61.2 million of net sales and a net loss of $9.3 million related to these acquired businesses. For the year ended December 31, 2010, the Company recorded $13.5 million of acquisition-related expenses, associated with acquisitions completed or contemplated, within selling, general and administrative expenses in the Consolidated Statements of Operations.

The Bowne, Nimblefish and 8touches acquisitions were recorded by allocating the cost of the acquisitions to the assets acquired, including intangible assets, based on their estimated fair values at the acquisition date. The excess of the cost of the acquisitions over the net amounts assigned to the fair value of the assets acquired was recorded as goodwill, most of which is not tax deductible. Based on the valuations, the final purchase price allocations for these acquisitions were as follows:


Accounts receivable	$	129.0
Inventories		32.1
Prepaid expenses and other current assets		18.1
Property, plant and equipment and other long-term assets		127.3
Amortizable intangible assets		159.8
Goodwill		257.9
Accounts payable and accrued liabilities		(159.7	)
Pension benefits and other long-term liabilities		(76.7	)
Deferred taxes—net		(17.6	)

Total purchase price—net of cash acquired		470.2
Less: debt assumed		28.2

Net cash paid	$	442.0

The fair values of property, plant and equipment, amortizable intangible assets and goodwill associated with the acquisitions of Bowne, Nimblefish and 8touches were determined to be Level 3 under the fair value hierarchy. Property, plant and equipment values were estimated using the cost approach or market approach, if a secondhand market existed. Customer relationships intangible asset values were estimated based on expected future cash flows discounted using an estimated weighted-average cost of capital. Estimates of future customer attrition rates were considered in estimating the expected future cash flows from customer relationships. The tradename intangible asset value was estimated based on the relief of royalty method.

2009 Acquisitions

On June 18, 2009, the Company acquired Prospectus Central, LLC ("Prospectus"), an e-delivery company, for a purchase price of $3.0 million. Prospectus's operations are included in the U.S. Print and Related Services segment.

On January 2, 2009, the Company acquired PROSA, a web printing company located in Santiago, Chile. The purchase price for PROSA was approximately $23.6 million. PROSA's operations are included in the International segment.

The operations of these acquired businesses are complementary to the Company's existing products and services. As a result, the addition of these businesses has improved the Company's ability to serve customers, increased capacity utilization, and reduced management, procurement and manufacturing costs. For the year ended December 31, 2009, the Company's Consolidated Financial Statements included $18.7 million of net sales and net earnings of $3.5 million related to these acquired businesses. For the year ended December 31, 2009, the Company recorded $1.6 million of acquisition-related expenses, associated with acquisitions completed or contemplated, within selling, general and administrative expenses in the Consolidated Statements of Operations.

The PROSA and Prospectus acquisitions were recorded by allocating the cost of the acquisitions to the assets acquired, including intangible assets, based on their estimated fair values at the acquisition date. The excess of the cost of the acquisitions over the net amounts assigned to the fair value of the assets acquired was recorded as goodwill, none of which is tax deductible. Based on the valuations, the final purchase price allocations for these acquisitions were as follows:


Accounts receivable	$	2.4
Property, plant and equipment		9.2
Amortizable intangible assets		11.6
Goodwill		6.5
Accounts payable and accrued liabilities		(2.5	)
Deferred taxes—net		(0.6	)

Net cash paid	$	26.6

The fair values of property, plant and equipment, amortizable intangible assets and goodwill associated with the acquisitions of PROSA and Prospectus were determined to be Level 3 under the fair value hierarchy. Property, plant and equipment values were estimated based on discussions with machinery and equipment brokers, dealer quotes, and internal expertise related to equipment and current marketplace conditions. Intangible asset values, including customer relationships and a non-compete agreement, were estimated based on expected future cash flows discounted using an estimated weighted-average cost of capital. Estimates of future customer attrition rates were considered in estimating the expected future cash flows from customer relationships.

Pro forma results

The following unaudited pro forma financial information for the years ended December 31, 2011 and 2010 presents the combined results of operations of the Company and the 2010 and 2011 acquisitions described above, as if the acquisitions had occurred at January 1, 2010.

The unaudited pro forma financial information is not intended to represent or be indicative of the Company's consolidated results of operations or financial condition that would have been reported had these acquisitions been completed as of the beginning of the periods presented and should not be taken as indicative of the Company's future consolidated results of operations or financial condition. Pro forma adjustments are tax-effected at the applicable statutory tax rates.


	2011			2010
Net sales	$	10,646.5		$	10,711.5
Net earnings (loss) attributable to RR Donnelley common shareholders		(76.3	)		137.1
Net earnings (loss) per share attributable to RR Donnelley common shareholders:
Basic	$	(0.39	)	$	0.66

Diluted	$	(0.39	)	$	0.65

The unaudited pro forma financial information for the years ended December 31, 2011 and 2010 included $113.2 million and $116.3 million, respectively, for the amortization of purchased intangibles. The unaudited pro forma financial information includes restructuring and impairment charges from operations of $579.5 million and $275.2 million for the years ended December 31, 2011 and 2010, respectively. Additionally, the pro forma adjustments affecting net earnings (loss) attributable to RR Donnelley common shareholders for the years ended December 31, 2011 and 2010 were as follows:


	2011			2010
Depreciation and amortization of purchased assets, pre-tax	$	(0.5	)	$	(6.0	)
Acquisition-related expenses, pre-tax		1.5			40.5
Restructuring and impairment charges, pre-tax		88.3			(108.6	)
Inventory fair value adjustments, pre-tax		3.6			(3.8	)
Other pro forma adjustments, pre-tax		(7.1	)		4.0
Income taxes		(34.5	)		50.1