-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N0+6pyVCkUW+OeM/u3VumQkynIejylEhcld7Mx8rfNX4luvnY7KLg4PKZw+/rnUg 9d5sXduJmfng8Se3PKejwg== 0001193125-08-235214.txt : 20081113 0001193125-08-235214.hdr.sgml : 20081113 20081113163808 ACCESSION NUMBER: 0001193125-08-235214 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20081105 ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20081113 DATE AS OF CHANGE: 20081113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RR Donnelley & Sons Co CENTRAL INDEX KEY: 0000029669 STANDARD INDUSTRIAL CLASSIFICATION: COMMERCIAL PRINTING [2750] IRS NUMBER: 361004130 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04694 FILM NUMBER: 081185447 BUSINESS ADDRESS: STREET 1: 111 SOUTH WACKER DRIVE CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3123268000 MAIL ADDRESS: STREET 1: 111 SOUTH WACKER DRIVE CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: DONNELLEY R R & SONS CO DATE OF NAME CHANGE: 19920703 8-K 1 d8k.htm FORM 8-K Form 8-K

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 5, 2008

 

 

R. R. DONNELLEY & SONS COMPANY

(Exact name of Registrant as Specified in Its Charter)

 

 

 

Delaware   1-4694   36-1004130

(State or Other Jurisdiction

of Incorporation)

   (Commission File Number)  

(IRS Employer

Identification No.)

 

111 South Wacker Drive,

Chicago, Illinois

   60606
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s Telephone Number, Including Area Code: (312) 326-8000

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 8.01 Other Events.

Attached as Exhibit 100 to this Current Report on Form 8-K are the following materials from R.R. Donnelley & Sons Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed on November 5, 2008, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. Users of this data are advised pursuant to Rule 401 of Regulation S-T that the financial information contained in the XBRL documents is unaudited and these are not the official publicly filed financial statements of R.R. Donnelley & Sons Company. The purpose of submitting these XBRL formatted documents is to test the related format and technology and, as a result, investors should continue to rely on the official filed version of the furnished documents and not rely on this information in making investment decisions.

In accordance with Rule 402 of Regulation S-T, the information in this Current Report on Form 8-K, including Exhibit 100, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits

 

100    The following materials from R.R. Donnelley & Sons Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed on November 5, 2008 formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    R. R. DONNELLEY & SONS COMPANY
Date: November 13, 2008     By:  

/s/ Andrew B. Coxhead

      Andrew B. Coxhead
      Senior Vice President and Controller
      (Chief Accounting Officer)

EXHIBIT INDEX

 

Exhibit

Number

  

Description

Exhibit 100.INS   XBRL Instance Document
Exhibit 100.SCH   XBRL Taxonomy Extension Schema Document
Exhibit 100.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 100.LAB   XBRL Taxonomy Extension Label Linkbase Document
Exhibit 100.PRE   XBRL Taxonomy Extension Presentation Linkbase Document
 EX-100.INS 2 rrd-20080930.xml XBRL INSTANCE DOCUMENT 11937100000 0 303700000 363400000 847600000 889800000 2881100000 994500000 3547100000 1191700000 115500000 3245100000 1200400000 791400000 7938700000 11937100000 500000 3076000000 3198100000 421400000 561300000 255200000 0 83700000 851200000 2671900000 2115700000 5100000 1643900000 3998400000 1193700000 435700000 0.80 0.80 0.26 2090300000 2558200000 164700000 168200000 249100000 0.80 0.80 0 0.00 0.00 79700000 56200000 -1100000 1200000 168200000 306400000 23400000 2864600000 279800000 209700000 209100000 -800000 56700000 2600000 -41200000 -8700000 11200000 -46300000 -67800000 -29200000 -149700000 82600000 -5800000 -40500000 -347400000 -276800000 689600000 690400000 23300000 245400000 0 165800000 121500000 238700000 191700000 2200000 0 275000000 42900000 26300000 400000000 5100000 20200000 25000000 2.34 2.34 0.78 6452000000 7932900000 486500000 495300000 688400000 2.33 2.33 1700000 0.01 0.01 189500000 171000000 7000000 3600000 497000000 852400000 46500000 8785300000 947900000 212500000 212000000 12086700000 0 303700000 341300000 872300000 954900000 2858400000 1085300000 3521300000 725000000 102200000 3264900000 1323200000 709500000 8179400000 12086700000 3000000 2765200000 3601900000 418100000 689100000 247900000 0 85500000 833200000 2726000000 2181200000 63900000 1312900000 3907300000 909000000 379000000 343000000 0.80 0.80 0.26 2122400000 2615600000 152800000 175000000 235800000 0.80 0.80 0 0.00 0.00 59300000 59100000 500000 1500000 175000000 294400000 19900000 2910000000 320500000 218500000 217800000 -500000 131600000 318300000 -131200000 18600000 -600000 0 31700000 101800000 800000 61500000 12900000 -15000000 1559000000 -2228200000 782200000 782700000 19200000 250800000 13100000 171000000 1929100000 321100000 652400000 102100000 1244200000 0 7000000 9300000 0 4800000 22000000 35800000 1.12 1.11 0.78 6218200000 8000400000 443700000 244500000 332900000 1.12 1.11 -100000 0.00 0.00 85500000 167900000 2300000 2900000 244400000 498500000 361800000 8498900000 976700000 220300000 219100000 211400000 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated interim financial statements include the accounts of R.R. Donnelley & Sons Company and its subsidiaries (the "Company" or "RR Donnelley") and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. These unaudited condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and the related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2007, as amended by Form 10-K/A filed with the SEC on May 6, 2008. Operating results for the three and nine months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2008. All significant intercompany transactions have been eliminated in consolidation. These unaudited condensed consolidated interim financial statements include estimates and assumptions of management that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates. Certain prior year amounts have been reclassified to conform to the Company's current segment structure. 2. ACQUISITIONS 2008 Acquisitions On March 14, 2008, the Company acquired Pro Line Printing, Inc. ("Pro Line"), a multi-facility, privately held producer of newspaper inserts headquartered in Irving, Texas. The purchase price for Pro Line was approximately $122.2 million, net of cash acquired of $1.7 million and including acquisition costs of $4.2 million. Pro Line's operations are included in the U.S. Print and Related Services segment. The operations of Pro Line are complementary to the Company's existing retail insert product line. As a result, this acquisition is expected to improve the Company's ability to serve customers, increase capacity utilization, and reduce management, procurement and manufacturing costs. The Pro Line and another immaterial acquisition were recorded by allocating the cost to the assets acquired, including intangible assets and liabilities assumed, based on their estimated fair values at the acquisition date. The excess of the cost of the acquisitions over the net amounts assigned to the fair value of the assets acquired and the liabilities assumed was recorded as goodwill, none of which is tax deductible. The allocation below is preliminary, as the final valuation of deferred taxes and tax contingencies has not been completed. The preliminary purchase price allocations for Pro Line and another immaterial acquisition are as follows: Accounts receivable $ 17.4 Inventories 7.7 Other current assets 0.9 Property, plant and equipment and other long-term assets 102.6 Amortizable intangible assets 15.5 Goodwill 30.9 Accounts payable and accrued liabilities (29.7 ) Deferred taxes-net (7.5 ) Long-term liabilities (5.8 ) Total purchase price-net of cash acquired $ 132.0 2007 Acquisitions On January 9, 2007, the Company acquired Banta Corporation ("Banta"), a provider of comprehensive printing and digital imaging solutions to publishers and direct marketers, including digital content management and e-business services. Additionally, Banta provided a wide range of procurement management and other outsourcing capabilities to technology and medical device companies. The purchase price for Banta was approximately $1,352.7 million, net of cash acquired of $72.9 million and including $13.9 million of acquisition costs and the assumption of $17.6 million of Banta's debt. Banta's operations are included in the U.S. Print and Related Services segment with the exception of its Global Turnkey Solutions operations, which are included in the International segment. On January 24, 2007, the Company acquired Perry Judd's Holdings Incorporated ("Perry Judd's"), a provider of consumer and business-to-business catalogs as well as consumer, trade, and association magazines. The purchase price for Perry Judd's was approximately $181.5 million, net of cash acquired of $0.3 million and including acquisition costs of $2.6 million. Perry Judd's operations are included in the U.S. Print and Related Services segment. On May 16, 2007, the Company acquired Von Hoffmann, a U.S.-based printer of books and other products that serve primarily the education, trade and business-to-business catalog sectors. The purchase price for Von Hoffmann was approximately $412.5 million including acquisition costs of $7.5 million. Von Hoffmann's operations are included in the U.S. Print and Related Services segment. On December 27, 2007, the Company acquired Cardinal Brands, Inc. ("Cardinal Brands"), a designer, developer and manufacturer of document-related business, consumer and hobby products. The purchase price for Cardinal Brands was approximately $121.6 million, net of cash acquired of $2.5 million and including acquisition costs of $3.9 million. Cardinal Brands' operations are included in the U.S. Print and Related Services segment. The operations of these acquired businesses are complementary to the Company's existing products and services. As a result, the addition of these businesses is expected to improve the Company's ability to serve customers, increase capacity utilization and reduce management, procurement and manufacturing costs. These acquisitions were recorded by allocating the cost of the assets acquired, including intangible assets and liabilities assumed, based on their estimated fair values at the acquisition dates. The excess of the cost of each acquisition over the net amounts assigned to the fair value of the assets acquired and the liabilities assumed was recorded as goodwill, none of which is tax deductible. The allocation below is preliminary, as the final valuation of deferred taxes and tax contingencies has not been completed for the Cardinal Brands acquisition. The purchase price allocations for the other acquisitions completed during 2007 are final. The preliminary purchase price allocation is as follows: Restricted cash equivalents $ 102.5 Accounts receivable 424.3 Inventories 178.0 Other current assets 11.5 Property, plant and equipment and other long-term assets 586.2 Intangible assets 621.1 Goodwill 790.9 Accounts payable and accrued liabilities (328.7 ) Postretirement and pension benefits and other long-term liabilities (50.2 ) Deferred taxes-net (267.3 ) Total purchase price-net of cash acquired 2,068.3 Debt assumed and not repaid 17.6 Net cash paid $ 2,050.7 Pro forma results The following unaudited pro forma financial information for the three and nine months ended September 30, 2008 presents the combined results of operations of the Company and Pro Line as if the acquisition of Pro Line had occurred at January 1, 2008. The unaudited pro forma financial information for the three and nine months ended September 30, 2007 presents the combined results of operations of the Company and Banta, Perry Judd's, Von Hoffmann, Cardinal Brands and Pro Line as if the acquisition of each had occurred at January 1, 2007. The unaudited pro forma financial information is not intended to represent or be indicative of the Company's consolidated results of operations or financial condition that would have been reported had these acquisitions been completed as of the beginning of the period presented and should not be taken as indicative of the Company's future consolidated results of operations or financial condition. Pro forma adjustments are tax-effected at the applicable statutory tax rates. Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Net sales $ 2,864.6 $ 2,984.8 $ 8,808.9 $ 8,889.4 Net earnings 168.2 172.7 492.4 232.3 Earnings per share: Basic 0.80 0.79 2.32 1.06 Diluted 0.80 0.79 2.32 1.05 The unaudited pro forma results for the three months ended September 30, 2008 and 2007 include $32.2 million and $31.8 million, respectively, for the amortization of purchased intangibles. The unaudited pro forma results for the nine months ended September 30, 2008 and 2007 include $97.8 million and $96.2 million, respectively, for the amortization of purchased intangibles. Also included in the pro forma financial information for the three and nine months ended September 30, 2008 are net restructuring and impairment charges of $23.4 million and $46.5 million, respectively, and for the three and nine months ended September 30, 2007, $19.9 million and $361.8 million, respectively (see Note 6). 3. INVENTORIES September 30, December 31, 2008 2007 Raw materials and manufacturing supplies $ 327.6 $ 300.7 Work-in-process 237.9 204.0 Finished goods 312.8 272.4 LIFO reserve (86.9 ) (67.6 ) $ 791.4 $ 709.5 4. PROPERTY, PLANT AND EQUIPMENT September 30, December 31, 2008 2007 Land $ 95.1 $ 97.2 Buildings 1,175.1 1,164.9 Machinery and equipment 6,043.3 5,826.3 7,313.5 7,088.4 Less: Accumulated depreciation (4,641.6 ) (4,362.4 ) Total $ 2,671.9 $ 2,726.0 Assets Held for Sale As a result of recent restructuring actions, certain facilities and equipment are considered held for sale. The net book value of assets held for sale was $6.2 million at September 30, 2008 and $11.0 million at December 31, 2007. These assets are included in other noncurrent assets in the Condensed Consolidated Balance Sheets and have been assessed for impairment based on their estimated fair value, less estimated costs to sell. 5. GOODWILL AND OTHER INTANGIBLE ASSETS Foreign Exchange and December 31, Other September 30, Goodwill 2007 Dispositions Acquisitions Adjustments 2008 U.S. Print and Related Services $ 2,544.5 $ - $ 30.9 $ (8.0 ) $ 2,567.4 International 720.4 - - (42.7 ) 677.7 $ 3,264.9 $ - $ 30.9 $ (50.7 ) $ 3,245.1 During the three months ended September 30, 2008, the Company finalized its valuation of certain tax contingencies related to the 2006 acquisition of OfficeTiger Holdings Inc. ("OfficeTiger"). As a result, the Company recorded reductions of $15.0 million to goodwill and accrued liabilities. OfficeTiger's operations are included in the International segment. Gross Carrying Accumulated Weighted- Amount Additions Amortization Average at January 1, During the and Foreign September 30, Amortization Other Intangible Assets 2008 Year Exchange 2008 Period Trademarks, licenses and agreements $ 21.9 $ - $ (21.9 ) $ - N/A Patents 98.3 - (56.1 ) 42.2 3.4 years Customer relationship intangibles 1,449.5 15.6 (339.8 ) 1,125.3 9.7 years Trade names 19.3 - (4.5 ) 14.8 31.4 years Indefinite-lived trade names 16.4 1.7 - 18.1 Indefinite $ 1,605.4 $ 17.3 $ (422.3 ) $ 1,200.4 Amortization expense for other intangibles was $32.2 million and $30.5 million for the three months ended September 30, 2008 and 2007, respectively, and $97.2 million and $86.3 million for the nine months ended September 30, 2008 and 2007, respectively. Estimated annual amortization expense will be approximately $130 million for 2008, $129 million for 2009 through 2011, $117 million for 2012, and $115 million for 2013. 6. RESTRUCTURING AND IMPAIRMENT CHARGES Restructuring and Impairment Costs Charged to Results of Operations For the three months ended September 30, 2008 and 2007, the Company recorded the following net restructuring and impairment charges: Three Months Ended Three Months Ended September 30, 2008 September 30, 2007 Employee Other Employee Other Terminations Charges Impairment Total Terminations Charges Impairment Total U.S. Print and Related Services $ 16.3 $ - $ 0.4 $ 16.7 $ 9.5 $ 0.8 $ 1.5 $ 11.8 International 4.2 0.7 0.1 5.0 3.2 0.6 - 3.8 Corporate 1.1 0.6 - 1.7 1.0 3.3 - 4.3 $ 21.6 $ 1.3 $ 0.5 $ 23.4 $ 13.7 $ 4.7 $ 1.5 $ 19.9 For the nine months ended September 30, 2008 and 2007, the Company recorded the following net restructuring and impairment charges: Nine Months Ended Nine Months Ended September 30, 2008 September 30, 2007 Employee Other Employee Other Terminations Charges Impairment Total Terminations Charges Impairment Total U.S. Print and Related Services $ 21.4 $ 2.4 $ 2.1 $ 25.9 $ 19.3 $ 1.1 $ 259.5 $ 279.9 International 14.6 2.3 0.2 17.1 10.1 3.0 58.8 71.9 Corporate 0.6 2.6 0.3 3.5 5.3 4.7 - 10.0 $ 36.6 $ 7.3 $ 2.6 $ 46.5 $ 34.7 $ 8.8 $ 318.3 $ 361.8 For the three and nine months ended September 30, 2008, the Company recorded net restructuring charges of $21.6 million and $36.6 million, respectively, for employee termination costs for 1,338 employees, 1,232 of whom were terminated as of September 30, 2008, associated with actions resulting from the reorganization of certain operations and the exiting of certain business activities. These actions included the realignment and consolidation of the Canadian organization, management reorganization within Latin America, the closing of two Global Turnkey Solutions manufacturing facilities within the International segment and the realignment and consolidation of financial print organizations in the U.S. Print and Related Services and International segments. Additionally, the Company incurred other restructuring charges, including the lease termination and other facility closure costs of $1.3 million and $7.3 million, respectively, for the three and nine months ended September 30, 2008. For the three and nine months ended September 30, 2008, the Company recorded $0.5 million and $2.6 million, respectively, of impairment charges for other long-lived assets. For the three and nine months ended September 30, 2007, the Company recorded $1.5 million and $318.3 million, respectively, for impairment of assets, of which $316.1 million reflected the write-off of the Moore Wallace, OfficeTiger and other trade names associated with the Company's decision in September 2007 to unify most of its printing and related services offerings under the single RR Donnelley brand. For the three and nine months ended September 30, 2007, the Company recorded net restructuring charges of $13.7 million and $34.7 million, respectively, for employee termination costs for 704 employees, all of whom were terminated as of September 30, 2008, associated with actions resulting from the reorganization of certain operations and the exiting of certain business activities. These actions included management changes to simplify the management reporting structure and cost structure reductions, including the closing of one manufacturing facility within the U.S. Print and Related Services segment. In addition, the Company incurred other restructuring charges, primarily lease termination costs, of $4.7 million and $8.8 million for the three and nine months ended September 30, 2007, respectively. Restructuring Costs Capitalized as a Cost of Acquisition During 2008, the Company recorded $2.4 million of restructuring costs related to employee terminations and other costs in connection with the acquisitions of Pro Line and Cardinal Brands. Restructuring Reserve In addition to the 2008 restructuring actions, the Company initiated various restructuring actions in 2007 and prior years, which included the consolidation of operations and workforce reductions, for which restructuring reserves continue to be utilized. The reconciliation of the restructuring reserve as of September 30, 2008 is as follows: Restructuring Cost, Net Charged to Capitalized December 31, Results of as a Cost of Cash September 30, 2007 Operations Acquisitions Paid 2008 Employee terminations $ 32.8 $ 36.6 $ 1.4 $ 37.9 $ 32.9 Other 13.9 7.3 1.0 10.7 11.5 $ 46.7 $ 43.9 $ 2.4 $ 48.6 $ 44.4 The Company anticipates that payments associated with employee terminations will be substantially completed by September of 2009. The restructuring liabilities classified as "other" consist of the estimated remaining payments related to lease exit costs and other facility closing costs. Payments on certain of these lease obligations are scheduled to continue until 2017. Market conditions and the Company's ability to sublease these properties could affect the ultimate charge related to these lease obligations. Any potential recoveries or additional charges could affect amounts reported in the consolidated financial statements of future periods. 7. EMPLOYEE BENEFITS The components of the estimated pension and postretirement benefits expense for the three and nine months ended September 30, 2008 and 2007 were as follows: Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Pension expense Service cost $ 21.5 $ 23.6 $ 64.4 $ 71.1 Interest cost 42.1 38.1 126.2 114.2 Expected return on assets (66.7 ) (60.4 ) (199.9 ) (181.2 ) Amortization, net (1.2 ) (0.9 ) (3.5 ) (2.7 ) Settlement - - (0.1 ) 0.6 Net pension expense (benefit) $ (4.3 ) $ 0.4 $ (12.9 ) $ 2.0 Postretirement benefits expense Service cost $ 3.1 $ 3.0 $ 9.3 $ 9.1 Interest cost 7.6 7.2 22.7 21.6 Expected return on assets (4.1 ) (3.8 ) (12.2 ) (11.4 ) Amortization, net (3.6 ) (2.3 ) (10.9 ) (6.9 ) Net postretirement benefits expense $ 3.0 $ 4.1 $ 8.9 $ 12.4 8. SHARE-BASED COMPENSATION The Company recognizes compensation expense, based on estimated fair values, for all share-based awards made to employees and directors, including stock options, restricted stock units and performance share units. The total compensation expense related to all share-based compensation plans was $6.4 million and $20.2 million for the three and nine months ended September 30, 2008, respectively. The total compensation expense related to all share-based compensation plans was $6.4 million and $22.0 million for the three and nine months ended September 30, 2007, respectively. Stock Options The Company granted 754,000 and 470,000 stock options during the nine months ended September 30, 2008 and 2007, respectively. The fair value of each stock option award is estimated on the date of grant using the Black Scholes option pricing model. The fair value of these stock options was determined using the following assumptions: 2008 2007 Grant Grant Expected volatility 22.78 % 20.34 % Risk-free interest rate 2.96 % 4.52 % Expected life (years) 6.25 7.00 Expected dividend yield 3.31 % 2.85 % The weighted average grant date fair value of these options was $5.63 and $7.84 per stock option for the grants in the first quarter of 2008 and 2007, respectively. The following table is a summary of the Company's stock option activity: Weighted Average Shares Weighted Remaining Under Average Contractual Aggregate Option Exercise Term Intrinsic Value (thousands) Price (years) (millions) Outstanding at December 31, 2007 3,489 $ 29.64 4.4 $ 30.4 Granted 754 32.07 9.4 Exercised (85 ) 29.66 Cancelled/forfeited/expired (508 ) 41.41 Outstanding at September 30, 2008 3,650 $ 28.78 5.4 $ 6.2 Exercisable at September 30, 2008 1,001 $ 18.33 3.1 $ 6.2 The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company's closing stock price on September 30, 2008 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2008. This amount will change in future periods based on the fair market value of the Company's stock and the number of options outstanding. The total intrinsic value of options exercised for the three and nine months ended September 30, 2008 was $0.2 million and $1.0 million, respectively. Compensation expense recognized related to stock options for the three and nine months ended September 30, 2008 was $0.7 million and $1.8 million, respectively. Compensation expense recognized related to stock options for the three and nine months ended September 30, 2007 was $0.4 million and $1.9 million, respectively. As of September 30, 2008, there was $6.1 million of total unrecognized compensation expense related to stock options. That cost is expected to be recognized over a weighted average period of 3.0 years. Restricted Stock Units Nonvested restricted stock unit awards as of September 30, 2008 and December 31, 2007 and changes during the nine months ended September 30, 2008 were as follows: Shares Weighted Average Grant (thousands) Date Fair Value Nonvested at December 31, 2007 1,409 $ 33.16 Granted 1,032 28.25 Vested (540 ) 32.96 Forfeited (77 ) 33.08 Nonvested at September 30, 2008 1,824 $ 30.47 Compensation expense recognized related to restricted stock units for the three and nine months ended September 30, 2008 was $5.1 million and $16.5 million, respectively. Compensation expense recognized related to restricted stock units for the three and nine months ended September 30, 2007 was $5.7 million and $17.5 million, respectively. As of September 30, 2008, there was $35.0 million of unrecognized share-based compensation expense related to nonvested restricted stock unit awards. That cost is expected to be recognized over a weighted-average period of 2.7 years. Performance Share Unit Awards No performance share unit awards were granted during the nine months ended September 30, 2008. During the nine months ended September 30, 2007, the Company granted performance share unit awards to certain senior officers. Distributions under these awards are payable at the end of the performance period in common stock or cash, at the Company's discretion. Should certain performance targets be achieved, the amount payable under these awards could reach 250% of the initial award. These awards are subject to forfeiture upon termination of employment prior to vesting, subject in some cases to early vesting upon specified events, including death or permanent disability of the grantee or a change in control of the Company. In addition, upon termination by the Company without cause, or by the senior officer for good reason or by reason of retirement, these awards will vest and be payable, if at all, on the same terms and conditions that would have applied had employment not been terminated (a pro rata portion only will vest in the case of retirement). Compensation expense recognized related to performance share unit awards for the three and nine months ended September 30, 2008 was $0.6 million and $1.9 million, respectively. Compensation expense recognized related to performance share unit awards for the three and nine months ended September 30, 2007 was $0.3 million and $2.6 million, respectively. As of September 30, 2008, there was $3.6 million of unrecognized share-based compensation expense related to nonvested performance share unit awards. That cost is expected to be recognized over a weighted average period of 1.5 years. Other Information Authorized unissued shares or treasury shares may be used for issuance under the share-based compensation plans. The Company intends to use treasury shares of its common stock to meet the stock requirements of its awards in the future. As of September 30, 2008, the Company purchased its full authorization of common stock under the terms of a share repurchase program approved by the Board of Directors. On October 29, 2008, the Company's Board of Directors approved a new share repurchase, authorizing the repurchase of up to 10 million shares. During the nine months ended September 30, 2008, the Company purchased in the open market 10 million shares of its common stock at a total cost of $278.8 million, of which purchases of 8.6 million shares settled on or prior to September 30, 2008 at a total cost of $245.4 million. 9. EARNINGS PER SHARE Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Net earnings $ 168.2 $ 175.0 $ 497.0 $ 244.4 Basic: Weighted average number of common shares outstanding 209.1 217.8 212.0 219.1 Net earnings per share-basic $ 0.80 $ 0.80 $ 2.34 $ 1.12 Diluted: Dilutive options and awards (a) 0.6 0.7 0.5 1.2 Diluted weighted average number of common shares outstanding 209.7 218.5 212.5 220.3 Net earnings per share-diluted $ 0.80 $ 0.80 $ 2.34 $ 1.11 Cash dividends paid per common share $ 0.26 $ 0.26 $ 0.78 $ 0.78 (a) For the three months ended September 30, 2008 and 2007, 2.0 million and 1.2 million common stock equivalents, respectively, were excluded as their effect would be anti-dilutive. For the nine months ended September 30, 2008 and 2007, 1.9 million and 0.9 million common stock equivalents, respectively, were excluded as their effect would be anti-dilutive. 10. COMPREHENSIVE INCOME Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Net earnings, as reported $ 168.2 $ 175.0 $ 497.0 $ 244.4 Translation adjustments (37.6 ) 35.4 19.9 75.2 Change in fair value of derivatives and hedge reclassifications, net of tax (19.3 ) - 10.2 7.7 Adjustment for net periodic pension and postretirement benefit cost, net of tax (2.8 ) (1.6 ) (6.6 ) (6.7 ) Change in unrealized (loss) gain on investment, net of tax - 0.4 (1.4 ) 0.5 Comprehensive income $ 108.5 $ 209.2 $ 519.1 $ 321.1 For the three and nine months ended September 30, 2008, the changes in other comprehensive income were net of tax provision of $8.3 million and $9.8 million, respectively, related to unrealized foreign currency gains, tax benefit of $12.2 million and tax provision of $7.4 million, respectively, related to changes in the fair value of derivatives and hedge reclassifications and tax benefits of $1.7 million and $6.4 million related to the adjustment for net periodic pension and postretirement benefit cost. For the three and nine months ended September 30, 2007, the changes in other comprehensive income were net of tax benefits of $4.8 million and $4.9 million, respectively, related to unrealized foreign currency losses, $5.9 million of tax provision for the nine months ended September 30, 2007 related to changes in the fair value of derivatives and tax benefits of $2.0 million and $4.3 million, respectively related to the adjustment for net periodic pension and postretirement benefit cost. 11. SEGMENT INFORMATION The Company operates primarily in the commercial print portion of the printing industry, with related service offerings designed to offer customers complete solutions for communicating their messages to target audiences. The Company's segments and their product and service offerings are summarized below: U.S. Print and Related Services The U.S. Print and Related Services segment includes the Company's U.S. printing operations, managed as one integrated platform, along with related logistics, premedia and print-management services. This segment's products and related service offerings include magazines, catalogs, retail inserts, books, directories, financial print, direct mail, forms, labels, office products, premedia and logistics services. International The International segment includes the Company's non-U.S. printing operations in Asia, Europe, Latin America and Canada. Additionally, this segment includes the Company's business process outsourcing and Global Turnkey Solutions operations. Business process outsourcing provides transactional print and outsourcing services, statement printing, direct mail and print management services through its operations in Europe, Asia and North America. Global Turnkey Solutions provides outsourcing capabilities including product configuration, customized kitting and order fulfillment for technology, medical device and other companies around the world through its operations in Europe and North America. Corporate Corporate consists of unallocated general and administrative activities and associated expenses including, in part, executive, legal, finance, information technology, human resources and certain facility costs. In addition, certain costs and earnings of employee benefit plans, primarily components of net pension and post-retirement benefits expense other than service cost, are included in Corporate and not allocated to operating segments. The Company has disclosed income (loss) from continuing operations as the primary measure of segment earnings (loss). This is the measure of profitability used by the Company's chief operating decision-maker and is most consistent with the presentation of profitability reported within the condensed consolidated financial statements. Income (Loss) from Depreciation Intersegment Net Continuing and Capital Total Sales Sales Sales Operations Amortization Expenditures Three months ended September 30, 2008 U.S. Print and Related Services $ 2,147.8 $ (4.4 ) $ 2,143.4 $ 287.9 $ 109.3 $ 42.3 International 736.8 (15.6 ) 721.2 60.9 45.2 24.9 Total operating segments 2,884.6 (20.0 ) 2,864.6 348.8 154.5 67.2 Corporate - - - (42.4 ) 10.2 14.0 Total continuing operations $ 2,884.6 $ (20.0 ) $ 2,864.6 $ 306.4 $ 164.7 $ 81.2 Income (Loss) from Depreciation Intersegment Net Continuing and Capital Total Sales Sales Sales Operations Amortization Expenditures Three months ended September 30, 2007 U.S. Print and Related Services $ 2,168.1 $ (6.4 ) $ 2,161.7 $ 276.9 $ 103.0 $ 51.4 International 757.1 (8.8 ) 748.3 53.6 41.0 26.5 Total operating segments 2,925.2 (15.2 ) 2,910.0 330.5 144.0 77.9 Corporate - - - (36.1 ) 8.8 6.4 Total continuing operations $ 2,925.2 $ (15.2 ) $ 2,910.0 $ 294.4 $ 152.8 $ 84.3 Income (Loss) from Assets of Depreciation Intersegment Net Continuing Continuing and Capital Total Sales Sales Sales Operations Operations Amortization Expenditures Nine months ended September 30, 2008 U.S. Print and Related Services $ 6,559.7 $ (13.9 ) $ 6,545.8 $ 837.2 $ 7,669.2 $ 322.7 $ 143.6 International 2,282.4 (42.9 ) 2,239.5 148.3 3,053.8 132.9 72.6 Total operating segments 8,842.1 (56.8 ) 8,785.3 985.5 10,723.0 455.6 216.2 Corporate - - - (133.1 ) 1,214.1 30.9 22.5 Total continuing operations $ 8,842.1 $ (56.8 ) $ 8,785.3 $ 852.4 $ 11,937.1 $ 486.5 $ 238.7 Income (Loss) from Assets of Depreciation Intersegment Net Continuing Continuing and Capital Total Sales Sales Sales Operations Operations Amortization Expenditures Nine months ended September 30, 2007 U.S. Print and Related Services $ 6,350.8 $ (18.1 ) $ 6,332.7 $ 539.9 $ 7,646.3 $ 297.0 $ 189.8 International 2,186.7 (20.5 ) 2,166.2 92.6 3,523.9 120.6 114.9 Total operating segments 8,537.5 (38.6 ) 8,498.9 632.5 11,170.2 417.6 304.7 Corporate - - - (134.0 ) 1,232.7 26.1 16.4 Total continuing operations $ 8,537.5 $ (38.6 ) $ 8,498.9 $ 498.5 $ 12,402.9 $ 443.7 $ 321.1 12. COMMITMENTS AND CONTINGENCIES The Company is subject to laws and regulations relating to the protection of the environment. Expenses associated with environmental remediation obligations are provided for when such amounts are probable and can be reasonably estimated. Such accruals are adjusted as new information develops or circumstances change and are not discounted. The Company has been designated as a potentially responsible party in twelve federal and state Superfund sites. In addition to the Superfund sites, the Company may also have the obligation to remediate seven other previously owned facilities and three other currently owned facilities. At the Superfund sites, the Comprehensive Environmental Response, Compensation and Liability Act provides that the Company's liability could be joint and several, meaning that the Company could be required to pay an amount in excess of its proportionate share of the remediation costs. The financial strength of other potentially responsible parties at the Superfund sites and of other liable parties at the previously owned facilities has been considered, where appropriate, in the determination of the Company's estimated liability. The Company has established reserves, recorded in accrued liabilities, that it believes are adequate to cover its share of the potential costs of remediation at each of the Superfund sites and the previously and currently owned facilities. While it is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Company may undertake in the future, in the opinion of management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect on the Company's consolidated annual results of operations, financial position or cash flows. From time to time, the Company's customers and others file voluntary petitions for reorganization or liquidation under United States bankruptcy laws. In such cases, certain pre-petition payments received by us could be considered preference items and subject to return to the bankruptcy administrator. In addition, the Company may be party to certain litigation arising in the ordinary course of business. Management believes that the final resolution of these preference items and litigation will not have a material adverse effect on the Company's consolidated annual results of operations, financial position or cash flows. 13. DEBT The Company's debt consists of the following: September 30, December 31, 2008 2007 Commercial paper $ 483.8 $ 308.1 Credit facility borrowings 275.0 400.0 3.75% senior notes due April 1, 2009 399.9 399.9 4.95% senior notes due May 15, 2010 499.6 499.4 5.625% senior notes due January 15, 2012 624.4 624.3 4.95% senior notes due April 1, 2014 598.7 598.5 5.50% senior notes due May 15, 2015 499.5 499.4 6.125% senior notes due January 15, 2017 620.9 620.5 8.875% debentures due April 15, 2021 80.9 80.9 6.625% debentures due April 15, 2029 199.2 199.2 8.820% debentures due April 15, 2031 68.9 68.9 Other, including capital leases 39.0 27.8 Total debt 4,389.8 4,326.9 Less: current portion (1,191.7 ) (725.0 ) Long-term debt $ 3,198.1 $ 3,601.9 14. INCOME TAXES The Company's unrecognized tax benefits at December 31, 2007 and September 30, 2008 were as follows: Balance, December 31, 2007 $ 212.2 Additions for tax positions of the current period 8.9 Additions for tax positions of prior periods 4.1 Reductions for tax positions of prior periods (47.4 ) Settlements during the period (11.2 ) Lapses of applicable statutes of limitations (2.5 ) Foreign exchange and other (1.8 ) Balance, September 30, 2008 $ 162.3 As of September 30, 2008 and December 31, 2007, the Company had $162.3 million and $212.2 million, respectively, of unrecognized tax benefits. Of these unrecognized tax benefits at September 30, 2008, $47.4 million, if recognized, would decrease the effective income tax rate and increase net earnings. This potential impact on net earnings reflects the reduction of these unrecognized tax benefits net of certain deferred tax assets and the federal tax benefit of state income tax items. The Company recognized $5.2 million and $6.9 million of previously unrecognized federal and international tax benefits, respectively, due to the resolution of audits during the three months ended September 30, 2008 and $36.1 million, $3.9 million and $7.4 million of previously unrecognized federal, state and international tax benefits, respectively, due to the resolution of audits during the nine months ended September 30, 2008. In addition, the Company had no settlements and $11.2 million, respectively, of previously unrecognized federal and state tax benefits during the three and nine months ended September 30, 2008, resulting in an increase in current taxes payable. As a result of these changes, the Company recorded $7.3 million and $8.4 million, respectively as a reduction of goodwill and $7.3 million and $46.3 million, respectively, as a decrease in income tax expense for the three and nine months ended September 30, 2008. As of September 30, 2008, it is reasonably possible that the total amounts of unrecognized tax benefits will decrease within 12 months by as much as $8.9 million due to resolution of audits or statute of limitations expirations related to state tax positions. The impact of these unrecognized tax benefits, if recognized, would increase net earnings or, in certain instances, decrease goodwill by $8.6 million and $0.3 million, respectively. The Company has tax years from 2000 that remain open and subject to examination by the IRS, major state taxing authorities and major foreign tax jurisdictions. The Company classifies interest expense and any related penalties related to income tax uncertainties as a component of income tax expense. The total interest expense related to tax uncertainties recognized in the Condensed Consolidated Statements of Operations was $1.9 million and $7.3 million, respectively, for the three and nine months ended September 30, 2008. Penalties in the amounts of $0.4 million and $1.0 million were recognized for the three and nine months ended September 30, 2008, respectively. The total interest expense related to tax uncertainties recognized in the Condensed Consolidated Statements of Operations was $3.5 million and $11.1 million, respectively, for the three and nine months ended September 30, 2007. Penalties in the amounts of $0.2 million and $0.7 million were recognized for the three and nine months ended September 30, 2007, respectively. Accrued interest of $67.9 million and $80.2 million related to income tax uncertainties were recognized in other noncurrent liabilities on the Condensed Consolidated Balance Sheets at September 30, 2008 and December 31, 2007, respectively. Accrued penalties of $3.2 million and $4.0 million related to income tax uncertainties were recognized in other noncurrent liabilities on the Condensed Consolidated Balance Sheets at September 30, 2008 and December 31, 2007, respectively. 15. NEW ACCOUNTING PRONOUNCEMENTS In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"), which was adopted in the first quarter of 2008 for financial assets and is effective in the first quarter of 2009 for non-financial assets. This statement clarifies the definition of fair value, establishes a framework for measuring fair value, and expands the disclosures on fair value measurements. The adoption of SFAS 157 for financial assets did not have a material impact on the Company's consolidated financial position, annual results of operations or cash flows. The Company has outstanding cross currency swaps with an aggregate notional value of $1,130.8 million. These swaps have been determined to be Level 2 under the fair value hierarchy in accordance with SFAS 157 and are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount. At September 30, 2008, the fair market value of these cross currency swaps of $29.5 million was included in other noncurrent assets. The adoption of SFAS 157 for non-financial assets is not expected to have a material impact on the Company's consolidated financial position, annual results of operations or cash flows. In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), "Business Combinations" ("SFAS 141(R)"), which is effective for the Company in fiscal year 2009. SFAS 141(R) retains the fundamental requirements in Statement of Financial Accounting Standards No. 141, "Business Combinations" which requires that the acquisition method of accounting (formerly known as the purchase method) is used for all business combinations and changes the accounting treatment for certain acquisition related costs, restructuring activities, and acquired contingencies, among other changes. SFAS 141(R) retains the guidance in SFAS 141 for identifying and recognizing intangible assets separately from goodwill. This standard is required to be adopted for acquisitions consummated after December 31, 2008, with certain provisions applied to earlier acquisitions. The Company continues to evaluate the impact of SFAS 141(R), and expects that its adoption will reduce the Company's operating earnings due to required recognition of acquisition and restructuring costs through operating earnings. The magnitude of this impact will be dependent on the number, size, and nature of acquisitions in periods subsequent to adoption. In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51" ("SFAS 160"), which amends the accounting for and disclosure of the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement clarifies the definition and classification of a noncontrolling interest, revises the presentation of noncontrolling interests in the consolidated income statement, establishes a single method of accounting for changes in a parent's ownership interest in a subsidiary that does not result in deconsolidation, and requires that a parent recognize a gain or loss in net earnings (loss) when a subsidiary is deconsolidated. This statement also requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent's owners and the interests of the noncontrolling owners of a subsidiary. SFAS 160 will be effective for the Company beginning in fiscal 2009. The Company does not expect the adoption of SFAS 160 to have a material impact on the Company's consolidated financial position, annual results of operations or cash flows. In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161"), which amends the disclosure requirements for derivative instruments and hedging activities. This statement requires that entities provide enhanced disclosures about how and why an entity uses derivative instruments, how those instruments are accounted for, and how derivative instruments affect the entity's statements of financial position, operations or cash flows. SFAS 161 will be effective for the Company beginning in fiscal 2009. The Company does not expect the adoption of SFAS 161 to have a material impact on the Company's consolidated financial position, annual results of operations or cash flows. In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." The Company does not expect the adoption to have a material effect on the Company's consolidated financial position, annual results of operations or cash flows. In May 2008, the FASB issued Statement of Financial Accounting Standards No. 163, "Accounting for Financial Guarantee Insurance Contracts-An interpretation of FASB Statement No. 60" ("SFAS 163"). SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise's risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. 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