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R.H. Donnelley Reports Fourth Quarter and Full Year 2008 Results

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  • Achieves Guidance for EBITDA and Free Cash Flow
  • Retains Financial Advisor to Evaluate Capital Structure

CARY, N.C., March 12, 2009 /PRNewswire-FirstCall via COMTEX/ -- R.H. Donnelley Corporation, one of the nation's leading Yellow Pages and online local commercial search companies, today reported full year 2008 net revenues of $2,617 million, representing a 2 percent decline from the prior year. Adjusted EBITDA(1) in the year was $1,417 million, down $26 million or 2 percent from 2007. 2008 adjusted free cash flow was $510 million - based on cash flow from operations of $549 million, capital expenditures of $71 million and $32 million of other adjustments - down from $617 million in the prior year. Full year advertising sales were $2,518 million, down 8 percent from pro forma advertising sales for the prior year. Operating loss was $3,006 million in 2008. Excluding $3,870 million of impairment charges, operating income would have been $865 million in the year. Operating income in 2007 was $905 million. Net debt during 2008 decreased by $621 million, resulting in year-end net debt outstanding of $9,405 million, excluding the purchase accounting fair value adjustment.

In the fourth quarter of 2008, net revenue declined 7 percent from the fourth quarter of the prior year to $630 million. Adjusted EBITDA(1) was $360 million, an increase of $8 million or 2 percent compared to fourth quarter 2007. Adjusted free cash flow during the quarter was $151 million compared to $208 million in the prior year period.

"During 2008, we took significant initiatives to address the challenging selling environment and advanced our strategic priorities," said David C. Swanson, chairman and CEO of R.H. Donnelley. "We dramatically improved our efficiency and eliminated non-essential operating costs, reducing headcount by 20% and achieving $100 million of cost savings. At the same time, we broadened and improved our Dex branded interactive local search solutions. We also completed a major, company-wide systems integration and upgrade project and reduced net debt by more than $600 million. These initiatives helped us to continue building a foundation for sustainable growth once the economy recovers."

Swanson continued, "Advertising sales declined 8 percent for the full year and 12 percent in the fourth quarter as trends weakened during the second half of the year. These disappointing results were primarily due to the impact that the recession had on small and medium sized businesses, including lower consumer spending, reduced liquidity and higher business failure rates. We continued to diversify advertisers into our online and mobile platforms in addition to our core print solutions, but could not overcome the extremely difficult economic conditions. Despite the challenging environment, our mission remains unchanged - to help local businesses grow. R.H. Donnelley continues to generate large volumes of ready-to-buy leads at an accessible price and attractive ROI for local advertisers. Our services will generate even more value as the market becomes more complex and fragmented."

During the fourth quarter, R.H. Donnelley recognized a $744 million non-cash, pre-tax impairment charge associated with its intangible assets that in large part reflects the decline in the market value of the Company's debt and equity securities and the impact that the overall economy has had on its operating results. Earlier in the year, the Company recorded $3.1 billion of non-cash, pre-tax charges associated with goodwill impairment to reflect the decline in the market value of the Company's debt and equity securities.

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 related 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 revenues, which is recognized under the deferral and amortization method.

R.H. Donnelley is presently in the process of finalizing its 2008 year end income tax accounts, particularly as it relates to deferred income tax and net operating loss carryforwards. KPMG, the Company's independent registered public accounting firm, remains involved in finalizing its audit with respect to those income tax accounts. Because this analysis is not yet complete, the financial results provided in this release do not include tax related items and items affected by tax. The Company may need to file a Form 12b-25 with the SEC for an extension of the filing deadline with respect to its Form 10-K that the Company expects to file as soon as practicable and in any event by March 31, 2009.

Capital Structure

R.H. Donnelley has engaged Lazard as its financial advisor to assist in the evaluation of its capital structure, including various balance sheet restructuring alternatives.

"Our goal is to better position R.H. Donnelley for the future by establishing a more sustainable capital structure," said Steven M. Blondy, executive vice president and CFO. "We have significant debt maturities commencing in 2010 that we are working to address. Though we intended to refinance this debt prior to maturity, it may no longer be possible to do so given the current state of the capital markets. In the meantime, the company continues to generate robust EBITDA and has significant liquidity to meet all our financial and business obligations."

Blondy continued, "We plan to initiate discussions with our banks and bondholders about amending, refinancing or restructuring our debt obligations. Whichever path we choose to strengthen our balance sheet, R.H. Donnelley will continue to provide outstanding service and support to our customers, while also remaining committed to our employees and business partners. Our print and digital solutions continue to be the best way for local businesses to connect with ready-to-buy consumers, which should position R.H. Donnelley for healthy growth once the economy stabilizes."

As previously reported, R.H. Donnelley borrowed $361 million from the revolving credit facilities of three of its operating subsidiaries on February 17, 2009. The Company borrowed the cash in order to increase liquidity and financial flexibility given the continuing uncertainty in the global credit markets. As of February 28, 2009, the company had more than $500 million of cash and cash equivalents on hand.

Fourth Quarter and Full Year Conference Call

R.H. Donnelley will host a conference call to provide additional context regarding its performance in the fourth quarter and full year today at 10:00 a.m. (ET). Individuals within the United States can access the call by dialing 888-387-9606 - others should dial 517-645-6055. The pass code for the call is "RHD". Please dial into 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 866-382-4784, or for those outside of the United States, 203-369-0363. There is no pass code for the replay, which will be available through March 26, 2009. 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 (OTC: RHDC) connects businesses and consumers through its 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, 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 and dexknows.com.

Helping Local Small and Medium Sized Businesses Reach More Customers

R.H. Donnelley's interactive offerings are essential to its Triple Play(TM) solution suite -- an integrated set of products and services that efficiently and effectively extend the marketing reach of local businesses. Spanning multiple media platforms -- print Yellow Pages directories, dexknows.com(R) search site and the major search engines (e.g., Yahoo!(R) and Google(R)) via the Company's Dex Search Network(TM) -- Triple Play delivers the advertisements of local businesses to a wider set of ready-to-buy consumers.

Safe Harbor Provision

Certain statements contained in this press release regarding R.H. Donnelley'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," "would," "planned," "estimated," "potential," "goal," "outlook," "may," "predicts," "could," or the negative of such terms, or other comparable expressions, as they relate to R.H. Donnelley or its management, have been used to identify such forward-looking statements. All forward-looking statements reflect only R.H. Donnelley's current beliefs and assumptions with respect to future business plans, prospects, decisions and results, and are based on information currently available to R.H. Donnelley. Accordingly, the statements are subject to significant risks, uncertainties and contingencies, which could cause R.H. Donnelley's actual operating results, performance or business plans or prospects to differ materially from those expressed in, or implied by, these statements.

Factors that could cause actual results to differ materially from current expectations include risks and other factors described in R.H. Donnelley's publicly available reports filed with the SEC, which contain a discussion of various factors that may affect R.H. Donnelley's business or financial results. Such risks and other factors, which in some instances are beyond R.H. Donnelley's control, include: our ability to generate sufficient cash to service our significant debt levels; our ability to comply with or obtain modifications or waivers of the financial covenants contained in our debt agreements, and the potential impact to operations and liquidity as a result of restrictive covenants in such debt agreements; our ability to refinance or restructure our debt on reasonable terms and conditions as might be necessary from time to time, particularly in light of the continuing instability in the global credit markets; increasing LIBOR rates; changes in directory advertising spend and consumer usage; regulatory and judicial rulings; competition and other economic conditions; changes in the Company's and the Company's subsidiaries credit ratings; changes in accounting standards; adverse results from litigation, governmental investigations or tax related proceedings or audits; the effect of labor strikes, lock-outs and negotiations; successful integration and realization of the expected benefits of acquisitions; the continued enforceability of the commercial agreements with Qwest, Embarq and AT&T; our reliance on third-party vendors for various services; and other events beyond our control that may result in unexpected adverse operating results. R.H. Donnelley is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet service providers. This press release is being furnished to the SEC through a Form 8-K. The Company's 2008 annual report on Form 10-K to be filed with the SEC may contain updates to the information included in this release.

(See attached tables)

(1) Before the following expenses: (a) restructuring, (b) FAS 123 R, (c) restricted stock units related to the Business.com acquisition, (d) impairment charges and (e) gains / losses on debt transactions. Includes one-time $40 million gain related to curtailment of non-union retiree medical plans.


    R.H. DONNELLEY CORPORATION                                      Schedule 1
    INDEX OF SCHEDULES

    Schedule 1:   Index of Schedules

    Schedule 2:   Unaudited Condensed Consolidated Statements of Pre-Tax Loss
                  for the three months ended December 31, 2008 and 2007

    Schedule 3:   Unaudited Condensed Consolidated Statements of Pre-Tax
                  Income (Loss) for the years ended December 31, 2008 and 2007

    Schedule 4:   Unaudited Selected Balance Sheet Data at December 31, 2008
                  and 2007

    Schedule 5:   Unaudited Condensed Consolidated Statements of Cash Flows
                  for the three months ended December 31, 2008 and 2007 and
                  years ended December 31, 2008 and 2007

    Schedule 6:   Reconciliation of Non-GAAP Measures

    Schedule 7:   Statistical Measure - Advertising Sales

    Schedule 8:   Notes to Unaudited Condensed Consolidated Financial Data and
                  Non-GAAP Measures

    Note:  These schedules are preliminary and subject to change pending the
    Company's filing of its Form 10-K.



    R.H. DONNELLEY CORPORATION
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF PRE-TAX LOSS
    -----------------------------------------------------------

                                                                    Schedule 2
    Amounts in millions

                                                       ------------------
                                                       Three Months Ended
                                                          December 31,
                                                       ------------------
                                                         2008        2007
    --------------                                       ----        ----
    Net revenue (1)                                    $630.4      $680.8
    Expenses (1)                                        292.6       341.1
    Depreciation and amortization                       120.0       119.3
    Impairment charges (1) (2)                          746.6        20.0
                                                        -----        ----
    Operating income (loss)                            (528.8)      200.4
    Non-operating income                                    -         1.8
    Interest expense, net (1)                          (205.1)     (202.9)
    Gain (loss) on debt transactions, net (1)(3)         33.6       (26.3)
                                                         ----       -----
    Pre-tax loss                                      $(700.3)     $(27.0)
                                                      =======      ======

    See accompanying Notes to Unaudited Condensed Consolidated Financial Data
    and Non-GAAP Measures - Schedule 8.

    Note:  These schedules are preliminary and subject to change pending the
    Company's filing of its Form 10-K.



    R.H. DONNELLEY CORPORATION
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF PRE-TAX INCOME (LOSS)
    --------------------------------------------------------------------

                                                                    Schedule 3
    Amounts in millions

                                                     ------------------------
                                                     Years Ended December 31,
                                                     ------------------------
                                                         2008        2007
    --------------                                       ----        ----
    Net revenue (1)                                    $2,616.8    $2,680.3
    Expenses (1)                                        1,268.8     1,312.2
    Depreciation and amortization                         483.3       443.1
    Impairment charges (1) (2)                          3,870.4        20.0
                                                        -------        ----
    Operating income (loss)                            (3,005.7)      905.0
    Non-operating income                                      -         1.8
    Interest expense, net (1)                            (835.5)     (804.6)
    Gain (loss) on debt transactions, net (1)(3)          265.2       (26.3)
                                                          -----       -----
    Pre-tax income (loss)                             $(3,576.0)      $75.9
                                                      =========       =====

    See accompanying Notes to Unaudited Condensed Consolidated Financial Data
    and Non-GAAP Measures - Schedule 8.

    Note:  These schedules are preliminary and subject to change pending the
    Company's filing of its Form 10-K.



    R.H. DONNELLEY CORPORATION                                 Schedule 4
    UNAUDITED SELECTED BALANCE SHEET DATA
    -------------------------------------


    Amounts in millions
    -------------------                           ------------ ------------
                                                  December 31, December 31,
                                                      2008         2007
                                                      ----         ----
    Assets
      Cash and cash equivalents                       $131.2        $46.1
      Accounts receivable, net                       1,027.0      1,063.5
      Deferred directory costs                         164.3        183.7
      Fixed assets and computer software, net          188.7        187.7
      Intangible assets, net (2)                    10,009.3     11,170.5
      Goodwill (2)                                         -      3,124.3

    Current Liabilities
      Deferred directory revenue                     1,076.3      1,172.0
      Current portion of long-term debt (3)            113.6        177.2

    Long-Term Liabilities
      Long-term debt (3)                             9,508.7      9,998.5

    See accompanying Notes to Unaudited Condensed Consolidated Financial Data
    and Non-GAAP Measures - Schedule 8.

    Note:  These schedules are preliminary and subject to change pending the
    Company's filing of its Form 10-K.



    R.H. DONNELLEY CORPORATION
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS      Schedule 5
    ---------------------------------------------------------


    Amounts in millions
    -------------------

                                   Three Months          Years Ended
                                 Ended December 31,      December 31,
                                   --------------      ----------------
                                   2008      2007      2008        2007
                                   ----      ----      ----        ----
    Operating activities:
    Net cash provided by
     operating activities         $162.0    $221.5    $548.7      $691.8

    Investment activities:
    Additions to fixed assets and
     computer software             (23.3)    (15.6)    (70.6)      (77.4)
    Acquisitions, net of cash
     received                          -      (0.2)        -      (329.1)
    Equity investment
     disposition (investment)          -         -       4.3        (2.5)
                                    ----      ----      ----        ----
    Net cash used in
     investing activities          (23.3)    (15.8)    (66.3)     (409.0)

    Financing activities:
    Proceeds from the issuance of
     debt, net of costs                -   1,145.0         -     1,468.6
    Additional borrowings under
     credit facilities, net of
     costs                          (1.0)  1,416.8   1,017.2     1,416.8
    Credit facilities repayments   (57.0) (1,111.8) (1,281.7)   (1,674.1)
    Note repurchases and
     repayments                     (7.4) (1,398.9)    (92.1)   (1,398.9)
    Revolver repayments                -    (215.3)   (422.2)     (781.4)
    Borrowings under the Revolver      -     151.9     398.1       722.6
    Proceeds from the issuance
     of common stock                   -         -         -         9.0
    Repurchase of common stock         -     (89.6)     (6.1)      (89.6)
    Tender, redemption and call
     premium payments                  -     (71.7)        -       (71.7)
    Debt issuance costs             (0.9)        -     (10.5)          -
    Decrease in checks not yet
     presented for payment          (2.0)     (5.7)     (0.1)       (7.6)
    Proceeds from employee stock
     option exercises                  -       0.7       0.1        13.4

                                   -----    ------    ------      ------
    Net cash used in financing
     activities                    (68.3)   (178.6)   (397.3)     (392.9)

    Increase (decrease) in
     cash and cash equivalents      70.4      27.1      85.1      (110.1)

    Cash and cash equivalents,
     beginning of period            60.8      19.0      46.1       156.2

                                  ------     -----    ------       -----
    Cash and cash equivalents,
     end of period                $131.2     $46.1    $131.2       $46.1
                                  ======     =====    ======       =====

    Supplemental Information:
    -------------------------
    Non-cash financing
     activities:
       Reduction of debt from
        debt transactions         $(20.7)       $-   $(193.5)         $-


    See accompanying Notes to Unaudited Condensed Consolidated Financial Data
    and Non-GAAP Measures - Schedule 8.

    Note:  These schedules are preliminary and subject to change pending the
    Company's filing of its Form 10-K.



    R.H. DONNELLEY CORPORATION                                     Schedule 6a
    RECONCILIATION OF NON-GAAP MEASURES
    ------------------------------------
    (unaudited)

    Amounts in millions

                            ------------------   -----------------
                            Three Months Ended      Years Ended
                               December 31,        December 31,
                            ------------------   -----------------
                               2008    2007      2008         2007
                               ----    ----      ----         ----

    Reconciliation of
     operating income
     (loss) - GAAP to
     EBITDA and
     Adjusted EBITDA (4)

    Operating
     income (loss) -
      GAAP                    $(528.8) $200.4 $(3,005.7)      $905.0
    Plus
     impairment
     charges (2)                746.6    20.0   3,870.4         20.0
    Plus
     depreciation
     and
     amortization (1)           120.0   119.3     483.3        443.1
                                -----   -----     -----        -----
    EBITDA                     $337.8  $339.7  $1,348.0     $1,368.1
                               ------  ------  --------     --------

    Amortized deferred cost
     uplift on Dex sales
     contracts as of the
     merger date                    -     1.0         -         28.9

    Purchase accounting
     adjustments related
     to bad debt expense
     previously charged
     to goodwill related to
     Qwest directories
     acquired in the Dex
     Media transaction              -       -         -          3.3

    SFAS No. 123 R
     non-cash
     compensation
     expense                      6.1     9.0      29.5         39.0

    Restricted
     stock unit
     expense
     related to the
     Business.com
     acquisition                  0.4     2.4       4.7          3.2

    Restructuring
     costs                       15.5       -      34.4            -

                               ------  ------  --------     --------
    Adjusted EBITDA            $359.8  $352.1  $1,416.6     $1,442.5
                               ======  ======  ========     ========


                            -----------
                             Year Ended
                            -----------
                            December 31,
                                2008
                            -----------
    Reconciliation of
     operating loss -
     GAAP to adjusted
     operating
     income (4)

    Operating loss
     - GAAP                 $(3,005.7)
    Plus:
     Impairment
     charges                  3,870.4
                              -------
    Adjusted
     operating
     income                    $864.7
                               ======

    See accompanying Notes to Unaudited Condensed Consolidated Financial Data
    and Non-GAAP Measures - Schedule 8.

    Note:  These schedules are preliminary and subject to change pending the
    company's filing of its Form 10-K.



    R.H. DONNELLEY CORPORATION                                    Schedule 6b
    RECONCILIATION OF NON-GAAP MEASURES (cont'd)
    --------------------------------------------
    (unaudited)

    Amounts in millions

                             -------------------       ----------------
                             Three Months Ended         Years Ended
                                  December 31,           December 31,
                             -------------------       ----------------
                               2008         2007       2008        2007
                               ----         ----       ----        ----
    Reconciliation of
     cash flow from
     operations -
     GAAP to adjusted
     free cash flow

    Cash flow from
     operations -
     GAAP                      $162.0      $221.5     $548.7       $691.8
    Add: Cash
     restructuring
     payments                    11.5           -       27.0            -
    Add: Cash
     restricted
     stock unit
     payments
     related to the
     Business.com
     acquisition                  0.6         1.6        5.1          2.4
                                  ---         ---        ---          ---
    Adjusted cash
     flow from
     operations                 174.1       223.1      580.8        694.2
    Less:
     Additions to
     fixed assets
     and computer
     software -
     GAAP                        23.3        15.6       70.6         77.4
                                 ----        ----       ----         ----
    Adjusted free
     cash flow                 $150.8      $207.5     $510.2       $616.8
                               ======      ======     ======       ======



                               -------------------        -----------------
                               Three Months Ended            Years Ended
                                   December 31,              December 31,
                               -------------------        -----------------
                               2008           2007        2008         2007
                               ----           ----        ----         ----
    Reconciliation of
     interest expense -
     GAAP to adjusted
     interest expense (5)

    Interest
     expense - GAAP (1)        $205.1        $202.9      $835.5       $804.6
    Plus:
     Amortization
     of fair value
     adjustment due
     to purchase
     accounting                   4.6           6.7        17.6         29.9
    Less: One-time
     expense
     related to
     ineffective
     interest rate
     swaps as a
     result of the
     refinancings
     completed
     during the
     second quarter
     of 2008                        -             -       (21.0)           -
                                  ---           ---       -----          ---
    Adjusted
     interest
     expense                   $209.7        $209.6      $832.1       $834.5
                               ======        ======      ======       ======



                               -----          -----
                               As of          As of
                               -----          -----
                            December 31,   December 31,
                               2008           2007
                            ------------   ------------
    Reconciliation of debt -
     GAAP to net debt and
     net debt - excluding
     fair value
     adjustment (5) (6)

    Debt - GAAP              $9,622.3     $10,175.7
    Less: Cash and
     cash
     equivalents               (131.2)        (46.1)
                               ------         -----
    Net debt                  9,491.1      10,129.6

    Less: Fair
     value
     adjustment due
     to purchase
     accounting                 (86.2)       (103.8)
                                -----        ------
    Net debt -
     excluding fair
     value
     adjustment              $9,404.9     $10,025.8
                             ========     =========

    See accompanying Notes to Unaudited Condensed Consolidated Financial Data and Non-GAAP Measures - Schedule 8.

    Note:  These schedules are preliminary and subject to change pending the
    Company's filing of its Form 10-K.



    R.H. DONNELLEY CORPORATION                                      Schedule 7
    STATISTICAL MEASURE
    CALCULATION OF ADVERTISING SALES PERCENTAGE CHANGE OVER PRIOR YEAR PERIODS
    --------------------------------------------------------------------------
    (unaudited)


    Amounts in millions, except percentages
    ---------------------------------------

                   Year Ended                Three Months Ended
                   ----------   ----------------------------------------------
                   December 31  December 31  September 30  June 30    March 31
                   -----------  -----------  ------------  -------    --------


    2008
     Advertising
     sales (7)       $2,518.4    $618.4         $503.6    $678.4       $718.0

    2007
     Advertising
     sales
     disclosed in
     2007 Form 10-
     K and Forms
     10-Q             2,718.2     700.3          541.6     729.0        747.3

    Pro forma
     adjustments
     related to
     Business.com
     Acquisition         27.5         -              -      14.2         13.3

    Adjustments
     primarily
     related to
     changes in
     publication
     dates                  -       0.1            7.7      (1.2)        (6.6)
                          ---       ---            ---      ----         ----

    2007 Pro
     forma
     advertising
     sales           $2,745.7    $700.4         $549.3    $742.0       $754.0

                         ----     -----           ----      ----         ----
    Pro forma
     advertising
     sales
     percentage
     change over
     prior year
     periods            (8.3%)   (11.7%)         (8.3%)    (8.6%)       (4.8%)
                         ====     =====           ====      ====         ====

    See accompanying Notes to Unaudited Condensed Consolidated Financial Data and Non-GAAP Measures - Schedule 8.

    Note:  These schedules are preliminary and subject to change pending the Company's filing of its Form 10-K.



    R.H. DONNELLEY CORPORATION                                     Schedule 8
    NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL DATA
    --------------------------------------------------------
    AND NON-GAAP MEASURES
    ---------------------

    (1)  Our advertising revenues are earned primarily from the sale of
         advertising in yellow pages directories that we publish. Revenue from
         the sale of such advertising is deferred when a directory is
         published, net of estimated sales claims, and recognized ratably over
         the life of a directory, which is typically 12 months. Advertising
         revenues also include revenues for Internet-based advertising
         products, including our proprietary local search site, dexknows.com,
         and our Dex Search Network. Revenues with respect to our Internet-
         based advertising products that are sold with print advertising are
         initially deferred until the service is delivered or fulfilled and
         recognized ratably over the life of the contract. Revenues with
         respect to Internet-based services that are not sold with print
         advertising are recognized as delivered or fulfilled.

         During the year ended December 31, 2007, we recorded a loss on debt
         transactions of $26.3 million resulting from the refinancing
         transactions conducted during the fourth quarter of 2007. In our
         Current Report on Form 8-K filed on February 28, 2008, these charges
         were included in interest expense on the unaudited condensed
         consolidated statements of operations. In order to conform to the
         current period's presentation, these amounts have been reclassified
         to gain (loss) on debt transactions, net, on the unaudited condensed
         consolidated statements of operations. During the year ended December
         31, 2007, we recorded an intangible asset impairment charge of $20.0
         million associated with the tradenames acquired in the Embarq
         Acquisition. In our Current Report on Form 8-K filed on February 28,
         2008, these charges were included in depreciation and amortization on
         the unaudited condensed consolidated statements of operations. In
         order to conform to the current period's presentation, these amounts
         have been reclassified to impairment charges on the unaudited
         condensed consolidated statements of operations.

    (2)  As a result of the decline in the trading value of our debt and
         equity securities and the decline in our operating results, we
         recognized non-cash goodwill impairment charges totaling $3.1 billion
         for the year ended December 31, 2008.  As a result of these
         impairment charges, we have no recorded goodwill at December 31,
         2008. Given the ongoing credit and liquidity crisis and the
         significant negative impact on financial markets, as well as the
         overall economy, and the recent suspension of trading of our common
         stock on the New York Stock Exchange ("NYSE"), we performed
         impairment tests of our definite-lived intangible assets and other
         long-lived assets in accordance with SFAS No. 144, Accounting for the
         Impairment or Disposal of Long-Lived Assets, as of December 31, 2008.
         As a result of these tests, the Company recognized a non-cash
         intangible asset impairment charge of $744.0 million during the
         fourth quarter of 2008 associated with the local and national
         customer relationships acquired in the Dex Media Merger, AT&T
         Directory Acquisition and Embarq Acquisition. In addition, as a
         result of the Company's decision to discontinue the use of tradenames
         and technology acquired in the Local Launch Acquisition,
         we recognized a non-cash impairment charge of $2.2 million during the
         fourth quarter of 2008, for a total impairment charge related to our
         intangible assets of $746.2 million during the year ended December
         31, 2008. During the year ended December 31, 2008, we retired certain
         computer software fixed assets, which resulted in an impairment
         charge of $0.4 million.

    (3)  During the fourth quarter of 2008, we repaid $9.8 million of Term
         Loan D-1 and $45.9 million of Term Loan D-2 under the RHDI credit
         facility by making voluntary prepayments of $35.5 million, including
         fees, at a discount to par. As a result, we recognized a gain of
         $20.0 million during the year ended December 31, 2008, consisting of
         the difference between the face amount of the Term Loans repaid and
         the voluntary prepayments made, offset by the write-off of
         unamortized deferred financing costs of $0.2 million. During
         September and October 2008, we repurchased $187.0 million ($181.4
         million accreted value, as applicable) of our senior notes and senior
         discount notes (collectively referred to as the "Notes") for a
         purchase price of $92.1 million.  As a result of these repurchases,
         we recognized a gain of $86.0 million, consisting of the difference
         between the accreted value (in the case of the senior discount notes)
         or par value, as applicable, and purchase price of the Notes, offset
         by the write-off of unamortized deferred financing costs of $3.3
         million. On June 25, 2008, RHD completed an exchange of its senior
         notes and senior discount notes for new senior notes ("Debt
         Exchanges"). Please refer to our Current Report on Form 8-K filed on
         June 25, 2008 for additional information. The Debt Exchanges have
         been accounted for as an extinguishment of debt, resulting in a gain
         of approximately $161.3 million, representing the difference between
         the accreted value or par value, as applicable, of the former senior
         notes and senior discount notes and the new senior notes of $172.8
         million, offset by the write-off of unamortized deferred financing
         costs of $11.5 million associated with the former senior notes and
         senior discount notes. During the second quarter of 2008, we
         recognized a charge of $2.2 million for the write-off of unamortized
         deferred financing costs associated with the refinancing of the
         former Dex Media West credit facility and portions of the amended
         RHDI Credit Facility, which have been accounted for as
         extinguishments of debt. As a result of these financing activities,
         we recorded a net gain of $33.6 million  and $265.2 million during
         the three months and year ended December 31, 2008, respectively.
         During the fourth quarter of 2007, we recorded a loss on debt
         transactions of $26.3 million resulting from tender, redemption and
         call premium payments of $71.7 million and the write-off of
         unamortized deferred financing costs of $16.8 million, offset by
         accelerated amortization of the fair value adjustment to Dex Media's
         debt of $62.2 million (see Note 5 below) resulting from the
         refinancing transactions conducted during the fourth quarter of 2007.

    (4)  EBITDA and Adjusted EBITDA are not measurements of operating
         performance computed in accordance with GAAP and should not be
         considered as a substitute for operating income prepared in
         conformity with GAAP. In addition, EBITDA may not be comparable to
         similarly titled measures of other companies. Adjusted EBITDA is
         determined by adjusting EBITDA for items such as (i) impairment
         charges, (ii) stock-based compensation in accordance with SFAS No.
         123 (R), Share-Based Payment, (iii) cost uplift related to the Dex
         Media Merger, which is defined 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, (iv) restricted stock
         unit expense related to the Business.com Acquisition, (v)
         restructuring costs, and for 2007, (vi) recoveries and other purchase
         accounting adjustments related to bad debt expense previously charged
         to goodwill related to Qwest directories acquired in the Dex Media
         transaction. Adjusted net income represents net loss - GAAP adjusted
         for all impairment charges recorded during the three months and year
         ended December 31, 2008.

    (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 interest expense eliminates the interest benefit
         resulting from the amortization of the fair value adjustment to Dex
         Media's debt. As a result of the amendment of the RHDI Credit
         Facility and the refinancing of the former Dex Media West credit
         facility on June 6, 2008, the existing interest rate swaps associated
         with these two debt arrangements are no longer highly effective in
         offsetting changes in cash flows. Accordingly, these interest rate
         swaps became ineffective on June 6, 2008 and cash flow hedge
         accounting treatment under SFAS No. 133, Accounting for Derivative
         Instruments and Hedging Activities, is no longer permitted.  Interest
         expense for the year ended December 31, 2008 includes a non-cash
         charge of $21.0 million resulting from the reclass of amounts
         previously charged to accumulated other comprehensive loss related to
         these interest rate swaps. Adjusted interest expense eliminates this
         one time charge to interest expense.

    (6)  Net debt represents total debt less cash and cash equivalents on the
         respective date. Net debt - excluding fair value adjustments
         represents net debt 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 December 31, 2008
         is $86.2 million.

    (7)  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. 2007 pro forma
         advertising sales assumes the Business.com Acquisition occurred on
         January 1, 2007.

    Note:  These schedules are preliminary and subject to change pending the
    Company's filing of its Form 10-K.

SOURCE R.H. Donnelley Corporation

http://www.rhd.com

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