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RR Donnelley Reports $2.5 Billion Net Sales for Q1 2012Thursday, May 03, 2012 Press release from the issuing company R.R. Donnelley & Sons Company today reported first-quarter net earnings attributable to common shareholders of $37.4 million, or $0.21 per diluted share, on net sales of$2.5 billion compared to net earnings of $33.9 million, or $0.16 per diluted share, on net sales of $2.6 billion in the first quarter of 2011. First-quarter 2012 net earnings attributable to common shareholders included pre-tax charges for restructuring ($40.7 million) and impairment ($9.3 million, non-cash), a loss on debt extinguishment ($12.1 million), acquisition-related expenses ($0.3 million) and a $19.8 million pre-tax favorable adjustment to accounts receivable for prior periods' over-accruals of rebates owed to certain customers within the office products reporting unit in the U.S. Print and Related Services segment. First-quarter 2011 net earnings attributable to common shareholders included pre-tax charges for restructuring ($42.7 million) and impairment ($8.1 million, non-cash) and acquisition-related expenses ($0.4 million). The Company believes that certain non-GAAP measures, when presented in conjunction with comparable GAAP (Generally Accepted Accounting Principles) measures, are useful because that information is an appropriate measure for evaluating the Company's operating performance. Internally, the Company uses this non-GAAP information as an indicator of business performance, and evaluates management's effectiveness with specific reference to these indicators. These measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Non-GAAP net earnings attributable to common shareholders totaled $78.8 million, or $0.44 per diluted share, in the first quarter of 2012 compared to $68.6 million, or $0.33 per diluted share, in the first quarter of 2011. First-quarter non-GAAP net earnings attributable to common shareholders exclude restructuring and impairment charges and acquisition-related expenses for both years as well as the loss on debt extinguishment in 2012. For non-GAAP comparison purposes, the effective tax rate decreased to 29.3% in the first quarter of 2012 from 32.7% in the first quarter of 2011, resulting from a release of valuation allowances on deferred tax assets within Europe. A reconciliation of GAAP net earnings attributable to common shareholders to non-GAAP net earnings attributable to common shareholders is presented in the attached schedules. "We are pleased with our first-quarter results," said Thomas J. Quinlan III, RR Donnelley's President and Chief Executive Officer. "The revenue trend improved from the fourth quarter of 2011, reflecting a favorable trend in customer demand and new customer wins that we added to the platform during the quarter. We expect this improved trend, in conjunction with our continuing cost management efforts, to have a positive impact going forward." Business Review Summary Excluding restructuring and impairment charges and acquisition-related expenses, non-GAAP operating margin improved to 6.8% in the first quarter of 2012 from 6.2% in the first quarter of 2011. Lower pension expense, the customer rebate adjustment, lower depreciation and amortization, productivity improvements and lower variable compensation expense more than offset an unfavorable product mix and continued pricing pressure. Segments Net sales for the International segment of $643.5 million increased slightly from the first quarter of 2011. Volume growth in business process outsourcing, Asia and Latin America and higher pass-through paper sales in Europe were mostly offset by a $19.7 million (307 basis points) unfavorable impact of changes in foreign exchange rates, volume declines inEurope and the impact of continued pricing pressure across the segment. The segment's operating income of $30.6 million in the first quarter of 2012, which was negatively impacted by charges for restructuring and impairment of $5.4 million, decreased $13.5 million from operating income of $44.1 million in the first quarter of 2011, which included charges for restructuring and impairment of $9.2 million. The segment's non-GAAP operating margin declined to 5.6% in the first quarter of 2012 from 8.3% in the first quarter of 2011 as pricing pressure, wage and other inflationary increases in certain countries and an unfavorable product mix were only partially offset by lower depreciation and amortization and lower variable compensation expense. Unallocated Corporate operating expenses decreased to $48.4 million in the first quarter of 2012 as compared to $76.6 million in the first quarter of 2011. Excluding charges for restructuring and impairment and acquisition-related expenses totaling $5.2 million in the first quarter of 2012 and $3.8 million in the first quarter of 2011, unallocated Corporate operating expenses decreased $29.6 million to $43.2 million in the first quarter of 2012. Lower pension expense, a lower provision for bad debt, productivity improvements and lower variable compensation expense were partially offset by the reinstatement of the 401k match and higher benefits-related expense. Outlook - 2012 Full-Year Guidance Conference Call
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