EXHIBIT 99.2
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Media contact: Investor contact:
Vera Panchak Christopher Curtis
Director, Corporate Communication Director, Investor Relations
312-326-8418 312-326-8313
vera.panchak@rrd.com christopher.curtis@rrd.com
R.R. Donnelley Reports 3rd-Quarter 2001 Earnings; Revises 2001 Guidance
CHICAGO, Oct. 24, 2001 -- R.R. Donnelley & Sons Company reported
third-quarter earnings before restructuring charges and other one-time items of
46 cents per diluted share compared with 69 cents a year ago. Net income was
$54.3 million compared with $84.4 million a year ago.
2001 results exclude a pretax restructuring and impairment charge of $19.9
million ($12.2 million after-tax, or 10 cents per diluted share). The $19.9
million pretax restructuring and impairment charge includes $11.6 million of
noncash charges related to the impairment of goodwill and other noncurrent
assets of the company's commercial print operation in Mexico. 2000 results
exclude a $12.9 million pretax gain ($7.9 million after-tax, or 6 cents per
diluted share) from the sale of shares received in the demutualization of the
company's basic life insurance carrier.
After restructuring and impairment charges, net income for the quarter was $42.0
million, or 36 cents per diluted share. Revenues for the quarter were $1.3
billion, down 10.1 percent from the year-earlier period.
The company's performance in July and August offset the weakness of the last
three weeks of September, enabling the company to meet its internal
expectations. The effects of the economy are being felt across the company's
businesses, with the largest impacts in the commercial print operations that
produce magazine, catalog and advertising inserts, and R.R. Donnelley Financial,
which is being affected by the slowdown in capital markets activity.
Due to the overall effect of the deteriorating economy, the company adjusted its
expectations for 2001 earnings per share to range between $1.45 and $1.55 before
restructuring and impairment charges and other one-time items.
"We remain firmly committed to transforming our organization to deliver
world-class service and distinctive solutions to meet our customers'
increasingly challenging communications needs," stated William L. Davis,
chairman, president and chief executive officer for R.R. Donnelley. "Despite a
worsening economy, our transformation is on track."
R.R. Donnelley Logistics achieved double-digit revenue growth despite the
economic slowdown in the markets it serves. Sales were up 16 percent
year-over-year during the third quarter. In addition, higher prices, improved
management of transportation costs and lower postage costs from increased postal
penetration contributed to a profitable quarter for this segment.
The company continues to drive its transformation to an integrated
communications solutions provider. These efforts, which are well under way,
include building the print platform of the future, which involves the investment
of up to $300 million over the next two years to consolidate, upgrade and
modernize plants with fewer, yet wider and faster, presses.
"This streamlined, flexible and integrated platform will give us the
capabilities to stay ahead of our customers' increasingly challenging
communications needs," noted Davis. "The printed word is not going away. Our
customers will continue to be the leading users of content. And, Donnelley's
transformation is essential to their success."
Across all its businesses, the company also is realizing the financial benefits
of idling equipment and reducing work hours to adjust capacity to current
activity levels, and streamlining the delivery of general and administrative
services. Announced actions will reduce the total workforce by more than 7
percent.
R.R. Donnelley is also reprioritizing activities and scaling back capital
spending for 2001, which is now expected to be below $300 million, down from
previous guidance of $300 million to $350 million. Through September, the
company has spent $163 million.
During the quarter the company repurchased $46 million of its shares, or 1.6
million shares. Since February, R.R. Donnelley has repurchased 5.6 million
shares at a cost of $159 million. The company has slowed the pace of share
repurchase under its current authorization and will not complete the $300
million program this year, as previously expected.
R.R. Donnelley will hold its quarterly investor conference call to review its
third-quarter 2001 results at 10 a.m., central time, on Wednesday, October 24,
2001. For a link to the call, log on to www.rrdonnelley.com/invest/events/.
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 2001
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 1 of the
company's annual report on Form 10-K for the year ended December 31, 2000, for a
description of such factors.
CONDENSED CONSOLIDATED INCOME STATEMENT
($000's omitted, except per-share data)
3 mos ended September 30 % Change 9 mos ended September 30 % Change
------------------------ -------- ------------------------ --------
2001 2000 2001 2000
---- ---- ---- ----
Net Sales $ 1,288,237 $ 1,433,000 (10.1%) $ 3,882,937 $ 4,164,775 (6.8%)
Value Added Revenue 739,500 839,502 (11.9%) 2,215,709 2,419,187 (8.4%)
Value Costs of Sales 501,879 535,356 (6.3%) 1,556,233 1,607,885 (3.2%)
Gross Profit 237,621 304,146 (21.9%) 659,476 811,302 (18.7%)
Selling and Administrative expenses 135,438 147,221 (8.0%) 417,827 446,590 (6.4%)
Restructuring and impairments charge 19,860 -- N/A 93,935 -- N/A
Earnings from Operations 82,323 156,925 (47.5%) 147,714 364,712 (59.5%)
Other Income (expenses):
Interest expense (18,831) (22,810) (17.4%) (55,132) (69,912) (21.1%)
Other, net 4,870 15,980 (69.5%) 9,360 22,841 (59.0%)
Earnings before income taxes 68,362 150,095 (54.5%) 101,942 317,641 (67.9%)
Provision for income taxes 26,320 57,787 (54.5%) 39,248 122,292 (67.9%)
NET INCOME $ 42,042 $ 92,308 (54.5%) $ 62,694 $ 195,349 (67.9%)
3 mos ended September 30 9 mos ended September 30
------------------------ ------------------------
2001 2000 2001 2000
---- ---- ---- ----
Per-Share: Basic Diluted Basic Diluted Basic Diluted Basic Diluted
----- ------- ----- ------- ----- ------- ----- -------
Continuing operations $ 0.47 $ 0.46 $ 0.70 $ 0.69 $ 1.01 $ 1.01 $ 1.54 $ 1.53
JH demutualization gain 0.00 0.00 0.06 0.06 0.00 0.00 0.06 0.06
Restructuring and impairment charge (0.11) (0.10) 0.00 0.00 (0.48) (0.48) 0.00 0.00
----- ----- ----- ----- ----- ----- ----- -----
Consolidated $ 0.36 $ 0.36 $ 0.76 $ 0.75 $ 0.53 $ 0.53 $ 1.60 $ 1.59
3 mos ended September 30 9 mos ended September 30
------------------------ ------------------------
2001 2000 2001 2000
---- ---- ---- ----
Basic shares outstanding at September 30 115,125 122,015 115,125 122,015
Average basic shares outstanding 115,831 121,936 117,610 122,012
Effect of dilutive securities 1,935 1,504 1,767 1,167
Average diluted shares oustanding 117,766 123,440 119,377 123,179
Percent to Net Sales:
Gross profit 18.4% 21.2% 17.0% 19.5%
S&A expense 10.5% 10.3% 10.8% 10.7%
Earnings from operations /1/ 7.9% 11.0% 6.2% 8.8%
Net Income /1/,/2/ 4.2% 5.9% 3.1% 4.5%
Percent to VAR:
Gross profit 32.1% 36.2% 29.8% 33.5%
S&A expense 18.3% 17.5% 18.9% 18.5%
Earnings from operationa /1/ 13.8% 18.7% 10.9% 15.1%
Net income /1/,/2/ 7.3% 10.1% 5.4% 7.7%
3 mos ended September 30 9 mos ended September 30
------------------------ ------------------------
2001 2000 2001 2000
---- ---- ---- ----
EBITDA /1/,/2/ 198,108 256,856 533,425 661,465
Capital Spending 67,751 58,615 162,806 181,151
As of September 30
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2001 2000
---- ----
Return on avg invested capital /1/,/2/,/3/ 10.7% 14.3%
Operating working capital /4/ 6.0% 6.5%
(% of net sales)
Total Debt 1,097,897 1,145,050
KEY INFORMATION
($000's omitted)
Industry Segment Data:
Commercial Logistics Consolidated
Print Services Other/5/ Corporate Total
---------- ---------- ------------- ------------ -------------
Third Quarter 2001
- ------------------
Sales $1,095,884 $ 190,059 $ 2,294 $ -- $1,288,237
Restructuring and impairment charge 19,901 190 (231) -- 19,860
Earnings (loss) from operations 73,790 236 (3,716) 12,013 82,323
Earnings (loss) before income taxes 77,700 353 (3,919) (5,772) 68,362
Third Quarter 2000
- ------------------
Sales $1,265,415 $ 164,593 $ 2,992 $ -- $1,433,000
Restructuring and impairment charge -- -- -- -- --
Earnings (loss) from operations 164,001 (2,857) (10,721) 6,502 156,925
Earnings (loss) before income taxes 167,454 (2,882) (13,270) (1,207) 150,095
Nine Months Ended September 30, 2001
- ------------------------------------
Sales $3,312,891 $ 562,394 $ 7,652 $ -- $3,882,937
Restructuring and impairment charge 86,923 281 1,103 5,628 93,935
Earnings (loss) from operations 131,626 (7,566) (18,867) 42,521 147,714
Earnings (loss) before income taxes 143,703 (7,480) (19,506) (14,775) 101,942
Assets 2,739,063 245,255 26,376 643,209 3,653,903
Nine Months Ended September 30, 2000
- ------------------------------------
Sales $3,680,303 $ 471,368 $ 13,104 $ -- $4,164,775
Restructuring and impairment charge -- -- -- -- --
Earnings (loss) from operations 370,289 (3,931) (23,477) 21,831 364,712
Earnings (loss) before income taxes 378,792 (4,031) (27,037) (30,083) 317,641
Assets 3,074,701 239,466 33,138 653,898 4,001,203
/1/ Excludes 2001 restructuring and impairment charges.
/2/ Excludes 2000 gain related to the sale of shares received from the
demutualization of the company's basic life insurance carrier of $12.9
million ($7.9 million after-tax, or $0.06 per diluted share).
/3/ Computed on a 12-month rolling net income excluding restructuring and
impairment charges and other one-time items divided by a 13-point average
of debt and equity.
/4/ Computed on a 13-point average of net receivables, net inventories, and
prepaid expenses minus accounts payable and accrued liabilities (adjusted
for restructuring reserves) divided by 12-month rolling net sales.
/5/ Represents other operating segments of the company.