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Moore Wallace Delivers Profitability Growth and Strong Cash Flow

Thursday, October 30, 2003

Press release from the issuing company

MISSISSAUGA, Ontario & NEW YORK--Oct. 29, 2003-- Moore Wallace Incorporated today reported financial results for its third quarter ended September 30, 2003. Third quarter sales totaled $828.9 million with GAAP (Canadian Generally Accepted Accounting Principles) net earnings of $26.0 million, or $0.16 per diluted share for the third quarter. (All dollar amounts discussed in this press release are in U.S. currency.) The Company believes that certain non-GAAP measures, when presented in conjunction with comparable GAAP measures, are useful because that information, which excludes acquisition-related charges, restructuring and restructuring-related charges, and gains on asset disposals, is an appropriate measure for evaluating the Company's operating performance. Internally, the Company uses this non-GAAP information as an important indicator of business performance, and management's effectiveness is evaluated with specific reference to these indicators. A reconciliation of GAAP net earnings to non-GAAP net earnings for these adjustments is presented in the tables below. These measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. On May 15, 2003, the Company merged with Wallace Computer Services, Inc., a leading provider of comprehensive print management solutions. The differences in the operating results of the Company in 2003 versus 2002 are primarily due to this merger. Non-GAAP net earnings for the third quarter of 2003 were $40.3 million, or $0.25 per diluted share. Non-GAAP net earnings include a $23.4 million adjustment on a before-tax basis, which consists of $12.1 million for acquisition-related items, and $12.0 million in restructuring and restructuring-related charges, partially offset by a $0.7 million benefit included in investment and other income. GAAP income from operations was $51.0 million, or 6.2% of sales. These results were unfavorably affected by acquisition-related items and restructuring actions taken as a result of the merger. Non-GAAP income from operations was $75.2 million, or 9.1% of sales. Mark A. Angelson, Moore Wallace's Chief Executive Officer, said, "We are pleased to have delivered another solid quarter, exceeding our earnings expectations and generating strong cash flow. This gives us continued confidence that our core strategy for the creation of shareholder value is working. "This marks the first full quarter of combined operations since the May 15 closing of the merger with Wallace. The integration is on track and meeting our objectives. During the quarter, we consolidated additional facilities and effected additional personnel reductions in line with our original plan. We are capitalizing upon our size and scale, gaining greater operating efficiencies, and building our position as one of the industry's lowest cost operators. We are achieving further benefits from our integration activities, specifically, cost containment, asset rationalization, productivity enhancements, vendor consolidation, and streamlined supply chain management." Business Overview In addition to traditional business forms, the Company's Forms & Labels business includes labels, supplies and print fulfillment. The Company's forms business continued to experience some softness in revenue, as it remains challenged by the economic environment and competitive pricing pressure. The Outsourcing business is comprised of the Company's customized, high-volume, variably imaged statement mailings and electronic statements and associated database services. Outsourcing continued to perform very well from both a revenue and profit perspective, due primarily to increased outsourcing of invoice and statement preparation by corporations. The Company's Commercial Print business includes commercial print, direct mail and warehouse inventory management products. Moderate strength in direct mail was offset by a modest decline in technical publications. Angelson said, "We are pleased with the performance and operating income generated by all three of our business segments, particularly in light of a difficult economy and a challenging industry environment. As expected, we saw some softness in our top line from the disruptive impact of shifting work and personnel from closed plants to other facilities, but we have succeeded in taking appropriate measures to ensure that we met or exceeded our earnings goals." Including the combined results of Moore and Wallace operations, third quarter net sales declined 3.5% year over year, while profit increased 26.9%. Asset Management The Company continued to strengthen its balance sheet by paying down debt ahead of schedule during the quarter, lowering leverage ratios and reducing its net debt position to $872.6 million from $918.2 million at the end of June. (Total debt was $923.3 million on September 30, 2003, and $952.8 million on June 30, 2003.) (1) Outlook For the fourth quarter of fiscal 2003, Moore Wallace is targeting non-GAAP earnings per diluted share of approximately $0.30. Non-GAAP earnings exclude unusual items that the Company does not expect to occur in the ordinary course of business, or are unrelated to the ongoing operations of the business. These items include acquisition-related charges, restructuring and restructuring-related charges that are currently not determinable; and for that reason, the Company is unable to provide GAAP earnings estimates at this time.




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