R.R. Donnelley to use combo of borrowings, cash, commercial paper to fund April maturity

By Jennifer Lanning Drey

Portland, Ore., Feb. 25 - R.R. Donnelley & Sons Co. expects to fund its $400 million of senior notes maturing on April 1 with its revolving credit facility, cash on hand and through the commercial paper market, Miles McHugh, chief financial officer of R.R. Donnelley, said Wednesday during the company's fourth-quarter earnings call.

"Our [unsecured note] issuance last month positions us well as we plan for upcoming maturities in 2010 and 2012, McHugh said.

As previously reported, in January R.R. Donnelley issued $400 million of 11.25% senior notes due 2019.

R.R. Donnelley generated $1 billion of cash from operations in 2008, representing a $160 million decline from the 2007 level, primarily as a result of higher working capital usage.

The company expects to improve its cash flow performance in 2009, with help from tax benefits and internal improvements. R.R. Donnelley received about $64 million of tax benefits in 2008 and expects another $165 million cash benefit in 2009, McHugh said.

In addition, the company has targeted a series of working capital improvements and linked compensation to the improvements, he said.

R.R. Donnelley also plans to reduce capital expenditures by more than $70 million from 2008 levels.

"While we expect 2009 to be challenging for earnings, we do expect relatively strong cash flow performance," McHugh said.

R.R. Donnelley posted a fourth-quarter net loss from continuing operations of $686.9 million on net sales of $2.8 billion. The figures compared to a net loss from continuing operations of $292.9 million on net sales of $3.1 billion in the prior-year fourth quarter.

During 2008, R.R. Donnelley reduced debt by $200 million to $4.1 billion at year-end. At Dec. 31, the company had $1.5 billion available under its $2.0 billion revolver, which is a backstop to its commercial paper program and can be used for general corporate purposes.

"We expect to continue to focus on liquidity and debt reduction in this environment," McHugh said.

R.R. Donnelley is a Chicago-based printing services provider.

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