-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MbDAPkmkta7+kDJ7bSVXINRmmCdsO9C+4956Rx8D9+nDm4Pi5Od94HA+DFZ95tgx xgKo9cdGJsE4h39Cw3xjIg== 0001157523-06-004565.txt : 20060503 0001157523-06-004565.hdr.sgml : 20060503 20060503171420 ACCESSION NUMBER: 0001157523-06-004565 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060503 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060503 DATE AS OF CHANGE: 20060503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: R H DONNELLEY CORP CENTRAL INDEX KEY: 0000030419 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 132740040 STATE OF INCORPORATION: DE FISCAL YEAR END: 1205 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07155 FILM NUMBER: 06804857 BUSINESS ADDRESS: STREET 1: 1001 WINSTEAD DRIVE CITY: CARY STATE: NC ZIP: 27513 BUSINESS PHONE: 9198046000 MAIL ADDRESS: STREET 1: 1001 WINSTEAD DRIVE CITY: CARY STATE: NC ZIP: 27513 FORMER COMPANY: FORMER CONFORMED NAME: DUN & BRADSTREET CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DUN & BRADSTREET COMPANIES INC DATE OF NAME CHANGE: 19790429 8-K 1 a5139166.txt R.H. DONNELLEY CORPORATION 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 8-K CURRENT REPORT -------------- Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 3, 2006 -------------- R.H. DONNELLEY CORPORATION (Exact name of registrant as specified in its charter) -------------- Delaware 1-07155 13-2740040 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 1001 Winstead Drive Registrant's telephone number, Cary, NC including area code: 27513 (Address of principal executive offices) (919) 297-1600 (Zip Code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition. On May 3, 2006, R.H. Donnelley Corporation (the "Company") issued a press release containing certain financial results of the Company and Dex Media, Inc. ("Dex Media") for the three month period ended March 31, 2006. None of the contents of this Form 8-K are incorporated by reference into any registration statement or report of the Company or Dex Media. A copy of this press release has been attached hereto as Exhibit 99.1 to this Form 8-K. Item 9.01. Financial Statements and Exhibits. (c) Exhibits. The following exhibit is filed with this report: Exhibit No. Exhibit Description ----------- ------------------- 99.1 Press Release issued May 3, 2006. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. R.H. DONNELLEY CORPORATION /s/ Robert J. Bush ----------------------------------- Robert J. Bush Vice President, General Counsel & Corporate Secretary Date: May 3, 2006 3 EXHIBIT INDEX Exhibit No. Exhibit Description ----------- ------------------- 99.1 Press Release issued May 3, 2006. 4 EX-99.1 2 a5139166ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 R.H. Donnelley Generates Strong Cash Flow in First Quarter; Dex Integration On Track CARY, N.C.--(BUSINESS WIRE)--May 3, 2006--R.H. Donnelley Corporation (NYSE: RHD), one of the nation's leading Yellow Pages and online local commercial search companies, today reported pro forma adjusted cash flow from operations of $243.2 million and GAAP cash flow from operations of $196.0 million. "During the quarter we made considerable progress integrating Dex and R.H. Donnelley. We appointed the new senior management team when the deal closed on January 31 and have made significant progress building out all functional groups for the new combined company. After spending the last few months in the Dex markets evaluating people and products, we're more convinced than ever that this acquisition strengthens RHD's product portfolio, management team and sales organization," said David C. Swanson, chairman and chief executive officer of R.H. Donnelley. Swanson added, "First quarter results were in line with expectations and on track relative to the full year guidance provided earlier this year. Advertising sales on a same store basis were even with the prior year, reflecting another good quarter in the Sprint markets, the transition underway in the Dex business, and a decline associated with our continued rebuilding efforts in Illinois." During the first quarter of 2006, RHD generated pro forma adjusted free cash flow of $231.7 million. Pro forma adjusted cash flow includes Dex Media GAAP results for the month of January, adjusted to exclude $7.5 million of professional fees paid in connection with the sale to RHD, plus RHD GAAP results for the entire quarter. Pro forma adjusted free cash flow includes $11.5 million of pro forma adjusted capital expenditures. GAAP operating cash flow in the quarter was $196.0 million and GAAP capital expenditures in the quarter were $10.4 million. As a result of the Dex Media transaction, RHD recorded Dex Media's outstanding debt at fair market value on the acquisition date in accordance with purchase accounting. Although debt book value increased as a result, interest payments and principal obligations are unchanged. As of March 31, 2006, RHD's net debt outstanding, excluding the fair value adjustment, was $10,468.5 million. On a GAAP basis, including the fair value adjustment, net debt was $10,684.7 million. See the attached schedules for operating results and a reconciliation of non-GAAP financial measures presented in this release to the most comparable GAAP measures. Please note that combined adjusted figures from first quarter 2005 are not strictly comparable to pro forma adjusted numbers from the current quarter. Different accounting methodologies and certain other factors impact year-over-year comparability. We urge you to read the schedules, Comparative Financial Results section below and the schedule footnotes carefully to better understand the limitations of using these figures for any analysis. Outlook The Company affirms guidance for full year 2006 provided under Item 2.02 in the Current Report on Form 8-K furnished to the SEC on February 22, 2006. First Quarter Conference Call R.H. Donnelley will host a conference call to discuss the first quarter 2006 results of RHD on May 4, 2006 at 10:00 a.m. (ET). The call can be accessed by dialing 888-387-9606 (domestic) or 517-645-6055 (international). The passcode 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 webcast, which can be accessed by visiting our website at www.rhd.com, clicking on "Investor Information" and following the instructions provided. Those unable to participate at the scheduled time may access a recorded replay by dialing 800-813-5526 (domestic) or 402-280-1632 (international). The recording will be available through May 19, 2006. There is no passcode for the replay. About R.H. Donnelley R.H. Donnelley is one of the nation's leading Yellow Pages and online local commercial search companies. The company has more than 4,000 employees operating in 28 states across the United States. Every day, consumers rely on the company's more than 600 directories, online city guides, and search websites to find businesses that provide the services they need. RHD's directories, which have a circulation of approximately 80 million, are marketed under three of the industry's most recognized brands: AT&T Yellow Pages (formerly SBC Yellow Pages) in Illinois and Northwest Indiana; Dex(R) Yellow Pages and Sprint Yellow Pages(R). R.H. Donnelley's expanding presence on the Internet now includes the Best Red Yellow Pages(R) brand at bestredyp.com(R), in AT&T Yellow Pages markets at CHICAGOLANDYP.com and local search services through DexOnline(R) at DexOnline.com(R). Visit www.rhd.com for more information. Comparative Financial Results As a result of the AT&T and Dex Media transactions and the related financing and associated accounting, management believes that R.H. Donnelley's 2006 and 2005 results reported in accordance with GAAP are not comparable, nor do they reflect the underlying operational or financial performance of R.H. Donnelley. 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. Pro forma adjusted 2006 results discussed in this press release and the attached schedules 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. Combined adjusted 2005 results included in the attached schedules reflect the sum of adjusted RHD results and Dex Media GAAP results during the period. While pro forma adjusted and combined adjusted results each exclude the effects of purchase accounting (and certain other items) to better reflect operating results in the respective periods, because of differences between RHD, AT&T and Dex Media and their respective predecessor accounting policies, pro forma adjusted and combined adjusted results are not strictly comparable and should not be treated as such. The primary adjustments related to the AT&T transaction and the Dex Media transaction are recognition of pre-acquisition deferred revenue and deferred expenses that are not reportable under GAAP due to purchase accounting requirements, but that absent purchase accounting would have been recognized during the periods presented. Pro forma adjusted results for R.H. Donnelley also exclude professional fees related to the Dex Media Merger and deferred directory costs related to sales contracts executed prior to the AT&T and Dex Media transactions for directories that were scheduled to publish subsequent to the acquisition, determined based on the estimated billable value of the published directories less the expected costs to complete the directories plus a normal margin. In addition, pro forma adjusted results include interest and depreciation and amortization expenses as if the Dex Media transaction occured on January 1, 2006 and eliminates the interest benefit resulting from the amortization of the fair market value adjustment to Dex Media's debt. R.H. Donnelley's adjusted earnings per share assumes conversion at the beginning of the period of the preferred stock that was outstanding at December 31, 2005. The attached schedules include a reconciliation of all non-GAAP financial measures to the most comparable GAAP measures and a further description of the related adjustments for R.H. Donnelley results. While purchase accounting related to the Dex Media merger will impact R.H. Donnelley's 2006 reported results, it did not affect 2005 results for either company or, therefore, combined adjusted results for 2005. 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, 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. Such risks, uncertainties and contingencies include, but are not limited to, statements about the benefits of the merger between RHD and Dex Media, Inc., including future financial and operating results, RHD's plans, objectives, expectations and intentions and other statements that are not historical facts. 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 businesses will not be integrated successfully; (2) the risk that the expected strategic advantages and cost savings from the Dex transaction may not be fully realized or may take longer to realize than expected; (3) disruption from the Dex transaction 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 the registration statement on Form S-4 that RHD filed with the Securities and Exchange Commission (the "SEC") (Registration No. 333-129539), which contains the joint proxy statement/prospectus relating to the transaction, RHD's Annual Report on Form 10-K for the fiscal year ended December 31, 2005 in Item 1A "Risk Factors," Dex Media's Annual Report on Form 10-K for the fiscal year ended December 31, 2005 in Item 1A "Risk Factors," as well as RHD's and Dex Media'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 March 31, 2006 and 2005 Schedule 3: Unaudited Condensed Consolidated Pro Forma Adjusted and Combined Adjusted Statements of Operations for the three months ended March 31, 2006 and 2005 Schedule 4: Unaudited Condensed Consolidated Balance Sheets at March 31, 2006 and December 31, 2005 Schedule 5: Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2005 Schedule 6: Reconciliation of Reported to Unaudited Condensed Consolidated Pro Forma Adjusted and Combined Adjusted Statements of Operations for the three months ended March 31, 2006 and 2005 Schedule 7: Reconciliation of Non-GAAP Measures 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 Schedule 2 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - ---------------------------------------------------------------------- Amounts in millions, except earnings per share - ---------------------------------------------------------------------- Three months ended March 31, -------------------------------- 2006 2005 Reported Reported - ---------------------------------------------------------------------- Net revenue (1) $320.5 $207.3 Expenses 219.7 115.4 Depreciation and amortization 62.7 21.7 -------------------------------- Operating income 38.1 70.2 Interest expense, net (153.8) (57.5) -------------------------------- Pre-tax (loss) income (115.7) 12.7 Tax benefit (provision) 44.0 (5.0) -------------------------------- Net (loss) income (71.7) 7.7 (Gain) loss on repurchase of Preferred Stock (29.2) 133.7 Preferred dividend - 3.3 -------------------------------- Loss available to common shareholders $(42.5) $(129.3) ================================ Loss per share (EPS): (4) Basic $(0.76) $(4.10) Diluted $(0.76) $(4.10) Shares used in computing EPS: (4) Basic 55.6 31.5 Diluted 55.6 31.5 - ---------------------------------------------------------------------- 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 3 UNAUDITED CONDENSED CONSOLIDATED PRO FORMA ADJUSTED AND COMBINED ADJUSTED STATEMENTS OF OPERATIONS - ---------------------------------------------------------------------- Amounts in millions, except earnings per share - ---------------------------------------------------------------------- Three months ended March 31, - ---------------------------------------------------------------------- 2006 2005 Pro Forma Combined Adjusted (2) Adjusted (2) - ---------------------------------------------------------------------- Net revenue (1) $676.5 $670.9 Expenses 317.3 284.8 Depreciation and amortization 83.2 ------------------------------ Operating income 276.0 Interest expense, net (212.7) --------------- Pre-tax income 63.3 Tax provision (24.1) --------------- Net income $39.2 =============== Earnings per share (EPS): (5), (12) Basic $0.57 Diluted $0.56 Shares used in computing EPS: (5), (12) Basic 68.2 Diluted 70.2 - ---------------------------------------------------------------------- See accompanying Notes to Unaudited Condensed Consolidated Financial Statements and Non-GAAP Measures - Schedule 8. See Schedule 6 for a reconciliation of reported to pro forma adjusted and combined adjusted amounts. 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 - ---------------------------------------------------------------------- March 31, December 31, 2006 2005 Reported Reported - ---------------------------------------------------------------------- Assets Cash and cash equivalents $199.3 $7.8 Accounts receivable, net 1,344.4 457.3 Deferred directory costs 211.2 67.7 Other current assets 64.1 33.0 ------------------------------ Total current assets 1,819.0 565.8 Fixed assets and computer software, net 164.2 55.7 Intangible assets, net 11,708.8 2,833.2 Other non-current assets (13) 175.4 105.9 Goodwill 2,671.4 319.0 ------------------------------ Total Assets $16,538.8 $3,879.6 ============================== Liabilities, Redeemable Convertible Preferred Stock and Shareholders' Equity (Deficit) Accounts payable and accrued liabilities $127.4 $68.9 Accrued interest 136.3 20.6 Deferred directory revenue 783.3 463.4 Short-term deferred income taxes, net 255.1 85.7 Current portion of long-term debt 460.5 100.2 ------------------------------ Total current liabilities 1,762.6 738.8 Long-term debt 10,423.5 2,978.6 Deferred income taxes, net (13) 2,179.9 65.2 Other non-current liabilities 155.4 54.3 ------------------------------ Total liabilities 14,521.4 3,836.9 Redeemable convertible preferred stock - 334.1 Shareholders' equity (deficit) 2,017.4 (291.4) ------------------------------ Total Liabilities, Redeemable Convertible Preferred Stock and Shareholders' Equity (Deficit) $16,538.8 $3,879.6 ============================== - ---------------------------------------------------------------------- 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 5 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------- For the three months ended March 31, 2006 and 2005 Amounts in millions - ---------------------------------------------------------------------- Reported Reported Three Months Three Months ended ended Operating activities: March 31, 2006 March 31, 2005 ------------------------------ Net (loss) income $(71.7) $7.7 Depreciation and amortization 62.7 21.7 Deferred income tax (43.9) 21.8 Changes in working capital 208.9 56.7 Other 40.0 4.9 ------------------------------ Net cash provided by operating activities 196.0 112.8 Investment activities: Additions to fixed assets and computer software (10.4) (5.5) Merger, net of cash received (1,888.7) - ------------------------------ Net cash used in investing activities (1,899.1) (5.5) Financing activities: (Decrease) increase in checks not yet presented for payment (6.0) 1.9 Proceeds from issuance of debt, net of costs 2,517.5 291.7 Repurchase of redeemable convertible preferred stock (336.1) (277.2) Repayment of debt (418.9) (111.4) Revolver repayments (44.7) (90.2) Borrowings under the Revolver 168.7 72.0 Proceeds from option exercises 14.1 2.7 ------------------------------ Net cash provided by (used in) financing activities 1,894.6 (110.5) Increase (decrease) in cash and cash equivalents 191.5 (3.2) Cash and cash equivalents, beginning of period 7.8 10.8 ------------------------------ Cash and cash equivalents, end of period $199.3 $7.6 ============================== - ---------------------------------------------------------------------- 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 6 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - ------------------------------------------------ Reconciliation of Reported to Unaudited Condensed Consolidated Pro Forma Adjusted and Combined Adjusted Amounts (unaudited) Amounts in millions, except earnings per share - ---------------------------------------------------------------------- Three Months Ended March 31, 2006 -------------------------------------- RHD Pro Forma Reported Adjustments (2) Adjusted - ------------------------------- -------------------------------------- Net revenue (1) $320.5 $356.0 (6) $676.5 Expenses 219.7 97.6 (6) 317.3 Depreciation and amortization 62.7 20.5 (7) 83.2 -------- ----------- -------- Total expenses 282.4 118.1 400.5 --------- ----------- -------- Operating income 38.1 237.9 276.0 Interest expense, net (153.8) (58.9)(7) (212.7) --------- ----------- -------- Pre-tax (loss) income (115.7) 179.0 63.3 Tax benefit (provision) 44.0 (68.1)(8) (24.1) --------- ----------- -------- Net (loss) income (71.7) 110.9 39.2 (Gain) loss on repurchase of Preferred Stock (29.2) 29.2 (3) - Preferred dividend - - - -------- ----------- -------- (Loss) income available to common shareholders $(42.5) $81.7 $39.2 ======== =========== ======== (Loss) Earnings per share (EPS): (3), (4), (5), (12) Basic $(0.76) $0.57 Diluted $(0.76) $0.56 Shares used in computing EPS: (3), (4), (5), (12) Basic 55.6 12.6 (3), (12) 68.2 Diluted 55.6 14.6 (3), (12) 70.2 - ---------------------------------------------------------------------- Three Months Ended March 31, 2005 - ---------------------------------------------------------------------- RHD RHD Dex Combined Media Reported Adjustments(2) Adjusted Reported(2) Adjusted - ---------------------------------------------------------------------- Net revenue (1) $207.3 $51.9 (6) $259.2 $411.7 $670.9 Expenses 115.4 (8.0)(6) 107.4 177.4 284.8 - ---------------------------------------------------------------------- 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 7a RECONCILIATION OF NON-GAAP MEASURES - ----------------------------------- (unaudited) Amounts in millions, except per share amounts - --------------------------------------------------------------------- Three Months Ended March 31, ----------------------------- 2006 2005 - --------------------------------------------------------------------- Reconciliation of advertising sales to net revenue - GAAP, net revenue - pro forma adjusted and net revenue combined adjusted (9) RHD advertising sales disclosed in March 31, 2005 Form 10-Q $256.6 Dex Media implied publication sales for first quarter 2005, disclosed in Dex Media's second quarter 2005 press release 452.2 Combined adjustments for changes in publication dates and definition of advertising sales (1.6) -------------- RHD pro forma advertising sales $707.0 707.2 Advertising sales percentage change over prior year 0.0% Less pre-acquisition Dex Media advertising sales not recognized as current period revenue. Less combined current period advertising sales not recognized as revenue due to the deferral method of accounting. Plus combined net revenue reported in the period for advertising sales from prior periods. (392.0) (500.4) -------------- -------------- Net directory advertising revenue 315.0 206.8 Other revenue 5.5 0.5 -------------- -------------- Net revenue - GAAP 320.5 207.3 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 356.0 51.9 -------------- Net revenue - pro forma adjusted $676.5 ============== Dex Media net revenue 411.7 -------------- Net revenue - combined adjusted $670.9 ============== - ---------------------------------------------------------------------- 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 7b RECONCILIATION OF NON-GAAP MEASURES (cont'd) - -------------------------------------------- (unaudited) Amounts in millions, except per share amounts - ---------------------------------------------------------------------- Three Months Ended March 31, --------------- 2006 - ---------------------------------------------------------------------- Reconciliation of net loss - GAAP to EBITDA and pro forma adjusted EBITDA Net loss - GAAP $(71.7) Plus tax benefit (44.0) Plus interest expense, net 153.8 Plus depreciation and amortization 62.7 --------------- EBITDA (10) 100.8 Plus net revenue from Dex Media-branded directories that published prior to the acquisition that would have been recognized during the period absent purchase accounting adjustments required under GAAP 356.0 Less expenses on directories that published prior to each acquisition that would have been recognized during the period absent purchase accounting required under GAAP and professional fees associated with the Dex Media transaction paid for by Dex Media, net of amortized deferred cost uplift on sales contracts as of the date of each acquisition. (97.6) --------------- Net effect of adjustments 258.4 --------------- Pro forma adjusted EBITDA (10) $359.2 =============== - ---------------------------------------------------------------------- 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 7c RECONCILIATION OF NON-GAAP MEASURES (cont'd) - -------------------------------------------- (unaudited) Amounts in millions, except per share amounts - ---------------------------------------------------------------------- Three Months Ended ------------------ March 31, 2006 - ---------------------------------------------------------------------- Reconciliation of diluted loss per share - GAAP to diluted earnings per share - pro forma adjusted Diluted loss per share - GAAP $(0.76) Effect of converting preferred stock to common stock at the beginning of the period (0.26) Impact of acquisitions, including adjustments to eliminate purchase accounting 1.58 ------------------ Diluted earnings per share - pro forma adjusted $0.56 ================== - ---------------------------------------------------------------------- Three Months Ended ------------------ March 31, 2006 - ---------------------------------------------------------------------- Reconciliation of cash flow from operations - GAAP to pro forma adjusted cash flow from operations and pro forma adjusted free cash flow Cash flow from operations - GAAP $196.0 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 243.2 Less: additions to fixed assets and computer software - GAAP 10.4 Less: Dex Media additions to fixed assets and computer software for January 2006 - GAAP 1.1 ------------------ Pro forma adjusted free cash flow $231.7 ================== - ---------------------------------------------------------------------- Three Months Ended ------------------ March 31, 2006 - ---------------------------------------------------------------------- Reconciliation of debt - GAAP to net debt - excluding fair market value adjustment (11) Debt - GAAP $10,884.0 Less: Cash (199.3) ------------------ Net debt - GAAP 10,684.7 Less: Fair market value adjustment due to purchase accounting (216.2) ------------------ Net debt - excluding fair market value adjustment $10,468.5 ================== - ---------------------------------------------------------------------- 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 7d RECONCILIATION OF NON-GAAP MEASURES (cont'd) (unaudited) $ in billions - ---------------------------------------------------------------------- Full Year 2006 Outlook - --------------------------------------------------------------------- Reconciliation of cash flow from operations outlook - GAAP to free cash flow outlook GAAP and pro forma adjusted free cash flow outlook Cash flow from operations outlook - GAAP $0.73 Less: Additions to fixed assets and computer software (0.08) ---------- Free cash flow outlook 0.65 ---------- Add: Dex Media free cash flow for January 2006 0.04 Add: Professional fees related to the Dex Media Merger paid for by Dex Media 0.01 ---------- Pro forma adjusted free cash flow outlook $0.70 - -----------------------------------------------------------==========- This schedule updates and replaces the reconciliation of cash flow from operations outlook - GAAP to free cash flow outlook GAAP and pro forma adjusted free cash flow outlook provided in Schedule 9d in the fourth quarter 2005 and full year 2005 earnings release dated February 22, 2006. 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) Publishing revenue is recognized using the deferral and amortization method of accounting. Under this method, when a directory is published, the publication sales value is deferred and amortized into the statement of operations ratably over the life of the directory, which is typically 12 months. (2) As a result of the Dex Media and AT&T (formerly known as SBC) transactions and the related financing and associated accounting, management believes that the 2006 and 2005 results reported in accordance with GAAP are not comparable, nor do they reflect the Company's underlying operational or 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. 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 market value adjustment to Dex Media's debt balance described in footnote 7. Combined adjusted 2005 results reflect the sum of adjusted RHD results, which exclude the impact of purchase accounting related to the AT&T transaction and certain other adjustments described below, and Dex GAAP results for the period. The pro forma adjusted and combined adjusted results assume that the appropriate pro rata portion of the revenues and direct costs of directories acquired from Dex Media and AT&T, respectively, that published prior to the transactions 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 reported GAAP results. Additionally, the cost uplift reported under GAAP to eliminate profit on sales contracts completed before the transaction date for Dex Media and AT&T directories not yet published at the transaction date has also been excluded from pro forma adjusted and combined adjusted results. See Schedule 6 for details of all adjustments to the reported GAAP results. (3) Pro forma adjusted results for the three months ended March 31, 2006 assume the remaining Preferred Stock was completely converted to Common Stock at the beginning of the period and therefore the gain on the repurchase of Preferred Stock is excluded. (4) On a reported basis, basic EPS is calculated under the "two-class" method that requires earnings (loss) available to common shareholders, after deducting preferred dividends, the accretion of Preferred Stock to fair value and the loss (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 income (loss) allocable to common shareholders by the weighted average number of shares outstanding. Diluted EPS is calculated by dividing income (loss) allocable 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. (5) On a 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 assuming the Dex Media transaction was consummated at the beginning of the period. - ---------------------------------------------------------------------- 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 (cont'd) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NON-GAAP MEASURES (cont'd) - ---------------------------------------------------------------------- (6) Adjustments for the three months ended March 31, 2006 and 2005 include revenue and expenses for directories acquired as a result of the Dex Media and AT&T transactions, respectively, that published prior to the 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 from both periods presented. Adjustments to reported GAAP expenses in 2006 also exclude professional fees associated with the Dex Media transaction incurred by Dex Media in January 2006 (7) 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. 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 market value. Pro forma adjusted interest eliminates the interest expense benefit resulting from the amortization of the fair market value adjustment to Dex Media's debt. Pro forma adjusted depreciation and amortization reflects the amortization of intangible assets acquired as if the Dex Media transaction occurred on January 1, 2006. (8) Represents the tax effect of adjustments. (9) Advertising sales represent the total billable value of print and online products in the period when billing commences. (10) EBITDA represents earnings (loss) before interest, taxes, depreciation and amortization. Pro forma adjusted EBITDA represents pro forma adjusted earnings before interest, taxes, depreciation and amortization. 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 March 31, 2006 includes a charge of $16.5 million for stock-based compensation in accordance with Statement of Financial Accounting Standards No. 123 (R), Share-Based Payment. (11) Net debt - GAAP represents total debt less cash and cash equivalents for the respective period. Net debt - excluding fair market value adjustments represents net debt - GAAP adjusted to remove the fair value purchase accounting adjustment of Dex Media's debt noted in footnote 7. (12) 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. Pro forma adjusted weighted average common shares outstanding for 2006 assumes the Dex Media transaction occured on January 1, 2006. 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. (13) Reported amounts at December 31, 2005 have been reclassified to conform with the current period presentation. - ---------------------------------------------------------------------- Note: These schedules are preliminary and subject to change pending the Company's filing of its Form 10-Q. CONTACT: R.H. Donnelley Corporation, Cary Investors: James M. Gruskin, 800-497-6329 or Media: Tyler D. Gronbach, 919-297-1541 -----END PRIVACY-ENHANCED MESSAGE-----