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- Triple Play Lifts Illinois Market
- Launches Unified Dex Brand And DexKnows.com
- RHD To Acquire Business.com
CARY, N.C., July 26 /PRNewswire-FirstCall/ -- R.H. Donnelley Corporation
(NYSE: RHD), one of the nation's leading Yellow Pages and online local
commercial search companies, today reported second quarter 2007 free cash flow
of $146 million based on cash flow from operations of approximately $171
million and $24 million of capital expenditures. Advertising sales during the
second quarter were $729 million, up 0.2 percent from the same period in the
prior year. Net revenue for the quarter was $667 million. EBITDA, including
$8 million of FAS 123 R expense and approximately $8 million of purchase
accounting entries, during the second quarter was $348 million. Net income
and EPS for the same period were $25 million and $0.34 per share,
respectively. As of June 30, 2007, RHD's net debt outstanding, including the
purchase accounting fair value adjustment of $181 million, was $9,980 million.
"The highlight of the quarter was the growth in our AT&T markets in
Illinois," said David C. Swanson, chairman and CEO of R.H. Donnelley. "Second
quarter is that region's largest ad sales period and includes the highly
competitive Chicago market. We've worked hard over the last two years to make
improvements there and it's rewarding to see the results of those efforts.
Our robust suite of Internet solutions in addition to our print yellow pages
are proving to be a very effective combination in larger markets. Our
progress in Illinois was partially offset by the impact of the soft real
estate sector and the challenges in major metro markets in our EMBARQ and
Qwest markets."
Dex Brand and DexKnows.com
In June, R.H. Donnelley launched DexKnows.com(TM), a new online local
search site that combines RHD's robust local content with new search
technology and innovative features to help consumers find the most relevant
local businesses faster and more efficiently than if they used conventional
search engines. At the same time, R.H. Donnelley launched the Dex(R) market
brand in Las Vegas with an integrated, mass media campaign ahead of the
publication of its market-leading directory. Las Vegas is the first market
outside of the Qwest 14-state region to pair the recognizable incumbent
telephone brand with Dex. This unified market brand serves as a strong
foundation for the Company's Triple Play(TM) strategy as it links together all
of RHD's local commercial search solutions for consumers and advertisers.
Business.com Acquisition
Today, R.H. Donnelley issued a separate press release announcing that it
has signed a definitive agreement to acquire Business.com, a leading business
search engine and directory and pay-per-click advertising network.
Through this transaction, R.H. Donnelley will add to its existing
interactive portfolio a rapidly growing and profitable business-to-business
company, with online properties that include Business.com, Work.com and the
Business.com Advertising Network. These online brands attract an audience of
highly qualified and motivated business decision makers. Business.com
optimizes the revenues from these properties through the use of its
Performance Based Advertising (PBA) platform, which is considered to be one of
the most advanced systems in the marketplace.
In addition, R.H. Donnelley's Triple Play business-to-consumer integrated
marketing solutions will also benefit from a significant infusion of leading-
edge search and directory technology and interactive thought leadership from
Business.com, particularly in the areas of performance based advertising
technologies and corresponding ad network capabilities.
Business.com employs approximately 100 highly-skilled technologists,
strategists and businesspeople and serves more than 6,000 business-to-business
advertisers and their agencies. The company is profitable and is expected to
generate revenues of greater than $50 million in 2007. It is widely
recognized as a leader in the online business-to-business commercial search
space and has been named to the "Inc. 500" and BtoB magazine's "Media Power
50".
Under the terms of the agreement, R.H. Donnelley will acquire Business.com
for $345 million in cash and deferred purchase consideration. The deal is
expected to close in the third quarter of 2007 and is subject to customary
terms and closing conditions, including compliance with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
Outlook
The Company is affirming the annual guidance last provided on April 26,
2007. The guidance is summarized below and does not reflect the impact of the
pending acquisition of Business.com.
-- Positive advertising sales growth.
-- Net revenue of approximately $2.67 billion.
-- EBITDA, excluding FAS 123 R expense and purchase accounting impacts, of
approximately $1.44 billion.
-- Free cash flow of approximately $615 million.
-- Net debt, excluding fair value adjustment, at year end of approximately
$9.5 billion.
-- Weighted average fully diluted shares outstanding during 2007 of up to
72.5 million.
See Schedule 6 for a reconciliation of the foregoing non-GAAP measures to
the most comparable GAAP measures.
Further important information regarding operating results and related
reconciliations of non-GAAP financial measures to the most comparable GAAP
measures can be found in the schedules and the schedule footnotes of this
press release, which should be thoroughly reviewed. Advertising sales is a
statistical measure and consists of sales of advertising in print directories
distributed during the period and Internet-based products and services with
respect to which such advertising first appeared publicly during the period.
It is important to distinguish advertising sales from net revenue, which is
recognized under the deferral and amortization method.
Second Quarter Conference Call
R.H. Donnelley will host a conference call to discuss its second quarter
2007 results today at 10:00 a.m. (ET). The call can be accessed by dialing
888-387-9606 (domestic) or 517-645-6055 (international). The pass code for
the call is "RHD". Please dial in to the call by 9:50 a.m. (ET) to ensure a
prompt start time. The call will also be available through a Web cast, which
can be accessed by visiting our Web site at www.rhd.com, clicking on "Investor
Relations" and following the instructions provided. Those unable to
participate at the scheduled time may access a recorded replay by dialing
800-793-2380 (domestic) or 203-369-3339 (international). The recording will
be available through August 9, 2007. There is no pass code for the replay.
In addition, an archived version of the Web cast will be available on RHD's
Web site for up to one year from the date of the call.
About R.H. Donnelley
R.H. Donnelley connects businesses and consumers through its broad
portfolio of print and interactive marketing solutions. Small- and medium-
sized businesses look to R.H. Donnelley's experienced team of marketing
consultants to help them grow their companies and drive sales leads.
Consumers depend on the Company's reliable, trusted, local business content to
deliver the most relevant search results when they are seeking local goods and
services. For more information, visit www.rhd.com.
Safe Harbor Provision
Certain statements contained in this press release regarding RHD's future
operating results or performance or business plans or prospects and any other
statements not constituting historical fact are "forward-looking statements"
subject to the safe harbor created by the Private Securities Litigation Reform
Act of 1995. Where possible, the words "believe," "expect," "anticipate,"
"intend," "should," "will," "planned," "estimated," "potential," "goal,"
"outlook" and similar expressions, as they relate to RHD or its management,
have been used to identify such forward-looking statements. All forward-
looking statements reflect only RHD's current beliefs and assumptions with
respect to future business plans, prospects, decisions and results, and are
based on information currently available to RHD. Accordingly, the statements
are subject to significant risks, uncertainties and contingencies, which could
cause RHD's actual operating results, performance or business plans or
prospects to differ materially from those expressed in, or implied by, these
statements.
The following factors, among others, could cause actual results to differ
from those set forth in the forward-looking statements: (1) the risk that the
legacy Dex and RHD businesses will not continue to be integrated successfully;
(2) the risk that the expected strategic advantages and remaining cost savings
from the Dex Media merger may not be fully realized or may take longer to
realize than expected; (3) disruption from the Dex Media merger making it more
difficult to maintain relationships with customers, employees or suppliers;
and (4) general economic conditions and consumer sentiment in our markets.
Additional factors that could cause RHD's results to differ materially from
those described in the forward-looking statements are described in detail in
RHD's Annual Report on Form 10-K for the fiscal year ended December 31, 2006
in Item 1A "Risk Factors" as well as RHD's other periodic filings with the SEC
that are available on the SEC's website at www.sec.gov.
R.H. DONNELLEY CORPORATION Schedule 1
INDEX OF SCHEDULES
Schedule 1: Index of Schedules
Schedule 2: Unaudited Condensed Consolidated Statements of Operations
for the three months ended June 30, 2007 and 2006 and
Adjusted Statement of Operations for the three months ended
June 30, 2006
Schedule 3: Unaudited Condensed Consolidated Statements of Operations
for the six months ended June 30, 2007 and 2006 and Pro Forma
Adjusted Statement of Operations for the six months ended
June 30, 2006
Schedule 4: Unaudited Condensed Consolidated Balance Sheets at June 30,
2007 and December 31, 2006
Schedule 5: Unaudited Condensed Consolidated Statements of Cash Flows
for the three and six months ended June 30, 2007 and 2006
Schedule 6: Reconciliation of Non-GAAP Measures
Schedule 7: Statistical Measures - Advertising Sales
Schedule 8: Notes to Unaudited Condensed Consolidated Financial
Statements and Non-GAAP Measures
Note: These schedules are preliminary and subject to change pending the
Company's filing of its Form 10-Q.
R.H. DONNELLEY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ADJUSTED
STATEMENT OF OPERATIONS
Schedule 2
Amounts in millions, except earnings (loss) per share
Three Months Ended June 30,
2007 2006 2006 2006
Reported Reported Adjustments(3) Adjusted
Net revenue (1) $666.6 $432.3 $244.4 (4) $676.7
Expenses 318.3 273.4 27.4 (4) 300.8
Depreciation and amortization 109.2 85.5 - 85.5
Operating income 239.1 73.4 217.0 290.4
Interest expense, net (199.0) (202.1) (9.1)(5) (211.2)
Pre-tax income (loss) 40.1 (128.7) 207.9 79.2
Tax (provision) benefit (15.2) 48.9 (78.9)(6) (30.0)
Net income (loss) $24.9 $(79.8) $129.0 $49.2
Earnings (loss) per share (EPS):
Basic $0.35 $(1.15) $0.71
Diluted $0.34 $(1.15) $0.69
Shares used in computing EPS:
Basic 71.0 69.7 69.7
Diluted 72.5 69.7 1.8 (8) 71.5
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements and Non-GAAP Measures - Schedule 8.
Note: These schedules are preliminary and subject to change pending the
Company's filing of its Form 10-Q.
R.H. DONNELLEY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND PRO FORMA
ADJUSTED STATEMENT OF OPERATIONS
Schedule 3
Amounts in millions, except earnings (loss) per share
Six Months Ended June 30,
2006
2007 2006 2006 Pro Forma
Reported Reported Adjustments(3) Adjusted
Net revenue (1) $1,329.4 $752.8 $600.3 (4) $1,353.1
Expenses 650.1 493.1 125.0 (4) 618.1
Depreciation and amortization 212.2 148.2 20.4 (5) 168.6
Operating income 467.1 111.5 454.9 566.4
Interest expense, net (400.6) (355.9) (68.0)(5) (423.9)
Pre-tax income (loss) 66.5 (244.4) 386.9 142.5
Tax (provision) benefit (25.6) 92.9 (147.0)(6) (54.1)
Net income (loss) $40.9 (151.5) 239.9 88.4
Gain on repurchase of Preferred
Stock (31.2) 31.2 (7) -
Preferred dividend 2.0 (2.0)(7) -
(Loss) income available to common
shareholders $(122.3) $210.7 $88.4
Earnings (loss) per share (EPS): (2)
Basic $0.58 $(1.95) $1.28
Diluted $0.57 $(1.95) $1.25
Shares used in computing EPS: (2)
Basic 70.7 62.7 6.3 (7),(8) 69.0
Diluted 72.0 62.7 8.1 (7),(8) 70.8
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements and Non-GAAP Measures - Schedule 8.
Note: These schedules are preliminary and subject to change pending the
Company's filing of its Form 10-Q.
R.H. DONNELLEY CORPORATION Schedule 4
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts in millions
June 30, December 31,
2007 2006
Assets
Cash and cash equivalents $65.0 $156.2
Accounts receivable, net 1,163.2 1,048.3
Deferred directory costs 225.5 211.8
Other current assets 95.9 115.9
Total current assets 1,549.6 1,532.2
Fixed assets and computer
software, net 171.0 159.4
Intangible assets, net 11,290.9 11,478.0
Other non-current assets 129.6 141.6
Goodwill 2,837.9 2,836.3
Total Assets $15,979.0 $16,147.5
Liabilities and Shareholders' Equity
Accounts payable and accrued
liabilities $159.8 $169.5
Accrued interest 174.5 179.4
Deferred directory revenue 1,299.3 1,197.8
Short-term deferred income taxes, net - 79.9
Current portion of long-term debt 353.5 382.6
Total current liabilities 1,987.1 2,009.2
Long-term debt 9,691.9 10,020.5
Deferred income taxes, net 2,211.1 2,099.1
Other non-current liabilities 188.5 197.9
Total liabilities 14,078.6 14,326.7
Shareholders' equity 1,900.4 1,820.8
Total Liabilities and Shareholders'
Equity $15,979.0 $16,147.5
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements and Non-GAAP Measures - Schedule 8.
Note: These schedules are preliminary and subject to change pending the
Company's filing of its Form 10-Q.
R.H. DONNELLEY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Schedule 5
Amounts in millions
Three months Six months ended
ended June 30, June 30,
Operating activities: 2007 2006 2007 2006
Net income (loss) $24.9 $(79.8) $40.9 $(151.5)
Depreciation and amortization 109.2 85.5 212.2 148.2
Deferred income taxes 15.1 (48.9) 25.3 (93.0)
Changes in working capital (6.7) 224.1 (17.4) 441.1
Other 28.1 27.6 53.4 59.7
Net cash provided by operating
activities 170.6 208.5 314.4 404.5
Investment activities:
Additions to fixed assets and
computer software (24.3) (14.2) (37.4) (24.6)
Acquisitions, net of cash received - (0.5) - (1,889.2)
Equity investment - - (2.5) -
Net cash used in investing activities (24.3) (14.7) (39.9) (1,913.8)
Financing activities:
Increase (decrease) in checks not
yet presented for payment 4.6 4.8 (1.5) (1.2)
Proceeds from issuance of debt, net
of costs - (2.9) - 2,514.5
Repurchase of redeemable convertible
preferred stock and redemption of
preferred stock purchase rights - (0.7) - (336.8)
Credit facilities repayments (153.5) (157.9) (347.1) (576.8)
Revolver repayments (164.2) (309.9) (390.6) (354.6)
Borrowings under the Revolver 154.4 263.8 361.7 432.5
Proceeds from option exercises 2.7 5.1 11.8 19.3
Net cash (used in) provided by
financing activities (156.0) (197.7) (365.7) 1,696.9
(Decrease) increase in cash and cash
equivalents (9.7) (3.9) (91.2) 187.6
Cash and cash equivalents,
beginning of period 74.7 199.3 156.2 7.8
Cash and cash equivalents, end of
period $65.0 $195.4 $65.0 $195.4
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements and Non-GAAP Measures - Schedule 8.
Note: These schedules are preliminary and subject to change pending
the Company's filing of its Form 10-Q.
R.H. DONNELLEY CORPORATION Schedule 6a
RECONCILIATION OF NON-GAAP MEASURES
(unaudited)
Amounts in millions
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Reconciliation of net income (loss) -
GAAP to EBITDA, adjusted EBITDA and
pro forma adjusted EBITDA (9)
Net income (loss) - GAAP $24.9 $(79.8) $40.9 $(151.5)
Plus tax provision (benefit) 15.2 (48.9) 25.6 (92.9)
Plus interest expense, net 199.0 202.1 400.6 355.9
Plus depreciation and amortization 109.2 85.5 212.2 148.2
EBITDA $348.3 158.9 $679.3 259.7
Plus net revenue from directories
that published prior to acquisitions
that would have been recognized
during the period absent purchase
accounting adjustments required
under GAAP. 244.4 600.3
Less expenses on Qwest directories
that published prior to the Dex
Media transaction that would
have been recognized during the
period absent purchase accounting
required under GAAP, net of amortized
deferred cost uplift on Dex and
AT&T sales contracts as of their
respective acquisition dates, plus
professional fees associated with the
Dex Media transaction paid for by
Dex Media. 7.6 (27.4) 27.9 (125.0)
Adjusted EBITDA including SFAS No. 123 R 375.9
Pro forma adjusted EBITDA including
SFAS No. 123 R 735.0
Plus SFAS No. 123 R Expense 7.5 9.3 21.5 25.7
Adjusted EBITDA $385.2
Pro forma adjusted EBITDA $760.7
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements and Non-GAAP Measures - Schedule 8.
Note: These schedules are preliminary and subject to change pending the
Company's filing of its Form 10-Q.
R.H. DONNELLEY CORPORATION Schedule 6b
RECONCILIATION OF NON-GAAP MEASURES (cont'd)
(unaudited)
Amounts in millions
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Reconciliation of cash flow from
operations - GAAP to free cash flow,
adjusted free cash flow and pro forma
adjusted free cash flow
Cash flow from operations - GAAP $170.6 $208.5 $314.4 $404.5
Add: Dex Media cash flow from
operations for January 2006 - GAAP - - - 39.7
Add: Professional fees related to the
Dex Media Merger paid for by Dex
Media - - - 7.5
Pro forma adjusted cash flow from
operations 170.6 208.5 314.4 451.7
Less: Additions to fixed assets and
computer software - GAAP 24.3 14.2 37.4 24.6
Less: Dex Media additions to fixed
assets and computer software for
January 2006 - GAAP - - - 1.1
Free cash flow $146.3 $277.0
Adjusted free cash flow $194.3
Pro forma adjusted free cash flow $426.0
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Reconciliation of interest expense -
GAAP to adjusted interest expense
and pro forma adjusted interest
expense (5)
Interest expense - GAAP $199.0 $202.1 $400.6 $355.9
Plus: Incremental interest expense as
if the Dex Media transaction
occurred on January 1, 2006 - - - 52.9
Plus: Fair value adjustment due to
purchase accounting 7.7 9.1 15.3 15.1
Adjusted interest expense $206.7 $211.2 $415.9
Pro forma adjusted interest expense $423.9
As of As of
June 30, 2007 December 31, 2006
Reconciliation of debt - GAAP to net
debt - GAAP and net debt - excluding
fair value adjustment (10)
Debt - GAAP $10,045.4 $10,403.1
Less: Cash and cash equivalents (65.0) (156.2)
Net debt - GAAP 9,980.4 10,246.9
Less: Fair value adjustment due to
purchase accounting (180.7) (195.9)
Net debt - excluding fair value
adjustment $9,799.7 $10,051.0
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements and Non-GAAP Measures - Schedule 8.
Note: These schedules are preliminary and subject to change pending the
Company's filing of its Form 10-Q.
R.H. DONNELLEY CORPORATION Schedule 6c
RECONCILIATION OF NON-GAAP MEASURES (cont'd)
(unaudited)
Amounts in billions
Full Year 2007
Outlook
Reconciliation of adjusted EBITDA
excluding SFAS No. 123 R outlook to
operating income - GAAP outlook
Adjusted EBITDA excluding SFAS No. 123 R outlook $1.44
Less: Depreciation and amortization (0.44)
Less: SFAS No. 123 R expense (0.03)
Adjusted operating income outlook 0.97
Less: Deferred cost uplift (0.03)
Operating income - GAAP outlook $0.94
Full Year 2007
Outlook
Reconciliation of cash flow from
operations - GAAP outlook to free
cash flow outlook
Cash flow from operations - GAAP outlook $0.69
Less: Additions to fixed assets and
computer software (0.07)
Free cash flow outlook $0.62
Full Year 2007
Outlook
Reconciliation of net debt - GAAP
outlook to net debt - excluding fair
value adjustment outlook
Net debt - GAAP outlook $9.7
Less: Fair value adjustment due to
purchase accounting (0.2)
Net debt - excluding fair value
adjustment outlook $9.5
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements and Non-GAAP Measures - Schedule 8.
Note: These schedules are preliminary and subject to change pending the
Company's filing of its Form 10-Q.
R.H. DONNELLEY CORPORATION Schedule 7
STATISTICAL MEASURES
CALCULATION OF ADVERTISING SALES PERCENTAGE CHANGE OVER PRIOR YEAR PERIOD
(unaudited)
Amounts in millions, except percentages
Six Months
Ended Three Months Ended
June 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
2007 Advertising
sales (11) $1,476.3 $729.0 $747.3
2006 Advertising
sales disclosed
in 2006
Form 10-Q's 1,431.6 724.7 707.0 $682.6 $533.9
Adjustments
primarily related
to changes in
publication dates 45.1 3.0 42.0
2006 Advertising
sales $1,476.7 $727.7 $749.0 682.6 533.9
2005 RHD publication
sales disclosed
in 2005 Form 10-Q's 293.5 223.6
2005 Qwest directory
publication sales
disclosed in
Dex Media's
2005 quarterly
press releases 411.0 421.7
Adjustments for
changes in
publication dates and
definition of
advertising sales (11.1) (100.7)
2005 Advertising sales $693.4 $544.6
Advertising sales
percentage change
over prior
year period (0.0%) 0.2% (0.2%) (1.6%) (2.0%)
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements and Non-GAAP Measures - Schedule 8.
Note: These schedules are preliminary and subject to change pending the
Company's filing of its Form 10-Q.
R.H. DONNELLEY CORPORATION Schedule 8
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AND NON-GAAP MEASURES
(1) Revenue with respect to print advertising, and Internet-based
advertising products that are bundled with print advertising, is
recognized under the deferral and amortization method, whereby
revenue is initially deferred when a directory is published and
recognized ratably over the directory's life, which is typically 12
months. Revenue with respect to Internet-based services that are not
bundled with print advertising, such as SEM and SEO services, is
recognized as delivered or fulfilled.
(2) On a reported basis, for the periods when preferred stock was
outstanding, basic EPS was calculated under the "two-class" method
that requires loss available to common shareholders, after deducting
preferred dividends and the gain on repurchase of Preferred Stock, to
be allocated between the common and preferred shareholders based on
the respective rights to receive dividends. Basic EPS is then
calculated by dividing loss available to common shareholders by the
weighted average number of shares outstanding. Diluted EPS is
calculated by dividing loss available to common shareholders by the
weighted average common shares outstanding plus potentially dilutive
common stock equivalents. In periods that result in a net loss, the
net loss is not allocated between common and preferred shareholders
since the preferred shareholders do not have a contractual obligation
to share in any loss.
(3) As a result of the Dex Media and AT&T (formerly known as SBC)
transactions and the related financing and associated purchase
accounting, management believes that the 2007 and 2006 results
reported in accordance with GAAP are not comparable and our 2006
results are not indicative of our underlying operating and financial
performance. Accordingly, management is presenting certain non-GAAP
financial measures in addition to results reported in accordance with
GAAP in order to better communicate underlying operational and
financial performance in each period. Management urges you to read
the schedules and the footnotes carefully to better understand the
limitations of using these figures for any analysis.
Adjusted and pro forma adjusted results for 2006 reflect the
combination of RHD with Dex Media as if the transaction had been
consummated at the beginning of 2006 and reflect certain other
adjustments described below, including adjustments to exclude the
effects of purchase accounting related to the Dex Media and AT&T
transactions and professional fees associated with the Dex Media
transaction incurred by Dex Media in January 2006. In addition, pro
forma adjusted results include interest and depreciation and
amortization expenses as if the Dex Media transaction occurred on
January 1, 2006 and eliminates the interest benefit resulting from
the amortization of the fair value adjustment to Dex Media's debt
balance described in footnote 5. Adjusted and pro forma adjusted
results do not necessarily reflect what the underlying operational or
financial performance of RHD would have been had the Dex Media
transaction been consummated at the beginning of 2006.
Adjusted and pro forma adjusted results for 2006 assume that the
appropriate pro rata portion of the revenues and direct costs of
directories acquired from Dex Media ("Qwest" directories) that
published prior to the transaction were recognized during the period
pursuant to the deferral and amortization method. As a result of
purchase accounting, these pre-acquisition revenues and expenses are
not included in 2006 reported GAAP results. Additionally, the cost
uplift reported under GAAP to eliminate profit on sales contracts
completed before the transaction date for Qwest and AT&T directories
that were not yet published at the transaction date has been excluded
from adjusted and pro forma adjusted results. See Schedules 2 and 3
for details of all adjustments to the 2006 reported GAAP results.
(4) Adjustments for the three and six months ended June 30, 2006 include
revenue and expenses for Qwest directories acquired that published
prior to the Dex Media transaction date and that would have been
recognized during the period absent purchase accounting adjustments
required under GAAP. Additionally, the cost uplift reported under
GAAP to eliminate profit on sales contracts completed before the
transaction date for directories not yet published at the transaction
date has also been removed. Adjustments to reported GAAP expenses
also exclude professional fees associated with the Dex Media
transaction incurred by Dex Media in January 2006.
(5) As a result of purchase accounting, RHD was required to adjust the
carrying value of Dex Media's debt at January 31, 2006 to its fair
value. Adjusted and pro forma adjusted interest expense eliminates
the interest benefit resulting from the amortization of the fair
value adjustment to Dex Media's debt. Interest expense is presented
on a pro forma adjusted basis reflecting the incremental debt RHD
incurred as if the Dex Media transaction occurred on January 1, 2006.
Pro forma adjusted depreciation and amortization reflects the
amortization of intangible assets acquired as if the Dex Media
transaction occurred on January 1, 2006.
(6) Represents the tax effect of adjustments.
(7) Pro forma adjusted results for the six months ended June 30, 2006
assume the remaining Preferred Stock was completely converted to
Common Stock at the beginning of the period and therefore the
preferred dividend and the gain on the repurchase of Preferred Stock
is excluded.
(8) On an adjusted and pro forma adjusted basis in 2006, basic and
diluted EPS are calculated as net income divided by the weighted
average basic and diluted shares outstanding for the period and on a
pro forma adjusted basis, assumes the Dex Media transaction was
consummated on January 1, 2006. Pursuant to the Dex Media Merger
Agreement, each issued and outstanding share of Dex Media common
stock as of January 31, 2006 was converted into the right to receive
$12.30 in cash and 0.24154 of a share of RHD common stock. As of
January 31, 2006, 151,309,850 shares of Dex Media common stock were
issued and outstanding, which resulted in the issuance of 36,547,381
shares of RHD common stock. Adjusted and pro forma adjusted basic and
diluted EPS for 2006 does not necessarily reflect what the underlying
operational or financial performance of RHD would have been had the
Dex Media transaction been consummated at the beginning of 2006.
(9) EBITDA represents earnings before interest, taxes, depreciation and
amortization. Adjusted EBITDA represents adjusted earnings before
interest, taxes, depreciation and amortization. Pro forma adjusted
EBITDA represents pro forma adjusted earnings before interest, taxes,
depreciation and amortization. EBITDA, adjusted EBITDA and pro forma
adjusted EBITDA are not measurements of operating performance
computed in accordance with GAAP and should not be considered as a
substitute for operating income or net income prepared in conformity
with GAAP. In addition, EBITDA may not be comparable to similarly
titled measures of other companies. EBITDA for the three months ended
June 30, 2007 and 2006 includes charges of $7.5 million and
$9.3 million, respectively, for stock-based compensation in
accordance with Statement of Financial Accounting Standards
No. 123 (R), Share-Based Payment ("SFAS No. 123 (R)"). EBITDA for
the six months ended June 30, 2007 and 2006 includes charges of $21.5
million and $25.7 million, respectively, for stock-based compensation
in accordance with SFAS No. 123 (R). As a result of purchase
accounting required by GAAP, we recorded the deferred directory costs
related to Qwest directories that were scheduled to publish
subsequent to the Dex Media Merger at their fair value, determined as
(a) the estimated billable value of the published directory less (b)
the expected costs to complete the directories, plus (c) a normal
profit margin. We refer to this purchase accounting entry as "cost
uplift." Net income - GAAP and EBITDA for the three and six months
ended June 30, 2007 includes approximately $7.6 million and $24.6
million, respectively, of cost uplift associated with the Dex Media
transaction. EBITDA for the six months ended June 30, 2007 also
excludes recoveries and other purchase accounting adjustments
relating to bad debt expense previously charged to goodwill of $3.3
million, related to Qwest directories acquired in the Dex Media
transaction.
(10) Net debt - GAAP represents total debt less cash and cash equivalents
on the respective date. Net debt - excluding fair value adjustments
represents net debt - GAAP adjusted to remove the remaining fair
value purchase accounting adjustment of Dex Media's debt noted in
footnote 5 above. The unamortized fair value adjustment at June 30,
2007 is $180.7 million.
(11) Advertising sales is a statistical measure and consists of sales of
advertising in print directories distributed during the period and
Internet-based products and services with respect to which such
advertising first appeared publicly during the period. It is
important to distinguish advertising sales from net revenue, which is
recognized under the deferral and amortization method.
Note: These schedules are preliminary and subject to change pending the
Company's filing of its Form 10-Q.
SOURCE R.H. Donnelley Corporation
CONTACT: Investors - Tom McCallum, 1-800-497-6329, or
Media - Tyler D. Gronbach, +1-919-297-1541, both of R.H. Donnelley Corporation
Web site: http://www.rhd.com
(RHD)
