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R.R. Donnelley Settles IRS Dispute: Net Cash Impact of $150 Million

Monday, April 08, 2002

Press release from the issuing company

CHICAGO, April 8 -- R.R. Donnelley has reached a settlement with the Internal Revenue Service (IRS) on its dispute over the deductibility of interest on loans secured by corporate owned life insurance (COLI) policies. The settlement calls for the company to pay the IRS a portion of taxes on all prior deductions plus interest. The company also surrendered various life insurance policies held by the company and received favorable tax treatment on the proceeds as part of the settlement agreement. The net cash impact to the company will be approximately $150 million, most of which will be paid during the second quarter of 2002. There will be no negative impact to earnings as a result of the settlement. The company will provide additional details in conjunction with its first quarter 2002 earnings release, scheduled for May 1. "We are pleased to put this issue behind us,"said Gregory A. Stoklosa, executive vice president and chief financial officer. "The agreement eliminates uncertainty, and we fared better than we might have in litigation with the IRS.'' The COLI tax exposure was previously disclosed by the company in its periodic financial statements filed with the U.S. Securities and Exchange Commission. The settlement reflects the company's risk management considerations, weighing recent unfavorable court decisions against the costs of continuing to seek relief through litigation or other means.




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