R.R. Donnelley & Sons Company is the world's premier full-service global print
provider and the largest printing company in North America, serving customers
in the publishing, healthcare, advertising, retail, telecommunications, technology,
financial services, and many other industries. Founded more than 140 years ago,
the Company provides solutions in commercial printing, forms and labels, direct
mail, financial printing, print fulfillment, business communication outsourcing,
logistics, online services, digital photography, color services and content and
database management.
Publishing and Retail Services.'The Publishing and Retail Services segment
consists of the following businesses:
Magazine, catalog and retail: Provides print services to consumer magazine
and catalog publishers as well as retailers.
Directories: Serves the global printing needs of yellow and white pages directory
publishers.
Logistics: Consolidates and delivers Company-printed products, as well as products
printed by third parties; also provides expedited distribution of time-sensitive
and secure material, warehousing and fulfillment services.
Premedia: Offers conventional and digital photography, creative, color matching,
page production and content management services to the advertising, catalog,
corporate, magazine, retail and telecommunications markets.
Integrated Print Communications.'The Integrated Print Communications segment
consists primarily of short-run and variable print operations in the following
lines of business:
Book: Provides print services to the consumer, religious, educational and specialty
book markets.
Direct Mail: Offers services with respect to direct marketing programs including
content creation, database management, printing, personalization, finishing
and distribution in North America and Europe.
Financial Print: Provides information management, content assembly and print
services to corporations and their investment banks and law firms as those corporations
access the global capital markets; as well as customized communications solutions
for investment management, banking, insurance and managed care companies.
Business Communications Services: Offers customized, variably-imaged business
communications, including account statements, customer invoices, insurance policies,
enrollment kits, transaction confirmations and database services, primarily
to the financial services, telecommunications, insurance and healthcare industries.
Short-Run Commercial Print: Provides print and print-related services to a
diversified customer base. Examples of materials produced include annual reports,
marketing brochures, catalog and marketing inserts, pharmaceutical inserts and
other marketing, retail point-of-sale and promotional materials and technical
publications.
Europe: Provides print and print-related services to the telecommunications,
consumer magazine and catalog markets.
Asia: Provides print and print-related services to the book, telecommunications
and consumer magazine markets.
Forms and Labels.'The Forms and Labels segment designs and manufactures paper-based
business forms, labels and printed office products, and provides print-related
services, including print-on-demand services, from facilities located in North
America and Latin America. The Latin American business also prints magazines,
catalogs, books and directories.
Corporate.'The Corporate segment includes unallocated net earnings of benefit
plans (excluding service costs) and unallocated general and administrative expenses
including, in part, executive, legal, finance, information technology, human
resources and certain facility costs.
Raw Materials
The primary raw materials the Company uses in its print businesses are paper
and ink. The Company negotiates with leading suppliers to maximize its purchasing
efficiencies, but it does not rely on any one supplier. The Company has existing
paper supply contracts to cover substantially all of its requirements through
2005 and management believes extensions and renewals of these purchase contracts
will provide adequate paper supplies in the future. Ink and related materials
are currently available in sufficient amounts, and the Company believes that
it will have adequate supplies in the future. The Company also coordinates purchasing
activity at the local facility and corporate levels to increase economies of
scale. Fluctuations in paper prices, however, can affect the Company's operations.
Prices for most paper grades increased in 2004. Although the pricing environment
is difficult, the Company is continuing its efforts to raise its prices to cover
a substantial portion of these increases, but there is no assurance that the
Company will be successful in passing these increases to customers.
Competition
The Company operates principally in the commercial print portion of the print
industry, with related service offerings designed to provide customers complete
solutions for communicating their messages to targeted audiences. The environment
is highly competitive in most of our product categories and geographic regions.
Competition is based largely on price, quality and servicing the special needs
of customers. Industry analysts believe that there is overcapacity in most commercial
printing markets. Therefore, competition is intense. In this competitive pricing
environment, companies have focused on reducing costs in order to preserve operating
margins. Management believes this environment will continue to lead to more
consolidation within the commercial print industry as companies seek economies
of scale, broader customer relationships, geographic coverage and product breadth
to overcome or offset industry excess-capacity and pricing pressures.