RR Donnelley and Interesting Book Data

As the world’s largest and best run printer, RR Donnelley just released a preview of its annual report and there is one piece of data that demonstrates the real difference between QW and RRD. While QW mentions a contract with Mann Roland in 2005 for 20 presses and the purchase of several gravure presses as well, since January 1, 2004, RRD has invested over $1.5 billion in capital expenditures and this does not include the costs of acquisitions. I am still unable to determine how much of the $1.2 billion invested by QW was for just capital expenditures. 25 presses at a average cost of $15 million would only amount to $375 million of the announced $1.2 billion. With over 347 heat set web and 91 gravure presses, the recent additions will require extensive additional capital expenditures over the next 5 years to keep up with this type of continuing investment by Donnelley. This business is all about the pressroom and related technology to continue to be a low cost producer. While QW is on the right track, it will quickly become a Vertis or American Color if it does not continue the capital expenditures even while going through this latest financial crisis.

While books are thought to be continually under pressure due to lack of reading or electronic substitutions (Amazon’s Kindle being the latest), book publishing will still bring in $15 billion in revenue this year and 408 million books will be bought and read. While the NY Times article noted that 27% of American had not read a book this year, happily 27% read 15 or more books per year. So to those who are devoted to their e-books, downloads, text messaging, other e-content and may tend to ignore the printed book, there is a very loyal following that will continue to drive this segment years longer than any LBO or financial models need to justify purchasing anything to do with print! Hence, QW may still find a good owner other than Pierre Karl!