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RR Donnelley Reports Q2: Logistics unit makes up for drop in print business

Press release from the issuing company

CHICAGO, Aug. 6 -- RR Donnelley today announced second-quarter 2003 earnings per diluted share of 17 cents, compared to 21 cents in the year ago period. Revenues for the second quarter were $1.1 billion, flat compared to the prior year. Net income was $19 million, compared to $24 million in the second quarter of 2002. Included in the above results for the second quarter of 2003 are restructuring and impairment charges of $5 million ($3 million after-tax, or 3 cents per diluted share). In the year-earlier period, results included restructuring and impairment charges of $16 million ($10 million after-tax, or 8 cents per diluted share). "We are still operating in challenging markets," said William L. Davis, RR Donnelley's chairman, president and chief executive officer. "But we're lean operationally and we're winning market share, both of which bode well for the future." Growth in the company's logistics and international businesses offset the continued year-over-year revenue decline in its print and financial services businesses. In its domestic print business, the company experienced stable volumes and lower prices, as expected, relative to the prior year. However, weaker-than-expected global capital markets and mutual fund activity in the first half of 2003 caused revenue and earnings to fall short of the company's expectations in its financial services business. The company reiterated its previously issued full-year earnings guidance of $1.25 to $1.40 per diluted share. This range includes six cents per diluted share for expected restructuring activity, four cents of which have been recognized through June 30, 2003. However, the company cautioned that earnings will likely be at the lower end of the range, mainly due to weaker-than expected activity in financial services as well as continued softness in direct mail. The company's guidance continues to incorporate the weak print demand and pricing environment, largely offset by its continued cost reduction and productivity efforts. In addition, the company's guidance assumes no improvement in global capital markets or mutual fund activity in the second half of 2003, as compared to the prior year. Capital spending is expected to be below $250 million, unchanged from prior guidance. In July, the company announced its 33rd consecutive annual increase in its quarterly dividend. "We remain committed to delivering tangible value to our shareholders through our dividend," said Gregory A. Stoklosa, RR Donnelley's executive vice president and chief financial officer. Recently the company announced Mr. Davis' retirement plans. The company's board of directors is conducting a search for his successor, and Mr. Davis will continue to lead the company until that person is named. "I am very optimistic about RR Donnelley's future," said Mr. Davis. "Through the hard work of our employees over the past six years, we now have the capabilities and culture necessary to drive long-term success with our customers and shareholders."