NON-GAAP

Non-GAAP Financial Information

This document contains non-GAAP financial measures, including non-GAAP adjusted income from operations, non-GAAP adjusted operating margin, non-GAAP effective tax rate, non-GAAP adjusted diluted EPS, net organic sales growth rate 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 fina ncial performance. Internally, the company uses this non-GAAP information as an indicator of business performance, and evaluates management's effectiveness with specific reference to these indicators. These measures should be considered in addition to, n ot a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation of GAAP to non- GAAP financial measures can be found in our periodic filings with the Securities and Exchange Commission.

Note on Continuing Operations

Beginning in the third quarter of 2020, we have reflected our Logistics business as discontinued operations for all periods presented. Our references to net sales, SG&A, income from operations, net income or loss, and per share amounts in this presentation are on a continuing operations basis without Logistics. All prior periods presented have been restated to conform to this presentation.

COMPILATION OF RECONCILIATIONS FROM PRIOR EARNING RELEASES

1. Organic Sales Reconciliation

pg. 5

2. GAAP to Non-GAAP Income from Operations and Non-GAAP

pg. 10

Adjusted EBITDA and Margin Reconciliation By Segment

3. Reconciliation of GAAP to Non-GAAP Measures

pg. 13

4. Debt Leverage Ratios

pg. 21

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(1) Adjusted for net sales of RRD Brazil, disposed in the first quarter of 2019; the R&D business, disposed of in the second quarter of 2019, the GDS business, disposed of in the fourth quarter of 2019, and RRD Chile, disposed of in the first quarter of 2020.

(1) Adjusted for net sales of RRD Brazil, disposed in the first quarter of 2019; the R&D business, disposed of in the second quarter of 2019, and the GDS business, disposed of in the fourth quarter of 2019.

  • (1) Adjusted for net sales of RRD Brazil, disposed in the first quarter of 2019; the R&D business, disposed of in the second quarter of 2019, and the GDS business, disposed of in the fourth quarter of 2019.

  • (2) The reported results of the Company include the results of acquired businesses from the acquisition date forward. To calculate the impact of the acquisition of Precision Dialogue in August of 2016, the Company has calculated pro forma net sales as if the acquisition took place on January 1, 2016 for the purposes of this schedule. This resulted in the addition of $36.8 million of pro forma net sales during the full year 2016.

  • (3) Adjusted for net sales of disposed businesses: entities within the Business Services segment were disposed in the first and third quarters of 2016.

  • (4) Adjusted for new sales as a result of the Commercial Agreements entered into in conjunction with the spinoff transactions.

  • (1) Exclusive of depreciation and amortization.

  • (2) Restructuring, impairment and other-net: charges incurred in the third quarter of 2020 primarily included pre-tax charges of $37.3 million for multi-employer pension plan withdrawal obligations, of which $34.5 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 recent debt exchanges as well as the ongoing SEC and DOJ investigations in RRD Brazil.

  • (1) Exclusive of depreciation and amortization.

  • (2) Restructuring, impairment and other-net: charges incurred in the second quarter of 2020 primarily included pre-tax charges of $13.9 million for other restructuring charges, primarily consisting of consulting charges; $12.9 million for employee termination costs; and

    $1.6 million for impairment and other charges, including multi-employer pension plan withdrawal obligations. Charges incurred in the second quarter of 2019 primarily included pre-tax charges of $10.7 million for employee termination costs; $4.5 million for other restructuring charges and $0.7 million for multi-employer pension plan withdrawal obligations.

  • (3) Loss (gain) on disposal of an operating entity: relates to the bankruptcy liquidation of RR Donnelley Editora e Grafica Ltda., a subsidiary of RRD, on March 31, 2019.

  • (4) All other: primarily included expenses related to the recent debt exchanges as well as the ongoing SEC and DOJ investigations in RRD Brazil.

  • (1) Exclusive of depreciation and amortization.

  • (2) Restructuring, impairment and other-net: charges incurred in the first quarter of 2020 primarily $4.1 million for other restructuring charges partially offset by net gains of $1.7 million on the sale of restructured facilities; $8.1 million for employee termination costs and $0.7 million for multi-employer pension plan withdrawal obligations. Charges incurred in the first quarter of 2019 included pre-tax charges of $8.2 million for other restructuring charges; $8.1 million for employee termination costs; and $0.8 million for impairment and other charges, including MEPP withdrawal obligations.

  • (3) Loss (gain) on disposal of an operating entity: relates to the bankruptcy liquidation of RR Donnelley Editora e Grafica Ltda., a subsidiary of RRD, on March 31, 2019.

  • (4) All other: primarily included expenses related to the recent debt exchanges as well as the ongoing SEC and DOJ investigations in RRD Brazil.

  • (1) Exclusive of depreciation and amortization.

  • (2) Restructuring, impairment and other charges - net: charges incurred in the twelve months ended December 31, 2019 included pre-tax charges of $22.2 million for employee termination costs; $16.6 million of other restructuring costs; and $3.6 million for impairment and other charges, including multi-employer pension plan withdrawal obligations somewhat offset by net gains of $5.7 million on the sale of restructured facilities. Charges incurred in the twelve months ended December 31, 2018 included pre-tax charges of $12.7 million for employee termination costs; $15.9 million of other restructuring costs; $13.8 million of impairment of intangible and long lived assets; and $2.9 million for multi-employer pension plan withdrawal obligations somewhat offset by net gains of $6.7 million on the sale of restructured facilities.

  • (3) Loss on debt extinguishments: related to the repurchase of senior notes and debentures during the twelve months ended December 31, 2019. During the twelve months ended December 31, 2018, related to premiums paid in connection with tenders, unamortized debt issuance costs and other expenses associated with the tender offer.

  • (4) All other: primarily included expenses related to the ongoing SEC and DOJ investigations, an increase in reserves for an unfavorable state sales tax matter and expenses related to the ongoing bankruptcy liquidation of RRD Brazil, partially offset by gain on disposal of businesses during the twelve months ended December 31, 2019. During the twelve months ended December 31, 2018, included adjustments to the provisional amounts recorded at December 31, 2017 as a result of the Tax Act and adjustments to deferred taxes.

  • (1) Exclusive of depreciation and amortization.

  • (2) Restructuring, impairment and other- net: charges incurred in the twelve months ended December 31, 2017 included pre-tax charges of $23.2 million for employee termination costs; $4.1 million of other restructuring costs; $22.7 million of impairment of intangibles and long lived assets which includes $21.3 million goodwill impairment in the digital and creative solutions business within Marketing Solutions segment; and $2.9 million for multi-employer pension plan withdrawal obligations partially offset by net gains of $0.3

    million on the sale of restructured facilities.

  • (3) Net gain on investments: included a pre-tax non-cash net realized gain of $94.0 million ($95.7 million after-tax) resulting from the debt-for-equity exchange of the Company's retained shares of Donnelley Financial for certain outstanding senior notes and a pre-tax gain of $1.3 million ($0.8 million after-tax) resulting from the sale of certain of the Company's affordable housing investments, partially offset by a pre-tax loss of $51.6 million ($51.6 million after-tax) resulting from the sale of the Company's retained shares in LSC during the twelve months ended December 31, 2017.

  • (4) Tax expense related to the enactment of the Tax Cuts and Jobs Act: included a provisional estimate for the one-time transition tax on foreign earnings of $93.8 million, as well as a provisional adjustment to the net deferred tax assets for the reduced corporate income tax rate of $6.2 million.

  • (5) All other: During the twelve months ended December 31, 2017, included $3.3 million of charges related to consulting and other expenses associated with the 2016 spinoff transactions and $1.5 million of non-cash pension settlement charges.

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R.R. Donnelley & Sons Company published this content on 24 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 February 2021 09:31:04 UTC.