By Ann Levine November 10, 2003 – R. R. Donnelley (NYSE: DNY) announced third quarter results of $0.47 earning per share up from $0.42 per share for the same period last year. Included in the earnings was a $0.01 restructuring and impairment charge. Net sales were $1.2 billion compared to $1.8 billion for the same period last year. Income was $54 million compared to $48 million for the third quarter of 2002. Topics of this summary: * Company and Segment Performance * Guidance * Q & A Company and Segment Performance Today’s call began with an outline of strategic actions that resulted in company improvements. The company has improved productivity, increased asset optimization, managed the business using real-time platforms, and saved $175 million with cost restructuring. The strategic changes were made for the long-term value potential of the company. Company officials expressed optimism with regard to the economic environment due to increased activities in the financial markets. Improvements in the economic environment are expected by next spring, resulting in a decent second half of 2004. In the Print sector, revenues were flat year over year with earnings reflecting the pricing environment. In the magazine and catalog and retail business, consumer ad pages were down less than 1% as was B2B in July and September. Catalogs had a stronger showing. Book revenues were down 1%. In print overall, Donnelley is now operating on a shared manufacturing platform where work is managed centrally, continuous improvement is now part of the company’s culture and Donnelley has changed it’s approach to market development. Book performance was highlighted during today’s call. The book industry represents a $2.8 billion market in the U.S. For Donnelley, it is a profitable market and the company is gaining market share and achieving above average margins and returns. Recent changes in the segment include driving asset productivity through the utilization of a unified network, common processes throughout the business and the development and implementation of new marketing processes. Donnelley was disappointed in Logistics sector results as profits have declined due to a slower than expected start-up of the New York, PA facility. Momentum Logistics also experienced losses in the business-to-business operations. Losses were $3 million. Financial Services reported an increase in sales of 7% during the third quarter which showed the first meaningful increase in several quarters. Earnings in this sector improved $10 million. Guidance Donnelley forecasts earnings per share at the low end of the range of $1.25 to $1.40 for the full year of 2003. The range includes $0.06 per share for expected restructuring activity. Gains in the Financial Services sector are expected to offset declines in the Logistics sector. Capital expenditures are expected to be below $250 million. Q & A 1. The profit shortfall in the Logistics business was $7 million between the York start-up costs and the acquisition issues. Costs are expected to be a little higher in the fourth quarter but Donnelley maintains its stated guidance. 2. The search for a replacement for President and CEO Bill Davis is continuing on track. A special committee of the Board of Directors is conducting the search process. 3. The print environment with pricing remains difficult. The percent of value added revenue has historically been 1.5% –2% historically. The company is seeing a 3%-4% range impact. 4. Giving the company optimism on the economic outlook is the long-term nature of their contracts. Long-term contracts indicate companies have a degree of confidence about price moving forward. 5. There has bee a reversal of incentive compensation across the business. Pension income should decrease for 2004. 6. On the company’s income line, there was a $4 million gain on a sale on investment on international yellow pages. The income line fluctuates from quarter to quarter.