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R.R. Donnelley Reports Q3: Lowers Guidance, Reduces Capital Spending

Press release from the issuing company

CHICAGO, Oct. 23 -- R.R. Donnelley & Sons Company today announced third quarter 2002 revenues of $1.2 billion, down 9 percent from the year ago period. Diluted earnings per share, excluding unusual items, were 54 cents, an increase of 17 percent from 46 cents a year ago. Net income, excluding unusual items, was $61 million, up 13 percent from $54 million a year ago. Including unusual items, the company reported earnings per diluted share of 42 cents compared with 36 cents for the year-earlier period. Net income, including unusual items, was $48 million, compared with $42 million in 2001. Third quarter 2002 unusual items included restructuring and impairment charges of $23 million ($14 million after-tax, or 12 cents per diluted share). In the year-earlier period, unusual items included restructuring and impairment charges of $20 million ($12 million after-tax, or 10 cents per diluted share). "Our efforts to reduce our fixed costs and improve productivity are delivering results," said William L. Davis, R.R. Donnelley's chairman, president and chief executive officer. "The improvements we're seeing on the cost side are working to offset revenue declines in a challenging economic environment." The company's results were bolstered by aggressive actions over the past two years to reduce the overall cost structure. The actions, in total, are expected to reduce the company's cost structure by $175 million on an annualized basis. The benefit from these actions during the third quarter helped offset revenue declines across the company, most significantly in financial services and magazines, catalogs and retail. The company revised its earnings guidance for 2002, driven by sharply lower activity within its financial services business. The company adjusted its expectations for 2002 earnings per share to range between $1.35 and $1.45, excluding restructuring and impairment charges and other unusual items. Capital spending is now expected to be below $280 million for the year. Separately, the company adjusted its second quarter results to correct a systems-related error in Donnelley Logistics' transportation management system. The error caused transportation expense to be under-reported in the second quarter; the adjustment resulted in a reduction to pre-tax earnings of $1.6 million. While not material to the company's consolidated results, the adjustment is significant to its Logistics segment. Despite the adjustment, Logistics remains on plan to meet its earnings target for the year.