Business Wire | Nov 3, 2021 06:57AM EDT

RRD Reports Third Quarter 2021 Results

Nov. 03, 2021

CHICAGO--(BUSINESS WIRE)--Nov. 03, 2021--R.R. Donnelley & Sons Company (NYSE: RRD) ("RRD" or the "Company") today reported financial results for the third quarter of 2021.

Q3 Key messages

* GAAP net sales, including the impact of foreign exchange, increased 6.4%; Non-GAAP organic net sales increased 5.5%; largely driven by strengthening demand for many of the Company's products and services * GAAP and Non-GAAP income from operations exceeded prior year; both benefitted from higher sales and strong cost management despite supply chain challenges and inflation * GAAP operating margin improved 450 bps while Non-GAAP improved by 20 bps * GAAP earnings per share from continuing operations of $0.38 and Non-GAAP adjusted earnings per share from continuing operations of $0.57, both improved significantly from prior year * Cash used in operating activities during the nine months ended September 30, 2021 was $29 million compared to cash provided by operating activities of $25 million in the prior year period; current year results reflect working capital investments due to increased volume and inflation in addition to $33 million paid earlier this year to settle LSC bankruptcy-related claims and terminate certain interest rate swap agreements * Gross leverage ratio of 3.7x improved 1.0x from September 30, 2020; net leverage ratio of 3.2x improved 0.5x from the same period last year

"RRD delivered a very strong quarter through the continued execution of our well-defined strategic initiatives," said Dan Knotts, RRD President and Chief Executive Officer. "We reported our second consecutive quarter of organic sales growth driven by strengthening client demand and higher volumes in our strategic product categories. Our Q3 adjusted income from operations was higher than our 2019 pre-pandemic earnings for the second consecutive quarter. Through the combination of organic sales growth and the ongoing successful management of our cost structure, we also delivered improved operating margins despite supply chain challenges and inflation. We further enhanced our financial flexibility with our debt level at the end of the quarter being down significantly from the prior year and representing the lowest debt level for any third quarter reported since the spin. Looking forward, the RRD team remains highly focused on driving sales growth, aggressively managing our cost structure to combat the challenges created by the global pandemic, inflationary pressures and supply chain disruptions, and further improving our financial flexibility."

Financial highlights

The following table provides an overview of RRD's financial performance:

3^rd Quarter Results

Q3 2021 Q3 2020 % Change

Net sales $1.27 $1.19 6.4% billion billion

Income from operations $73.1 $15.9 nm million million

Diluted earnings (loss) per share from continuing $0.38 ($0.13) nm operations



Adjusted income from operations - non-GAAP ^(1) $81.5 $73.9 10.3% million million

Adjusted diluted earnings per share from continuing $0.57 $0.32 78.1% operations - non-GAAP ^(1)

(1)

Refer to "Use of Non-GAAP Information" for additional information on the usage and presentation of non-GAAP financial measures, and refer to the schedules for reconciliations to the most directly comparable GAAP financial measures.

Net sales in the third quarter were $1.27 billion, up $76.5 million or 6.4% from the same period in 2020. Third quarter net sales benefitted $10.8 million due to changes in foreign exchange rates. The increase also includes higher volume reflecting strengthening demand for many of the Company's products and services due to the continued recovery from the COVID-19 pandemic. Notably, net sales of Commercial Print products were up significantly due to strong demand for domestic trading cards as well as other printed products produced in China. In addition, higher demand for e-commerce sales have contributed to five consecutive quarters of net sales growth in the Company's Labels and Packaging products.

Organic net sales increased 5.5%. The Business Services segment was up 7.1% on a GAAP basis and 5.9% on a non-GAAP organic basis while the Marketing Solutions segment was up 3.8% both on a GAAP and non-GAAP organic basis from the third quarter of 2020. The Business Services segment experienced continued growth in our strategic growth focus areas of Labels and Packaging in addition to continued growth from the pandemic recovery, which was partially offset by large one-time COVID-related projects in Supply Chain Management in the 2020 quarter. Net sales in Marketing Solutions experienced growth, led by higher volumes in Direct Marketing and Digital Print and Fulfillment.

Income from operations was $73.1 million in the third quarter of 2021 compared to income from operations of $15.9 million in the third quarter of 2020. The third quarter of 2021 included net restructuring, impairment and other charges of $4.0 million, a decrease from $54.2 million in the prior year period which included charges for LSC's MEPP withdrawal obligations and higher employee termination costs.

Non-GAAP adjusted income from operations of $81.5 million increased $7.6 million from the prior year period. The increase was primarily due to the impact of higher net sales and ongoing cost control initiatives. This was partially offset by higher variable incentive compensation, unfavorable foreign exchange of approximately $7 million, which was driven by our operations in China, and continued inflation.

Earnings per share from continuing operations attributable to common stockholders was $0.38 in the third quarter of 2021 compared to loss per share of $0.13 reported in the third quarter of 2020. The 2021 results benefitted from higher income from operations, including lower net restructuring, impairment and other charges and lower interest expense, partially offset by higher income tax expense.

Non-GAAP adjusted earnings per share from continuing operations attributable to common stockholders of $0.57 in the third quarter of 2021 increased from $0.32 in the third quarter of 2020 primarily due to favorable income taxes, higher adjusted income from operations and lower interest expense.

Other highlights and information

Cash used in operating activities during the nine months ended September 30, 2021 was $29.0 million compared to cash provided by operating activities of $25.2 million in the prior year period. The increase in cash used from operations during 2021 is primarily driven by working capital due to increased volume and inflation, $23.9 million of LSC bankruptcy-related payments mostly associated with lump sum settlements for employee retirement obligations, higher tax and incentive compensation payments and a $9.2 million payment to terminate certain interest rate swap agreements. In addition, the prior year amount benefitted from payroll taxes being deferred as part of the CARES Act. These factors were partially offset by lower restructuring and interest payments in 2021 as compared to last year.

Capital expenditures in the nine months ended September 30, 2021 were $48.6 million compared to $54.4 million in the prior year period.

As of September 30, 2021, cash on hand was $223.5 million, down $65.3 million from December 31, 2020. Total debt outstanding at the end of the quarter was $1.51 billion, up $9.8 million from December 31, 2020 and down $508.4 million from September 30, 2020. Availability under the credit facility was $515.7 million at September 30, 2021. Total liquidity, including cash on hand, was $739.2 million, up from $542.6 million at September 30, 2020.

During 2020, the Company completed the sale of its DLS Worldwide, International Logistics and Courier Logistics businesses. The Company has reflected the Logistics businesses as discontinued operations, and the financial results of these businesses have been excluded from continuing operations and segment results for all periods presented unless otherwise noted.

Acquisition by Atlas

In a separate release issued today, RRD announced that it has entered into a definitive merger agreement to be acquired by affiliates of Atlas Holdings LLC ("Atlas"). Under the terms of the merger agreement, Atlas will acquire all of the outstanding shares of RRD common stock, and RRD stockholders will receive $8.52 per share in cash for each share of RRD common stock. The transaction is expected to close in the first half of 2022, subject to customary closing conditions, including approval by RRD stockholders and receipt of regulatory approvals. The foregoing description of the merger agreement and the transactions contemplated thereby is subject to, and is qualified in its entirety by reference to, the full terms of the merger agreement, which the Company will be filing on Form 8-K.

Outlook

The Company is withdrawing its previous financial outlook for 2021 and has suspended any further updates as a result of the pending transaction.

Conference call

RRD will host a conference call to discuss its third quarter results on Wednesday, November 3, 2021 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). Participants must register in advance in order to either join the webcast or request the dial-in information to join by telephone. Registration links for both the webcast and the telephone options are available on the Events & Presentations page of the Investor Relations website. For those unable to join live, a replay of the webcast will be available until January 31, 2022 under the Past Events section of the Investor Relations website.

A slide presentation will be available on the Investors section of the RRD web site at www.rrd.com or by clicking through this link.

About RRD

RRD is a leading global provider of multichannel business communications services and marketing solutions. With 30,000 clients and 33,000 employees across 28 countries, RRD offers the industry's most comprehensive offering of solutions designed to help companies-from Main Street to Wall Street-optimize customer engagement and streamline business operations across the complete customer journey. RRD offers a comprehensive portfolio of capabilities, experience and scale that enables organizations around the world to create, manage, deliver, and optimize their marketing and business communications strategies.

For more information, visit the Company's web site at www.rrd.com.

Use of non-GAAP information

This news release contains non-GAAP financial measures, including non-GAAP SG&A, non-GAAP income from operations, non-GAAP Adjusted EBITDA, non-GAAP interest expense, non-GAAP effective tax rate, non-GAAP net earnings (loss) attributable to common stockholders, non-GAAP diluted earnings (loss) per share, non-GAAP organic net sales and gross and net leverage ratios. The Company believes that these non-GAAP measures, when presented in conjunction with comparable GAAP measures, provide useful information about its operating results and enhance the overall ability to assess the Company's financial performance. These measures should be considered in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. RRD uses these non-GAAP measures, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business. Additional information relating to the adjustments for the non-GAAP SG&A, non-GAAP income from operations, non-GAAP Adjusted EBITDA, non-GAAP effective tax rate, non-GAAP net earnings (loss) attributable to common stockholders, non-GAAP diluted earnings (loss) per share, non-GAAP organic net sales and gross and net leverage ratios for RRD is set forth in the attached schedules.

Use of Forward-Looking Statements

This communication includes certain "forward-looking statements" within the meaning of, and subject to the safe harbor created by, the federal securities laws, including statements related to the proposed acquisition of R. R. Donnelley & Sons Company ("RRD") by affiliates of Atlas Holdings LLC (the "Transaction"). These forward-looking statements are based on RRD's current expectations, estimates and projections regarding, among other things, the expected date of closing of the Transaction and the potential benefits thereof, its business and industry, management's beliefs and certain assumptions made by RRD, all of which are subject to change. Forward-looking statements often contain words such as "expect," "anticipate," "intend," "aims," "plan," "believe," "could," "seek," "see," "will," "may," "would," "might," "considered," "potential," "estimate," "continue," "likely," "expect," "target" or similar expressions or the negatives of these words or other comparable terminology that convey uncertainty of future events or outcomes. By their nature, forward-looking statements address matters that involve risks and uncertainties because they relate to events and depend upon future circumstances that may or may not occur, such as the consummation of the Transaction and the anticipated benefits thereof. These and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Important risk factors that may cause such a difference include (i) the completion of the Transaction on anticipated terms and timing, including obtaining required stockholder and regulatory approvals, and the satisfaction of other conditions to the completion of the Transaction; (ii) significant transaction costs associated with the Transaction; (iii) potential litigation relating to the Transaction, including the effects of any outcomes related thereto; (iv) the risk that disruptions from the Transaction will harm RRD's business, including current plans and operations; (v) the ability of RRD to retain and hire key personnel; (vi) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the Transaction; (vii) legislative, regulatory and economic developments affecting RRD's business; (viii) general economic and market developments and conditions; (ix) the evolving legal, regulatory and tax regimes under which RRD operates; (x) potential business uncertainty, including changes to existing business relationships, during the pendency of the Transaction that could affect RRD's financial performance; (xi) certain restrictions during the pendency of the Transaction that may impact RRD's ability to pursue certain business opportunities or strategic transactions; (xii) continued availability of capital and financing and rating agency actions; (xiii) the ability of affiliates of Atlas Holdings LLC to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the Transaction; (xiv) the occurrence of any event, change or other circumstance that could give rise to the termination of the Transaction, including in circumstances requiring RRD to pay a termination fee; (xv) unpredictability and severity of catastrophic events, including acts of terrorism, outbreak of war or hostilities or the COVID-19 pandemic, as well as RRD's response to any of the aforementioned factors; (xvi) competitive responses to the Transaction; (xvii) the risks and uncertainties pertaining to RRD's business, including those detailed under the heading "Risk Factors" and elsewhere in RRD's public periodic filings with the U.S. Securities and Exchange Commission (the "SEC"); and (xviii) the risks and uncertainties that will be described in the proxy statement to be filed by RRD with the SEC in connection with the Transaction (the "Proxy Statement") and available from the sources indicated below. These risks, as well as other risks associated with the Transaction, will be more fully discussed in the Proxy Statement. While the list of factors presented here is, and the list of factors to be presented in the Proxy Statement will be, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material impact on RRD's financial condition, results of operations, credit rating or liquidity. These forward-looking statements speak only as of the date they are made, and RRD does not undertake to and specifically disclaims any obligation to publicly release the results of any updates or revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Important Additional Information and Where to Find It

This communication is being made in connection with the Transaction. In connection with the Transaction, RRD intends to file the Proxy Statement and certain other documents regarding the Transaction with the SEC. The definitive version of the Proxy Statement (if and when available) will be mailed to RRD stockholders. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, and is not a substitute for the Proxy Statement or any other document that RRD may file with the SEC. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain, free of charge, copies of the Proxy Statement (when it is available) and other documents that are filed or will be filed with the SEC by RRD through the website maintained by the SEC at www.sec.gov, the Investor Relations portion of RRD's website at investor.rrd.com or by contacting the RRD investor relations department at the following:

Telephone: 630-322-7111 E-mail: investor.info@rrd.com Attn.: Johan Nystedt

Participants in the Solicitation

RRD and certain of its directors, executive officers and other employees may be deemed to be participants in the solicitation of proxies from RRD stockholders in connection with the Transaction. Additional information regarding the identity of the participants, and their respective direct and indirect interests in the Transaction, by security holdings or otherwise, will be set forth in the Proxy Statement and other materials to be filed with the SEC in connection with the Transaction (if and when they become available). Information relating to the foregoing can also be found in RRD's proxy statement for its 2021 annual meeting of stockholders, which was filed with the SEC on April 13, 2021 (the "Annual Meeting Proxy Statement"). To the extent holdings of securities by potential participants (or the identity of such participants) have changed since the information printed in the Annual Meeting Proxy Statement, such information has been or will be reflected on RRD's Statements of Change in Ownership on Forms 3 and 4 filed with the SEC. You may obtain free copies of these documents using the sources indicated above.

Refer to "Use of Non-GAAP Information" for additional information on the(1) usage and presentation of non-GAAP financial measures, and refer to the schedules for reconciliations to the most directly comparable GAAP financial measures.

Net sales in the third quarter were $1.27 billion, up $76.5 million or 6.4% from the same period in 2020. Third quarter net sales benefitted $10.8 million due to changes in foreign exchange rates. The increase also includes higher volume reflecting strengthening demand for many of the Company's products and services due to the continued recovery from the COVID-19 pandemic. Notably, net sales of Commercial Print products were up significantly due to strong demand for domestic trading cards as well as other printed products produced in China. In addition, higher demand for e-commerce sales have contributed to five consecutive quarters of net sales growth in the Company's Labels and Packaging products.

Organic net sales increased 5.5%. The Business Services segment was up 7.1% on a GAAP basis and 5.9% on a non-GAAP organic basis while the Marketing Solutions segment was up 3.8% both on a GAAP and non-GAAP organic basis from the third quarter of 2020. The Business Services segment experienced continued growth in our strategic growth focus areas of Labels and Packaging in addition to continued growth from the pandemic recovery, which was partially offset by large one-time COVID-related projects in Supply Chain Management in the 2020 quarter. Net sales in Marketing Solutions experienced growth, led by higher volumes in Direct Marketing and Digital Print and Fulfillment.

Income from operations was $73.1 million in the third quarter of 2021 compared to income from operations of $15.9 million in the third quarter of 2020. The third quarter of 2021 included net restructuring, impairment and other charges of $4.0 million, a decrease from $54.2 million in the prior year period which included charges for LSC's MEPP withdrawal obligations and higher employee termination costs.

Non-GAAP adjusted income from operations of $81.5 million increased $7.6 million from the prior year period. The increase was primarily due to the impact of higher net sales and ongoing cost control initiatives. This was partially offset by higher variable incentive compensation, unfavorable foreign exchange of approximately $7 million, which was driven by our operations in China, and continued inflation.

Earnings per share from continuing operations attributable to common stockholders was $0.38 in the third quarter of 2021 compared to loss per share of $0.13 reported in the third quarter of 2020. The 2021 results benefitted from higher income from operations, including lower net restructuring, impairment and other charges and lower interest expense, partially offset by higher income tax expense.

Non-GAAP adjusted earnings per share from continuing operations attributable to common stockholders of $0.57 in the third quarter of 2021 increased from $0.32 in the third quarter of 2020 primarily due to favorable income taxes, higher adjusted income from operations and lower interest expense.

Other highlights and information

Cash used in operating activities during the nine months ended September 30, 2021 was $29.0 million compared to cash provided by operating activities of $25.2 million in the prior year period. The increase in cash used from operations during 2021 is primarily driven by working capital due to increased volume and inflation, $23.9 million of LSC bankruptcy-related payments mostly associated with lump sum settlements for employee retirement obligations, higher tax and incentive compensation payments and a $9.2 million payment to terminate certain interest rate swap agreements. In addition, the prior year amount benefitted from payroll taxes being deferred as part of the CARES Act. These factors were partially offset by lower restructuring and interest payments in 2021 as compared to last year.

Capital expenditures in the nine months ended September 30, 2021 were $48.6 million compared to $54.4 million in the prior year period.

As of September 30, 2021, cash on hand was $223.5 million, down $65.3 million from December 31, 2020. Total debt outstanding at the end of the quarter was $1.51 billion, up $9.8 million from December 31, 2020 and down $508.4 million from September 30, 2020. Availability under the credit facility was $515.7 million at September 30, 2021. Total liquidity, including cash on hand, was $739.2 million, up from $542.6 million at September 30, 2020.

During 2020, the Company completed the sale of its DLS Worldwide, International Logistics and Courier Logistics businesses. The Company has reflected the Logistics businesses as discontinued operations, and the financial results of these businesses have been excluded from continuing operations and segment results for all periods presented unless otherwise noted.

Acquisition by Atlas

In a separate release issued today, RRD announced that it has entered into a definitive merger agreement to be acquired by affiliates of Atlas Holdings LLC ("Atlas"). Under the terms of the merger agreement, Atlas will acquire all of the outstanding shares of RRD common stock, and RRD stockholders will receive $8.52 per share in cash for each share of RRD common stock. The transaction is expected to close in the first half of 2022, subject to customary closing conditions, including approval by RRD stockholders and receipt of regulatory approvals. The foregoing description of the merger agreement and the transactions contemplated thereby is subject to, and is qualified in its entirety by reference to, the full terms of the merger agreement, which the Company will be filing on Form 8-K.

Outlook

The Company is withdrawing its previous financial outlook for 2021 and has suspended any further updates as a result of the pending transaction.

Conference call

RRD will host a conference call to discuss its third quarter results on Wednesday, November 3, 2021 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). Participants must register in advance in order to either join the webcast or request the dial-in information to join by telephone. Registration links for both the webcast and the telephone options are available on the Events & Presentations page of the Investor Relations website. For those unable to join live, a replay of the webcast will be available until January 31, 2022 under the Past Events section of the Investor Relations website.

A slide presentation will be available on the Investors section of the RRD web site at www.rrd.com or by clicking through this link.

About RRD

RRD is a leading global provider of multichannel business communications services and marketing solutions. With 30,000 clients and 33,000 employees across 28 countries, RRD offers the industry's most comprehensive offering of solutions designed to help companies-from Main Street to Wall Street-optimize customer engagement and streamline business operations across the complete customer journey. RRD offers a comprehensive portfolio of capabilities, experience and scale that enables organizations around the world to create, manage, deliver, and optimize their marketing and business communications strategies.

For more information, visit the Company's web site at www.rrd.com.

Use of non-GAAP information

This news release contains non-GAAP financial measures, including non-GAAP SG&A, non-GAAP income from operations, non-GAAP Adjusted EBITDA, non-GAAP interest expense, non-GAAP effective tax rate, non-GAAP net earnings (loss) attributable to common stockholders, non-GAAP diluted earnings (loss) per share, non-GAAP organic net sales and gross and net leverage ratios. The Company believes that these non-GAAP measures, when presented in conjunction with comparable GAAP measures, provide useful information about its operating results and enhance the overall ability to assess the Company's financial performance. These measures should be considered in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. RRD uses these non-GAAP measures, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business. Additional information relating to the adjustments for the non-GAAP SG&A, non-GAAP income from operations, non-GAAP Adjusted EBITDA, non-GAAP effective tax rate, non-GAAP net earnings (loss) attributable to common stockholders, non-GAAP diluted earnings (loss) per share, non-GAAP organic net sales and gross and net leverage ratios for RRD is set forth in the attached schedules.

Use of Forward-Looking Statements

This communication includes certain "forward-looking statements" within the meaning of, and subject to the safe harbor created by, the federal securities laws, including statements related to the proposed acquisition of R. R. Donnelley & Sons Company ("RRD") by affiliates of Atlas Holdings LLC (the "Transaction"). These forward-looking statements are based on RRD's current expectations, estimates and projections regarding, among other things, the expected date of closing of the Transaction and the potential benefits thereof, its business and industry, management's beliefs and certain assumptions made by RRD, all of which are subject to change. Forward-looking statements often contain words such as "expect," "anticipate," "intend," "aims," "plan," "believe," "could," "seek," "see," "will," "may," "would," "might," "considered," "potential," "estimate," "continue," "likely," "expect," "target" or similar expressions or the negatives of these words or other comparable terminology that convey uncertainty of future events or outcomes. By their nature, forward-looking statements address matters that involve risks and uncertainties because they relate to events and depend upon future circumstances that may or may not occur, such as the consummation of the Transaction and the anticipated benefits thereof. These and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Important risk factors that may cause such a difference include (i) the completion of the Transaction on anticipated terms and timing, including obtaining required stockholder and regulatory approvals, and the satisfaction of other conditions to the completion of the Transaction; (ii) significant transaction costs associated with the Transaction; (iii) potential litigation relating to the Transaction, including the effects of any outcomes related thereto; (iv) the risk that disruptions from the Transaction will harm RRD's business, including current plans and operations; (v) the ability of RRD to retain and hire key personnel; (vi) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the Transaction; (vii) legislative, regulatory and economic developments affecting RRD's business; (viii) general economic and market developments and conditions; (ix) the evolving legal, regulatory and tax regimes under which RRD operates; (x) potential business uncertainty, including changes to existing business relationships, during the pendency of the Transaction that could affect RRD's financial performance; (xi) certain restrictions during the pendency of the Transaction that may impact RRD's ability to pursue certain business opportunities or strategic transactions; (xii) continued availability of capital and financing and rating agency actions; (xiii) the ability of affiliates of Atlas Holdings LLC to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the Transaction; (xiv) the occurrence of any event, change or other circumstance that could give rise to the termination of the Transaction, including in circumstances requiring RRD to pay a termination fee; (xv) unpredictability and severity of catastrophic events, including acts of terrorism, outbreak of war or hostilities or the COVID-19 pandemic, as well as RRD's response to any of the aforementioned factors; (xvi) competitive responses to the Transaction; (xvii) the risks and uncertainties pertaining to RRD's business, including those detailed under the heading "Risk Factors" and elsewhere in RRD's public periodic filings with the U.S. Securities and Exchange Commission (the "SEC"); and (xviii) the risks and uncertainties that will be described in the proxy statement to be filed by RRD with the SEC in connection with the Transaction (the "Proxy Statement") and available from the sources indicated below. These risks, as well as other risks associated with the Transaction, will be more fully discussed in the Proxy Statement. While the list of factors presented here is, and the list of factors to be presented in the Proxy Statement will be, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material impact on RRD's financial condition, results of operations, credit rating or liquidity. These forward-looking statements speak only as of the date they are made, and RRD does not undertake to and specifically disclaims any obligation to publicly release the results of any updates or revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Important Additional Information and Where to Find It

This communication is being made in connection with the Transaction. In connection with the Transaction, RRD intends to file the Proxy Statement and certain other documents regarding the Transaction with the SEC. The definitive version of the Proxy Statement (if and when available) will be mailed to RRD stockholders. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, and is not a substitute for the Proxy Statement or any other document that RRD may file with the SEC. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain, free of charge, copies of the Proxy Statement (when it is available) and other documents that are filed or will be filed with the SEC by RRD through the website maintained by the SEC at www.sec.gov, the Investor Relations portion of RRD's website at investor.rrd.com or by contacting the RRD investor relations department at the following:

Telephone: 630-322-7111 E-mail: investor.info@rrd.com Attn.: Johan Nystedt

Participants in the Solicitation

RRD and certain of its directors, executive officers and other employees may be deemed to be participants in the solicitation of proxies from RRD stockholders in connection with the Transaction. Additional information regarding the identity of the participants, and their respective direct and indirect interests in the Transaction, by security holdings or otherwise, will be set forth in the Proxy Statement and other materials to be filed with the SEC in connection with the Transaction (if and when they become available). Information relating to the foregoing can also be found in RRD's proxy statement for its 2021 annual meeting of stockholders, which was filed with the SEC on April 13, 2021 (the "Annual Meeting Proxy Statement"). To the extent holdings of securities by potential participants (or the identity of such participants) have changed since the information printed in the Annual Meeting Proxy Statement, such information has been or will be reflected on RRD's Statements of Change in Ownership on Forms 3 and 4 filed with the SEC. You may obtain free copies of these documents using the sources indicated above.

R.R. Donnelley & Sons Company

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions, except per share data)



For the Three Months For the Nine Months Ended Ended

2021 2020 2021 2020

Net sales $ 1,267.8 $ 1,191.3 $ 3,586.5 $ 3,417.7



Cost of sales^ (1) 1,012.9 943.6 2,890.0 2,729.4



Gross profit^ (1) 254.9 247.7 696.5 688.3

Selling, general andadministrative expenses 141.2 138.0 438.3 436.7 (SG&A)^ (1)

Restructuring, impairment 4.0 54.2 19.5 93.8 and other charges-net

Depreciation and 32.3 36.2 99.0 112.3 amortization

Other operating expense 4.3 3.4 13.3 15.5

Income from operations 73.1 15.9 126.4 30.0

Interest expense - net 29.4 34.3 98.4 102.7

Loss on debt - 0.2 6.2 0.4 extinguishment

Investment and other (5.4 ) (3.6 ) (15.1 ) (10.8 )income - net

Income (loss) fromcontinuing operations 49.1 (15.0 ) 36.9 (62.3 )before income taxes

Income tax expense 21.0 (5.9 ) 19.7 (3.0 )(benefit)

Net income (loss) from 28.1 (9.1 ) 17.2 (59.3 )continuing operations

Income (loss) fromdiscontinued operations, - 0.4 0.6 (19.5 )net of tax

Net income (loss) 28.1 (8.7 ) 17.8 (78.8 )

Less: (loss) incomeattributable to (0.2 ) 0.2 0.2 0.3 noncontrolling interests

Net income (loss)attributable to RRD $ 28.3 $ (8.9 ) $ 17.6 $ (79.1 )common stockholders



Basic net earnings (loss)per share attributable to RRD common stockholders:

Continuing Operations $ 0.39 $ (0.13 ) $ 0.23 $ (0.83 )

Discontinued Operations $ - $ 0.01 $ 0.01 $ (0.27 )

Net earnings (loss)attributable to RR $ 0.39 $ (0.12 ) $ 0.24 $ (1.10 )Donnelley stockholders



Diluted net earnings(loss) per share attributable to RRDcommon stockholders:

Continuing Operations $ 0.38 $ (0.13 ) $ 0.23 $ (0.83 )

Discontinued Operations $ - $ 0.01 $ 0.01 $ (0.27 )

Net earnings (loss)attributable to RR $ 0.38 $ (0.12 ) $ 0.24 $ (1.10 )Donnelley stockholders



Weighted average common shares outstanding:

Basic 73.4 72.4 73.1 72.1

Diluted 74.1 72.4 74.0 72.1



Additional information:

Gross margin^ (1) 20.1 % 20.8 % 19.4 % 20.1 %

SG&A as a % of total net 11.1 % 11.6 % 12.2 % 12.8 %sales^ (1)

Operating margin 5.8 % 1.3 % 3.5 % 0.9 %

Effective tax rate 42.8 % 39.3 % 53.4 % 4.8 %

(1)

Exclusive of depreciation and amortization.

(1) Exclusive of depreciation and amortization.

R.R. Donnelley & Sons Company

Consolidated Balance Sheets

As of September 30, 2021 and December 31, 2020

(UNAUDITED)

(in millions, except per share data)

9/30/2021

12/31/2020

Assets

Cash and cash equivalents

$

223.5

$

288.8

Receivables, less allowances for credit losses

1,045.5

1,009.2

Inventories

379.9

302.1

Assets held-for-sale

19.1

23.1

Prepaid expenses and other current assets

145.5

133.4

Total Current Assets

1,813.5

1,756.6

Property, plant and equipment - net

408.3

438.8

Goodwill

406.8

410.6

Other intangible assets - net

54.5

68.8

Deferred income taxes

73.0

78.5

Operating lease assets

196.4

223.8

Other noncurrent assets

140.9

153.8

Total Assets

$

3,093.4

$

3,130.9

Liabilities

Accounts payable

822.3

804.5

Accrued liabilities and other

342.4

351.2

Short-term operating lease liabilities

66.6

73.4

Short-term and current portion of long-term debt

79.3

61.1

Total Current Liabilities

1,310.6

1,290.2

Long-term debt

1,433.6

1,442.0

Pension liabilities

74.2

89.5

Other postretirement benefits plan liabilities

50.4

55.8

Long-term income tax liability

60.3

68.3

Long-term operating lease liabilities

135.7

156.9

Other noncurrent liabilities

252.2

272.0

Total Liabilities

$

3,317.0

$

3,374.7

Equity

Common stock, $0.01 par value

Authorized: 165.0 shares;

Issued: 89.0 shares in 2021 and 2020

0.9

0.9

Additional paid-in capital

3,022.5

3,263.6

Accumulated deficit

(2,223.1

)

(2,240.7

)

Accumulated other comprehensive loss

(152.1

)

(153.9

)

Treasury stock, at cost, 16.1 shares in 2021 (2020 - 17.6 shares)

(885.1

)

(1,127.6

)

Total RRD stockholders' equity

(236.9

)

(257.7

)

Noncontrolling interests

13.3

13.9

Total Equity

$

(223.6

)

$

(243.8

)

Total Liabilities and Equity

$

3,093.4

$

3,130.9

R.R. Donnelley & Sons Company

Consolidated Balance Sheets

As of September 30, 2021 and December 31, 2020

(UNAUDITED)

(in millions, except per share data)



9/30/2021 12/31/2020

Assets



Cash and cash equivalents $ 223.5 $ 288.8

Receivables, less allowances for credit losses 1,045.5 1,009.2

Inventories 379.9 302.1

Assets held-for-sale 19.1 23.1

Prepaid expenses and other current assets 145.5 133.4

Total Current Assets 1,813.5 1,756.6

Property, plant and equipment - net 408.3 438.8

Goodwill 406.8 410.6

Other intangible assets - net 54.5 68.8

Deferred income taxes 73.0 78.5

Operating lease assets 196.4 223.8

Other noncurrent assets 140.9 153.8

Total Assets $ 3,093.4 $ 3,130.9



Liabilities



Accounts payable 822.3 804.5

Accrued liabilities and other 342.4 351.2

Short-term operating lease liabilities 66.6 73.4

Short-term and current portion of long-term debt 79.3 61.1

Total Current Liabilities 1,310.6 1,290.2

Long-term debt 1,433.6 1,442.0

Pension liabilities 74.2 89.5

Other postretirement benefits plan liabilities 50.4 55.8

Long-term income tax liability 60.3 68.3

Long-term operating lease liabilities 135.7 156.9

Other noncurrent liabilities 252.2 272.0

Total Liabilities $ 3,317.0 $ 3,374.7



Equity



Common stock, $0.01 par value

Authorized: 165.0 shares;

Issued: 89.0 shares in 2021 and 2020 0.9 0.9



Additional paid-in capital 3,022.5 3,263.6

Accumulated deficit (2,223.1 ) (2,240.7 )

Accumulated other comprehensive loss (152.1 ) (153.9 )

Treasury stock, at cost, 16.1 shares in 2021 (2020 - (885.1 ) (1,127.6 )17.6 shares)

Total RRD stockholders' equity (236.9 ) (257.7 )

Noncontrolling interests 13.3 13.9

Total Equity $ (223.6 ) $ (243.8 )

Total Liabilities and Equity $ 3,093.4 $ 3,130.9

R.R. Donnelley & Sons Company

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions)

2021

2020

Net income (loss)

$

17.8

$

(78.8

)

Adjustment to reconcile net income (loss) to net cash used in operating activities

93.0

152.6

Changes in operating assets and liabilities

(136.2

)

(42.3

)

Pension and other postretirement benefits plan contributions

(3.6

)

(6.3

)

Net cash (used in) provided by operating activities

$

(29.0

)

$

25.2

Capital expenditures

(48.6

)

(54.4

)

All other cash provided by investing activities

15.4

50.9

Net cash used in investing activities

$

(33.2

)

$

(3.5

)

Net cash (used in) provided by financing activities

$

(5.6

)

$

194.8

Effect of exchange rate on cash, cash equivalents and restricted cash

1.2

2.1

Net (decrease) increase in cash, cash equivalents and restricted cash

$

(66.6

)

$

218.6

Cash, cash equivalents and restricted cash at beginning of year

357.6

223.8

Cash, cash equivalents and restricted cash at end of period

$

291.0

$

442.4

Supplemental cash flow disclosures:

Operating cash flows provided by discontinued operations

$

-

$

15.7

Investing cash flows used in discontinued operations

$

-

$

(1.3

)

R.R. Donnelley & Sons Company

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions)



2021 2020



Net income (loss) $ 17.8 $ (78.8 )

Adjustment to reconcile net income (loss) to net cash used 93.0 152.6 in operating activities

Changes in operating assets and liabilities (136.2 ) (42.3 )

Pension and other postretirement benefits plan (3.6 ) (6.3 )contributions

Net cash (used in) provided by operating activities $ (29.0 ) $ 25.2



Capital expenditures (48.6 ) (54.4 )

All other cash provided by investing activities 15.4 50.9

Net cash used in investing activities $ (33.2 ) $ (3.5 )



Net cash (used in) provided by financing activities $ (5.6 ) $ 194.8



Effect of exchange rate on cash, cash equivalents and 1.2 2.1 restricted cash



Net (decrease) increase in cash, cash equivalents and $ (66.6 ) $ 218.6 restricted cash



Cash, cash equivalents and restricted cash at beginning of 357.6 223.8 year



Cash, cash equivalents and restricted cash at end of period $ 291.0 $ 442.4



Supplemental cash flow disclosures:

Operating cash flows provided by discontinued operations $ - $ 15.7

Investing cash flows used in discontinued operations $ - $ (1.3 )

R.R. Donnelley & Sons Company

Reconciliation of GAAP to Non-GAAP Measures

For the Three Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions, except per share data)

For the Three Months Ended September 30, 2021

For the Three Months Ended September 30, 2020

Income from operations

Income tax expense

Net income from continuing operations attributable to common stockholders

Net earnings from continuing operations attributable to common stockholders per diluted share

SG&A (1)

Income from operations

Income tax (benefit) expense

Net (loss) income from continuing operations attributable to common stockholders

Net (loss) earnings from continuing operations attributable to common stockholders per diluted share

GAAP basis measures

$

73.1

$

21.0

$

28.3

$

0.38

$

138.0

$

15.9

$

(5.9

)

$

(9.3

)

$

(0.13

)

Non-GAAP adjustments:

Restructuring, impairment and other charges-net (2)

4.0

(3.6

)

7.6

0.10

-

54.2

16.2

38.0

0.52

All other (3)

4.4

(2.0

)

6.3

0.09

(0.5

)

3.8

9.1

(5.3

)

(0.07

)

Total Non-GAAP adjustments

8.4

(5.6

)

13.9

0.19

(0.5

)

58.0

25.3

32.7

0.45

Non-GAAP measures

$

81.5

$

15.4

$

42.2

$

0.57

$

137.5

$

73.9

$

19.4

$

23.4

$

0.32

Additional non-GAAP information:

2021

2020

Gross margin (1)

20.1

%

20.8

%

Adjusted SG&A as a % of total net sales (1)

11.1

%

11.5

%

Adjusted operating margin

6.4

%

6.2

%

Adjusted effective tax rate

26.8

%

44.9

%

R.R. Donnelley & Sons Company

Reconciliation of GAAP to Non-GAAP Measures

For the Three Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions, except per share data)



For the Three Months Ended September 30, 2021 For the Three Months Ended September 30, 2020

Net earnings Net (loss) Net income from Net (loss) earnings from continuing income from from Income Income continuing operations Income Income continuing continuing from tax operations attributable SG&A from tax operations operations operations expense attributable to common (1) operations (benefit) attributable attributable to common stockholders expense to common to common stockholders per diluted stockholders stockholders share per diluted share

GAAP basis $ 73.1 $ 21.0 $ 28.3 $ 0.38 $ 138.0 $ 15.9 $ (5.9 ) $ (9.3 ) $ (0.13 )measures



Non-GAAP adjustments:

Restructuring,impairment andother 4.0 (3.6 ) 7.6 0.10 - 54.2 16.2 38.0 0.52 charges-net(2)

All other (3) 4.4 (2.0 ) 6.3 0.09 (0.5 ) 3.8 9.1 (5.3 ) (0.07 )

Total Non-GAAP 8.4 (5.6 ) 13.9 0.19 (0.5 ) 58.0 25.3 32.7 0.45 adjustments

Non-GAAP $ 81.5 $ 15.4 $ 42.2 $ 0.57 $ 137.5 $ 73.9 $ 19.4 $ 23.4 $ 0.32 measures



Additional non-GAAP 2021 2020 information:

Gross margin (1) 20.1 % 20.8 %

Adjusted SG&A as a % of 11.1 % 11.5 % total net sales (1)

Adjusted operating margin 6.4 % 6.2 %

Adjusted effective tax 26.8 % 44.9 % rate

(1)

Exclusive of depreciation and amortization.

(2)

Restructuring, impairment and other-net: charges incurred in the third quarter of 2021 included $4.5 million in other restructuring charges, primarily lease terminations and environmental costs, and $2.5 million for employee termination costs, partially offset by net gains on the sale of restructured facilities. Charges incurred in the third quarter of 2020 included $37.3 million for multi-employer pension plan withdrawal obligations, of which $37.1 million related to LSC's MEPP contingent liability, $9.0 million for employee termination costs, and $6.7 million for other restructuring charges.

(3)

All other: Primarily included expenses related to the ongoing SEC and DOJ investigations and costs related to the investigation by Brazil regulators.

(1) Exclusive of depreciation and amortization.

Restructuring, impairment and other-net: charges incurred in the third quarter of 2021 included $4.5 million in other restructuring charges, primarily lease terminations and environmental costs, and $2.5 million for employee termination costs, partially offset by net gains on the sale of(2) restructured facilities. Charges incurred in the third quarter of 2020 included $37.3 million for multi-employer pension plan withdrawal obligations, of which $37.1 million related to LSC's MEPP contingent liability, $9.0 million for employee termination costs, and $6.7 million for other restructuring charges.

(3) All other: Primarily included expenses related to the ongoing SEC and DOJ investigations and costs related to the investigation by Brazil regulators.

R.R. Donnelley & Sons Company

Reconciliation of GAAP to Non-GAAP Measures

For the Nine Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions, except per share data)

For the Nine Months Ended September 30, 2021

For the Nine Months Ended September 30, 2020

SG&A (1)

Income from operations

Interest Expense

Income tax expense

Net income from continuing operations attributable to common stockholders

Net earnings from continuing operations attributable to common stockholders per diluted share

SG&A (1)

Income from operations

Income tax (benefit) expense

Net (loss) income from continuing operations attributable to common stockholders

Net (loss) earnings from continuing operations attributable to common stockholders per diluted share

GAAP basis measures

$

438.3

$

126.4

$

98.4

$

19.7

$

17.0

$

0.23

$

436.7

$

30.0

$

(3.0

)

$

(59.6

)

$

(0.83

)

Non-GAAP adjustments:

Restructuring, impairment and other charges-net (2)

-

19.5

-

3.2

16.3

0.22

-

93.8

11.2

82.6

1.15

Loss on swap terminations

-

-

(9.2

)

4.1

5.2

0.07

-

-

-

-

-

Loss on debt extinguishment

-

-

-

2.7

3.4

0.04

-

-

-

-

-

All other (3)

(0.6

)

14.0

-

2.3

11.7

0.16

(6.0

)

21.4

9.2

12.5

0.17

Total Non-GAAP adjustments

(0.6

)

33.5

(9.2

)

12.3

36.6

0.49

(6.0

)

115.2

20.4

95.1

1.32

Non-GAAP measures

$

437.7

$

159.9

$

89.2

$

32.0

$

53.6

$

0.72

$

430.7

$

145.2

$

17.4

$

35.5

$

0.49

Additional non-GAAP information:

2021

2020

Gross margin (1)

19.4

%

20.1

%

Adjusted SG&A as a % of total net sales (1)

12.2

%

12.6

%

Adjusted operating margin

4.5

%

4.2

%

Adjusted effective tax rate

37.3

%

32.6

%

R.R. Donnelley & Sons Company

Reconciliation of GAAP to Non-GAAP Measures

For the Nine Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions, except per share data)



For the Nine Months Ended September 30, 2021 For the Nine Months Ended September 30, 2020

Net earnings Net (loss) Net income from Net (loss) earnings from continuing income from from Income Income continuing operations Income Income continuing continuing SG&A from Interest tax operations attributable SG&A from tax operations operations (1) operations Expense expense attributable to common (1) operations (benefit) attributable attributable to common stockholders expense to common to common stockholders per diluted stockholders stockholders share per diluted share

GAAP basis $ 438.3 $ 126.4 $ 98.4 $ 19.7 $ 17.0 $ 0.23 $ 436.7 $ 30.0 $ (3.0 ) $ (59.6 ) $ (0.83 )measures



Non-GAAP adjustments:

Restructuring,impairment andother - 19.5 - 3.2 16.3 0.22 - 93.8 11.2 82.6 1.15 charges-net(2)

Loss on swap - - (9.2 ) 4.1 5.2 0.07 - - - - - terminations

Loss on debt - - - 2.7 3.4 0.04 - - - - - extinguishment

All other (3) (0.6 ) 14.0 - 2.3 11.7 0.16 (6.0 ) 21.4 9.2 12.5 0.17

Total Non-GAAP (0.6 ) 33.5 (9.2 ) 12.3 36.6 0.49 (6.0 ) 115.2 20.4 95.1 1.32 adjustments

Non-GAAP $ 437.7 $ 159.9 $ 89.2 $ 32.0 $ 53.6 $ 0.72 $ 430.7 $ 145.2 $ 17.4 $ 35.5 $ 0.49 measures



Additional non-GAAP information: 2021 2020

Gross margin (1) 19.4 % 20.1 %

Adjusted SG&A as a % of total net 12.2 % 12.6 % sales (1)

Adjusted operating margin 4.5 % 4.2 %

Adjusted effective tax rate 37.3 % 32.6 %

(1)

Exclusive of depreciation and amortization.

(2)

Restructuring, impairment and other-net: charges incurred in the nine months ended September 30, 2021 included $16.1 million in other restructuring charges, primarily lease terminations and environmental costs, and $6.3 million for employee termination costs, partially offset by net gains on the sale of restructured facilities. Charges incurred in the nine months ended September 30, 2020 included $39.2 million for multi-employer pension plan withdrawal obligations, including $37.1 million related to LSC's MEPP contingent obligation, $29.9 million for employee termination costs, primarily related to the closure of the Chilean operations and other facility closures, and $24.8 million for lease termination and other restructuring charges.

(3)

All other: Primarily included expenses related to the ongoing SEC and DOJ investigations and costs related to the investigation by Brazil regulators.

(1) Exclusive of depreciation and amortization.

Restructuring, impairment and other-net: charges incurred in the nine months ended September 30, 2021 included $16.1 million in other restructuring charges, primarily lease terminations and environmental costs, and $6.3 million for employee termination costs, partially offset by net gains on the sale of restructured facilities. Charges incurred in the(2) nine months ended September 30, 2020 included $39.2 million for multi-employer pension plan withdrawal obligations, including $37.1 million related to LSC's MEPP contingent obligation, $29.9 million for employee termination costs, primarily related to the closure of the Chilean operations and other facility closures, and $24.8 million for lease termination and other restructuring charges.

(3) All other: Primarily included expenses related to the ongoing SEC and DOJ investigations and costs related to the investigation by Brazil regulators.

R.R. Donnelley & Sons Company

Segment GAAP to Non-GAAP Income (Loss) from Operations and Non-GAAP Adjusted EBITDA and Margin Reconciliation

For the Three Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions)

Business Services

Marketing Solutions

Corporate

Consolidated

For the Three Months Ended September 30, 2021

Net sales

$

1,003.6

$

264.2

$

-

$

1,267.8

Income (loss) from operations

84.8

17.1

(28.8

)

73.1

Operating margin %

8.4

%

6.5

%

nm

5.8

%

Non-GAAP Adjustments

Restructuring, impairment and other charges-net

0.2

1.1

2.7

4.0

Other

-

-

4.4

4.4

Total Non-GAAP adjustments

0.2

1.1

7.1

8.4

Non-GAAP income (loss) from operations

$

85.0

$

18.2

$

(21.7

)

$

81.5

Non-GAAP operating margin %

8.5

%

6.9

%

nm

6.4

%

Depreciation and amortization

22.1

7.8

2.4

32.3

Investment and other income-net (1)

1.5

-

3.9

5.4

Non-GAAP Adjusted EBITDA

$

108.6

$

26.0

$

(15.4

)

$

119.2

Non-GAAP Adjusted EBITDA margin %

10.8

%

9.8

%

nm

9.4

%

For the Three Months Ended September 30, 2020

Net sales

$

936.8

$

254.5

$

-

$

1,191.3

Income (loss) from operations

69.1

10.3

(63.5

)

15.9

Operating margin %

7.4

%

4.0

%

nm

1.3

%

Non-GAAP Adjustments

Restructuring, impairment and other charges-net

7.0

4.7

42.5

54.2

Other

-

0.1

3.7

3.8

Total Non-GAAP adjustments

7.0

4.8

46.2

58.0

Non-GAAP income (loss) from operations

$

76.1

$

15.1

$

(17.3

)

$

73.9

Non-GAAP operating margin %

8.1

%

5.9

%

nm

6.2

%

Depreciation and amortization

23.5

11.4

1.3

36.2

Investment and other income-net (1)

0.9

-

2.7

3.6

Non-GAAP Adjusted EBITDA

$

100.5

$

26.5

$

(13.3

)

$

113.7

Non-GAAP Adjusted EBITDA margin %

10.7

%

10.4

%

nm

9.5

%

R.R. Donnelley & Sons Company

Segment GAAP to Non-GAAP Income (Loss) from Operations and Non-GAAP Adjusted EBITDA and Margin Reconciliation

For the Three Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions)



Business Marketing Corporate Consolidated Services Solutions

For the Three Months Ended September 30, 2021

Net sales $ 1,003.6 $ 264.2 $ - $ 1,267.8

Income (loss) from 84.8 17.1 (28.8 ) 73.1 operations

Operating margin % 8.4 % 6.5 % nm 5.8 %



Non-GAAP Adjustments

Restructuring, impairment 0.2 1.1 2.7 4.0 and other charges-net

Other - - 4.4 4.4

Total Non-GAAP adjustments 0.2 1.1 7.1 8.4



Non-GAAP income (loss) from $ 85.0 $ 18.2 $ (21.7 ) $ 81.5 operations

Non-GAAP operating margin % 8.5 % 6.9 % nm 6.4 %



Depreciation and 22.1 7.8 2.4 32.3 amortization

Investment and other 1.5 - 3.9 5.4 income-net^ (1)

Non-GAAP Adjusted EBITDA $ 108.6 $ 26.0 $ (15.4 ) $ 119.2

Non-GAAP Adjusted EBITDA 10.8 % 9.8 % nm 9.4 %margin %



For the Three Months Ended September 30, 2020

Net sales $ 936.8 $ 254.5 $ - $ 1,191.3

Income (loss) from 69.1 10.3 (63.5 ) 15.9 operations

Operating margin % 7.4 % 4.0 % nm 1.3 %



Non-GAAP Adjustments

Restructuring, impairment 7.0 4.7 42.5 54.2 and other charges-net

Other - 0.1 3.7 3.8

Total Non-GAAP adjustments 7.0 4.8 46.2 58.0



Non-GAAP income (loss) from $ 76.1 $ 15.1 $ (17.3 ) $ 73.9 operations

Non-GAAP operating margin % 8.1 % 5.9 % nm 6.2 %



Depreciation and 23.5 11.4 1.3 36.2 amortization

Investment and other 0.9 - 2.7 3.6 income-net^ (1)

Non-GAAP Adjusted EBITDA $ 100.5 $ 26.5 $ (13.3 ) $ 113.7

Non-GAAP Adjusted EBITDA 10.7 % 10.4 % nm 9.5 %margin %

(1)

Represents amounts in investment and other income-net that are not non-GAAP adjustments, and primarily includes pension and postretirement benefits interest cost, expected return on plan assets and net amortization.

Represents amounts in investment and other income-net that are not non-GAAP(1) adjustments, and primarily includes pension and postretirement benefits interest cost, expected return on plan assets and net amortization.

R.R. Donnelley & Sons Company

Segment GAAP to Non-GAAP Income (Loss) from Operations and Non-GAAP Adjusted EBITDA and Margin Reconciliation

For the Nine Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions)

Business Services

Marketing Solutions

Corporate

Consolidated

For the Nine Months Ended September 30, 2021

Net sales

$

2,835.3

$

751.2

$

-

$

3,586.5

Income (loss) from operations

193.2

39.9

(106.7

)

126.4

Operating margin %

6.8

%

5.3

%

nm

3.5

%

Non-GAAP Adjustments

Restructuring, impairment and other charges-net

6.9

5.8

6.8

19.5

Other

-

-

14.0

14.0

Total Non-GAAP adjustments

6.9

5.8

20.8

33.5

Non-GAAP income (loss) from operations

$

200.1

$

45.7

$

(85.9

)

$

159.9

Non-GAAP operating margin %

7.1

%

6.1

%

nm

4.5

%

Depreciation and amortization

67.4

23.9

7.7

99.0

Investment and other income-net (1)

3.3

-

11.8

15.1

Non-GAAP Adjusted EBITDA

$

270.8

$

69.6

$

(66.4

)

$

274.0

Non-GAAP Adjusted EBITDA margin %

9.6

%

9.3

%

nm

7.6

%

For the Nine Months Ended September 30, 2020

Net sales

$

2,625.4

$

792.3

$

-

$

3,417.7

Income (loss) from operations

123.9

33.4

(127.3

)

30.0

Operating margin %

4.7

%

4.2

%

nm

0.9

%

Non-GAAP Adjustments

Restructuring, impairment and other-net

22.3

7.5

64.0

93.8

Other

0.2

0.1

21.1

21.4

Total Non-GAAP adjustments

22.5

7.6

85.1

115.2

Non-GAAP income (loss) from operations

$

146.4

$

41.0

$

(42.2

)

$

145.2

Non-GAAP operating margin %

5.6

%

5.2

%

nm

4.2

%

Depreciation and amortization

71.7

37.6

3.0

112.3

Investment and other income-net (1)

2.4

-

8.4

10.8

Non-GAAP Adjusted EBITDA

$

220.5

$

78.6

$

(30.8

)

$

268.3

Non-GAAP Adjusted EBITDA margin %

8.4

%

9.9

%

nm

7.9

%

R.R. Donnelley & Sons Company

Segment GAAP to Non-GAAP Income (Loss) from Operations and Non-GAAP Adjusted EBITDA and Margin Reconciliation

For the Nine Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions)



Business Marketing Corporate Consolidated Services Solutions

For the Nine Months Ended September 30, 2021

Net sales $ 2,835.3 $ 751.2 $ - $ 3,586.5

Income (loss) from 193.2 39.9 (106.7 ) 126.4 operations

Operating margin % 6.8 % 5.3 % nm 3.5 %



Non-GAAP Adjustments

Restructuring, impairment 6.9 5.8 6.8 19.5 and other charges-net

Other - - 14.0 14.0

Total Non-GAAP adjustments 6.9 5.8 20.8 33.5



Non-GAAP income (loss) from $ 200.1 $ 45.7 $ (85.9 ) $ 159.9 operations

Non-GAAP operating margin % 7.1 % 6.1 % nm 4.5 %



Depreciation and 67.4 23.9 7.7 99.0 amortization

Investment and other 3.3 - 11.8 15.1 income-net^ (1)

Non-GAAP Adjusted EBITDA $ 270.8 $ 69.6 $ (66.4 ) $ 274.0

Non-GAAP Adjusted EBITDA 9.6 % 9.3 % nm 7.6 %margin %



For the Nine Months Ended September 30, 2020

Net sales $ 2,625.4 $ 792.3 $ - $ 3,417.7

Income (loss) from 123.9 33.4 (127.3 ) 30.0 operations

Operating margin % 4.7 % 4.2 % nm 0.9 %



Non-GAAP Adjustments

Restructuring, impairment 22.3 7.5 64.0 93.8 and other-net

Other 0.2 0.1 21.1 21.4

Total Non-GAAP adjustments 22.5 7.6 85.1 115.2



Non-GAAP income (loss) from $ 146.4 $ 41.0 $ (42.2 ) $ 145.2 operations

Non-GAAP operating margin % 5.6 % 5.2 % nm 4.2 %



Depreciation and 71.7 37.6 3.0 112.3 amortization

Investment and other 2.4 - 8.4 10.8 income-net^ (1)

Non-GAAP Adjusted EBITDA $ 220.5 $ 78.6 $ (30.8 ) $ 268.3

Non-GAAP Adjusted EBITDA 8.4 % 9.9 % nm 7.9 %margin %

(1)

Represents amounts in investment and other income-net that are not non-GAAP adjustments, and primarily includes pension and postretirement benefits interest cost, expected return on plan assets and net amortization.

Represents amounts in investment and other income-net that are not non-GAAP(1) adjustments, and primarily includes pension and postretirement benefits interest cost, expected return on plan assets and net amortization.

R.R. Donnelley & Sons Company

Reconciliation of Reported to Organic Net Sales

For the Three and Nine Months Ended September 30, 2021

(UNAUDITED)

For the Three Months Ended September 30, 2021

Business Services

Marketing Solutions

Consolidated

Reported net sales change

7.1

%

3.8

%

6.4

%

Less:

Year-over-year impact of changes in foreign currency rates

1.2

%

--

%

0.9

%

Net organic sales change

5.9

%

3.8

%

5.5

%

R.R. Donnelley & Sons Company

Reconciliation of Reported to Organic Net Sales

For the Three and Nine Months Ended September 30, 2021

(UNAUDITED)



For the Three Months Ended September 30, 2021

Business Marketing Consolidated Services Solutions

Reported net sales change 7.1 % 3.8 % 6.4 %

Less:

Year-over-year impact of changes in 1.2 % -- % 0.9 %foreign currency rates



Net organic sales change 5.9 % 3.8 % 5.5 %

For the Nine Months Ended September 30, 2021

Business Services

Marketing Solutions

Consolidated

Reported net sales change

8.0

%

(5.2

%)

4.9

%

Less:

Year-over-year impact of changes in foreign currency rates

1.8

%

--

%

1.4

%

Year-over-year impact of dispositions (1)

(0.3

%)

--

%

(0.2

%)

Net organic sales change

6.5

%

(5.2

%)

3.7

%

For the Nine Months Ended September 30, 2021

Business Marketing Consolidated Services Solutions

Reported net sales change 8.0 % (5.2 %) 4.9 %

Less:

Year-over-year impact of changes 1.8 % -- % 1.4 %in foreign currency rates

Year-over-year impact of (0.3 %) -- % (0.2 %)dispositions^ (1)



Net organic sales change 6.5 % (5.2 %) 3.7 %

(1)

Adjusted for net sales of RRD Chile, disposed of in the first quarter of 2020.

(1) Adjusted for net sales of RRD Chile, disposed of in the first quarter of 2020.

R.R. Donnelley & Sons Company

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted EBITDA

For the Three and Nine Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions)

For the Three Months Ended September 30,

2021

2020

GAAP net income (loss) from continuing operations attributable to RRD common stockholders

$

28.3

$

(9.3

)

Adjustments

(Loss) income attributable to noncontrolling interests

(0.2

)

0.2

Income tax expense (benefit)

21.0

(5.9

)

Interest expense - net

29.4

34.3

Depreciation and amortization

32.3

36.2

Restructuring, impairment and other charges-net

4.0

54.2

Loss on debt extinguishment

-

0.2

Other

4.4

3.8

Total Non-GAAP adjustments

90.9

123.0

Non-GAAP adjusted EBITDA

$

119.2

$

113.7

Net sales

$

1,267.8

$

1,191.3

Non-GAAP adjusted EBITDA margin %

9.4

%

9.5

%

R.R. Donnelley & Sons Company

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted EBITDA

For the Three and Nine Months Ended September 30, 2021 and 2020

(UNAUDITED)

(in millions)



For the Three Months Ended September 30,

2021 2020

GAAP net income (loss) from continuing operations $ 28.3 $ (9.3 )attributable to RRD common stockholders



Adjustments

(Loss) income attributable to noncontrolling (0.2 ) 0.2 interests

Income tax expense (benefit) 21.0 (5.9 )

Interest expense - net 29.4 34.3

Depreciation and amortization 32.3 36.2

Restructuring, impairment and other charges-net 4.0 54.2

Loss on debt extinguishment - 0.2

Other 4.4 3.8

Total Non-GAAP adjustments 90.9 123.0

Non-GAAP adjusted EBITDA $ 119.2 $ 113.7



Net sales $ 1,267.8 $ 1,191.3

Non-GAAP adjusted EBITDA margin % 9.4 % 9.5 %

For the Nine Months Ended September 30,

2021

2020

GAAP net income (loss) from continuing operations attributable to RRD common stockholders

$

17.0

$

(59.6

)

Adjustments

Income attributable to noncontrolling interests

0.2

0.3

Income tax expense (benefit)

19.7

(3.0

)

Interest expense - net

98.4

102.7

Depreciation and amortization

99.0

112.3

Restructuring, impairment and other charges-net

19.5

93.8

Loss on debt extinguishment

6.2

0.4

Other

14.0

21.4

Total Non-GAAP adjustments

257.0

327.9

Non-GAAP adjusted EBITDA

$

274.0

$

268.3

Net sales

$

3,586.5

$

3,417.7

Non-GAAP adjusted EBITDA margin %

7.6

%

7.9

%

For the Nine Months Ended September 30,

2021 2020

GAAP net income (loss) from continuing operations $ 17.0 $ (59.6 )attributable to RRD common stockholders



Adjustments

Income attributable to noncontrolling interests 0.2 0.3

Income tax expense (benefit) 19.7 (3.0 )

Interest expense - net 98.4 102.7

Depreciation and amortization 99.0 112.3

Restructuring, impairment and other charges-net 19.5 93.8

Loss on debt extinguishment 6.2 0.4

Other 14.0 21.4

Total Non-GAAP adjustments 257.0 327.9

Non-GAAP adjusted EBITDA $ 274.0 $ 268.3



Net sales $ 3,586.5 $ 3,417.7

Non-GAAP adjusted EBITDA margin % 7.6 % 7.9 %

R.R. Donnelley & Sons Company

Debt Leverage Ratios

As of September 30, 2021 and 2020

(UNAUDITED)

As of September 30,

2021

2020

Gross Leverage Ratio

Total Debt

1,512.9

2,021.3

Trailing 12 months adjusted EBITDA

406.6

407.8

on a continuing basis

Discontinued operations adjusted EBITDA (1)

n/a

20.8

Total adjusted EBITDA

406.6

428.6

Gross Leverage Ratio

3.7x

4.7x

Net Leverage Ratio

Total Debt

1,512.9

2,021.3

Less Cash and cash equivalents

223.5

414.8

Net Debt

1,289.4

1,606.5

Trailing 12 months adjusted EBITDA

406.6

407.8

on a continuing basis

Discontinued operations adjusted EBITDA (1)

n/a

20.8

Total adjusted EBITDA

406.6

428.6

Net Leverage Ratio

3.2x

3.7x

R.R. Donnelley & Sons Company

Debt Leverage Ratios

As of September 30, 2021 and 2020

(UNAUDITED)





As of September 30,

2021 2020

Gross Leverage Ratio

Total Debt 1,512.9 2,021.3



Trailing 12 months adjusted EBITDA 406.6 407.8

on a continuing basis

Discontinued operations adjusted EBITDA (1) n/a 20.8

Total adjusted EBITDA 406.6 428.6



Gross Leverage Ratio 3.7x 4.7x





Net Leverage Ratio

Total Debt 1,512.9 2,021.3

Less Cash and cash equivalents 223.5 414.8

Net Debt 1,289.4 1,606.5



Trailing 12 months adjusted EBITDA 406.6 407.8

on a continuing basis

Discontinued operations adjusted EBITDA (1) n/a 20.8

Total adjusted EBITDA 406.6 428.6



Net Leverage Ratio 3.2x 3.7x

(1)

September 30, 2021 leverage ratios exclude EBITDA from discontinued operations as proceeds from the sale of the divested businesses were used to reduce debt.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211103005603/en/

CONTACT: Investor Contact Johan Nystedt, Senior Vice President, Finance Telephone: 630-322-7111 E-mail: investor.info@rrd.com