R.R. Donnelley & Sons Company is North America's premier printing and business service provider, serving multinational clients in publishing, advertising, retail , technology, healthcare and other industries. Since 2006, growth has been driven by targeted acquisitions of related companies, enabling the company to provide more complete and flexible communications service offerings. Facing intense price competition n the highly fragmented and competitive commercial print portion of the print and business services markets, R.R. Donnelley has increasingly focused attention on lowering costs through internal restructuring in the last three years.[1]

R.R. Donnelley is vulnerable to changes in overall economic conditions, particularly in the U.S., where the company does 75% of its business. R.R. Donnelley is also vulnerable to changes in demand associated with substitution of new technologies and media for print services, and rising costs of postage and shipping. Although R.R. Donnelley is able to pass fluctuating costs of raw materials on to consumers, the company has faced a rise in manufacturing costs due to higher energy prices in recent years. [1]

In June, 2009, R.R. Donnelley's bid to buy the assets of competitor Quebecor World (IQW) expired. Quebecor rejected R.R. Donnelley's offer and expects to complete bankruptcy proceedings in July, 2009. [2][3]

Company Overview

Business and Financial Metrics

Based in Chicago, Illinois, R.R. Donnelley and Sons provides print and business process solutions including mass mailings, paper advertising, catalogs, and outsourced call centers. In the face of an evolving technological market and a global economic downturn, the company has seen slowed growth in sales and significant drops in earnings.

Net sales in 2007 increased by 24.4% from the preceding year. Approximately 84% of this increase was due to sales from four companies acquired between 2006 and 2007. Net sales in 2008 decreased slightly from the preceding year. Despite a 3.6% increase in sales from three companies acquired in 2007 and two additional companies acquired in 2008, declining volumes and prices in most product and service areas more than offset the increase. R.R. Donnelley's growth has been largely driven by acquisitions made between 2006 and 2008. Six companies acquired in that time have accounted for almost all of R.R. Donnelley's growth in the past two years, with existing R.R. Donnelley facilities reporting losses which negate gains from acquisitions.[4]

Annual Financial Data, in millions 2004 2005 2006 2007 2008[4] Q12009[5]
Net sales $7,156.4 $8,430.2 $9,316.6 $11,587.1 $11,581.6 $2,455.6
Net earnings (loss) $178.3 $137.1 $400.6 ($48.9) ($189.9) $16.4

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The commercial printing industry is large and fragmented. Of the 35,000 companies, the majority are small local to midsized companies with one plant and fewer than 20 employees. R.R. Donnelley is the largest company in the industry, with its closest competitor in size, Quebecor World (IQW), currently in the midst of bankruptcy proceedings.[6] Although consolidation in the industry has increased during the recent economic downturn,[3] and R.R. Donnelley uses acquisitions to drive growth, the largest 50 companies account for only 30% of the commercial printing market.[6] Excess capacity in the industry fuels intense price competition. R.R. Donnelley has been able to attract and maintain clients in this market, benefiting from economies of scale.

Main Competitors

Competitor Metrics

Earnings of Printing Industry Leaders, in millions 2004 2005 2006 2007 2008
R.R. Donnelley[4] $178.3 $137.1 $400.6 ($48.9) ($189.9)
Quebecor World[7] $103.3 ($209.5) ($3.9) ($2256.8) ($1575.8)

In 2009, R.R. Donnelley's main competitor, Quebecor World, filed for bankruptcy in Canada and for Chapter 11 bankruptcy in the United States and is currently undergoing restructuring. R.R. Donnelley made multiple bids to acquire the company's assets, which expired in June of 2009. [3]

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