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DEAR FELLOW SHAREHOLDERS,
In 2004 RR Donnelley redefined the printing industry.With the acquisition of Moore Wallace, RR Donnelley positioned itself uniquely to address customers' needs for printed products and print-related services. I am pleased that our operating results and marketplace victories reflect our employees' exceptional efforts to implement our strategy. In fiscal 2004, net sales increased 71% over the prior year due to the acquisition of Moore Wallace and strong performances in our publishing and retail services segment and financial print, book, and international businesses. Excluding restructuring, impairment, and integration charges, operating margins and earnings per share from continuing operations improved handsomely year-over-year. We generated cash flow from continuing operations of nearly $760 million, which enabled us to fund capital expenditures, dividends, share repurchases, and other initiatives. Our strong balance sheet and enhanced liquidity position help assure that your company is in excellent financial condition. In less than a year, we realized important synergies; combined operations to enhance efficiency, scale, and customer service; sold or discontinued businesses that did not fit with our long-term plans; and, in the process, took unprofitable direct mail, Latin American, and logistics operations and made them profitable. When we brought RR Donnelley and Moore Wallace together, we stated several priorities - to integrate quickly, reduce costs, cross-sell, and operate with integrity. We have moved aggressively to deliver on each front - identifying best practices and making them our standard, building financial discipline into every aspect of our business, listening carefully to our customers in order to craft integrated solutions for them, and treating each of our customers, shareholders, suppliers, communities, and employees fairly, ethically, and honestly. Working Together To Deliver For Customers
Even as our employees have worked swiftly to
integrate internal operations, they continued to
focus on working more closely with our customers. For example, every day many of RR Donnelley's talented employees report to work, not in our
own facilities, but on-site at our customers' locations. There they manage customers' digital asset libraries, provide print-management consultation, and shepherd critical projects to completion.
Our Premedia Technologies group manages more than 2 million digital assets for our customers.
Each day our customers access a broad array of RR Donnelley's Internet-based toolsets to track their projects through our production cycles, to order more printed materials, to launch direct response mailings, and more. Our market-leading, web-enabled tools are woven deeply into our customers' own processes. For example, at the rate of more than a million times a year, our customers login to proprietary RR Donnelley websites to release orders from our warehouses, initiate print-on-demand projects, track their orders through the production-to-delivery cycle, and even create custom materials that speak with a one-to-one voice. As customers enact their own just-in-time strategies, enabled increasingly by radio-frequency labels that we provide, they turn to RR Donnelley for logistics solutions that bring print into their facilities as needed - to restock shelves, keep production lines running, or meet crucial mailing dates. The RR Donnelley model is not just built around waiting for customers to ask us to bid on a project's predetermined specifications. Ours is a proactive approach, in which our well-trained sales professionals and customer service specialists offer ideas about ways to enhance a project's design, workflow, logistics, material components, and more. We work together with our customers to do more than deliver award-winning printed products. Customers draw on RR Donnelley's expertise and unmatched global production platform to increase their revenues, reduce their costs, achieve their cycle time goals, build their brands, improve their processes, and comply with complex regulations. Throughout 2004, customers responded favorably to our consultative approach, selecting RR Donnelley to produce their marquee projects, extend long-term contractual relationships, and initiate new contracts for a broad mix of products and services. Our marketplace momentum provides a clear indication that RR Donnelley's unique ability to prepare, produce, and deliver complex print-related products and services - virtually anywhere in the world - resonates with our diverse blue-chip customer base. Working Together To Deliver For Each Other
Over the past year we asked much of our employees. In every way, they gave their best to help
RR Donnelley reach demanding goals. Ours is an extremely talented workforce, which daily demonstrates craftsmanship, creativity, dedication, and professionalism.
Their remarkable work delivers exceptional quality to our customers. In 2004, RR Donnelley received industry recognition for excellence in printing, including more Gold Ink Awards than any other printer. These awards were won for work from across our platform: for hard cover fiction and nonfiction books and textbooks, magazines and catalogs, brochures, direct mail materials, media kits, posters, newsletters, packaging, and point-of-purchase displays. RR Donnelley was also recognized for its focus on environmental stewardship and workplace safety. We were named Environmental Company of the Year in the United Kingdom by PrintWeek magazine, and two of our U.S. magazine and catalog facilities received important Forest Stewardship Council Chain-of-Custody certification, which is essential to the many customers who want to assure that raw materials for their publications are drawn from sustainable forest resources. In addition, our Reno, Nevada, plant became the first gravure-printing facility in the United States to receive Voluntary Protection Program Star certification from the Occupational Safety and Health Administration, followed shortly by our Lynchburg, Virginia facility, which is the largest gravure plant to earn this important certification. These two facilities joined our operations in Senatobia, Mississippi and Roanoke, Virginia in achieving Star status. Our employees' efforts were further recognized by respondents from a variety of leading organizations who in FORTUNE Magazine named RR Donnelley as one of America's Most Admired Companies. RR Donnelley finished first in the printing industry, and swept each category the survey measured. During 2004 we also redesigned our compensation systems better to align our employees' goals with our shareholders' interests. The RR Donnelley team competes with a special will-to-win, and is rewarded for achieving challenging, measurable goals. Our employees work actively to improve service, reduce waste, contain costs, and delight customers. Working Together For Long-Term Performance
The strategy we began implementing in 2004 to build the new RR Donnelley continues. Our leadership, drawn from the very best of our combined entities and complemented by exceptional outside talent, is working as a seamless team which is focused on increasing value. In 2005 we intend to:
We extend thanks to our shareholders for their confidence, to our customers for selecting us to help them achieve their print-related goals, and to our employees for the enthusiasm with which they have embraced and implemented our strategy. Very truly yours,  Mark A. Angelson Chief Executive Officer March 30, 2005 |
