R. R. Donnelley & Sons Company

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R. R. Donnelley & Sons Company

The R. R. Donnelley Building
77 West Wacker Drive
Chicago, Illinois 60601
U.S.A.
(312) 326-8000
Fax: (312) 326-8543

Public Company
Incorporated: 1890
Employees: 34,000
Sales: $4.19 billion
Stock Exchanges: New York Pacific Chicago
SICs: 2732 Book Printing; 2759 Commercial Printing Nee; 7372 Prepackaged Software; 7375 Information Retrieval Services

R.R. Donnelley & Sons Company is the largest commercial printing firm in the world. Included in its broad range of products are telephone directories, Bibles, books, consumer magazines, and catalogues.

In 1864 Richard R. Donnelley, a 26-year-old saddlemaker’s apprentice from Hamilton, Ontario, moved to Chicago. There he established a print shop, called Church, Goodman, and Donnelley—Steam Printers, which became a modest success. When the shop’s building and presses were destroyed in the Chicago fire of 1871, leaving Donnelley virtually penniless, he borrowed $20 for a trip to New York, where he managed to get new presses completely on credit. Nevertheless, it took Donnelley nearly two years to get the printing plant fully operational again.

Donnelley was a perfectionist who paid particular attention to both the artistic aspects of printing as well as the trade’s scientific developments. His approach resulted in a high quality of printing that won the firm many customers. In a move that proved fortuitous, Donnelley began printing telephone books in 1886, a market that grew astronomically with the importance of the telephone. The firm also pioneered the printing of mailorder catalogues, beginning with such local firms as Sears, Roebuck & Co. In 1890, under the aggressive leadership of Richard’s son Thomas E. Donnelley, the firm was incorporated as R.R. Donnelley and Sons. By 1897 the company was so successful that it expanded into larger quarters in another building. After the turn of the century, Donnelley began printing encyclopedias.

Although becoming increasingly mechanized, printing was still very much a craft executed by hand before World War I. Donnelley often hired his employees right out of grade school, putting young workers through the Apprentice Training School he started in 1908, one of the first industrial training programs in the United States. Employees worked their way up through each department, learning all aspects of the printing business.

In 1921 Donnelley opened a printing plant in Crawfordsville, Indiana. The plant was built by local workers, who then helped install the equipment, and were offered jobs and training in how to use the equipment. In 1928 Donnelley began printing one of the first of a new wave of national, mass marketed magazines, entitled Time. The following year, the onset of the Great Depression was disastrous for the printing industry, and magazine and newspaper circulations plummeted. However, with contracts like it had with Time, Donnelley was able to stay in business.

In 1934 magazine circulations began to increase again. Donnelley foresaw the demand for a larger format for magazines, printed on coated paper, as well as the industry’s need to produce these new magazines on tight deadlines. Thus the company began developing the materials and expertise to produce such magazines at a reasonable cost. Donnelley engineers combined a rotary press with smaller printing cylinders with a highspeed folder to increase production from 6,000 to 15,000 impressions an hour. Donnelley researchers, working with ink manufacturers, developed a heat-set process for instantly drying ink at these speeds, using a gas heater built right into the printing press.

During this time, the publishers of Time magazine had been considering the development of a picture magazine. Shortly after they heard about Donnelley’s new high-speed printing methods they awarded the firm the contract to publish the new Life magazine. The first issue came out nine months later, in 1936.

World War II, with its paper shortages and government imposed restrictions on commercial printing, was a difficult time in the industry. After the war, however, printing boomed, quickly becoming a $3 billion-a-year industry. New technologies appeared that promised to revolutionize the industry, including phototypesetting and electronic scanners for platemaking. Donnelley, already the biggest commercial printer in the United States and continuing to grow, quickly invested in such technologies as they came out.

Donnelley went public in 1956 to raise capital for further expansion. By that time the company had over 160 presses, many of them huge and modern, using over 1,000 tons of paper and 20 tons of ink a day. The firm employed 7,500 people; Crawfordsville alone had 1,600 employees. Representing a rare exception in the printing industry, most Donnelley employees did not belong to a union. About 90 percent of Donnelley’s executives and supervisors were graduates of the Apprentice Training School and were either college graduates who had gone through a training program or those who had come up through the ranks. The firm’s turnover remained low.

The firm’s magazine printing business was its most profitable, and nationally distributed periodicals like Time, Life, Look, Sports Illustrated, Farm Journal, National Geographic and Fortune accounted for about half of the company’s sales. Donnelley’s huge mail-order catalogues for Sears, Roebuck & Co. and Marshall Field’s accounted for about 17 percent of sales. Donnelley printed over 1,000 telephone directories for subscribers throughout much of the United States, accounting for about 13 percent of its sales. It printed encyclopedias like World Book, Encyclopedia Britannica and Compton’s, as well as corporate reports, the Bible and other religious publications. Donnelley engaged in less glamorous printing as well, such as booklets, pamphlets, menus, and the labels for packages and cans.

Donnelley mailed so many publications every day that the U.S. Post Office had employees working in the company’s plants to supervise the vast mailings. Major plants, with total floor space totaling nearly three million square feet, were located in Chicago; Willard, Ohio; and Crawfordsville and Warsaw, Indiana. The firm continued its role as a research and development leader in the industry, spending about $1.6 million a year. In addition to designing mechanical equipment and improving printing materials, Donnelley worked to keep up with cutting-edge electronic and photographic technology. Looking for new technologies was imperative as the costs of labor, material, and equipment were all rising, while intense competition kept prices down.

Having gone public, Donnelley grew by a total of 50 percent between 1954 and 1959, with record sales of $130.1 million in 1959. Despite a depressed economy, sales reached $149.8 million in 1961, with Time Inc. accounting for 29 percent. During the mid-1960s, however, Donnelley’s profits leveled off. The firm recovered by 1968 as magazine sales, which accounted for 41 percent of sales, broke out of a slump. By that point Donnelley’s hardcover publishing had increased to represent 22 percent of its sales. Retail catalogues also stood at 22 percent.

Printing technology changed rapidly in the late 1960s. Photocomposition, computerized justification, and electronic scanning were changing the way plates were readied, while highspeed offset printing was also changing the process. In 1968 Donnelley bought an RCA Videocomp, which set 4,500 characters of type per second using a cathode ray tube. One Donnelley manager estimated that the machine could set as much type as every hot-metal typesetter in the Midwest. Simultaneously, the firm created a separate photocomposition and electronics division which employed computer programmers and electronic communications specialists instead of production staff.

As type became easier to set, however, the popular magazine market was shrinking. Look folded in 1971, taking $15 million of Donnelley’s business with it. Also that year, Life cut circulation from 8.5 million to 5.5 million. As a result of these losses, Donnelley laid off 700 people, soon cutting an additional 400 people to keep its costs down. Thus, despite its losses, the firm made $24 million in 1971 on sales of $340 million. With magazines suffering, most of Donnelley’s growth was coming from catalogs and directories. To keep pace, the firm opened a plant in Lancaster, Pennsylvania, in 1972, exclusively for the printing of phone books for the Mid-Atlantic states. To further offset mass market magazine losses, Donnelley worked to win jobs producing special-interest periodicals, printing 24 such periodicals for Ziff-Davis Publishing alone.

In 1972 Life magazine stopped publishing entirely, resulting in a $3 million charge against earnings and further layoffs. Donnelley also lost its contracts with Fortune and American Home. Fortunately, the company found new customers in Esquire magazine, and signed ten-year contracts with Glamour and Mademoiselle, and a five-year contract with U.S. New & World Report. Donnelley’s conservative financial practices helped it weather the storm. The firm paid low dividends on its earnings, had net working capital of $90 million, and only $3 million in long-term debt.

In 1974 the firm began shifting away from high quality, four-color, extended runs, which had accounted for most of its work until then. Numerous small publishers were appearing, and publishers were moving toward smaller initial press runs to cut down on remainders and the costs of storage. Publishers instead wanted the ability to quickly reprint books that sold out their first edition. Donnelley was determined to change accordingly. Over the next few years the company installed a short-run plant in Crawfordsville, for producing college, professional, and trade books, and doubled capacity at its Willard, Ohio, plant. In the late 1970s the firm began building a state-of-the-art plant in Harrisonburg, Virginia, to offer overnight delivery to publisher warehouses on the east coast. In the early 1980s, Donnelley increased its shift toward small press runs. It began an aggressive telemarketing campaign in which it contacted numerous small publishers, trying to change its image as a printing house for larger clients only. As a result, by 1983, Donnelley had between 600 and 700 book publishers as customers, and shortrun books accounted for nearly 50 percent of unit sales.

Sales grew rapidly, reaching $2.2 billion in 1986. The following year Donnelley purchased Metromail Corp. for $282.6 million. Metromail provided lists to direct-mail marketers, and, as Donnelley already printed and distributed catalogues for direct-mail marketers, the acquisition was expected to complement Donnelley’s existing business. It also moved into financial printing, opening a Wall Street financial printing center shortly before the stock market crash of October 1987.

In the late 1980s, Donnelley’s expansion went into overdrive, culminating with the purchase of Meredith/Burda Printing for $570 million. Donnelley was also moving rapidly into such information services as computer documentation, with sales of $190 million by 1989 out of total sales for the year of $3.1 billion. The firm used electronic printing techniques and information from Metromail to help its clients gear advertising and editorial content toward different audiences. Furthermore, Donnelley was entering the markets for printing books for children, professional books, and quick-printing, with the purchase of 25 percent of AlphaGraphics, a high-end quick-printing chain.

The firm pushed expansion so hard because it believed that rapidly changing technologies gave it an opportunity to capture large chunks of business from smaller companies that could not afford to keep up. Donnelley’s moves into cutting-edge technology were not always successful, however; in 1984 it had made a premature, ill-fated attempt to move into electronic shopping.

With the U.S. economy in recession in 1991, the firm’s net income declined about nine percent to $205 million. Donnelley bounced back the following year, however, with total sales of $4.193 billion. During this time, the company acquired Combined Communication Services, a trade magazine printer, and American Inline Graphics, a specialty, direct-mail printer. The firm also continued its expansion outside the United States, opening new offices and plants in The Netherlands, Scotland, Mexico, and Thailand. Furthermore, Donnelley increased its presence in electronic media and on-line services, manufacturing, for example, 350 products for QUE, an imprint of Prentice Hall Computer Books.

Such successes helped to partly offset losses in Donnelley’s traditional markets. In early 1993 Sears ceased publication of its 97-year-old catalogue, which Donnelley had printed since its inception. Consequently, Donnelley laid off 660 employees, took a $60 million charge against earnings, and closed its historic Lakeside Press plant. A few months later, Donnelley announced that it would become the printer of the National Enquirer and Star tabloids. These publications opted to use Donnelley because its advanced printing processes allowed for tighter deadlines and turnaround times of less than 40 hours.

While the printing industry remained fragmented and in constant flux in the early 1990s, Donnelley continued to emphasize its flexibility and focus on the future. Industry analysts predicted continued growth for this leading firm.