Server: Netscape-Enterprise/2.0a Date: Fri, 19 Dec 1997 04:36:43 GMT Content-type: text/html R.R. Donnelley & Sons: Headlines

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R.R. Donnelley Strengthens Core Business Focus, Announces Stream International Holdings Ownership Restructuring

Chicago, Dec. 16, 1997 -- R.R. Donnelley and Sons Company (NYSE: DNY) today announced plans to restructure its ownership in Stream International Holdings, Inc. (SIH), reclassify a portion of the business as discontinued operations and record a fourth-quarter charge of approximately $100 million pre-tax ($60 million after tax, or 41 cents per share) to adjust the carrying cost of the properties. In an unrelated action, R.R. Donnelley announced a $71 million pre- tax charge ($43 million after tax, or 29 cents per share) for the impairment of assets no longer aligned with its strategic objectives.

In April 1997, SIH was reorganized into three independent businesses: Stream International, which provides outsource technical support services; Corporate Software and Technology, a software resale and technology services company; and Modus Media International, a global manufacturing and fulfillment business.

Under the plan announced today, R.R. Donnelley will convert its current equity and debt positions in SIH into approximately 87 percent of the shares of common stock in both Stream International and Corporate Software and Technology, and non-voting preferred stock in Modus Media. Bain Capital, a minority shareholder of SIH, together with management of the companies will assume operating responsibility for Corporate Software and Technology to facilitate the management and planned divestiture of that company, and will assume operating control of Modus Media. R.R. Donnelley will reclassify Corporate Software and Technology and Modus Media as discontinued operations and reclassify its prior three years' consolidated financial statements.

Stream International has previously announced plans to become public through an initial offering of common shares. Upon completion of the offering, R.R. Donnelley's interest in Stream International will be reduced to less than 50 percent and the company will change its method of accounting for Stream International from consolidation to the equity method.

"Today's actions, along with our recently announced management reorganization, further demonstrate that we are committed to our strategy of focusing on our core businesses," said Cheryl A. Francis, executive vice president and chief financial officer of R.R. Donnelley. "The reorganization frees resources, time and attention to build on our printing industry leadership."

The $71 million pre-tax impairment charge will cover the cessation of activities no longer aligned with the company's strategic focus, including the development of certain manufacturing information systems, the pending sale of its Coris content-management software subsidiary, the shut-down of its book fulfillment operations and the closing of a development office in Singapore. Cash outlays associated with this charge are expected to total approximately $17 million.

"Combined with the reorganization of our interest in SIH, these actions represent significant progress in the disposition of assets and discontinuation of activities that do not contribute to our core print businesses," Chairman and Chief Executive Officer William L. Davis said. "By exiting non-strategic ventures we have generated approximately $60 million in cash during the course of this year to supplement the strong cash flow generated by our core print businesses. We also have reduced capital spending significantly from the levels originally expected for 1997. With our enhanced focus and capital discipline, we expect core-business cash generation to accelerate in 1998 as our return on investment improves."

R.R. Donnelley and Sons Company (1996 print-related sales: $4.9 billion) is a world leader in managing, reproducing and distributing print and digital information for the publishing, retailing, merchandising and information-technology markets. It specializes in the production of catalogs, inserts, magazines, books, directories and financial documentation. Founded in Chicago in 1864, the company employs approximately 28,000 people in its printing operations in North America and worldwide.

R.R. Donnelley Reports 3rd-Quarter 1997 Results

(10/22/97) R.R. Donnelley and Sons Company [NYSE:DNY] today reported net income for the third quarter of 1997 totaling $72 million, or 49 cents per share, compared with $68 million, or 45 cents per share, a year earlier.

For the first nine months of 1997, net income totaled $139 million, or 95 cents per share, compared with a year-earlier net loss of $255 million, or $1.66 per share. The loss for the first nine months of 1996 reflected $560 million in pre-tax restructuring charges, partly offset by a $44 million pre-tax gain on the initial public offering of Metromail Corporation common shares in the second quarter. Excluding the charges and the Metromail gain, net income for the first nine months of 1996 totaled $154 million, or $1.01 per share.

Results for the 1997 quarter reflect the decision by Metromail (in which R.R. Donnelley holds approximately a 38-percent stake) to expense as in-process research and development a substantial portion of the purchase price of Saxe Inc., which Metromail acquired in the third quarter. Excluding the effect of the write-down, third-quarter earnings totaled $75 million, or 51 cents per share.

"Our strategy of focusing on our core printing businesses to leverage our strengths and industry leadership into enhanced value for customers and shareholders is beginning to pay off," said Chairman and Chief Executive Officer William L. Davis. "Earlier this week, we took steps to simplify our organization and focus even more intensely on what we do best. We are confident that our strategic focus on markets and operating costs in our core businesses will produce continued improvement in margins and enhanced prospects for profitable growth."

Revenues
Net sales for the third quarter totaled $1.56 billion, down 2 percent from $1.59 billion in the 1996 period.

Net sales for print-related businesses -- excluding Stream International Holdings (SIH) and Metromail -- were $1.2 billion for the quarter, down 4 percent from a year ago. Sales gains in most business units were offset by lower revenues from materials sales (primarily paper) and lower Western European revenues, principally reflecting the discontinuation of magazine and catalog operations in the United Kingdom.

For the first nine months of 1997, net sales totaled $4.5 billion, compared with $4.7 billion a year earlier.

Net sales for print-related businesses were $3.3 billion for the nine-month period, down 3 percent from a year earlier. Revenue gains in most business units were offset by the factors affecting revenues for the quarter.

Operating results
Gross profit increased 6 percent to $300 million in the third quarter, reflecting strong demand for services in most businesses. For the first nine months, gross profit declined 4 percent to $783 million. The decline principally reflected the company's reduced interest in Metromail, as well as expenses associated with the continued development of the company's logistics and fulfillment businesses; the startup of a short-run book printing plant in Roanoke, Va.; and the indirect costs of restructuring gravure printing operations in the United States and magazine and catalog operations in the United Kingdom.

Operating earnings for the third quarter totaled $125 million, essentially unchanged from the 1996 period. Operating earnings for the first nine months totaled $255 million, compared with $293 million for the first nine months of 1996, excluding the restructuring charges.

Operating earnings from core print-related businesses decreased 1 percent from the year-earlier period to $133 million. For the nine months, operating earnings from print-related businesses declined 6 percent from the same period in 1996 to $281 million, reflecting the development, start-up and indirect restructuring expenses noted above.

SIH reported operating losses of $8 million for the third quarter and $26 million for the first nine months of 1997, compared with operating losses of $9 million and $19 million in the respective year- ago periods. Operating results in both 1997 periods reflect the costs of operating SIH as three separate businesses. Nine-month results also reflect an additional bad-debt reserve recorded in the first quarter of 1997.

Financial Position
Net cash provided by operating activities totaled $548 million for the nine months, up $25 million, or 5 percent, from the previous year. Operating working capital provided cash of $117 million, compared with $119 million in last year's first nine months. Improvements in inventory and receivables were offset by increases in other current assets.

Excluding restructuring charges and the Metromail gain, the return on invested capital (ROI) for the 12 months ended Sept. 30, 1997, was 8.9 percent, compared with 8.7 percent for the 12 months ended June 30, 1997. The ROI of the core printing businesses was 9.8 percent for the 12 months ended Sept. 30, 1997, compared with 9.2 percent for the 12 months ended June 30, 1997.

As previously reported, on Sept. 25, 1997, the company's Board of Directors declared a quarterly dividend of 20 cents per common share, payable on Nov. 29, 1997, to shareholders of record on Nov. 7, 1997.

R.R. Donnelley and Sons Company (1996 sales: $6.6 billion) is a world leader in managing, reproducing and distributing print and digital information for the publishing, retailing, merchandising and information-technology markets. It specializes in the production of catalogs, inserts, magazines, books, directories, and financial and computer documentation. Founded in Chicago in 1864, the company employs 38,000 people in 26 countries on five continents.

Condensed Consolidated Income Statement
($000's omitted, except share data)


                  3 Months Ended Sept. 30     9 Months Ended Sept. 30
                           1997        1996*      1997        1996*

NET SALES $1,557,349 $1,592,790 $4,537,584 $4,697,316 Cost of sales 1,257,461 1,309,608 3,754,436 3,883,249

Gross profit 299,888 283,182 783,148 814,067 Selling and administrative expenses 174,426 157,419 528,151 520,692 Restructuring charges -- -- -- 560,632

Earnings (loss) from operations 125,462 125,763 254,997 (267,257)

Interest expense (22,079) (21,818) (67,262) (71,614) Gain on sale of Metromail -- -- -- 44,158 Other (income) expense-net 8,490 1,198 28,039 30,757

Earnings (loss) before income taxes 111,873 105,143 215,774 (263,956) Income taxes 39,715 37,275 76,600 (9,182)

NET INCOME (LOSS) $72,158 $67,868 $139,174 $(254,774)

NET INCOME (LOSS) PER SHARE: Before restructuring charges and Metromail gain 0.49 0.45 0.95 1.01 After restructuring charges and Metromail gain 0.49 0.45 0.95 (1.66)

Average shares of common stock outstanding for the period 146,192,000 152,444,000 146,086,000 153,416,000 Shares of common stock outstanding at September 30 145,867,000 150,386,000 145,867,000 150,386,000

PERCENT TO NET SALES:** Gross profit 19% 18% 17% 17% Selling and administrative expenses 11% 10% 12% 11% Earnings from operations 8% 8% 6% 6% Pretax earnings 7% 7% 5% 5% Net income 5% 4% 3% 3%

OPERATING PERFORMANCE:** EBITDA (000's omitted)1 $234,694 $217,305 $575,361 $607,589

12 Months Ended Sept. 30, 1997 June 30, 1997 Return on average invested capital2 8.9% 8.7% Operating working capital (% of net sales)3 10.4% 9.6%

* Certain immaterial 1996 amounts have been reclassified to be consistent with current-year classifications.
** Excluding 1996 restructuring charges and Metromail gain.

1Earnings (excluding 1996 restructuring charge) before interest, income taxes, depreciation and amortization.
2Net income excluding interest expense (after-tax) divided by total debt and equity, computed on a 12-month average, and excluding restructuring charges and gains on partial divestitures of Metromail Corporation and Donnelley Enterprise Solutions Incorporated.
3Operating working capital represents inventories, accounts receivable and prepaid expenses, minus accounts payable, accrued compensation and other accrued liabilities (excludes restructuring reserve).

R.R. Donnelley Announces New Organizational Structure,
Names Jonathan P. Ward President, Chief Operating Officer

(Chicago, Oct. 21, 1997) -- R.R. Donnelley & Sons Company (NYSE: DNY) today announced a new management structure that simplifies the organization and focuses the company on its core printing businesses.

The organizational changes, effective immediately, include the promotion of Jonathan P. Ward, 43, to president and chief operating officer; the reorganization of all core businesses into one central structure replacing the former three-sector structure; and the creation of two new executive positions - - chief strategy officer and chief manufacturing officer -- that will focus, respectively, on strategic growth opportunities and optimal manufacturing efficiency.

In announcing the new management structure, William L. Davis, chairman and chief executive officer, said: "Jon Ward is an experienced, customer-focused leader who will play a crucial role in driving our core businesses to higher levels of profitability and steady growth. This new structure is designed to create one organization working together to deliver maximum value to our customers and shareholders. We have the leadership positions and size to achieve orderly growth and consistent profitability. Our mission now is to turn leadership into economic value. We can do that by focusing intensely on the things we do best."

Ward will join a team composed of Davis, Chief Financial Officer Cheryl A. Francis and the chief strategy officer in leading R.R. Donnelley's plans to capitalize on the full potential of its core businesses and assets. The COO, CFO and CSO will report to Davis.

Under the new management structure, Ward, most recently executive vice president and president of the Commercial Print Sector, will oversee all operating units of R.R. Donnelley, including those formerly in the Information Management and the Global Commercial Print sectors.

James R. Donnelley continues as vice chairman of the company, reporting to Davis. W. Ed Tyler, who was executive vice president and president of the Information Management Sector, has been named executive vice president and chief technology officer for the corporation, also reporting to Davis. Tyler will assume the responsibilities of John Nevins, interim chief information officer, as well as responsibility for the company's Technology Center in Downers Grove, Ill., and its venture-capital subsidiary. Steven J. Baumgartner, who was executive vice president and president of the Global Commercial Print Sector, will continue as executive vice president, assuming other corporate responsibilities until the end of 1997.

The chief manufacturing officer will report to Ward and will work closely with business unit presidents to maximize the productivity of R.R. Donnelley's plants and other assets. The CMO also will be responsible for Donnelley Logistics Services, manufacturing process investment strategy and central procurement.

Davis said that the company, with assistance from leading executive recruitment firms, is actively reviewing candidates for the positions of chief strategy officer and chief manufacturing officer.

"This is a first, major step in the process of building the best management structure to accelerate positive change and continually leverage our many strengths," Davis said. "In addition to unparalleled experience in commercial printing, we bring to customers a unique scope of customized services, the scale to handle increasingly complex assignments, and employees who are committed to performing as a world-class market leader."

Ward commented: "The new structure will make us faster and more focused in our service to our customers. By focusing on business platforms as opposed to plants, our businesses will be better able to leverage their capabilities and assets across a broad spectrum of customers, while significantly improving manufacturing efficiencies. This structure also will make it easier to build input from our strong field sales organization and our customers into our strategic planning."

Ward joined R.R. Donnelley in 1977 and has held increasingly senior positions for the last 10 years. Most recently, he had management responsibility for the nation's largest commercial printing operation. Prior to that, he served as president of the company's Merchandise Media and Financial Services business units. He also served as vice president and director of the company's Spartanburg, S.C., manufacturing division, and as senior vice president, sales.

Ward earned a B.S. degree in chemical engineering from the University of New Hampshire in 1976, and is a graduate of Harvard Business School's Advanced Management Program. Ward serves as a director of Metromail Corporation, Siegwerk, Inc. USA, the Direct Marketing Association and the National Association of Manufacturers. He also is a trustee of the Goodman Theatre in Chicago and a director of Chicago Youth Centers.

R.R. Donnelley & Sons Company (1996 sales: $6.6 billion) is a world leader in managing, reproducing, and distributing print and digital information for the publishing, retailing, merchandising, and information-technology markets. It specializes in the production of catalogs, inserts, magazines, books, directories, and financial and computer documentation. Founded in Chicago in 1864, the company employs 38,000 people in 26 countries on five continents.

R.R. Donnelley elects Sockwell to board

(Chicago, Sept. 25, 1997) -- R.R. Donnelley & Sons Company (NYSE:DNY) has elected Oliver R. Sockwell, 54, to its board of directors. Since 1987, Sockwell served as President and Chief Executive Officer of the Construction Loan Insurance Association (Connie Lee) and its operating subsidiary Connie Lee Insurance Company. He recently retired from that position to become an Executive In Residence at Columbia University's Graduate School of Business.

Sockwell fills the board position created by the retirement of H. Blair White, who served as an R.R. Donnelley director for nearly 18 years.

Sockwell previously served as Executive Vice President, Finance, Administration and Planning for the Student Loan Marketing Association (Sallie Mae). Before joining Sallie Mae, he was an investment banker with Smith Barney and Company in New York.

Sockwell is a director of Connie Lee Insurance Company and the Association of Financial Guarantee Insurers. In addition, he serves on the boards of the Columbia University Graduate School of Business, the National Center for Learning Disabilities and Ford's Theater.

Sockwell holds a bachelor's degree in physics from Howard University and an MBA in finance from Columbia University. He resides with his wife, Harriet, and their three children in the Washington, D.C. area.

R.R. Donnelley & Sons Company (1996 sales: US $6.6 billion) is a world leader in managing, reproducing and distributing print and digital information for the publishing, retailing, merchandising and information-technology markets. It specializes in the production of books, catalogs, inserts, magazines, directories, and financial and computer documentation. Founded in Chicago in 1864, the company employs 38,000 people in 26 countries on five continents.

R.R. Donnelley declares quarterly dividend

(Chicago, Sept. 25, 1997) -- The Board of Directors of R.R. Donnelley & Sons Company (NYSE:DNY) today declared a quarterly dividend of 20 cents per common share, payable on November 29, 1997, to shareholders of record on November 7, 1997.

R.R. Donnelley & Sons Company (1996 sales: US $6.6 billion) is a world leader in managing, reproducing and distributing print and digital information for the publishing, retailing, merchandising and information-technology markets. It specializes in the production of catalogs, inserts, magazines, books, directories, and financial and computer documentation. Founded in Chicago in 1864, the company employs 38,000 people in 26 countries on five continents.

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