In a SEC 8-K filing on Friday, RR Donnelley stated it has agreed to end its contractual relationship with a significant customer:
On September 24, 2009, R. R. Donnelley & Sons Company (the "Company") entered into a termination agreement (the "Termination Agreement") with a significant customer pursuant to which the parties agreed to end their contractual relationship allowing the Company to exit from certain unprofitable operations.Pursuant to the Termination Agreement, the Company will incur certain costs associated with exit or disposal activities. The estimated pre-tax charges associated with the Termination Agreement total approximately $123 million to $130 million. These charges include cash charges relating to a termination payment of approximately $122 million to the customer and severance costs and other charges of approximately $1.0 million to $8.0 million. The termination payment will be paid to the customer as follows: (1) $22 million will be paid in the third quarter of 2009; (2) approximately $42 million to $45 million will be paid into escrow for the benefit of the customer in the fourth quarter of 2009 and paid to the customer in the first quarter of 2011; and (3) the remaining payment will be made in the first quarter of 2010. Interest on the amount paid into escrow shall accrue to the Company.
RR Donnelley has not disclosed the name of the customer or provided any additional details.
R.R. Donnelley has struggled as demand for magazines, catalogs and books has weakened. Its second-quarter profit dropped 83%.
Discussion
By Dennis Beck on Sep 29, 2009
Well, so much for transparency. RR is a public company. Its' shareholders have an absolute right to know how THEIR MONEY IS BEING SPENT and to whom it is being paid.
By Richard Wright on Sep 30, 2009
Sometimes companies need to fire the customer when the arrangements become unreasonable. The company has an obligation to their shareholders to maximize return on investment. Assuming RRD has done their home work, they may be calling the customer's bluff for reduced costs.
By Bob Norman on Sep 30, 2009
Seriousely? An SEC filing and termination agreement to call a customers bluff???
Maybe RRD needs to shutter a facility and it is cheaper to buy their way out of the only customer they can't move.
By Dave on Sep 30, 2009
Donnelley's been trying to do to much lately that they aren't really equipped for in an attempt to be a "printer that does it all". I know of a few companies that have awarded RFP's to Donnelley and have come to regret it when poor turn arounds start occurring.
My clients respect me when I tell them a job isn't suited for my shop and I refer them to a better source. It just works best for me and everyone.
By Don on Sep 30, 2009
Dave's last statement is correct. If the project isn't a good fit for you and you're up front with the client, it goes a long way.
When commercial web printers try to take on the smaller and higher quality jobs that fit sheet fed operations will come back to bite them. I have seen it many times over the years in many business that when you try to be something to everyone, the odds of sucess are usually diminished.
By James Weaver on Oct 01, 2009
In order to deliver value (and retain a margin), the print provider/BPO really needs to become more than just a printer. Customers seem intent on commoditising the physical print/fulfilment processes, and treating it as a cost which must be reduced. They often appear unable to recognise the value that can be added to their business through the effective management of its communications channels, with a strategic partner. Magazine/catalogue demand falls - high value, highly personalised multi media/channel communication is on the up. Is this just a sign of the times?
By Michael on Oct 02, 2009
I wonder if the customer was Harrah's Gaming out of Las Vegas?
Discussion
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