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RR Donnelley Reports Second-Quarter 2010 Results

Excluding charges for restructuring and impairment and acquisition expenses, our non-GAAP operating margin in the second quarter of 2010 increased to 7.9% from 7.8% in the second quarter of 2009, as the benefits of increased volume, higher by-products recoveries and our productivity initiatives were mostly offset by continued price pressure and higher incentive compensation expense.

Segments

Net sales for the U.S. Print and Related Services segment in the quarter increased 1.6% from the second quarter of 2009 to $1.8 billion primarily attributable to volume increases in logistics, educational books, direct mail and commercial print, partially offset by price declines across most products and services, as well as lower paper sales. The segment’s operating income, which was negatively impacted by charges for restructuring and impairment of $3.5 million in the second quarter of 2010 and $26.0 million in the second quarter of 2009, increased to $179.5 million in the second quarter of 2010 from $138.5 million in the second quarter of 2009. Excluding the restructuring and impairment charges, the segment’s non-GAAP operating margin increased to 10.1% in the second quarter of 2010 from 9.2% in the second quarter of 2009, as the benefits of increased volume, productivity initiatives and higher by-products recoveries more than offset the impact of price erosion and higher incentive compensation expense.

Net sales for the International segment in the quarter increased 4.3% from the second quarter of 2009 to $599.3 million due to increased volume in Asia, Europe and Global Turnkey Solutions, partially offset by price declines across most platforms. Foreign exchange rate movements had little impact on the year-over-year revenue comparison. The segment’s operating income, which was negatively impacted by charges for restructuring and impairment of $6.5 million in the second quarter of 2010 and $20.9 million in the second quarter of 2009, improved to $42.7 million in the second quarter of 2010 from $22.9 million in the second quarter of 2009. Excluding the restructuring and impairment charges, the segment’s non-GAAP operating margin increased to 8.2% in the second quarter of 2010 from 7.6% in the second quarter of 2009 due to increased volume and favorable product mix, partially offset by the impact of price erosion and higher incentive compensation expense.

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